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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38129

Mersana Therapeutics, Inc.

(Exact name of registrant as specified in its charter)


Delaware			04-3562403
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

840 Memorial Drive Cambridge, MA 02139

(Address of principal executive offices)

(Zip Code)

(617) 498-0020

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	MRSN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 4,990,692 shares of Common Stock ($0.0001 par value per share) outstanding as of August 8, 2025.

Table of Contents

REFERENCES TO MERSANA

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Mersana,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Mersana Therapeutics, Inc. and its consolidated subsidiary, and “our board of directors” refers to the board of directors of Mersana Therapeutics, Inc.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “on track,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•the cost, timing, progress and results of our current clinical trials, including our Phase 1 clinical trials of emiltatug ledadotin (XMT-1660), which we refer to as Emi-Le, and XMT-2056;

•our ability to secure additional capital in the near term or to implement other strategies needed to alleviate our current substantial doubt about our ability to continue as a going concern;

•our estimates regarding expenses and future revenue and our expectations regarding our ability to fund our operating expenses with our existing cash resources and the period in which we expect that such cash resources will enable us to fund such operating requirements;

•the potential benefits of our existing strategic collaborations and our ability to enter into additional strategic collaborations;

•the timing of, and our ability to obtain and maintain, regulatory approvals for our product candidates;

•our ability to successfully complete clinical trials;

•unmet needs of patients with cancer indications;

•our intellectual property position, including with respect to our trade secrets; and

•our strategic priorities and our restructuring and reprioritization plan announced on May 6, 2025.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

The forward-looking statements contained herein represent our views as of the date of this Quarterly Report on Form 10-Q and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Table of Contents

This Quarterly Report on Form 10-Q may include industry and market data, which we may obtain from our own internal estimates and research, as well as from industry and general publications and research, surveys, and studies conducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third‑party sources.

RISK FACTOR SUMMARY

Our business is subject to varying degrees of risk and uncertainty. Investors should consider the risks and uncertainties summarized below, as well as the risks and uncertainties discussed in Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q.

Our business is subject to the following principal risks and uncertainties:

•We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.

•We have a limited number of product candidates being evaluated in clinical trials. A failure of any of our current product candidates in clinical development could adversely affect our business.

•We have incurred net losses since our inception, we have no products approved for commercial sale and we anticipate that we will continue to incur substantial operating losses for the foreseeable future.

•We are in the early stages in our clinical development efforts. We have two product candidates, Emi-Le and XMT-2056, in Phase 1 clinical development, and we have not yet completed a clinical trial for either of these product candidates.

•We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do.

•Drug development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure. We can provide no assurance of the successful and timely development of our antibody-drug conjugate product candidates.

•We can provide no assurance that our product candidates will obtain regulatory approval or that the results of clinical trials will be favorable.

•If we fail to attract and retain senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

•Our strategic restructuring and reprioritization plan and workforce reduction announced on May 6, 2025 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

•Unfavorable global economic or geopolitical conditions could adversely affect our business, financial condition or results of operations.

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•Our activities, including our interactions with healthcare providers, third party payors, patients and government officials, are, and will continue to be, subject to extensive regulation involving health care, anti-corruption, data privacy and security and consumer protection laws. Failure to comply with applicable laws could result in substantial penalties, contractual damages, reputational harm, diminished revenues and curtailment or restructuring of our operations.

•We rely upon patents and other intellectual property rights to protect our technology. We may be unable to protect our intellectual property rights, and we may be liable for infringing the intellectual property rights of others.

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			Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024			6
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2025 and 2024			7
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three and six months ended June 30, 2025 and 2024			8
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			43
Item 4. Controls and Procedures			43
PART II - OTHER INFORMATION			44
Item 1. Legal Proceedings			44
Item 1A. Risk Factors			44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			114
Item 5. Other Information			115
Item 6. Exhibits			115
Signatures			116

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mersana Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	June 30, 2025		December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	76,972	$	107,750
Short-term marketable securities	—		26,870
Accounts receivable	266		—
Prepaid expenses and other current assets	2,903		2,284
Total current assets	80,141		136,904
Property and equipment, net	1,037		2,203
Operating lease right-of-use assets	2,895		4,578
Other assets, noncurrent	500		978
Total assets	$	84,573	$	144,663
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	2,923	$	4,330
Accrued expenses	15,184		18,964
Deferred revenue	20,183		22,168
Operating lease liabilities	3,270		3,856
Short-term debt, net	17,351		12,500
Other current liabilities	427		640
Total current liabilities	59,338		62,458
Operating lease liabilities, noncurrent	—		1,292
Long-term debt, net	—		10,950
Deferred revenue, noncurrent	78,381		79,464
Other liabilities, noncurrent	—		8
Total liabilities	137,719		154,172
Commitments (Note 11)
Stockholders' deficit:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively	—		—
Common stock, $0.0001 par value; 350,000,000 shares authorized; 4,990,692 and 4,626,010 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively	—		—
Additional paid-in capital	890,826		886,034
Accumulated other comprehensive income	—		10
Accumulated deficit	(943,972)		(895,553)
Total stockholders’ deficit	(53,146)		(9,509)
Total liabilities and stockholders’ deficit	$	84,573	$	144,663

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Collaboration revenue	$	3,056	$	2,293	$	5,810	$	11,538
Operating expenses:
Research and development	16,218		17,245		34,559		35,931
General and administrative	7,415		10,503		16,340		22,063
Restructuring expenses	3,940		—		3,940		—
Total operating expenses	27,573		27,748		54,839		57,994
Other income (expense):
Interest income	895		2,170		2,059		4,867
Interest expense	(674)		(983)		(1,449)		(1,985)
Total other income, net	221		1,187		610		2,882


Net loss	(24,296)		(24,268)		(48,419)		(43,574)
Other comprehensive loss
Unrealized (loss) gain on marketable securities, net of tax	—		19		(10)		(82)
Comprehensive loss	$	(24,296)	$	(24,249)	$	(48,429)	$	(43,656)
Net loss attributable to common stockholders — basic and diluted	$	(24,296)	$	(24,268)	$	(48,419)	$	(43,574)
Net loss per share attributable to common stockholders — basic and diluted	$	(4.87)	$	(4.96)	$	(9.72)	$	(8.93)

Weighted-average number of shares of common stock used in net loss per share attributable to common stockholders — basic and diluted	4,986,784		4,897,643		4,982,718		4,877,347

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(in thousands, except share data)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Stockholders’ (Deficit) Equity
	Shares	Amount
Balance at December 31, 2023	4,828,577	$	—	$	863,254	$	11	$	(826,361)	$	36,904
Issuance of common stock from at-the-market transactions, net of issuance costs of $185	41,647	—		5,780		—		—		5,780
Exercise of stock options	484	—		48		—		—		48
Vesting of restricted stock units	23,701	—		—		—		—		—
Stock-based compensation expense	—	—		4,660		—		—		4,660
Other comprehensive loss	—	—		—		(101)		—		(101)
Net loss	—	—		—		—		(19,306)		(19,306)
Balance at March 31, 2024	4,894,409	$	—	$	873,742	$	(90)	$	(845,667)	$	27,985

Exercise of stock options	84	—		8		—		—		8
Vesting of restricted stock units	6,394	—		—		—		—		—
Sales of common stock pursuant to ESPP	6,142	—		258		—		—		258
Stock-based compensation expense	—	—		4,425		—		—		4,425
Other comprehensive gain	—	—		—		19		—		19
Net loss	—	—		—		—		(24,268)		(24,268)
Balance at June 30, 2024	4,907,029	$	—	$	878,433	$	(71)	$	(869,935)	$	8,427








Balance at December 31, 2024	4,626,010	$	—	$	886,034	$	10	$	(895,553)	$	(9,509)


Vesting of restricted stock units and other stock awards	37,781	—		—		—		—		—
Exercise of pre-funded warrants in exchange for common stock	321,415	—		(1)		—		—		(1)
Stock-based compensation expense	—	—		2,775		—		—		2,775
Other comprehensive loss	—	—		—		(10)		—		(10)
Net loss	—	—		—		—		(24,123)		(24,123)
Balance at March 31, 2025	4,985,206	$	—	$	888,808	$	—	$	(919,676)	$	(30,868)


Vesting of restricted stock units and other stock awards	1,735	—		—		—		—		—
Sales of common stock pursuant to ESPP	3,751	—		29		—		—		29
Stock-based compensation expense	—	—		1,989		—		—		1,989

Net loss	—	—		—		—		(24,296)		(24,296)
Balance at June 30, 2025	4,990,692	$	—	$	890,826	$	—	$	(943,972)	$	(53,146)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2025		2024
Cash flows from operating activities
Net loss	$	(48,419)	$	(43,574)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	603		826
Impairment loss on property and equipment	563		—
Net amortization of premiums and discounts on marketable securities	(140)		(2,402)
Stock-based compensation	4,764		9,085
Non-cash operating lease expense	1,683		1,512
Other non-cash items	154		153
Changes in operating assets and liabilities:
Accounts receivable	(266)		(1,570)
Prepaid expenses and other current assets	(142)		321
Other assets	—		(500)
Accounts payable	(1,407)		(4,174)
Accrued expenses	(3,781)		(4,116)

Operating lease liabilities	(1,878)		(1,476)
Other liabilities	(594)		—
Deferred revenue	(3,068)		(8,597)
Net cash used in operating activities	(51,928)		(54,512)

Cash flows from investing activities
Maturities of marketable securities	27,000		40,000
Purchase of marketable securities	—		(106,901)
Upfront proceeds from sale of property and equipment	395		—
Purchase of property and equipment	—		(132)
Net cash provided by (used in) investing activities	27,395		(67,033)

Cash flows from financing activities

Net proceeds from at-the-market facilities	—		5,780
Proceeds from exercise of stock options	—		56
Proceeds from sales of common stock under ESPP	29		258



Repayment of debt	(6,250)		—
Payments under finance lease obligations	(24)		(112)
Net cash (used in) provided by financing activities	(6,245)		5,982

Decrease in cash, cash equivalents and restricted cash	(30,778)		(115,563)
Cash, cash equivalents and restricted cash, beginning of period	108,228		175,039
Cash, cash equivalents and restricted cash, end of period	$	77,450	$	59,476

Supplemental cash flow information:



Cash paid for interest	$	1,315	$	1,751

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements

(unaudited)

1. Nature of business and basis of presentation

Mersana Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company focused on developing antibody-drug conjugates (“ADCs”) that offer a clinically meaningful benefit for cancer patients with significant unmet need. The Company’s next-generation ADC platforms include Dolasynthen, which delivers a proprietary auristatin payload, and Immunosynthen, which delivers a proprietary stimulator of interferon genes (“STING”) agonist payload.

The Company is investigating emiltatug ledadotin (XMT-1660) (“Emi-Le”), a B7-H4-directed Dolasynthen ADC, in a Phase 1 clinical trial that has enrolled patients with solid tumors, including in breast, endometrial and ovarian cancers, as well as adenoid cystic carcinoma type 1. The Company initiated a Phase 1 clinical trial to investigate XMT-2056, an Immunosynthen STING-agonist ADC that is designed to target a novel epitope of human epidermal growth factor receptor 2 (“HER2”), in January 2023, enrolling previously treated patients with advanced/recurrent solid tumors expressing HER2, including breast, gastric, colorectal and non-small cell lung cancers. In March 2023, this clinical trial was placed on clinical hold by the U.S. Food and Drug Administration (“FDA”), and the FDA lifted this clinical hold in October 2023. The Company resumed patient enrollment in the first half of 2024.

In May 2025, the Company announced the implementation of a strategic restructuring and reprioritization plan that included a commitment to reduce the Company’s then-current employee base by approximately 55% across all functions (the “2025 Restructuring”). As part of the strategic restructuring and reprioritization plan, the Company also announced that it would reduce its research activities, eliminate its internal pipeline development efforts and, in the near term, focus Emi-Le development efforts on breast cancer to enable the generation of additional safety, tolerability and clinical activity data while continuing to support the dose escalation portion of the Company’s Phase 1 clinical trial of XMT-2056 and its ongoing collaborations. Refer to Note 13, Restructuring, for more information.

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, the need for additional capital, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval and reimbursement for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development of technological innovations by competitors, reliance on third party manufacturers and the ability to transition from pilot-scale production to large-scale manufacturing of products.

As a clinical-stage biopharmaceutical company that has devoted substantially all its efforts towards research and development activities, the Company has incurred cumulative net losses and negative cash flows from its operations since its inception. For the three months ended June 30, 2025 and 2024, the Company’s net loss was $24.3 million and $24.3 million, respectively. For the six months ended June 30, 2025 and 2024, the Company’s net loss was $48.4 million and $43.6 million, respectively. As of June 30, 2025, the Company had an ending cash balance of $77.0 million and an accumulated deficit of $944.0 million. Net losses and negative operating cash flows have had, and will continue to have, an adverse effect on the Company’s stockholders’ deficit and working capital. The Company expects to continue to incur operating losses for at least the next several years. The future success of the Company is dependent upon, among other factors, its ability to develop its product candidates and ultimately upon its ability to attain profitable operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year from the issuance of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

In order to fund its operations beyond twelve months from the date of these financial statements, the Company will need to raise additional funds, which could be through a combination of equity offerings, debt financings, other third-party funding, and strategic collaborations and licensing transactions. If the Company is unable to obtain future funding when needed, the Company may be forced to delay, reduce or eliminate some or all of its development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations. The Company’s estimates underlying its cash runway projections are based on assumptions that are subject to risks and uncertainties and may change or prove to be inaccurate as a result of multiple factors, many of which are outside of the Company’s control. There can be no assurance that the Company will be successful in obtaining sufficient funding to support continuing operations on terms acceptable to the Company or at all. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”), which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

Certain items in the prior period financial statements may be reclassified to conform to current period presentation. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2024 and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of June 30, 2025, the results of its operations for the three and six months ended June 30, 2025 and 2024, the statements of stockholders’ (deficit) equity for the three and six months ended June 30, 2025 and 2024 and statements of cash flows for the six months ended June 30, 2025 and 2024. Such adjustments are of a normal and recurring nature. The results for the three and six months ended June 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025, or for any future period.

On July 25, 2025, the Company effected a 1-for-25 reverse stock split of its issued and outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split did not impact the number of authorized shares of common stock or preferred stock or the par value per share of the common stock or preferred stock. All share and per share amounts in these condensed consolidated financial statements and notes thereto, except for the number of authorized shares and par value per share of the Company’s common stock or preferred stock, have been adjusted retroactively to reflect the Reverse Stock Split for all periods presented. Refer to Note 8, Stockholders’ equity, for more information.

2. Summary of significant accounting policies

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include those of the Company and its wholly owned subsidiary, Mersana Securities Corp. All intercompany balances and transactions have been eliminated.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates which include, but are not limited to, management’s judgments with respect to the identification of performance obligations and standalone selling prices of those performance obligations within its revenue arrangements, accrued preclinical, manufacturing and clinical expenses, valuation of stock-based awards and income taxes. Actual results could differ from those estimates.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision making group, in deciding how to allocate resources and assess performance. The Company views its operations and manages its business as a single operating segment, which is the business of discovering and developing ADCs. Refer to Note 12, Segment reporting, for more information.

Summary of Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2025 are consistent with those discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 3, 2025.

Fair Value Measurements

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC 820, Fair Value Measurement, establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Concentration of Credit Risk and Off-balance Sheet Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. The Company does not believe that it is subject to any significant concentrations of credit risk from these financial instruments. The Company has no financial instruments with off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity, or a remaining maturity at the time of purchase, of three months or less to be cash equivalents. The Company invests excess cash primarily in money market funds, treasury securities, commercial paper and government agency securities, which are highly liquid and have strong credit ratings. These investments are subject to minimal credit and market risks. Cash and cash equivalents are stated at cost, which approximates market value.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard-setting bodies, and the Company adopts such pronouncements as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards has had or may have a material impact on the Company's condensed consolidated financial statements or disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the disclosure requirements related to the new standard.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to disclose in the notes to the financial statements specified information about certain costs and expense including purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption. This standard also requires a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated, as well as disclosure of the total amount of selling expenses, and, in annual reporting periods, an entity’s definition of selling expenses. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the disclosure requirements related to the new standard.

3. Collaboration agreements

GSK

On August 6, 2022, the Company entered into a Collaboration, Option and License Agreement (the “GSK Agreement”) with GlaxoSmithKline Intellectual Property (No. 4) Limited (“GSK”), pursuant to which the Company granted GSK an exclusive option to obtain an exclusive license (the “Option”) to co-develop and to commercialize products containing XMT-2056 (the “Licensed Products”), exercisable within a specified time period (the “Option Period”) after the Company delivers to GSK data resulting from completion of dose escalation with enrichment for breast cancer patients in a Phase 1 single-agent clinical trial of XMT-2056. GSK’s exercise of the Option may require clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Clearance” and GSK’s exercise of the Option following any applicable HSR Clearance, the “GSK Option Exercise”). Prior to the GSK Option Exercise, the Company will lead and will be responsible for the costs of manufacturing, research, and early clinical development related to its XMT-2056 program.

Pursuant to the GSK Agreement, GSK paid the Company a non-refundable, upfront fee of $100.0 million in August 2022. Following the GSK Option Exercise, if any, GSK is obligated to pay the Company an option exercise payment of $90.0 million.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

The GSK Agreement will terminate at the end of the Option Period if GSK does not exercise its Option. In the event of the GSK Option Exercise, unless earlier terminated, the GSK Agreement will continue in effect until the date on which the royalty term and all payment obligations with respect to all Licensed Products in all countries have expired.

Accounting Analysis

The Company assessed the GSK Agreement in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), and concluded that the contract counterparty, GSK, is a customer. The Company identified the following two material performance obligations under the GSK Agreement: (i) development activities, including manufacturing, research and early clinical development activities, necessary to deliver the package of data, information and materials specified in the GSK Agreement (the “Development Activities”) and (ii) the Option to co-develop and to commercialize Licensed Products (the “License Option”).

The Company is recognizing revenue related to the Development Activities performance obligation over the estimated period of the pre-option development using a proportional performance model as the underlying activities are performed. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred.

The Company deferred revenue recognition related to the License Option. If the License Option is exercised and GSK obtains an exclusive license, the Company will recognize revenue as it fulfills its obligations under the GSK Agreement. If the Option is not exercised, the Company will recognize the entirety of the revenue in the period when the Option expires. As of June 30, 2025, the Company considered the remaining milestones to be fully constrained as achievement was outside the control of the Company. During July 2025, the Company achieved a $15.0 million development milestone related to its efforts under the GSK agreement. The milestone payment is due in the third quarter of 2025.

During the three and six months ended June 30, 2025, the Company recorded collaboration revenue of a de minimis amount and $1.0 million, respectively, related to its efforts under the GSK Agreement. During the three and six months ended June 30, 2024, the Company recorded collaboration revenue of a de minimis amount related to its efforts under the GSK Agreement. As of June 30, 2025 and December 31, 2024, the Company had recorded $90.4 million and $91.5 million, respectively, in deferred revenue related to the unsatisfied performance obligations under the GSK Agreement. This deferred revenue will be recognized over the remaining performance period and classified as current or noncurrent on the consolidated balance sheets based upon the expected timing of satisfaction of the respective performance obligations.

Johnson & Johnson

On February 2, 2022, the Company entered into a research collaboration and license agreement with Janssen Biotech Inc. (“Johnson & Johnson” and such agreement, as amended on July 14, 2023 and September 25, 2023, the “Johnson & Johnson Agreement”) focused on the research, development and commercialization of novel ADCs for three oncology targets by leveraging the Company’s ADC expertise and Dolasynthen platform with Johnson & Johnson’s proprietary antibodies. Upon execution of the Johnson & Johnson Agreement, the Company received a non-refundable upfront payment of $40.0 million. The Johnson & Johnson Agreement permits Johnson & Johnson to select up to three targets and to substitute each target once prior to a substitution deadline. Between the execution of the Johnson & Johnson Agreement in 2022 and December 31, 2023, Johnson & Johnson selected three targets under the Johnson & Johnson Agreement. During the year ended December 31, 2023, Johnson & Johnson exercised its first substitution right for a certain target. Johnson & Johnson was not required to pay a fee for its first substitution right but would have been required to pay a one-time fee for access to the subsequent substitution rights following its exercise of its second substitution right.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

On August 27, 2024, the Company entered into a clinical supply agreement with Johnson & Johnson (the “2024 Johnson & Johnson CSA” and, together with the Johnson & Johnson Agreement, the “Johnson & Johnson Agreements”). Under the terms of the 2024 Johnson & Johnson CSA, the Company performs clinical manufacturing services for Johnson & Johnson related to a licensed ADC for a selected target. Johnson & Johnson is required to pre-pay for such services at agreed-upon rates. The Company may enter into future clinical supply agreements should Johnson & Johnson request clinical supply services either beyond the scope of the 2024 Johnson & Johnson CSA or with respect to any other licensed ADC. Johnson & Johnson may also request that the Company perform a technology transfer of bioconjugation and manufacturing process technology, at Johnson & Johnson's cost, at an agreed upon rate. During the year ended December 31, 2024, Johnson & Johnson terminated without cause its development of ADCs directed to the other two targets it had selected under the Johnson & Johnson Agreement. As a result, the Johnson & Johnson Agreement remains in effect with respect to the one remaining target.

Pursuant to mutually agreed research and chemistry, manufacturing and controls (“CMC”) plans, the Company agreed to perform bioconjugation, production development, preclinical manufacturing, and certain related research and preclinical development activities, in order to progress the targets through investigational new drug application (“IND”) submission for further development, manufacture and commercialization by Johnson & Johnson.

Johnson & Johnson is required to pre-pay for the Company's preclinical CMC activities at agreed-upon rates, and the parties may enter into one or more clinical supply agreements related to clinical manufacturing services for each licensed ADC for a selected target, pursuant to which Johnson & Johnson would pre-pay for such services at agreed-upon rates. Unless earlier terminated, the Johnson & Johnson Agreement will expire upon the expiration of the last royalty term for a product under the Johnson & Johnson Agreement.

Accounting Analysis

The Company assessed the Johnson & Johnson Agreements in accordance with ASC 606 and concluded that the counterparty, Johnson & Johnson, is a customer. The Company identified the following seven material performance obligations under the Johnson & Johnson Agreement: (i) exclusive Johnson & Johnson licenses and research activities for each of the three designated targets, (ii) preclinical CMC activities for each of the three designated targets and (iii) the first target substitution right.

The Company determined that the consideration for preclinical CMC activities represents variable consideration. Preclinical CMC activities for one of the three designated targets were initiated. The Company has elected to apply the right to invoice practical expedient in accordance with ASC 606 related to the preclinical CMC activities under the Johnson & Johnson Agreement. As such, the Company recognizes revenue related to the preclinical CMC activities as the services are performed over the corresponding CMC plan for the target.

As of June 30, 2025, the revised total transaction price for the Johnson & Johnson Agreement was $56.0 million based on the reassessment of the constraint of certain development milestones and the remaining risks associated with the development required to achieve the milestones. As of June 30, 2025, the Company considered the remaining milestones to be fully constrained as achievement was outside the control of the Company.

The Company recognized revenue related to the Johnson & Johnson licenses and research services performance obligation over the estimated period of the research services using a proportional performance model. The Company measured proportional performance based on the costs incurred relative to the total costs expected to be incurred. The Company has completed its performance obligations under the research plans for the designated targets. The Company continues to perform work related to the preclinical CMC activities for the one remaining target.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

During the three and six months ended June 30, 2024, the Company recorded collaboration revenue of $1.8 million and $7.9 million, respectively, related to its performance obligations under the Johnson & Johnson Agreement.

With respect to the 2024 Johnson & Johnson CSA, the Company concluded that each manufacturing batch of the licensed ADC that the Company committed to deliver in the next twelve months represents a material performance obligation. As of June 30, 2025, the transaction price was $9.3 million based on the total costs expected to be incurred to develop and manufacture the licensed ADC. The Company is recognizing revenue related to the performance obligations over the estimated period of the clinical manufacturing services using a proportional performance model. During the three and six months ended June 30, 2025, the Company recorded collaboration revenue of $3.3 million and $4.0 million, respectively, related to its performance obligations under the 2024 Johnson & Johnson CSA.

As of June 30, 2025 and December 31, 2024, the Company had recorded $1.0 million and $3.2 million, respectively, in deferred revenue related to the Johnson & Johnson Agreements that will be recognized over the remaining performance period and classified as current or noncurrent on the consolidated balance sheets based upon the expected timing of satisfaction of the respective performance obligations.

Merck KGaA

Immunosynthen Platform Agreement

On December 22, 2022, the Company entered into a research collaboration and license agreement with Ares Trading S.A., a wholly owned subsidiary of Merck KGaA, Darmstadt, Germany (Merck KGaA and/or its affiliate, as applicable, “Merck KGaA” and such agreement, the “2022 Merck KGaA Agreement”), focused on the research, development and commercialization of novel ADCs for up to two specific target antigens by leveraging the Company’s ADC expertise and Immunosynthen platform with Merck KGaA’s proprietary antibodies. In connection with the 2022 Merck KGaA Agreement, the Company received a non-refundable upfront payment of $30.0 million. Pursuant to the 2022 Merck KGaA Agreement, the Company granted Merck KGaA two exclusive, non-transferable, worldwide licenses - a research license and a commercialization license (together, the “Merck KGaA Licenses”).

Pursuant to mutually agreed research and CMC plans, the Company agreed to perform bioconjugation, production development, preclinical manufacturing, and certain related research and preclinical development activities, in order to progress the targets through IND (or foreign equivalent) submission for further development, manufacture and commercialization by Merck KGaA. The Company estimates that its activities under the research plans for the targets will be performed into 2026.

The Company's preclinical CMC activities will be compensated by Merck KGaA at agreed upon rates. Unless earlier terminated, the 2022 Merck KGaA Agreement will expire upon the expiration of the last royalty term for a product under the 2022 Merck KGaA Agreement.

Merck KGaA may request that the Company perform clinical manufacturing services under a separate clinical supply agreement. Merck KGaA may also request that the Company perform a technology transfer of bioconjugation technology, at Merck KGaA's cost, at an agreed upon rate.

Accounting Analysis

The Company assessed the 2022 Merck KGaA Agreement in accordance with ASC 606 and concluded that the contract counter party, Merck KGaA, is a customer. The Company identified the following four material performance obligations under the 2022 Merck KGaA Agreement: (i) exclusive Merck KGaA Licenses and research activities for each of the two designated targets and (ii) preclinical CMC activities for each of the two designated targets.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

The Company determined that the consideration for preclinical CMC activities represents variable consideration. Preclinical CMC activities for one of the two designated targets were initiated. The Company has elected to apply the right to invoice practical expedient in accordance with ASC 606 related to the preclinical CMC activities under the 2022 Merck KGaA Agreement. As such, the Company will recognize revenue related to the preclinical CMC activities as the services are performed over the corresponding CMC plan for the target.

The Company is recognizing revenue related to the Merck KGaA Licenses and research services performance obligation over the estimated period of the research services using a proportional performance model. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred.

During the three months ended June 30, 2025 and 2024 and the six months ended June 30, 2025 and 2024, the Company recorded collaboration revenue of $0.4 million, a de minimis amount, $0.5 million and $3.2 million, respectively, related to its efforts under the 2022 Merck KGaA Agreement. As of June 30, 2025 and December 31, 2024, the Company had recorded $7.1 million and $7.0 million, respectively, in deferred revenue related to the unsatisfied performance obligations under the 2022 Merck KGaA Agreement. This deferred revenue will be recognized over the remaining performance period and classified as current or noncurrent on the consolidated balance sheets based upon the expected timing of satisfaction of the respective performance obligations.

Summary of Contract Assets and Liabilities

The following table presents changes in the balances of the Company's contract liabilities:


(in thousands)	Balance at Beginning of Period		Additions		Deductions		Balance at End of Period
Six months ended June 30, 2025

Contract liabilities:





Total deferred revenue	$	101,632	$	2,742	$	(5,810)	$	98,564

Six months ended June 30, 2024
Contract liabilities:

Total deferred revenue	$	125,314	$	2,940	$	(11,338)	$	116,916

The Company did not record any contract assets associated with its collaboration agreements as of June 30, 2025 and 2024.

During the three and six months ended June 30, 2025 and 2024, the Company recognized the following revenues as a result of changes in the contract liability balances in the respective periods:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Revenue recognized in the period from:




Amounts included in the contract liability at the beginning of the period	$	2,401	$	2,293	$	4,558	$	11,231

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

4. Fair value measurements

The following table presents information about the Company's assets measured at fair value on a recurring basis and indicates the level within fair value hierarchy of the valuation techniques utilized to determine such value.


	June 30, 2025
(in thousands)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	41,207	$	41,207	$	—	$	—
U.S. treasury securities	1,499		1,499		—		—
	$	42,706	$	42,706	$	—	$	—


	December 31, 2024
(in thousands)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	79,344	$	79,344	$	—	$	—


Marketable securities
U.S. treasury securities	$	26,870	$	26,870	$	—	$	—

There were no changes in valuation techniques or transfers between fair value measurement levels during the six months ended June 30, 2025 or during the year ended December 31, 2024.

Investments classified as Level 1 within the valuation hierarchy generally consist of U.S. treasury securities and money market funds, as the fair value is readily determinable based on active daily markets for identical securities. The Company estimates the fair values of investments by taking into consideration valuations obtained from third-party pricing sources.

The carrying amounts reflected in the consolidated balance sheets for prepaid expenses and other current assets, accounts receivable, accounts payable and accrued expenses, as applicable, approximate their fair values due to their short-term nature.

As of June 30, 2025 and December 31, 2024, the carrying value of the Company’s outstanding borrowing under the New Credit Facility (as defined in Note 7, Debt) approximated fair value (a Level 2 fair value measurement), reflecting interest rates currently available to the Company. The New Credit Facility is discussed in more detail in Note 7, Debt.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

5. Cash, cash equivalents, and short-term marketable securities

Cash and cash equivalents

The following table summarizes the Company's cash, cash equivalents, and restricted cash as of June 30, 2025 and 2024.


	Six Months Ended June 30, 2025				Six Months Ended June 30, 2024
(in thousands)	Beginning of period		End of period		Beginning of period		End of period
Cash and cash equivalents	$	107,750	$	76,972	$	174,561	$	58,998
Restricted cash included in other assets, noncurrent	478		—		478		478
Restricted cash included in prepaid expenses and other current assets	—		478		—		—
Total cash, cash equivalents and restricted cash per statement of cash flows	$	108,228	$	77,450	$	175,039	$	59,476

The restricted cash is held as a security deposit for a standby letter of credit related to the Company's facility lease.

Marketable securities

The following tables summarize the Company's marketable securities held at December 31, 2024. The Company did not hold marketable securities as of June 30, 2025.


	December 31, 2024
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable securities
U.S. treasury securities	$	26,860	$	10	$	—	$	26,870

The Company did not realize any gains or losses recognized on the sale of marketable securities during the six months ended June 30, 2025 and 2024, and as a result, the Company did not reclassify any amounts out of accumulated comprehensive loss.

As of December 31, 2024, the Company's debt security portfolio did not have any securities that were in an unrealized loss position. There were no securities in an unrealized loss position for greater than 12 months as of December 31, 2024.

The Company did not record any charges for credit-related impairments for any debt securities in its portfolio during the six months ended June 30, 2025 and 2024.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

6. Accrued expenses

Accrued expenses consisted of the following as of June 30, 2025 and December 31, 2024:


(in thousands)	June 30, 2025		December 31, 2024
Accrued clinical expenses	$	5,838	$	3,883
Accrued manufacturing expenses	3,793		5,862
Accrued payroll and related expenses	2,600		7,341
Accrued restructuring expenses	1,567		—
Accrued professional fees	692		800
Accrued research, development and non-clinical expenses	497		782
Accrued other	197		296
	$	15,184	$	18,964

7. Debt

On October 29, 2021, the Company entered into a loan and security agreement (as amended on February 17, 2022, October 17, 2022, December 27, 2022, and March 23, 2023, the “New Credit Facility”) with Silicon Valley Bank (“former SVB”) and Oxford Finance LLC (“Oxford” and, together with former SVB and the other lenders from time to time a party thereto, the “Lenders”). In March 2023, Silicon Valley Bridge Bank, N.A. (“SVBB”), as successor in interest to former SVB, replaced former SVB as a Lender, and then Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (“SVB”), which assumed all deposits and loans of SVBB, subsequently replaced SVBB as a Lender. The New Credit Facility was secured by substantially all of the Company's personal property owned or later acquired, excluding intellectual property (but including the rights to payments and proceeds from intellectual property), and a negative pledge on intellectual property. The Company had drawn $25.0 million under the New Credit Facility as of June 30, 2025. The Company had repaid $8.3 million of principal under the New Credit Facility as of June 30, 2025.

On July 1, 2025, the Company entered into a letter agreement with the Lenders providing for the repayment by the Company of all amounts owed under the New Credit Facility. On July 1, 2025, the Company paid approximately $17.9 million, including $16.7 million of principal, $1.1 million for the final payment, and $0.1 million of interest, relieving all of the Company’s indebtedness and obligations to the Lenders under the New Credit Facility.

Refer to Note 8, Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025, for more information regarding the New Credit Facility.

As a result of the repayment on July 1, 2025, the Company reflected its remaining debt obligations as short-term debt as of June 30, 2025. The $17.4 million of short-term debt per the condensed consolidated balance sheets consists of $16.7 million of outstanding principal and $0.8 million of accretion related to the final payment less $0.1 million of unamortized debt financing costs.

Interest expense related to the New Credit Facility for the three months ended June 30, 2025 and 2024 and the six months ended June 30, 2025 and 2024 was $0.6 million, $1.0 million, $1.4 million and $1.9 million, respectively.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

8. Stockholders’ equity

Reverse stock split

On July 25, 2025, the Company effected the Reverse Stock Split. Every 25 shares of issued and outstanding common stock were automatically reclassified and combined into one share of common stock. No fractional shares were issued in connection with the Reverse Stock Split. Each stockholder who would otherwise have been entitled to a fractional share of common stock received a cash payment in lieu of such fractional share. The Reverse Stock Split did not change the number of authorized shares of common stock or preferred stock or the par value of the common stock or preferred stock. As of the effective date of the Reverse Stock Split, common stock per the consolidated balance sheets was reduced proportionately based on the 1-for-25 exchange ratio, and additional paid-in capital was increased by the same amount.

All share and per share amounts in these condensed consolidated financial statements and notes thereto, except for the number of authorized shares of common stock or preferred stock or par value of common stock or preferred stock, have been adjusted retroactively to reflect the Reverse Stock Split for all periods presented.

Preferred stock

As of June 30, 2025, the Company had 25,000,000 shares of authorized preferred stock. No shares of preferred stock have been issued.

At-the-market (“ATM”) equity offering program

In November 2022, the Company established an ATM equity offering program (the “November 2022 ATM”), pursuant to which the Company was able to offer and sell up to $150.0 million of its common stock from time to time at prevailing market prices. During the six months ended June 30, 2024, the Company sold 41,647 shares of common stock under the November 2022 ATM, resulting in net proceeds of $5.8 million. As of December 31, 2024, the November 2022 ATM was no longer available for the offer and sale of additional shares of common stock due to the expiration of the applicable registration statement.

In February 2024, the Company established an ATM equity offering program (the “February 2024 ATM”), pursuant to which it is able to offer and sell up to $100.0 million of its common stock from time to time at prevailing market prices. As of June 30, 2025, $100.0 million remained unsold and available for sale under the February 2024 ATM.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

Pre-Funded warrants

On December 19, 2024, the Company entered into an exchange agreement (the “Exchange Agreement”) with entities affiliated with EcoR1 Capital, LLC (the “Exchanging Stockholders”), pursuant to which the Exchanging Stockholders agreed to exchange an aggregate of 321,467 shares of common stock of the Company beneficially owned by the Exchanging Stockholders in consideration for pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 321,467 shares of Common Stock (the “Pre-Funded Warrant Shares”), with an exercise price of $0.0025 per share. The Pre-Funded Warrants were exercisable at any time after the date of issuance, except that the Pre-Funded Warrants could not be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would have beneficially owned more than 9.99% of the Company’s common stock, subject to certain exceptions.

Refer to Note 9, Stockholders’ equity, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025, for more information regarding the Pre-Funded Warrants. As of December 31, 2024, none of the Pre-Funded Warrants had been exercised. In January 2025, the Exchanging Shareholders issued an exercise notice and a cashless exercise of all the Pre-Funded Warrants occurred, resulting in the issuance of 321,415 shares of common stock.

Common stock

The holders of the Company’s common stock are entitled to one vote for each share held. Common stockholders are not entitled to receive dividends, unless declared by the Board of Directors of the Company (the “Board”).

As of June 30, 2025 and December 31, 2024, there were 702,618 and 967,422 shares, respectively, of common stock reserved in the aggregate for the exercise of outstanding stock options, settlement of restricted stock units (“RSUs”) and exercise of Pre-Funded Warrants, as applicable.


	June 30, 2025	December 31, 2024
Stock options	542,488	488,627
Restricted stock units	160,130	157,328
Pre-Funded Warrants	—	321,467


	702,618	967,422

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

9. Stock-based compensation

Stock incentive plans

Prior to its initial public offering, the Company granted stock options pursuant to the Company’s 2007 Stock Incentive Plan (the “2007 Plan”). The 2007 Plan expired in June 2017. Any cancellations or forfeitures of options granted under the 2007 Plan will increase the options available under the Company's 2017 Stock Incentive Plan (the “2017 Plan”), as described below.

In June 2017, the Company’s stockholders approved the 2017 Plan. Under the 2017 Plan, shares of common stock could be granted to the Company's employees, officers, directors, consultants and advisors in the form of options, RSUs or other stock-based awards. The number of shares of common stock issuable under the 2017 Plan will be cumulatively increased annually on January 1 by the lesser of (a) 4% of the outstanding shares on the immediately preceding December 31 or (b) such other amount specified by the Board. The terms of the awards are determined by the Board, subject to the provisions of the 2017 Plan. Any cancellations or forfeitures of options granted under the 2007 Plan, which expired in June 2017, would increase the number of shares that could be granted under the 2017 Plan. On January 1, 2025, the number of shares of common stock issuable under the 2017 Plan was increased by 185,039 shares. During the six months ended June 30, 2025, the Company granted an aggregate of 243,215 RSUs and options to purchase shares of common stock to employees and non-employee directors under the 2017 Plan. As of June 30, 2025, there were 230,172 shares available for future issuance under the 2017 Plan.

Under the 2017 Plan, with respect to both incentive stock options and nonqualified stock options, the exercise price per share will not be less than the fair market value of the common stock on the date of grant and the vesting period for options granted to employees is generally four years. In accordance with the Company's non-employee director compensation policy, as in effect from time to time, options granted to non-employee directors in lieu of cash retainer fees earned are fully vested upon grant, options granted to non-employee directors upon initial election to the Board vest over three years, and options granted to non-employee directors on the date of each of annual meeting of stockholders vest over one year. Options granted under the 2017 Plan expire no later than 10 years from the date of grant. Options under the 2007 Plan were granted at an exercise price established by the Board (or an authorized committee thereof) that was not less than the fair market value of the underlying common stock on the date of grant and subject to such vesting provisions determined by the Board (or an authorized committee thereof). The Board may accelerate vesting or otherwise adjust the terms of granted options in the case of a merger, consolidation, dissolution, or liquidation of the Company.

Inducement awards

From time to time, the Company grants to its employees, upon approval by the Board or an authorized committee thereof, options to purchase shares of common stock and/or RSUs as an inducement to employment in accordance with Nasdaq Listing Rule 5635(c)(4). Prior to February 2022, only options to purchase shares of common stock were granted as inducement awards, and they were granted outside of an existing equity incentive plan. These options are subject to terms substantially the same as the 2017 Plan.

In February 2022, the Board adopted the Company's 2022 Inducement Stock Incentive Plan (the “Inducement Plan”), which provides for the grant of nonstatutory options, stock appreciation rights, restricted stock, RSUs and other stock-based awards, with respect to an aggregate of 80,000 shares of the Company's common stock (subject to adjustment as provided in the Inducement Plan). During the six months ended June 30, 2025, the Company granted an aggregate of 1,895 RSUs and options to purchase shares of common stock to newly hired employees under the Inducement Plan. As of June 30, 2025, there were 53,840 shares available for future issuance under the Inducement Plan.

As of June 30, 2025, there were options to purchase 13,800 shares of common stock outstanding which were granted as inducement awards prior to the establishment of the Inducement Plan.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

Stock option activity

A summary of stock option activity is as follows:


	Number of Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2024	488,627	$	158.83
Granted	138,167	$	15.21
Exercised	—	$	—
Cancelled/forfeited	(84,306)	$	100.98
Outstanding at June 30, 2025	542,488	$	131.24

Exercisable at June 30, 2025	325,106	$	187.80

The weighted-average grant date fair value of options granted during the six months ended June 30, 2025 and 2024 was $13.36 and $62.58 per share, respectively.

Restricted stock units and other awards

The Company periodically issues RSUs with a service condition to certain officers and other employees that typically vest between one year and four years from the grant date. In accordance with its non-employee director compensation policy, as in effect from time to time, the Company may also issue shares of common stock in lieu of cash retainer fees earned to certain non-employee directors, which shares are fully vested upon grant.

A summary of the RSU activity is as follows:


			Number of Shares
Unvested at December 31, 2024			157,328
Granted			106,943
Vested			(39,516)
Forfeited			(64,625)
Unvested at June 30, 2025			160,130

Employee stock purchase plan

During the year ended December 31, 2017, the Board adopted, and the Company’s stockholders approved, the 2017 employee stock purchase plan (the “2017 ESPP”). The number of shares of common stock issuable under the 2017 ESPP was increased by 18,000 on January 1, 2025. The Company issued 3,751 shares under the 2017 ESPP during the six months ended June 30, 2025. As of June 30, 2025, there were 35,799 shares available for issuance under the 2017 ESPP.

Stock-based compensation expense

The Company uses the provisions of ASC 718, Stock Compensation, to account for all stock-based awards to employees and non-employees.

Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period, using the straight-line method.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

The following table presents stock-based compensation expense by award type included within the Company’s condensed consolidated statements of operations and comprehensive loss:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Stock options	$	1,344	$	2,498	$	2,948	$	5,095
Restricted stock units and other stock awards	621		1,813		1,721		3,762
Employee stock purchase plan	24		114		95		228
Stock-based compensation expense included in total operating expenses	$	1,989	$	4,425	$	4,764	$	9,085

The following table presents stock-based compensation expense as reflected in the Company’s condensed consolidated statements of operations and comprehensive loss:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Research and development	$	908	$	2,362	$	2,352	$	4,890
General and administrative	1,081		2,063		2,412		4,195
Stock-based compensation expense included in total operating expenses	$	1,989	$	4,425	$	4,764	$	9,085

As of June 30, 2025, there was $7.6 million and $6.3 million of unrecognized stock-based compensation expense related to unvested stock options and unvested RSUs, respectively, that is expected to be recognized over a weighted-average period of 1.6 years and 2.3 years, respectively.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Risk-free interest rate	4.0	%	4.4	%	4.4	%	4.0	%
Expected dividend yield	—	%	—	%	—	%	—	%
Expected term (years)	5.50		5.49		6.00		5.98
Expected stock price volatility	122	%	118	%	121	%	116	%

Expected volatility for the Company’s common stock is determined based on its historical volatility. The risk-free interest rate is based on the yield of U.S. Treasury securities consistent with the expected term of the option. No dividend yield was assumed as the Company has not historically and does not expect to pay dividends on its common stock. The expected term of the options granted is based on the use of the simplified method, in which the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.

The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

10. Net loss per share

Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without further consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury stock method.

For purposes of the diluted net loss per share calculation, stock options to purchase common stock and unvested RSUs are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented.

The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):


	Three and Six Months Ended June 30, 2025	Three and Six Months Ended June 30, 2024
Stock options	542,488	505,527
Unvested restricted stock units	160,130	197,640

	702,618	703,167

11. Commitments

License agreements

During the three and six months ended June 30, 2025 and 2024, the Company did not record research and development expense related to non-refundable license payments or development milestones.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

12. Segment reporting

The following table presents the significant revenue and expense categories in the Company’s single operating and reporting segment:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Collaboration revenue	$	3,056	$	2,293	$	5,810	$	11,538
Research and development expense:
Emi-Le external costs	4,831		3,077		10,399		5,943
XMT-2056 external costs	1,693		986		3,506		2,047
UpRi external costs	—		129		—		569

Preclinical, discovery, and collaboration external costs	2,060		164		2,778		310
Internal research and development expense (a)	6,726		10,527		15,524		22,172
General and administrative expense	6,334		8,440		13,928		17,868
Stock-based compensation expense	1,989		4,425		4,764		9,085
Restructuring expense	3,940		—		3,940		—

Other:
Interest income	895		2,170		2,059		4,867
Interest expense	(674)		(983)		(1,449)		(1,985)

Segment and consolidated net loss	$	(24,296)	$	(24,268)	$	(48,419)	$	(43,574)

(a) Internal research and development expenses primarily consist of research and development employee compensation, allocated facility-based expenses and other indirect costs.

The measure of segment loss and segment assets used in determining how to manage and allocate resources is net loss as reported within the condensed consolidated statements of operations and cash and cash equivalents and short-term marketable securities as reported within the condensed consolidated balance sheets, respectively. Refer to Note 3, Collaboration agreements, for more information related to the Company’s revenue. Refer to Note 16, Segment reporting, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025, for more information regarding segment information.

13. Restructuring

On May 6, 2025, the Company announced the implementation of a strategic restructuring and reprioritization plan and the 2025 Restructuring. The 2025 Restructuring is expected to be substantially complete by the end of the third quarter of 2025.

As a result of the 2025 Restructuring, the Company estimates that it will incur approximately $4 - 4.5 million in the aggregate in costs consisting of severance and benefit payments, outplacement services and related expenses. Restructuring costs incurred are included within restructuring expenses on the condensed consolidated statements of operations and comprehensive loss. The estimate of costs that the Company expects to incur and the expected timing to complete the 2025 Restructuring are subject to a number of assumptions, and actual results may differ.

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Mersana Therapeutics, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

The following table summarizes the charges incurred in connection with the 2025 Restructuring:


(in thousands)	Severance & Employee Related Costs

Cumulative costs to date	$	3,940
Costs incurred during the three and six months ended June 30, 2025	$	3,940

The following tables summarizes the charges incurred in connection with the Restructuring related to research and development activities and general and administrative activities:


(in thousands)	Three and six months ended June 30, 2025
Research and development related	$	2,919
General and administrative related	$	1,021

Accrued restructuring costs, which are included in accrued expenses on the condensed consolidated balance sheets, were as follows:


(in thousands)	Severance & Employee Related Costs
Balance at December 31, 2024	$	—
Additional expense	3,940
Cash payments	(2,373)

Balance at June 30, 2025	$	1,567

14. Property and equipment sale

The Company reduced its research activities and is eliminating its internal pipeline development efforts pursuant to the strategic restructuring and reprioritization plan announced with the 2025 Restructuring. In June 2025, the Company entered into an agreement to sell its laboratory equipment and received an upfront cash payment of $0.4 million, representing 50% of the sale price. The remaining 50% of the sale price will be receivable after the equipment is delivered. The laboratory equipment is classified as held for sale as of June, 30, 2025, and the carrying value has been reduced to its fair value less costs to sell. As a result, the Company incurred an impairment loss of $0.6 million during the three and six months ended June 30, 2025, which is included within research and development expenses on the condensed consolidated statements of operations and comprehensive loss.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or this Quarterly Report, and the audited financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission, or SEC, on March 3, 2025. Unless otherwise indicated in this Quarterly Report on Form 10-Q, all share amounts and per share amounts, except for the number of authorized shares of common stock or preferred stock or par value of common stock or preferred stock, have been adjusted to reflect a 1-for-25 reverse split of our common stock, or the Reverse Stock Split.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report, including those risks identified under Part II, Item 1A. Risk Factors.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

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Overview

We are a clinical-stage biopharmaceutical company focused on developing antibody-drug conjugates, or ADCs, that offer a clinically meaningful benefit for cancer patients with significant unmet need. We have leveraged decades of industry learnings to develop two proprietary and differentiated ADC platforms: Dolasynthen and Immunosynthen. Dolasynthen is our cytotoxic ADC platform that is designed to generate site-specific, homogeneous ADCs. Dolasynthen allows for drug-to-antibody ratios, or DARs, to be optimized for specific targets and utilizes a proprietary auristatin payload that has been shown clinically to avoid dose-limiting severe neutropenia, peripheral neuropathy and ocular toxicity. Immunosynthen is our proprietary STING (stimulator of interferon genes)-agonist platform that is designed to generate systemically administered ADCs that locally activate STING signaling in both antigen-expressing tumor cells and in tumor-resident immune cells to unlock the anti-tumor potential of innate immune stimulation. We have utilized these platforms to generate ADC product candidates for our company and collaborators that we believe have the potential to be used as monotherapy and in combination with other agents to improve upon today’s standards of care. Our two clinical-stage product candidates are emiltatug ledadotin (XMT-1660), which we refer to as Emi-Le, and XMT-2056.

Emi-Le is a B7-H4-targeting Dolasynthen ADC designed with a precise, target-optimized DAR of 6. We are conducting a Phase 1 open-label clinical trial evaluating the safety and tolerability of Emi-Le. In January 2025, we announced positive initial clinical data as of a December 13, 2024 data cut date from the dose escalation and backfill cohorts of our ongoing Phase 1 clinical trial of Emi-Le in patients with breast cancer, endometrial cancer, ovarian cancer and adenoid cystic carcinoma type 1, or ACC-1.

On June 2, 2025, we announced the presentation in an oral session at the American Society of Clinical Oncology 2025 Annual Meeting, or ASCO, of additional positive interim clinical data as of a March 8, 2025 data cut date from the dose escalation and backfill cohorts of our ongoing Phase 1 clinical trial of Emi-Le.

The following clinical activity data from evaluable patients (those with measurable disease at baseline and at least one post-baseline scan) as of March 8, 2025 were presented at ASCO:

•31% confirmed objective response rate, or ORR, (8/26) across all enrolled tumor types with B7-H4 high tumor expression (defined as a tumor proportion score of 70% or higher) receiving intermediate Emi-Le doses (38.1 milligrams per meter squared, or mg/m2, to 67.4 mg/m2 per cycle).

◦44% confirmed ORR (7/16) in the subset of patients with ≤4 prior lines of therapy.

•56% ORR (5/9, including one unconfirmed response as of the March 8, 2025 data cut date that was subsequently confirmed) in evaluable patients with ACC-1 regardless of dose and B7-H4 expression. Among all ACC-1 patients who were enrolled in the Phase 1 clinical trial, the median progression free survival, or PFS, had not yet been reached as of the March 8, 2025 data cut date. ACC-1 is a rare and aggressive cancer that most frequently originates in the salivary glands. With no approved therapies, median PFS and median overall survival for patients with ACC-1 are reported to be 2-3 months and 2-3 years, respectively.

Furthermore, we observed a 50% ORR (2/4) in evaluable endometrial cancer patients with B7-H4 high tumor expression receiving intermediate doses of Emi-Le.

Additionally, as of the March 8, 2025 data cut date, among evaluable patients with TNBC who received intermediate doses of Emi-Le, ORR, PFS and preliminary overall survival, or OS, data included the following:

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	Patients with B7-H4 high TNBC receiving ≤4 prior treatment lines in advanced/ metastatic setting (n=7)	Patients with B7-H4 low TNBC receiving ≤4 prior treatment lines in advanced/ metastatic setting (n=11)
Received ≥1 Prior Topoisomerase-1 Inhibitor, or Topo-1, ADC	100% (7/7)	73% (8/11)
ORR	29% (2/7)	0% (0/11)
Median PFS	16.0 weeks	6.4 weeks
Median OS	Not reached	5.7 months

We presented the above TNBC data at the European Society for Medical Oncology Breast Cancer 2025 Annual Congress in May 2025.

Additionally, as of the March 8, 2025 data cut date, the dose escalation and backfill cohorts of our Phase 1 clinical trial of Emi-Le had enrolled a total of 141 patients. The enrolled patient population was heavily pretreated, with patients receiving up to 15 and a median of 4 prior lines of therapy. We retrospectively analyzed tumor samples from patients in the trial for B7-H4 expression. As of the March 8, 2025 data cut date, we had determined B7-H4 tumor expression for 116 patients. Among the 116 patients with known B7-H4 tumor expression, approximately 41% had a tumor proportion score of 70% or higher, which we have preliminarily characterized as “B7-H4 High.”

Emi-Le was observed to be generally well tolerated. As of the March 8, 2025 data cut date, the most common treatment-related adverse events, or TRAEs, of any grade across the entire patient population were transient aspartate aminotransferase, or AST, increase (44% of patients), generally asymptomatic and reversible proteinuria (40%), low-grade fatigue (33%) and generally low-grade nausea (31%). The only Grade 3 TRAEs in ≥5% or more of all patients were AST increase (17%), proteinuria (14%) and anemia (6%). Across the entire enrolled patient population, TRAEs leading to discontinuation, dose reduction and dose delay were observed in 3.5%, 16.3% and 23.4% of patients, respectively. No dose-limiting treatment-related neutropenia, neuropathy, ocular toxicity, interstitial lung disease or thrombocytopenia were reported as of the March 8, 2025 data cut date, which we believe differentiates Emi-Le from many other approved and clinical-stage ADCs.

We are currently nearing completion of the dose escalation and backfill cohort portion of our Phase 1 clinical trial of Emi-Le. Additionally, we are currently conducting the dose expansion portion of this trial in patients with TNBC who have received one to four prior treatment lines in the locally advanced or metastatic setting, including at least one prior topo-1 ADC. We have enrolled more than 45 patients across two dose expansion cohorts: the “Dose A” cohort, in which patients are receiving 67.4 mg/m2 of Emi-Le administered every four weeks. or Q4W, and the “Dose B” cohort, in which patients are receiving 80 mg/m2 of Emi-Le Q4W following a loading dose of 44.5 mg/m2 of Emi-Le on days 1 and 8 of the first four-week cycle. We plan to report initial clinical data from the dose expansion portion of our Phase 1 clinical trial of Emi-Le in the second half of 2025.

XMT-2056 is a systemically-administered Immunosynthen ADC targeting a novel human epidermal growth factor receptor 2, or HER2, epitope with a DAR of 8 that we are investigating in a Phase 1 clinical trial designed to assess the safety and tolerability. In late 2023, we announced the resolution of a U.S. Food and Drug Administration, or FDA, clinical hold on our Phase 1 clinical trial of XMT-2056 in previously treated patients with advanced or recurrent solid tumors expressing HER2, including breast, gastric, colorectal and non-small cell lung cancers, and in the first half of 2024, we restarted the trial. We continue to enroll patients in the dose escalation portion of the trial and expect to present initial clinical pharmacodynamic STING activation data in the second half of 2025. In July 2025, we achieved a $15 million development milestone under our Collaboration, Option and License Agreement, or the GSK Collaboration Agreement, with GlaxoSmithKline Intellectual Property (No. 4) Limited, or GSK, for which payment is due to us in the third quarter of 2025.

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On May 6, 2025, we announced the implementation of a strategic restructuring and reprioritization plan. In connection therewith, our board of directors approved certain expense reduction measures, including our commitment to a reduction of approximately 55% of our then-current employee base across all functions, or the 2025 Restructuring. The 2025 Restructuring is expected to be substantially complete by the end of the third quarter of 2025. As part of the strategic restructuring and reprioritization plan we announced with the 2025 Restructuring, we have also reduced our research activities and are eliminating our internal pipeline development efforts. In the near term, we are focusing Emi-Le development efforts on breast cancer to enable the generation of additional safety, tolerability and clinical activity data while continuing to support the dose escalation portion of our Phase 1 clinical trial of XMT-2056 and our ongoing collaborations.

As a result of the 2025 Restructuring, we estimate that we will incur approximately $4 - 4.5 million in the aggregate in costs resulting from cash expenditures consisting of severance and benefit payments, outplacement services and related expenses. The estimate of costs that we expect to incur and the expected timing to complete the 2025 Restructuring are subject to a number of assumptions, and actual results may differ.

In July 2023, we decided to discontinue the development of upifitimab rilsodotin (XMT-1536), or UpRi, and began to wind-down our UpRi-related development activities, including several clinical trials of UpRi, and our regulatory and commercial readiness efforts. At the same time, we announced that our board of directors had approved certain expense reduction measures, including a reduction of approximately 50% of our then-current employee base, or the 2023 Restructuring. Our wind-down of UpRi-related activities and the 2023 Restructuring were substantially complete as of December 31, 2023.

We have entered into a global collaboration pursuant to the GSK Collaboration Agreement that provides GSK an exclusive option to co-develop and commercialize XMT-2056. In addition, we have established strategic research and development collaborations with Janssen Biotech, Inc., or Johnson & Johnson, and Ares Trading, S.A., a wholly owned subsidiary of Merck KGaA, Darmstadt, Germany, or each of these entities, as applicable, Merck KGaA, for the development and commercialization of additional ADC product candidates leveraging our proprietary platforms against a limited number of targets selected by our collaborators. We believe the potential of our ADC product candidates and platforms, supported by our scientific and technical expertise and enabled by our intellectual property strategy, all support our independent and collaborative efforts to discover and develop life-changing ADCs for patients fighting cancer.

Since inception, our operations have focused on building our platforms, identifying potential product candidates, producing drug substance and drug product material for use in preclinical studies, conducting preclinical and toxicology studies, manufacturing clinical trial material and conducting clinical trials, establishing and protecting our intellectual property, staffing our company and raising capital. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through our strategic collaborations, private placements of our convertible preferred stock and public offerings of our common stock, including through our at-the-market, or ATM, equity offering programs.

Since inception, we have incurred significant cumulative operating losses. Our net losses were $48.4 million and $43.6 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $944.0 million. We expect to continue to incur significant expenses and operating losses over the next several years as we:

•continue clinical development and manufacturing activities for Emi-Le and XMT-2056;

•conduct activities under our collaborations with Johnson & Johnson, Merck KGaA and GSK;

•obtain marketing approvals for our current product candidates for which we complete clinical trials;

•develop a sustainable and scalable manufacturing process for our product candidates, including establishing and maintaining commercially viable supply and manufacturing relationships with third parties;

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•address any competing technological and market developments;

•maintain, expand and protect our intellectual property portfolio; and

•hire additional personnel.

As of June 30, 2025, we had cash and cash equivalents of $77.0 million. On July 1, 2025, we repaid approximately $17.9 million to extinguish our indebtedness under the New Credit Facility (as defined below). We believe that our currently available funds will be sufficient to fund our current operating plan commitments into mid-2026. There is substantial doubt about our ability to continue as a going concern. For more information, refer to Liquidity and Capital Resources below and Note 1, Nature of business and basis of presentation, in the notes to the condensed consolidated financial statements. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Impact of Tariffs

The new U.S. administration has announced or imposed a series of tariffs on U.S. trading partners. In response, several countries have threatened or imposed retaliatory measures. While we have not experienced, and do not currently expect to experience, any significant direct impact from these tariffs and retaliatory measures, the full extent of the future impact of these and other threatened measures remains uncertain. We continue to monitor these tariffs and retaliatory measures and their possible effects on our business.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from the sale of products. All of our revenue has been generated from strategic collaborations.

In December 2022, we entered into a collaboration and commercial license agreement, or the 2022 Merck KGaA Agreement, with Ares Trading S.A., a wholly-owned subsidiary of Merck KGaA, Darmstadt, Germany. The 2022 Merck KGaA Agreement provides for the development and commercialization of ADC product candidates utilizing our Immunosynthen platform for up to two target antigens. Merck KGaA is responsible for generating antibodies against the target antigens, and we are responsible for performing bioconjugation activities to create ADCs as well as certain chemistry, manufacturing and controls development and early-stage manufacturing activities at Merck KGaA's cost. Merck KGaA has the exclusive right to and is responsible for the further development and commercialization of these ADC product candidates. During the three months ended June 30, 2025 and 2024 and the six months ended June 30, 2025 and 2024, we recognized $0.4 million, a de minimis amount, $0.5 million, and $3.2 million, respectively, of collaboration revenue related to the 2022 Merck KGaA Agreement.

In August 2022, we entered into the GSK Agreement with GSK to provide GSK with an exclusive option to obtain an exclusive license to co-develop and to commercialize products containing XMT-2056, or Licensed Products. We are responsible for manufacturing, research and early clinical development related to our XMT-2056 program prior to GSK's exercise, if any, of its option. If GSK exercises its option, GSK will have the exclusive right to and will be responsible for the further co-development and commercialization of Licensed Products. During the three and six months ended June 30, 2025, we recognized a de minimis amount and $1.0 million, respectively, of collaboration revenue related to the GSK Agreement. During each of the three and six months ended June 30, 2024, we recognized a de minimis amount of collaboration revenue related to the GSK Agreement.

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In February 2022, we entered into a research collaboration and license agreement with Johnson & Johnson for the development and commercialization of ADC product candidates utilizing our Dolasynthen platform for up to three target antigens. We refer to such agreement, as amended on July 14, 2023 and September 25, 2023, as the Johnson & Johnson Agreement. Johnson & Johnson is responsible for generating antibodies against the target antigens, and we are responsible for performing bioconjugation activities to create ADCs as well as certain chemistry, manufacturing and controls development and early-stage manufacturing activities at Johnson & Johnson's cost. Johnson & Johnson has the exclusive right to and is responsible for the further development and commercialization of these ADC product candidates. In August 2024, we entered into a clinical supply agreement with Johnson & Johnson, or the 2024 Johnson & Johnson CSA, for the clinical manufacturing services related to a licensed ADC for a selected target. In December 2024, Johnson & Johnson terminated without cause its development of ADCs directed to the other two targets it had selected under the Johnson & Johnson Agreement. As a result, there is one ongoing ADC development program directed to the remaining target. During the three months ended June 30, 2025 and 2024 and six months ended June 30, 2025 and 2024, we recognized $3.4 million, $1.8 million, $4.2 million, and $7.9 million, respectively, of collaboration revenue related to performance under the Johnson & Johnson Agreement and the 2024 Johnson & Johnson CSA. The Johnson & Johnson Agreement and the 2024 Johnson & Johnson CSA are referred to as the Johnson & Johnson Agreements.

For the foreseeable future, we expect substantially all of our revenue to be generated from our ongoing collaboration agreements with GSK, Johnson & Johnson and Merck KGaA. Given the uncertain nature and timing of clinical development, we cannot predict when or whether we will receive further milestone payments or any royalty payments under these collaborations.

Expenses

Research and development expenses

Research and development expenses include our drug discovery efforts, manufacturing and the development of our product candidates, which consist of:

•employee-related expenses, including salaries, benefits and stock-based compensation expense;

•costs of funding research and development performed by third parties that conduct research, preclinical activities, manufacturing and clinical trials on our behalf;

•laboratory supplies;

•facility costs, including rent, depreciation and maintenance expenses; and

•upfront and milestone payments under our third-party licensing agreements.

Research and development costs are expensed as incurred. Costs of certain activities, such as manufacturing, preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations and information provided to us by the third parties with whom we contract.

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Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials and manufacturing costs. While, as part of the 2025 Restructuring, we have reduced our research activities and are eliminating our internal pipeline development efforts, we expect that our future research and development costs may increase over current levels, depending on the progress of our clinical development programs. There are numerous factors associated with the successful development and commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at our current stage of development. Additionally, future commercial and regulatory factors beyond our control may impact our clinical development programs and plans.

We have not historically allocated our internal research and development expenses on a program-by-program basis as our employees and other resources are deployed across multiple projects under development. Internal research and development expenses are presented as one total. Our internal research and development costs are primarily personnel-related costs, stock-based compensation costs, and facility costs, including depreciation and lab consumables.

We incur significant external costs for manufacturing our product candidates and platforms and for clinical research organizations that conduct clinical trials on our behalf. We capture these external expenses for each product candidate in clinical development. Costs for our platforms with an associated product candidate in clinical development are typically allocated to our most clinically advanced product candidate based on that platform. All external research and development expenses not attributable to our product candidates in clinical development are captured within preclinical, discovery and collaboration costs. These costs relate to our former preclinical product candidates XMT-2068 and XMT-2175, development of which we have terminated in connection with the 2025 Restructuring; additional earlier discovery stage programs; reimbursable costs incurred in association with our strategic collaborations and certain unallocated costs. The following table summarizes our external research and development expenses, presented by program as described above, and our internal research and development expenses for each of the three and six month periods ended June 30, 2025 and 2024.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Emi-Le external costs	$	4,831	$	3,077	$	10,399	$	5,943
XMT-2056 external costs	1,693		986		3,506		2,047
UpRi external costs	—		129		—		569
Preclinical, discovery and collaboration costs	2,060		164		2,778		310

Internal research and development costs	7,634		12,889		17,876		27,062
Total research and development costs	$	16,218	$	17,245	$	34,559	$	35,931

The successful development of our product candidates is highly uncertain. As such, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of our product candidates. We are also unable to predict when, if ever, we will generate revenue from commercialization and sale of any of our product candidates that obtain regulatory approval. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

•successful completion of preclinical studies and investigational new drug, or IND-enabling studies;

•successful enrollment in and completion of clinical trials;

•receipt of marketing approvals from applicable regulatory authorities;

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•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

•commercializing the product candidates, if and when approved, whether alone or in collaboration with others; and

•continued acceptable safety profile of the drugs following approval.

A change in the outcome of any of these variables with respect to the development, manufacture or commercialization of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.

For example, in July 2023 we announced our decision to discontinue the clinical development of UpRi. Consequently, we have allocated resources previously dedicated to this program into our next-generation ADCs and platforms, Dolasynthen and Immunosynthen. Similarly, as part of our strategic restructuring and reprioritization plan and the 2025 Restructuring, we have reduced our research activities and are eliminating our internal pipeline development efforts. In the near term, we are focusing Emi-Le development efforts on breast cancer while continuing to support the dose escalation portion of our Phase 1 clinical trial of XMT-2056 and our ongoing collaborations. We expect to incur significant research and development expenses over the next several years as we continue our clinical development and manufacturing of Emi-Le and XMT-2056.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other employee-related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development, legal operations, information technology and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and other consulting services.

We expect to incur significant general and administrative expenses over the next several years to support continued development activities and to operate as a public company.

Restructuring expenses

Restructuring expenses consists primarily of severance and benefit payments, outplacement services and related expenses. We estimate that we will incur approximately $4 - 4.5 million in the aggregate of costs as a result of the 2025 Restructuring. During the three and six months ended June 30, 2025, we recognized $3.9 million of such expenses. The 2025 Restructuring is expected to be substantially complete by the end of the third quarter of 2025.

Other income (expense)

Other income (expense) consists primarily of interest expense related to borrowings under our credit facility and associated amortization of the deferred financing costs and the accretion of debt discount. Interest income includes interest earned on cash equivalents and marketable securities.

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Results of Operations

Comparison of the three months ended June 30, 2025 and 2024

The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024, together with the changes in those items:


	Three Months Ended June 30,				Dollar Change
(in thousands)	2025		2024
Collaboration revenue	$	3,056	$	2,293	$	763
Operating expenses:
Research and development	16,218		17,245		(1,027)
General and administrative	7,415		10,503		(3,088)
Restructuring expenses	3,940		—		3,940
Total operating expenses	27,573		27,748		(175)
Other income (expense):
Interest income	895		2,170		(1,275)
Interest expense	(674)		(983)		309
Total other income, net	221		1,187		(966)


Net loss	$	(24,296)	$	(24,268)	$	(28)

Collaboration Revenue

Collaboration revenue increased by $0.8 million, from $2.3 million for the three months ended June 30, 2024 to $3.1 million for the three months ended June 30, 2025. The increase was primarily due to increases in collaboration revenue recognized of $1.5 million and $0.4 million under the Johnson & Johnson Agreements and 2022 Merck KGaA Agreement, respectively, partially offset by a decrease in collaboration revenue recognized of $1.1 million under the GSK Agreement.

Research and Development Expense

Research and development expense decreased by $1.0 million, from $17.2 million for the three months ended June 30, 2024 to $16.2 million for the three months ended June 30, 2025.

The decrease in research and development expense was primarily due to a decrease of $4.8 million related to employee compensation (including stock-based compensation), largely driven by reduced headcount, including as a result of the 2025 Restructuring, partially offset by increases of $2.3 million and $0.4 million related to clinical development activities for Emi-Le and XMT-2056, respectively, and an increase of $1.2 million related to CMC activities incurred for our collaboration partners.

General and Administrative Expense

General and administrative expense decreased by $3.1 million, from $10.5 million for the three months ended June 30, 2024 to $7.4 million for the three months ended June 30, 2025. The decrease in general and administrative expense was primarily due to a decrease of $1.9 million related to employee compensation (including stock-based compensation) as a result of reduced headcount, including as a result of the 2025 Restructuring, and a decrease of $1.2 million related to consulting and professional services fees.

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Total Other Income, net

Total other income, net decreased by $1.0 million, from $1.2 million for the three months ended June 30, 2024 to $0.2 million for the three months ended June 30, 2025. The decrease was primarily due to less interest income earned on cash equivalents and marketable securities.

Comparison of the six months ended June 30, 2025 and 2024

The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024:


	Six Months Ended June 30,				Dollar Change
(in thousands)	2025		2024
Collaboration revenue	$	5,810	$	11,538	$	(5,728)
Operating expenses:
Research and development	34,559		35,931		(1,372)
General and administrative	16,340		22,063		(5,723)
Restructuring expenses	3,940		—		3,940
Total operating expenses	54,839		57,994		(3,155)
Other income (expense):
Interest income	2,059		4,867		(2,808)
Interest expense	(1,449)		(1,985)		536
Total other income, net	610		2,882		(2,272)


Net loss	$	(48,419)	$	(43,574)	$	(4,845)

Collaboration Revenue

Collaboration revenue decreased by $5.7 million, from $11.5 million during the six months ended June 30, 2024 to $5.8 million during the six months ended June 30, 2025. The decrease was primarily due to decreases in collaboration revenue recognized of $3.7 million and $2.7 million under the Johnson & Johnson Agreements and 2022 Merck KGaA Agreement, respectively, partially offset by an increase in collaboration revenue recognized of $0.9 million under the GSK Agreement.

Research and Development Expense

Research and development expense decreased by $1.4 million, from $35.9 million for the six months ended June 30, 2024 to $34.6 million for the six months ended June 30, 2025. The decrease in research and development expense was primarily due to a decrease of $7.4 million related to employee compensation (including stock-based compensation), largely driven by reduced headcount, including as a result of the 2025 Restructuring, and a decrease of $1.0 million related to internal pipeline development, partially offset by increases of $4.7 million and $1.1 million related to clinical development activities for Emi-Le and XMT-2056, respectively, and an increase of $1.3 million related to CMC activities incurred for our collaboration partners.

General and Administrative Expense

General and administrative expense decreased by $5.7 million, from $22.1 million during the six months ended June 30, 2024 to $16.3 million during the six months ended June 30, 2025. The decrease in general and administrative expense was primarily due to a decrease of $3.4 million related to employee compensation (including stock-based compensation) as a result of reduced headcount, including as a result of the 2025 Restructuring, and a decrease of $2.3 million related to consulting and professional services fees.

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Total Other Income, net

Total other income, net decreased by $2.3 million, from $2.9 million during the six months ended June 30, 2024 to $0.6 million during the six months ended June 30, 2025. The decrease was primarily due to less interest income earned on cash equivalents and marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

We have financed our operations to date primarily through our strategic collaborations, private placements of our convertible preferred stock and public offerings of our common stock, including our initial public offering, our follow-on public offerings in 2019 and 2020 and our ATM equity offering programs. As of June 30, 2025, we had cash and cash equivalents of $77.0 million, prior to the repayment of our debt on July 1, 2025, as explained below. In addition to our existing cash and cash equivalents, we are eligible to earn milestone and other payments under our ongoing collaboration agreements with GSK, Johnson & Johnson and Merck KGaA. Our ability to earn the milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and, as such, are uncertain at this time.

In November 2022, we entered into a sales agreement, or the November 2022 ATM, with Cowen and Company, LLC, or Cowen, as sales agent, under which we were able to offer and sell to the public through Cowen up to $150.0 million of our common stock from time to time at prevailing market prices. During the six months ended June 30, 2024, we sold 41,467 shares of common stock under the November 2022 ATM, resulting in gross and net proceeds of $6.0 million and $5.8 million, respectively. As of December 31, 2024, the November 2022 ATM was no longer available for the offer and sale of additional shares of common stock due to the expiration of the applicable registration statement.

In February 2024, we entered into a sales agreement, or the February 2024 ATM, with Cowen, as sales agent, under which we are able to offer and sell to the public through Cowen up to $100.0 million of our common stock from time to time at prevailing market prices. We did not sell any shares of common stock pursuant to the February 2024 ATM during the six months ended June 30, 2025 and 2024 and $100.0 million remained unsold and available for sale under the February 2024 ATM as of June 30, 2025.

On October 29, 2021, we entered into a loan and security agreement with Oxford Finance LLC as the collateral agent and a lender, Silicon Valley Bank, or former SVB, as a lender, and the other lenders from time to time a party thereto, or collectively the Lenders. In March 2023, Silicon Valley Bridge Bank, N.A., or SVBB, as successor in interest to former SVB, replaced former SVB as a Lender, and then Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, or SVB, which assumed all deposits and loans of SVBB, subsequently replaced SVBB as a lender. We refer to this loan and security agreement, as amended on February 17, 2022, October 17, 2022, December 27, 2022 and March 23, 2023, as the New Credit Facility. As of June 30, 2025, we had borrowed $25.0 million under the New Credit Facility, and no additional borrowing amounts were available to us under the New Credit Facility. Further, we had repaid $8.3 million of principal under the New Credit Facility as of June 30, 2025.

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On July 1, 2025, we entered into a letter agreement with the Lenders providing for our repayment of all amounts owed under the New Credit Facility. On July 1, 2025, we paid approximately $17.9 million, including $16.7 million of principal, $1.1 million for the final payment, and $0.1 million of interest, relieving all of our indebtedness and obligations to the Lenders under the New Credit Facility.

Cash Flows

The following table provides information regarding our cash flows for the six months ended June 30, 2025 and 2024:


	Six Months Ended June 30,
(in thousands)	2025		2024
Net cash used in operating activities	$	(51,928)	$	(54,512)
Net cash provided by (used in) investing activities	27,395		(67,033)
Net cash (used in) provided by financing activities	(6,245)		5,982
Decrease in cash, cash equivalents and restricted cash	$	(30,778)	$	(115,563)

Net Cash Used in Operating Activities

Net cash used in operating activities was $51.9 million during the six months ended June 30, 2025 and primarily consisted of a net loss of $48.4 million, adjusted for changes in our net working capital, deferred revenue related to our collaboration agreements, and other non-cash items, including stock-based compensation of $4.8 million. Net cash used in operating activities was $54.5 million during the six months ended June 30, 2024 and primarily consisted of a net loss of $43.6 million, adjusted for changes in our net working capital, deferred revenue related to our collaboration agreements, and other non-cash items, including stock-based compensation of $9.1 million and net amortization of premiums and discounts on marketable securities of $2.4 million.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $27.4 million during the six months ended June 30, 2025 as compared to net cash used in investing activities of $67.0 million during the six months ended June 30, 2024. During the six months ended June 30, 2025, net cash provided by investing activities consisted of maturities of marketable securities. During the six months ended June 30, 2024, net cash used in investing activities consisted primarily of purchases of marketable securities, partially offset by maturities of marketable securities.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities was $6.2 million during the six months ended June 30, 2025 as compared to net cash provided by financing activities of $6.0 million during the six months ended June 30, 2024. During the six months ended June 30, 2025, net cash used in financing activities consisted primarily of debt principal payments. During the six months ended June 30, 2024, net cash provided by financing activities consisted primarily of proceeds from sales of shares of common stock under our November 2022 ATM of $5.8 million.

Funding Requirements

We expect our cash expenditures to increase in connection with our ongoing activities, particularly as we continue the development and manufacturing of, conduct clinical trials of and seek marketing approval for our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to drug sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators.

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As of June 30, 2025, we had cash and cash equivalents of $77.0 million, and on July 1, 2025, we repaid approximately $17.9 million to extinguish our indebtedness under the New Credit Facility. We believe that our currently available funds will be sufficient to fund our current operating plan commitments into mid-2026. There is substantial doubt about our ability to continue as a going concern. We will need to raise additional funds, which could be through a combination of equity offerings, debt financings, other third-party funding, and strategic collaborations and licensing transactions. If we are unable to obtain future funding when needed, we may be forced to delay, reduce or eliminate some or all of our develop programs, which could adversely affect our business prospects, or we may be unable to continue operations. There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:

•the scope, progress, results and costs of developing Emi-Le and XMT-2056 and conducting clinical trials;

•the cost of manufacturing Emi-Le and XMT-2056 for clinical trials in preparation for regulatory approval and in preparation for commercialization;

•the timing of, and the costs involved in, obtaining regulatory approvals for Emi-Le and XMT-2056 if clinical trials are successful;

•the cost of commercialization activities for Emi-Le and XMT-2056, if such product candidates are approved for sale, including manufacturing, marketing, sales and distribution costs;

•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

•the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we obtain and the timing and receipt of any such payments;

•the timing, receipt and amount of sales of, or royalties on, our future products, if any, or products developed by our collaborators;

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of any such litigation;

•the emergence of competing cancer therapies and other adverse market developments;

•the requirement for or the cost of developing any companion diagnostics and/or complementary diagnostics;

•our ability to complete the 2025 Restructuring;

•the incurrence of other cash or non-cash charges or cash expenditures not currently contemplated due to events that may occur as a result of, or in association with, the 2025 Restructuring; and

•the risk that our strategic restructuring and reprioritization efforts may not generate their intended benefits to the extent or as quickly as anticipated.

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Drug development is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve drug sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, that we can generate substantial product revenues, we expect to finance our cash needs through a combination of strategic collaborations, licensing arrangements, equity offerings and debt financings. We have the potential to earn cash milestone payments in connection with our ongoing agreements with GSK, Johnson & Johnson and Merck KGaA, if research and development activities are successful under our collaborations with those parties. If we raise funds through additional strategic collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Future additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Contractual Obligations

During the six months ended June 30, 2025, other than our repayment of $6.3 million of principal under the New Credit Facility, there were no material changes to our contractual obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 3, 2025.

Critical Accounting Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates. During the six months ended June 30, 2025, there were no material changes to our critical accounting estimates as reported under the heading “Critical Accounting Policies and Significant Judgements and Estimates” in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 3, 2025.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risks

We are exposed to market risk related to changes in interest rates. As of June 30, 2025, we had cash and cash equivalents of $77.0 million. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents and, at times, marketable securities are generally invested in money market funds, U.S. Treasury obligations, commercial paper, corporate bonds and U.S. government agency securities. However, we believe that due to the short-term duration of our investment portfolio and low-risk profile of our investments, an immediate 100 basis points change in the prime rate would not have a material effect on the fair market value of our investments portfolio.

Foreign Currency Exchange Rate Risks

As of June 30, 2025, we were not exposed to market risk related to changes in foreign currency exchange rates, but we may contract with vendors that are located in Asia and Europe and may be subject to fluctuations in foreign currency rates at that time.

Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Regardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors. We are not currently party to any material legal proceedings.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described below. The following information about these risks and uncertainties, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, and our 2024 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 3, 2025, including our consolidated financial statements and related notes thereto, should be carefully considered before making any decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. We cannot provide assurance that any of the events discussed below will not occur.

Risks Related to our Financial Position and Need for Additional Capital

We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or future commercialization efforts.

Our cash and cash equivalents were $77.0 million as of June 30, 2025. On July 1, 2025, we repaid approximately $17.9 million to extinguish our indebtedness under our loan and security agreement with Oxford Finance LLC as the collateral agent and a lender, Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as a lender, and the other lenders party thereto, which we refer to as the New Credit Facility. We believe that our current cash and cash equivalents will be sufficient to fund our current operating plan commitments into mid-2026. We have utilized substantial amounts of cash since our inception and expect that we will continue to expend substantial resources for the foreseeable future developing Emi-Le and XMT-2056. These expenditures may include costs associated with conducting clinical trials, potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any, and potentially acquiring new technologies. In addition, other unanticipated costs may arise. Because the outcome of our ongoing and future clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates. Our costs will increase if we experience any delays in our clinical trials for our product candidates, including delays in enrollment of patients. We expect to incur an aggregate of approximately $4.0 - $4.5 million of costs in connection with the reduction in force of approximately 55% of our then-current employee base across all functions, or the 2025 Restructuring. We may also incur costs associated with operating as a public company, hiring additional personnel and expanding our facilities in the future.

Our future capital requirements depend on many factors, including:

Mersana Therapeutics, Inc. 10-Q