| Item 1.01 | Entry Into a Material Definitive Agreement. |
On December 22, 2022, Mersana Therapeutics, Inc.
(“Mersana” or the “Company”) and Ares Trading S.A. (“MRKDG”), a wholly-owned subsidiary of Merck KGaA,
Darmstadt, Germany, entered into a Collaboration and Commercial License Agreement (the “Agreement”). Pursuant to the Agreement,
Mersana will grant MRKDG an exclusive license to use Mersana’s proprietary technology to develop, manufacture and commercialize
Immunosynthen antibody-drug conjugates (“ADCs”) directed to up to two specific target antigens selected by MRKDG within a
certain period following the effective date of the Agreement (the “Designated Targets”). Immunosynthen is Mersana’s
proprietary stimulator of interferon gene (“STING”) agonist ADC platform designed to generate systemically administered ADCs
that locally activate STING signaling in both tumor-resident immune cells and in antigen-expressing tumor cells. MRKDG has already selected
the first Designated Target under the Agreement.
Under the terms of the Agreement, the parties
will conduct up to two research programs. Each research program will involve activities related to Immunosynthen ADCs for a selected Target
(each such ADC developed under the Agreement, a “Licensed ADC”) until the submission of an Investigational New Drug Application
(or foreign equivalents) for a Licensed ADC directed at such Designated Target (each, a “Licensed Product”) or until the earlier
expiration of the defined research period. Each research program will follow a research plan agreed between the parties. For each Designated
Target, MRKDG is responsible for providing up to a specified number of antibodies against such Designated Target, and Mersana is responsible
for conjugating such antibodies using its Immunosynthen platform to create Licensed ADCs. Each party will be responsible for their own
costs under the research programs. In addition, Mersana will be responsible for certain chemistry, manufacturing and controls development
and certain manufacturing activities for the Licensed ADCs, up to and including manufacturing of drug substance for Licensed ADCs to be
used in certain preclinical studies and clinical trials, in each case at MRKDG’s expense, some of which will be prepaid by MRKDG.
Except as provided above, MRKDG is solely responsible for in vitro and in vivo characterization of any Licensed ADCs, other
preclinical work, and all clinical development and potential commercialization activities relating to any resulting Licensed Products.
Under the terms of the Agreement, Mersana
will receive an upfront payment of $30.0 million within forty-five days of December 22, 2022. Certain development and regulatory
milestones will be payable by MRKDG to Mersana for the research programs, including upon certain discovery milestones, initiation of certain
clinical trials, and regulatory approval of Licensed Products in certain geographies, with an aggregate total of up to $200 million in
the event MRKDG advances Licensed Products directed to both Designated Targets to regulatory approval.
In the event the commercialization of the
Licensed Product results in commercial sales, commercial milestones will be payable by MRKDG to Mersana for each program upon the achievement
of specified aggregate sales thresholds for a Licensed Product for the applicable Designated Target, with an aggregate total of up to
$600 million in the event Licensed Products directed to both Designated Targets are commercialized by MRKDG. In addition, the Company
is eligible to receive tiered royalties at percentages ranging from the single digits to the low double digits on future net sales of
Licensed Products.
MRKDG’s royalty
obligations continue with respect to each country and each Licensed Product until the latest of (i) the date on which such Licensed
Product is no longer covered by certain intellectual property rights in such country, (ii) the 10th anniversary of the first commercial
sale of such Licensed Product in such country and (iii) the expiration of marketing or data exclusivity for such Licensed Product
in such country.
Under the terms of the
Agreement, subject to certain exceptions and for an agreed period of time, the Company will not, itself or through third parties, research,
develop, manufacture or commercialize other ADCs utilizing its Immunosynthen platform that are directed to the Designated Targets. The
Company and MRKDG will form a joint research committee, joint manufacturing committee, and joint intellectual property committee responsible
for coordinating activities under the Agreement.
Each party has the right
to sublicense its rights under the Agreement subject to certain conditions, and the Agreement contains various representations, warranties,
covenants, dispute resolution mechanisms, indemnities and other provisions customary for transactions of this nature.
The Agreement will remain in effect, unless
earlier terminated, until the expiration of the last-to-expire royalty term for the last Licensed Product or, if MRKDG does not advance
any Licensed Products, upon the expiration of the last-to-expire research program. MRKDG may, at its convenience, terminate the Agreement
in its entirety or on a Designated Target-by-Designated Target basis upon certain notice to the Company. Either the Company or MRKDG may
terminate the Agreement for the other party’s insolvency or certain uncured breaches. In lieu of terminating the Agreement, in the
event MRKDG is entitled to terminate the Agreement due to an uncured material breach by the Company, MRKDG may make an election, as its
sole and exclusive remedy with respect to the applicable material breach of the Agreement by the Company, to invoke a specified financial
penalty impacting one or more future payments that may become payable to the Company following such uncured material breach. The Company
may terminate the Agreement with respect to a Designated Target in the event of certain failures by MRKDG to progress the corresponding
research program. Additionally, the Company may terminate the Agreement if MRKDG or any of its sublicensees or affiliates challenge, subject
to certain exceptions, the validity, enforceability, of patentability of certain of the Company’s patents.
The foregoing is only
a summary description of the terms of the Agreement, does not purpose to be complete and is qualified in its entirety by reference to
the Agreement, which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
2022.