Mersana Therapeutics (MRSN) 10-Q 9 May 19 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 08, 2019
Document and Entity Information
Entity Registrant Name	Mersana Therapeutics, Inc.
Entity Central Index Key	0001442836
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Common Stock, Shares Outstanding		47,716,857

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 137,279	$ 59,634
Short-term marketable securities		10,497
Accounts receivable	468	459
Prepaid expenses and other current assets	3,326	3,715
Total current assets	141,073	74,305
Property and equipment, net	2,868	2,694
Operating lease right-of-use assets	3,944
Other assets	1,503	1,503
Total assets	149,388	78,502
Current liabilities:
Accounts payable	6,965	10,727
Accrued expenses	7,938	12,375
Deferred revenue	5,604	46,196
Other liabilities	83	127
Operating lease liabilities	2,005
Total current liabilities	22,595	69,425
Operating lease liabilities, net of current portion	2,375
Other liabilities, net of current portion	346	282
Total liabilities	25,316	69,707
Commitments (Note 11)
Stockholders' equity
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
Common stock, $0.0001 par value; 175,000,000 shares authorized; 47,684,164 and 23,234,472 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	5	3
Additional paid-in capital	266,332	172,966
Accumulated other comprehensive loss		(8)
Accumulated deficit	(142,265)	(164,166)
Total stockholders’ equity	124,072	8,795
Total liabilities and stockholders’ equity	$ 149,388	$ 78,502

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	175,000,000	175,000,000
Common stock, shares issued	47,684,164	23,234,472
Common stock, shares outstanding	47,684,164	23,234,472

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Condensed Consolidated Statements of Operations and Comprehensive Loss
Collaboration revenue	$ 41,035	$ 3,064
Operating expenses:
Research and development	15,143	12,256
General and administrative	4,443	3,571
Total operating expenses	19,586	15,827
Other income:
Interest income	452	360
Total other income	452	360
Net income (loss)	21,901	(12,403)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities	8	(13)
Comprehensive income (loss)	21,909	(12,416)
Net income (loss) attributable to common stockholders - basic	21,901	(12,403)
Net income (loss) attributable to common stockholders - diluted	$ 21,901	$ (12,403)
Net income (loss) per share attributable to common stockholders — basic (in dollars per share)	$ 0.72	$ (0.54)
Net income (loss) per share attributable to common stockholders — diluted (in dollars per share)	$ 0.70	$ (0.54)
Weighted-average number of shares of common stock used in net income (loss) per share attributable to common stockholders — basic (in shares)	30,299,650	22,816,521
Weighted-average number of shares of common stock used in net income (loss) per share attributable to common stockholders — diluted (in shares)	31,461,696	22,816,521
Type of Revenue	mrsn:CollaborationMember	mrsn:CollaborationMember

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Stockholders' (Deficit) Equity - USD ($) $ in Thousands	Common stock	Additional paid-in capital	Accumulated other comprehensive income/(loss)	Accumulated deficit	Total
Balance at beginning of period (in shares) at Dec. 31, 2017	22,765,017
Balance at beginning of period at Dec. 31, 2017	$ 3	$ 168,018	$ (149)	$ (97,878)	$ 69,994
Increase (Decrease) in Stockholders' Equity
Cumulative effect adjustment for adoption of ASC 606				(2,031)	(2,031)
Exercise of stock options (in shares)	104,945
Exercise of stock options		255			255
Stock-based compensation expense		745			745
Other comprehensive income (loss)			(13)		(13)
Net income (loss)				(12,403)	(12,403)
Balance at end of period (in shares) at Mar. 31, 2018	22,869,962
Balance at end of period at Mar. 31, 2018	$ 3	169,018	(162)	(112,312)	56,547
Balance at beginning of period (in shares) at Dec. 31, 2017	22,765,017
Balance at beginning of period at Dec. 31, 2017	$ 3	168,018	(149)	(97,878)	69,994
Increase (Decrease) in Stockholders' Equity
Net income (loss)					(64,257)
Balance at end of period (in shares) at Dec. 31, 2018	23,234,472
Balance at end of period at Dec. 31, 2018	$ 3	172,966	(8)	(164,166)	8,795
Balance at beginning of period (in shares) at Mar. 31, 2018	22,869,962
Balance at beginning of period at Mar. 31, 2018	$ 3	169,018	(162)	(112,312)	56,547
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)	247,776
Exercise of stock options		470			470
Stock-based compensation expense		958			958
Other comprehensive income (loss)			72		72
Net income (loss)				(12,354)	(12,354)
Balance at end of period (in shares) at Jun. 30, 2018	23,117,738
Balance at end of period at Jun. 30, 2018	$ 3	170,446	(90)	(124,666)	45,693
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)	43,137
Exercise of stock options		128			128
Stock-based compensation expense		1,053			1,053
Other comprehensive income (loss)			48		48
Net income (loss)				(17,069)	(17,069)
Balance at end of period (in shares) at Sep. 30, 2018	23,160,875
Balance at end of period at Sep. 30, 2018	$ 3	171,627	(42)	(141,735)	29,853
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)	31,411
Exercise of stock options		65			65
Purchase of common stock under ESPP (in shares)	42,186
Purchase of common stock under ESPP		146			146
Stock-based compensation expense		1,128			1,128
Other comprehensive income (loss)			34		34
Net income (loss)				(22,431)	(22,431)
Balance at end of period (in shares) at Dec. 31, 2018	23,234,472
Balance at end of period at Dec. 31, 2018	$ 3	172,966	(8)	(164,166)	$ 8,795
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)	12,192				12,192
Exercise of stock options		42			$ 42
Issuance of common stock under public offering, net of issuance costs (in shares)	24,437,500
Issuance of common stock under public offering, net of issuance costs	$ 2	92,160			92,162
Stock-based compensation expense		1,164			1,164
Other comprehensive income (loss)			$ 8		8
Net income (loss)				21,901	21,901
Balance at end of period (in shares) at Mar. 31, 2019	47,684,164
Balance at end of period at Mar. 31, 2019	$ 5	$ 266,332		$ (142,265)	$ 124,072

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Stockholders' (Deficit) Equity (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity
Issuance costs	$ 5,587

Condensed Consolidated Statem_4

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net income (loss)	$ 21,901	$ (12,403)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	337	258
Loss on disposal of fixed assets		20
Net amortization of premiums and discounts on investments	4	(157)
Stock-based compensation	1,164	745
Non-cash rent expense	26	13
Changes in operating assets and liabilities:
Accounts receivable	(9)	496
Prepaid expenses and other current assets	389	(1,086)
Other assets		(1,433)
Accounts payable	(3,444)	(617)
Accrued expenses	(4,463)	(1,249)
Deferred revenue	(40,592)	(1,977)
Net cash used in operating activities	(24,687)	(17,390)
Cash flows from investing activities
Maturities of marketable securities	10,500	23,165
Purchase of property and equipment	(372)	(267)
Net cash provided by investing activities	10,128	22,898
Cash flows from financing activities
Net proceeds from public offering of common stock	92,162
Proceeds from exercise of stock options	42	255
Net cash provided by financing activities	92,204	255
Increase in cash, cash equivalents and restricted cash	77,645	5,763
Cash, cash equivalents and restricted cash, beginning of period	60,005	26,962
Cash, cash equivalents and restricted cash, end of period	137,650	32,725
Supplemental disclosures of non-cash activities:
Purchases of property and equipment included in accounts payable and accrued expenses	26	320
Property and equipment acquired under finance leases	$ 429
Adjustment to accumulated deficit and deferred revenue upon adoption of Topic 606		$ 2,031

Nature of business and basis of

Nature of business and basis of presentation	3 Months Ended
	Mar. 31, 2019
Nature of business and basis of presentation
Nature of business and basis of presentation	1. Nature of business and basis of Mersana Therapeutics, Inc. is a clinical stage biopharmaceutical company located in Cambridge, Massachusetts. The Company is focused on developing antibody drug conjugates (ADCs) that offer a clinically meaningful benefit for cancer patients with significant unmet need. The Company has leveraged over 20 years of industry learning in the ADC field to develop proprietary technologies that enable it to design ADCs to have improved efficacy, safety and tolerability relative to existing ADC therapies. The Company’s novel platform, Dolaflexin, has been used to generate proprietary ADC product candidates to address patient populations that are not currently amenable to treatment with traditional ADC‑based therapies. The Company’s lead product candidate, XMT‑1536, is an ADC targeting NaPi2b, an antigen broadly expressed in ovarian cancer and non small cell lung cancer (NSCLC). The first patient was dosed on XMT‑1536 in late 2017 and the study is currently in Phase 1 dose escalation in ovarian cancer, NSCLC and other orphan indications where a majority of patients express NaPi2b including endometrial, papillary renal, papillary thyroid, and salivary duct cancers. In January 2019, following a strategic evaluation by the Company of the competitive environment for HER2-targeted therapies, the Company and its former partner, Takeda Pharmaceutical Company Limited, or Takeda, discontinued the development of XMT-1522, which was then being studied in the dose escalation of a Phase 1 clinical trial. The Company’s collaboration agreements with Takeda were terminated during the first quarter of 2019. 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. The Company has incurred cumulative net losses since inception. In the first quarter of 2019, the Company recognized deferred revenue of $39,965 as a result of the above-mentioned discontinuation of the partnerships with Takeda, resulting in net income of $21,901 for the three months ended March 31, 2019. Cash used in operations for the period was $24,687. The Company’s net loss was $64,257 for the year ended December 31, 2018. The Company expects to continue to incur operating losses for at least the next several years. As of March 31, 2019, the Company had an accumulated deficit of $ 142,265 . The future success of the Company is dependent on its ability to identify and develop its product candidates, and ultimately upon its ability to attain profitable operations. The Company has devoted substantially all of its financial resources and efforts to research and development and general and administrative expense to support such research and development. The Company’s net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on the Company’s stockholders' equity and working capital. The Company believes that its existing cash and cash equivalents as of March 31, 2019 will enable it to fund its operating plan through at least mid 2021. The Company’s unaudited condensed consolidated financial statements have been prepared 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). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles 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 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, 2018 and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 8, 2019. 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 March 31, 2019, the results of its operations for the three months ended March 31, 2019 and 2018 and cash flows for the three months ended March 31, 2019 and 2018. Such adjustments are of a normal and recurring nature, other than the adjustments associated with the adoption of ASC 842, Leases (ASC 842). The results for the three months ended March 31, 2019 are not necessarily indicative of the results for the year ending December 31, 2019, or for any future period. Effective January 1, 2019, the Company adopted the requirements of ASC 842 using the modified retrospective method as discussed below in Note 2: Summary of Significant Accounting Policies.

Summary of significant accounti

Summary of significant accounting policies	3 Months Ended
	Mar. 31, 2019
Summary of significant accounting policies
Summary of significant accounting policies	2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include those of the Company and its subsidiary, Mersana Securities Corp. All intercompany balances and transactions have been eliminated. 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 performance obligations and estimated selling prices within its revenue arrangements, accrued 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 in deciding how to allocate resources and assess performance. The Company operates and manages its business as a single operating segment, which is the business of discovering and developing ADCs. Summary of Accounting Policies The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2019 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2018 Annual Report on Form 10-K, except as noted below with respect to the Company’s lease accounting policies and as disclosed within the “Recently issued accounting pronouncements” section below. 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 Topic 820 Fair Value Measurement (ASC 820) 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. 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, 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. The following amounts were presented as cash, cash equivalents and restricted cash: Three months ended Three months ended March 31, 2019 March 31, 2018 Beginning End Beginning End of period of period of period of period Cash and cash equivalents $ 59,634 $ 137,279 $ 26,591 $ 32,354 Restricted cash included in other assets 371 371 371 371 Total cash, cash equivalents and restricted cash per statement of cash flows $ 60,005 $ 137,650 $ 26,962 $ 32,725 Marketable Securities Short-term marketable securities consist of investments with maturities greater than three months and less than one year from the balance sheet date. Long-term marketable securities consist of investments with maturities greater than one year that are not expected to be used to fund current operations. The Company classifies all of its marketable securities as available-for-sale. Accordingly, these investments are recorded at fair value. Amortization and accretion of discounts and premiums are recorded as interest income within other income. Unrealized gains and losses on available-for-sale securities are included in other comprehensive loss as a component of stockholders’ equity until realized. Other Assets The Company recorded other assets of $1,503 as of March 31, 2019 and December 31, 2018, comprised of restricted cash of $371 held as security deposits for a standby letter of credit and $1,132 held by a service provider. Leases Consistent with ASC 842, the Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use lease assets (ROU assets), current portion of lease obligations and long-term lease obligations on the Company’s consolidated balance sheets. Assets subject to finance leases are included in property and equipment, and the related lease obligation is included in other current liabilities and other long-term liabilities on the Company’s consolidated balance sheets. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while expense for financing leases is recognized as depreciation expense and interest expense using the effective interest method. The Company elected the short-term lease recognition exemption for short-term leases, which allows the Company to not recognize lease liabilities and ROU assets on the consolidated balance sheets for leases with an original term of twelve months or less. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU lease asset also includes lease payments made and lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842), which replaced the guidance in ASC 840, Leases . The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This standard is effective for the Company in the fiscal year beginning after December 15, 2018. The Company adopted the new standard effective January 1, 2019 using the modified retrospective method as of the beginning of the period of adoption. The Company has elected the package of practical expedients permitted in ASC Topic 842. Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC Topic 842, (b) whether classification of the operating leases would be different in accordance with ASC Topic 842, or (c) whether the unamortized initial direct costs would have met the definition of initial direct costs in ASC Topic 842 at lease commencement. The Company also elected not to include leases with an initial term of twelve months or less in the recognized ROU asset and lease liabilities. As a result of the adoption of the new lease accounting guidance, the Company recognized on January 1, 2019 (a) an operating lease liability of $4,778, and (b) an operating ROU asset of $4,369 which represents the lease liability of $4,778 adjusted for deferred rent of $409. This standard had a material impact on the Company’s balance sheets but had no impact on the Company’s results of operations and cash flows from operations. The most significant impact was the recognition of ROU assets and lease obligations for operating leases. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting . This guidance simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, and early adoption is permitted. The guidance per ASU 2018-07 is to be adopted by using a modified retrospective approach with the cumulative effect of initially applying the new standard at the date of initial application. The Company adopted the new standard effective January 1, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808):Clarifying the Interaction between Topic 808 and Topic 606 . The main provisions of ASU 2018-18 include: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and (ii) precluding the presentation of transactions with collaborative arrangement participants that are not directly related to sales to third parties together with revenue. This guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption is permitted. The guidance per ASU 2018-18 is to be adopted retrospectively to the date of initial application of Topic 606. The Company is currently evaluating the potential impact that ASU No. 2018-18 may have on its financial position and results of operations.

Collaboration agreements

Collaboration agreements	3 Months Ended
	Mar. 31, 2019
Collaboration Agreements
Collaboration agreements	3. Collaboration agreements Merck KGaA In June 2014, the Company entered into a Collaboration and Commercial License Agreement with Merck KGaA (the Merck KGaA Agreement). Upon the execution of the agreement, Merck KGaA paid the Company a nonrefundable technology access fee of $12,000 for the right to develop ADCs directed to six exclusive targets over a specified period of time. No additional fees are due when a target is designated and the commercial license to the target is granted. Merck KGaA will be responsible for the product development and marketing of any products resulting from this collaboration. All six targets were designated prior to 2018. The Company is eligible to receive milestones under the Merck KGaA Agreement. The next potential milestone payment is a development milestone of $500 on Merck KGaA’s designation of a preclinical development candidate for any target. Revenue would be recognized upon achievement of the milestone. Under the terms of the Merck KGaA Agreement, the Company and Merck KGaA develop research plans to evaluate Merck KGaA's antibodies as ADCs incorporating the Company's technology. The Company receives fees for its efforts under the research plans. The goal of the research plans is to provide Merck KGaA with sufficient information to formally nominate a development candidate and begin IND-enabling studies or cease development on the designated target. In May 2018, the Company entered into a Supply Agreement with Merck KGaA (the Merck KGaA Supply Agreement). Under the terms of the agreement, the Company will provide Merck KGaA with materials that could be used for IND-enabling studies and clinical trials. The Company receives fees and reimbursement for its efforts under the Merck KGaA Supply Agreement. Accounting Analysis The Company identified the following performance obligations under the agreement: (i) exclusive license and research services for six designated targets, (ii) rights to future technological improvements and (iii) participation of project team leaders and providing joint research committee services. The Company recognizes revenue related to the exclusive license and the research and development services over the estimated period of the research and development 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. To the extent that the Company receives fees for the research and development services as they are performed, these amounts are recorded as deferred revenue. Revenue related to future technological improvements and joint research committee services will be recognized ratably over the respective performance periods (which in the case of the joint research committee services approximate the time and cost incurred each quarter), which are 10 and five years, respectively. The Company continues to reassess the estimated remaining term at each subsequent reporting period. During the three months ended March 31, 2019 and 2018, the Company recorded revenue of $18 and $332, respectively, related to its efforts under the Merck KGaA Agreement. During the three months ended March 31, 2019, the Company recognized revenue and expense of $1,037 related to the Merck KGaA Supply Agreement. Included in accounts receivable as of March 31, 2019 and December 31, 2018 were $427 and $450, respectively, related to the Merck KGaA Supply Agreement. As of March 31, 2019, the Company had recorded $5,440 in deferred revenue related to the Merck KGaA Agreement and Merck KGaA Supply Agreement that will be recognized in accordance with the proportional performance method. Takeda XMT-1522 Strategic Partnership In January 2016, the Company entered into a Development Collaboration and Commercial License Agreement with Takeda through its wholly owned subsidiary, Millennium Pharmaceuticals, Inc. for the development and commercialization of XMT-1522 (the XMT-1522 Agreement). Under the XMT-1522 Agreement, Takeda was granted the exclusive right to commercialize XMT-1522 outside of the United States and Canada. Under the XMT-1522 Agreement, the Company was responsible for conducting certain Phase 1 development activities for XMT-1522, including the ongoing Phase 1 clinical trial, at its own expense. The parties agreed to collaborate on the further development of XMT-1522 in accordance with a global development plan (Post-Phase 1 Development). On January 2, 2019, the Company received notice from Takeda stating that Takeda was exercising its right to terminate the XMT-1522 Agreement upon 30 days’ prior written notice. The XMT-1522 Agreement terminated in accordance with its provisions, and the Company and Takeda wound down activities related to the XMT-1522 Agreement as of March 31, 2019. Under the XMT-1522 Agreement, the Company and Takeda shared equally all Post-Phase 1 Development costs through the date of termination and for a period of 30 days after the effective termination date. For the applicable period within the three months ended March 31, 2019, the Company was billed $200 by Takeda representing the Company’s share of Post-Phase 1 Development costs incurred by Takeda. This amount has been reflected as research and development costs in the consolidated statement of operations. Takeda strategic research and development partnership In March 2014, the Company entered into a Research Collaboration and Commercial License Agreement with Takeda through Takeda’s wholly owned subsidiary, Millennium Pharmaceuticals, Inc. (the 2014 Agreement). The 2014 Agreement was amended in January 2015 and amended and restated in January 2016 (the 2016 Restated Agreement). The agreements provided Takeda with the right to develop ADCs directed to a total of seven exclusive targets, designated by Takeda, over a specified period of time. On January 2, 2019, the Company received notice from Takeda stating that Takeda was exercising its right to terminate the 2016 Restated Agreement upon 45 days’ prior written notice. The 2016 Restated Agreement terminated in accordance with its provisions, and the Company and Takeda wound down activities related to the 2016 Restated Agreement as of March 31, 2019. During the applicable period within the three months ended March 31, 2019, the Company billed Takeda $195 related to ASC 808 costs. Accounting Analysis The Company concluded that the termination of the XMT-1522 Agreement and the 2016 Restated Agreement resulted in the completion of all of its remaining performance obligations. As a result, $39,965 of previously deferred revenue related to the Takeda agreements as of December 31, 2018 was recognized as revenue during the three months ended March 31, 2019. Included in accounts receivable as of March 31, 2019 and December 31, 2018 was $26 and $9, respectively, related to the Takeda agreements. Included in accounts payable as of March 31, 2019 and December 31, 2018 was $2,754 and $2,749, respectively, related to the Takeda agreements. Summary of Contract Assets and Liabilities The following table presents changes in the balances of our contract assets and liabilities during the three months ended March 31, 2019: Balance at Beginning Balance at of Period Additions Deductions End of Period Three months ended March 31, 2019 Contract assets $ — $ — $ — $ — Contract liabilities: Deferred revenue $ 46,196 $ — $ 40,592 $ 5,604 During the three months ended March 31, 2019, the Company recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods: Three months ended March 31, 2019 Revenue recognized in the period from: Amounts included in the contract liability at the beginning of the period $ 40,592 Performance obligations satisfied in previous periods $ — Other Revenue The Company has provided limited services for a collaboration partner, Asana BioSciences. For the three months ended March 31, 2019 and 2018 the Company recognized revenue of $15 and $195, respectively, related to these services. The next potential milestone the Company is eligible to receive is $2,500 upon dosing the fifth patient in a Phase 1 clinical trial by Asana BioSciences. Included in accounts receivable as of March 31, 2019 was $15 related to the Asana agreement.

Fair value measurements

Fair value measurements	3 Months Ended
	Mar. 31, 2019
Fair value measurements
Fair value measurements	4. Fair value measurements The following table presents information about the Company's assets and liabilities regularly measured and carried at a fair value and indicates the level within fair value hierarchy of the valuation techniques utilized to determine such value as of December 31, 2018. The Company had no assets and liabilities regularly measured and carried at a fair value as of March 31, 2019: Significant Quoted Prices Other Significant in Active Observable Unobservable Fair Markets Inputs Inputs Value (Level 1) (Level 2) (Level 3) December 31, 2018 Marketable securities: U.S. Treasuries $ 10,497 $ 10,497 $ — $ — $ 10,497 $ 10,497 $ — $ — There were no changes in valuation techniques or transfers between fair value measurement levels during the three months ended March 31, 2019 and 2018. As of March 31, 2019 and December 31, 2018, cash and cash equivalents were comprised of cash and money market funds.

Marketable securities

Marketable securities	3 Months Ended
	Mar. 31, 2019
Marketable securities
Marketable securities	5. Marketable securities The following table summarizes marketable securities held December 31, 2018. The Company had no marketable securities as of March 31, 2019: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31, 2018 U.S. Treasuries $ 10,505 $ — $ (8) $ 10,497 $ 10,505 $ — $ (8) $ 10,497 There were no realized gains or losses on available-for-sale securities during the three months ended March 31, 2019 and 2018.

Accrued Expenses

Accrued Expenses	3 Months Ended
	Mar. 31, 2019
Accrued expenses
Accrued expenses	6. Accrued expenses Accrued expenses consisted of the following: March 31, December 31, 2019 2018 Accrued payroll and related expenses $ 1,532 $ 3,042 Accrued preclinical, manufacturing and clinical expenses 5,341 8,314 Accrued professional fees 693 567 Accrued other 372 452 $ 7,938 $ 12,375

Earnings per share

Earnings per share	3 Months Ended
	Mar. 31, 2019
Earnings per share
Earnings per share	7. Earnings per share The following table presents the calculation of basic and diluted net income per share: Three months ended March 31, 2019 2018 Numerator: Net income (loss) $ 21,901 $ (12,403) Denominator: Weighted-average number of shares - basic 30,299,650 22,816,521 Dilutive securities - share-based awards 1,052,730 - Dilutive securities - common stock warrants 109,316 - Weighted-average number of shares - diluted 31,461,696 22,816,521 Net income (loss) per share - basic $ 0.72 $ (0.54) Net income (loss) per share - diluted $ 0.70 $ (0.54) For the three months ended March 31, 2019 and 2018, basic earnings per share were computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. For the three months ended March 31, 2019, diluted earnings per share was computed using the "treasury method" by dividing the net income by the weighted-average number of shares of common stock and potentially dilutive securities outstanding during the period. The weighted-average number of shares of common stock were adjusted for the potential dilutive effect of the exercise of stock options and warrants to purchase common stock. For the three months ended March 31, 2018, potentially dilutive securities were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive, therefore basic and diluted net loss per share were the same for the three months ended March 31, 2018. Anti-dilutive stock-based awards excluded from the calculation of diluted EPS for the three months ended March 31, 2019 were 2,686,700.

Stockholders' equity

Stockholders' equity	3 Months Ended
	Mar. 31, 2019
Stockholders' equity (deficit)
Stockholders’ Equity (Deficit)	8. Stockholders’ equity Preferred stock As of March 31, 2019 the Company had 25,000,000 shares of authorized preferred stock. No shares of preferred stock have been issued. Common stock The holders of the 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 (the Board). In March 2019, the Company completed a follow-on public offering in which the Company issued and sold an aggregate of 24,437,500 shares of its common stock at the public offering price of $4.00 per share, which included the exercise in full of the underwriters’ option to purchase additional shares of common stock. The net proceeds from the offering were $92,162. At March 31, 2019 and December 31, 2018, there were 4,792,776 and 3,856,932 shares of common stock, respectively, reserved for the exercise of outstanding stock options and warrants. March 31, December 31, 2019 2018 Warrants 110,365 110,365 Stock options 4,682,411 3,746,567 4,792,776 3,856,932 At-the-market equity offering program On July 2, 2018, the Company established an at-the-market equity offering program (ATM) pursuant to which it is able to offer and sell up to $75,000 of its common stock from time to time at prevailing market prices. As of March 31, 2019, the Company had not sold any shares under the ATM. Warrants In connection with a 2013 Series A-1 Preferred Stock issuance, the Company granted to certain investors warrants to purchase 129,491 shares of common stock. The warrants have a $0.05 per share exercise price and a contractual life of 10 years. The fair value of these warrants was recorded as a component of equity at the time of issuance. As of March 31, 2019 , warrants to purchase 110,365 shares of common stock were outstanding.

Stock options

Stock options	3 Months Ended
	Mar. 31, 2019
Stock options
Stock options	9. Stock options Stock option plans In June 2017 the Company’s shareholders approved the 2017 Stock Incentive Plan (the 2017 Plan or the Plan). Under the 2017 Plan, up to 2,255,000 shares of common stock may be granted to the Company's employees, officers, directors, consultants and advisors in the form of options, restricted stock awards or other stock-based awards. The number of shares of common stock issuable under the Plan will be increased annually by 4% of the outstanding shares or such lesser amount specified by the Board. The terms of the awards are determined by the Board, subject to the provisions of the Plan. As of the adoption date of the 2017 Plan, there were 3,141,625 options outstanding under the Company’s 2007 Stock Incentive Plan (the 2007 Plan). Any cancellations under the 2007 Plan would increase the number of shares that could be granted under the 2017 Plan. In January 2019, the number of shares of common stock issuable under the Plan was increased by 929,378 shares. As of March 31, 2019 there were 2,066,390 shares available for future issuance under the Plan. With respect to incentive stock options, the option price per share will equal the fair market value of the common stock on the date of grant, as determined by the Board, and the vesting period is generally four years. Nonqualified stock options will be granted at an exercise price established by the Board at its sole discretion (which has not been less than fair market value on the date of grant) and the vesting periods may vary. Options granted under the Plan expire no later than 10 years from the date of grant. The Board may accelerate vesting or extend the expiration of granted options in the case of a merger, consolidation, dissolution, or liquidation of the Company. A summary of the activity under the Plans is as follows: Weighted- Remaining Number Average Contractual Life Aggregate of Shares Exercise Price (in years) Intrinsic Value Options outstanding at January 1, 2019 3,746,567 $ 6.58 7.6 $ 3,897 Granted 1,058,833 3.61 Exercised (12,192) 3.32 Cancelled (110,797) 10.67 Options outstanding at March 31, 2019 4,682,411 $ 5.82 7.8 $ 7,918 Options exercisable at March 31, 2019 2,215,137 $ 4.00 6.5 $ 5,688 The weighted-average grant date fair value of options granted during the three months ended March 31, 2019 and 2018, was $ 2.39 and $ 9.47 per share, respectively. Cash received from the exercise of stock options was $42 and $ 255 for the three months ended March 31, 2019 and 2018, respectively. Stock-based compensation The Company uses the provisions of ASC 718, Stock Compensation, to account for stock-based awards. The measurement date for employee awards is generally the date of grant. Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period, using the straight-line method. For the three months ended March 31, 2019 and 2018, the Company recorded stock-based compensation expense of $ 1,164 and $745, respectively. The Company had an aggregate of $11,059 of unrecognized stock compensation cost as of March 31, 2019 remaining to be amortized over the weighted-average period of 2.5 years. 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 March 31, 2019 2018 Risk-free interest rate 2.6 % 2.7 % Expected dividend yield — % — % Expected term (years) 6.00 6.08 Expected stock price volatility 74 % 73 % 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 Company initially reserved 225,000 shares of common stock for issuance under the 2017 ESPP. In January 2019, the number of shares of common stock for issuance under the 2017 ESPP was increased by 232,344 shares. The Company did not issue any shares under the 2017 ESPP during the three months ended March 31, 2019 and 2018. As of March 31, 2019, there were 415,158 shares available for issuance under the 2017 ESPP.

Leases

Leases	3 Months Ended
	Mar. 31, 2019
Leases
Leases	10. Leases The Company has an operating lease for its facility and operating and finance leases for certain equipment. The Company leases office space in Cambridge, MA under an operating lease, which was last amended in January 2018, and is effective through March 2021. The Company has an option to extend the lease term for an additional five years. This option to extend the lease term was not considered reasonably certain as of March 31, 2019. The Company has remaining lease terms of three years to five years for certain equipment, some of which may include options to purchase at fair value. During the three months ended March 31, 2019, the Company entered into finance leases for certain equipment. The Company recorded assets under finance leases of $429 as property and equipment. The components of lease expense were as follows: Three months ended March 31, 2019 Operating lease cost $ Supplemental balance sheet information related to leases was as follows: Three months ended March 31, 2019 Operating leases: Operating lease right-of-use assets $ 3,944 Operating lease liabilities 2,005 Operating lease liabilities, net of current portion 2,375 Finance leases: Property and equipment, gross $ 429 Other liabilities 83 Other liabilities, net of current portion 346 Weighted-average remaining lease term: Operating leases 2.0 years Finance leases 4.5 years Weighted-average discount rate: Operating leases Finance leases Supplemental cash flow information related to leases was as follows: Three months ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 514 Right-of-use assets obtained in exchange for lease obligations: Operating leases 4,369 Finance leases 429 Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as follows: Operating leases Finance leases 2019 (excluding the three months ended March 31, 2019) $ 1,757 $ 87 2020 2,394 116 2021 687 116 2022 — 84 2023 and thereafter — 92 4,838 495 Imputed interest — (66) $ 4,838 $ 429

Commitments

Commitments	3 Months Ended
	Mar. 31, 2019
Commitments
Commitments	11 . Commitments License agreements Through March 31, 2019, the Company had licensed intellectual property from two biotechnology companies. The consideration included upfront payments and a commitment to pay annual license fees, milestone payments, and, upon product commercialization, royalties on revenue generated from the sale of products covered by the licenses. The Company did not record any milestone payments during the three months ended March 31, 2019 and 2018, respectively.

Subsequent events

Subsequent events	3 Months Ended
	Mar. 31, 2019
Subsequent events
Subsequent events	12. Subsequent events For the purposes of the unaudited financial statements as of March 31, 2019 and the period then ended, the Company has evaluated subsequent events through May 9, 2019, the date the unaudited interim financial statements were issued. On May 8, 2019, the Company entered into a non-dilutive term loan agreement with Silicon Valley Bank (SVB) that provides Mersana the ability to draw up to $20.0 million. A tranche of $5.0 million was funded upon execution of the agreement and the Company has the option to draw the remainder through August 31, 2020. Payments under the loan will be interest-only through August 31, 2020. Borrowings under the term loan as of August 31, 2020 will be repayable in equal installments of principal and interest through February 1, 2023. The loan is secured by substantially all assets of the Company other than intellectual property and proceeds will be used for general working capital purposes.

Summary of significant accoun_2

Summary of significant accounting policies (Policies)	3 Months Ended
	Mar. 31, 2019
Summary of significant accounting policies
Principles of Consolidation	Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include those of the Company and its subsidiary, Mersana Securities Corp. All intercompany balances and transactions have been eliminated.
Use of Estimates	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 performance obligations and estimated selling prices within its revenue arrangements, accrued expenses, valuation of stock-based awards and income taxes. Actual results could differ from those estimates.
Segment Information	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 in deciding how to allocate resources and assess performance. The Company operates and manages its business as a single operating segment, which is the business of discovering and developing ADCs.
Fair Value Measurements	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 Topic 820 Fair Value Measurement (ASC 820) 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.
Cash and Cash Equivalents	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, 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. The following amounts were presented as cash, cash equivalents and restricted cash: Three months ended Three months ended March 31, 2019 March 31, 2018 Beginning End Beginning End of period of period of period of period Cash and cash equivalents $ 59,634 $ 137,279 $ 26,591 $ 32,354 Restricted cash included in other assets 371 371 371 371 Total cash, cash equivalents and restricted cash per statement of cash flows $ 60,005 $ 137,650 $ 26,962 $ 32,725
Marketable Securities	Marketable Securities Short-term marketable securities consist of investments with maturities greater than three months and less than one year from the balance sheet date. Long-term marketable securities consist of investments with maturities greater than one year that are not expected to be used to fund current operations. The Company classifies all of its marketable securities as available-for-sale. Accordingly, these investments are recorded at fair value. Amortization and accretion of discounts and premiums are recorded as interest income within other income. Unrealized gains and losses on available-for-sale securities are included in other comprehensive loss as a component of stockholders’ equity until realized.
Other Assets	Other Assets The Company recorded other assets of $1,503 as of March 31, 2019 and December 31, 2018, comprised of restricted cash of $371 held as security deposits for a standby letter of credit and $1,132 held by a service provider.
Leases	Leases Consistent with ASC 842, the Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use lease assets (ROU assets), current portion of lease obligations and long-term lease obligations on the Company’s consolidated balance sheets. Assets subject to finance leases are included in property and equipment, and the related lease obligation is included in other current liabilities and other long-term liabilities on the Company’s consolidated balance sheets. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while expense for financing leases is recognized as depreciation expense and interest expense using the effective interest method. The Company elected the short-term lease recognition exemption for short-term leases, which allows the Company to not recognize lease liabilities and ROU assets on the consolidated balance sheets for leases with an original term of twelve months or less. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU lease asset also includes lease payments made and lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. We have lease agreements with lease and non-lease components, which are generally accounted for separately.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842), which replaced the guidance in ASC 840, Leases . The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This standard is effective for the Company in the fiscal year beginning after December 15, 2018. The Company adopted the new standard effective January 1, 2019 using the modified retrospective method as of the beginning of the period of adoption. The Company has elected the package of practical expedients permitted in ASC Topic 842. Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC Topic 842, (b) whether classification of the operating leases would be different in accordance with ASC Topic 842, or (c) whether the unamortized initial direct costs would have met the definition of initial direct costs in ASC Topic 842 at lease commencement. The Company also elected not to include leases with an initial term of twelve months or less in the recognized ROU asset and lease liabilities. As a result of the adoption of the new lease accounting guidance, the Company recognized on January 1, 2019 (a) an operating lease liability of $4,778, and (b) an operating ROU asset of $4,369 which represents the lease liability of $4,778 adjusted for deferred rent of $409. This standard had a material impact on the Company’s balance sheets but had no impact on the Company’s results of operations and cash flows from operations. The most significant impact was the recognition of ROU assets and lease obligations for operating leases. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting . This guidance simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, and early adoption is permitted. The guidance per ASU 2018-07 is to be adopted by using a modified retrospective approach with the cumulative effect of initially applying the new standard at the date of initial application. The Company adopted the new standard effective January 1, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808):Clarifying the Interaction between Topic 808 and Topic 606 . The main provisions of ASU 2018-18 include: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and (ii) precluding the presentation of transactions with collaborative arrangement participants that are not directly related to sales to third parties together with revenue. This guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption is permitted. The guidance per ASU 2018-18 is to be adopted retrospectively to the date of initial application of Topic 606. The Company is currently evaluating the potential impact that ASU No. 2018-18 may have on its financial position and results of operations.

Summary of significant accoun_3

Summary of significant accounting policies (Tables)	3 Months Ended
	Mar. 31, 2019
Summary of significant accounting policies
Schedule of cash, cash equivalents and restricted cash	Three months ended Three months ended March 31, 2019 March 31, 2018 Beginning End Beginning End of period of period of period of period Cash and cash equivalents $ 59,634 $ 137,279 $ 26,591 $ 32,354 Restricted cash included in other assets 371 371 371 371 Total cash, cash equivalents and restricted cash per statement of cash flows $ 60,005 $ 137,650 $ 26,962 $ 32,725

Collaboration Agreements (Table

Collaboration Agreements (Tables)	3 Months Ended
	Mar. 31, 2019
Collaboration Agreements
Schedule of changes in the balances of our contract assets and liabilities and recognized revenue	The following table presents changes in the balances of our contract assets and liabilities during the three months ended March 31, 2019: Balance at Beginning Balance at of Period Additions Deductions End of Period Three months ended March 31, 2019 Contract assets $ — $ — $ — $ — Contract liabilities: Deferred revenue $ 46,196 $ — $ 40,592 $ 5,604 During the three months ended March 31, 2019, the Company recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods: Three months ended March 31, 2019 Revenue recognized in the period from: Amounts included in the contract liability at the beginning of the period $ 40,592 Performance obligations satisfied in previous periods $ —

Fair value measurements (Tables

Fair value measurements (Tables)	3 Months Ended
	Mar. 31, 2019
Fair value measurements
Schedule of assets and liabilities measured and carried at fair value	Significant Quoted Prices Other Significant in Active Observable Unobservable Fair Markets Inputs Inputs Value (Level 1) (Level 2) (Level 3) December 31, 2018 Marketable securities: U.S. Treasuries $ 10,497 $ 10,497 $ — $ — $ 10,497 $ 10,497 $ — $ —

Marketable securities (Tables)

Marketable securities (Tables)	3 Months Ended
	Mar. 31, 2019
Marketable securities
Schedule of reconciliation of marketable securities from cost basis to fair value	Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31, 2018 U.S. Treasuries $ 10,505 $ — $ (8) $ 10,497 $ 10,505 $ — $ (8) $ 10,497

Accrued expenses (Tables)

Accrued expenses (Tables)	3 Months Ended
	Mar. 31, 2019
Accrued expenses
Schedule of accrued expenses	March 31, December 31, 2019 2018 Accrued payroll and related expenses $ 1,532 $ 3,042 Accrued preclinical, manufacturing and clinical expenses 5,341 8,314 Accrued professional fees 693 567 Accrued other 372 452 $ 7,938 $ 12,375

Earnings per share (Tables)

Earnings per share (Tables)	3 Months Ended
	Mar. 31, 2019
Earnings per share
Schedule of calculation of basic and diluted net income per share	Three months ended March 31, 2019 2018 Numerator: Net income (loss) $ 21,901 $ (12,403) Denominator: Weighted-average number of shares - basic 30,299,650 22,816,521 Dilutive securities - share-based awards 1,052,730 - Dilutive securities - common stock warrants 109,316 - Weighted-average number of shares - diluted 31,461,696 22,816,521 Net income (loss) per share - basic $ 0.72 $ (0.54) Net income (loss) per share - diluted $ 0.70 $ (0.54)

Stockholders' equity (deficit)

Stockholders' equity (deficit) (Tables)	3 Months Ended
	Mar. 31, 2019
Stockholders' equity (deficit)
Schedule for number of common stock reserved for exercise of outstanding stock options and warrants	March 31, December 31, 2019 2018 Warrants 110,365 110,365 Stock options 4,682,411 3,746,567 4,792,776 3,856,932

Stock options (Tables)

Stock options (Tables)	3 Months Ended
	Mar. 31, 2019
Stock options
Schedule of stock option activity under Plan	Weighted- Remaining Number Average Contractual Life Aggregate of Shares Exercise Price (in years) Intrinsic Value Options outstanding at January 1, 2019 3,746,567 $ 6.58 7.6 $ 3,897 Granted 1,058,833 3.61 Exercised (12,192) 3.32 Cancelled (110,797) 10.67 Options outstanding at March 31, 2019 4,682,411 $ 5.82 7.8 $ 7,918 Options exercisable at March 31, 2019 2,215,137 $ 4.00 6.5 $ 5,688
Schedule of weighted average assumptions for estimating fair value of option awards	Three months ended March 31, 2019 2018 Risk-free interest rate 2.6 % 2.7 % Expected dividend yield — % — % Expected term (years) 6.00 6.08 Expected stock price volatility 74 % 73 %

Leases (Tables)

Leases (Tables)	3 Months Ended
	Mar. 31, 2019
Leases
Schedule of components of lease expense	Three months ended March 31, 2019 Operating lease cost $
Schedule of supplemental balance sheet information related to leases	Three months ended March 31, 2019 Operating leases: Operating lease right-of-use assets $ 3,944 Operating lease liabilities 2,005 Operating lease liabilities, net of current portion 2,375 Finance leases: Property and equipment, gross $ 429 Other liabilities 83 Other liabilities, net of current portion 346 Weighted-average remaining lease term: Operating leases 2.0 years Finance leases 4.5 years Weighted-average discount rate: Operating leases Finance leases
Schedule of supplemental cash flow information related to leases	Three months ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 514 Right-of-use assets obtained in exchange for lease obligations: Operating leases 4,369 Finance leases 429
Schedule of future minimum lease payments under non-cancellable leases	Operating leases Finance leases 2019 (excluding the three months ended March 31, 2019) $ 1,757 $ 87 2020 2,394 116 2021 687 116 2022 — 84 2023 and thereafter — 92 4,838 495 Imputed interest — (66) $ 4,838 $ 429

Nature of business and basis _2

Nature of business and basis of presentation - Termination of collaborative arrangement - (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Collaboration agreements
Collaboration revenue	$ 41,035	$ 3,064
Deferred revenue recognized	40,592
2016 Restated Tokeda Agreement and XMT-1522 Agreement
Collaboration agreements
Deferred revenue recognized	$ 39,965

Nature of business and basis _3

Nature of business and basis of presentation - Liquidity (Details) - USD ($) $ in Thousands	3 Months Ended					12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2018
Nature of business and basis of presentation
Net income (loss)	$ 21,901	$ (22,431)	$ (17,069)	$ (12,354)	$ (12,403)	$ (64,257)
Net cash (used in) provided by operating activities	(24,687)				$ (17,390)
Accumulated deficit	$ (142,265)	$ (164,166)				$ (164,166)
Substantial doubt about going concern, within twelve months	false

Summary of significant accoun_4

Summary of significant accounting policies - Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Cash, cash equivalents and restricted cash
Cash and cash equivalents	$ 137,279	$ 59,634	$ 32,354	$ 26,591
Restricted cash included in other assets	371	371	371	371
Total cash, cash equivalents and restricted cash per statement of cash flows	$ 137,650	$ 60,005	$ 32,725	$ 26,962
Restricted cash, Balance Sheet Location	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent

Summary of significant accoun_5

Summary of significant accounting policies - Other Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Other Assets
Other assets	$ 1,503	$ 1,503
Restricted cash included in other assets	$ 371	$ 371	$ 371	$ 371
Restricted cash, Balance Sheet Location	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent
Held by service provider	$ 1,132	$ 1,132

Summary of significant accoun_6

Summary of significant accounting policies - Recently Issued Accounting Pronouncement (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Jan. 01, 2019
New Accounting pronouncements
Lease, Practical Expedients, Package	true
Lease liability	$ 4,838
Operating lease right-of-use assets	$ 3,944
ASU-02, Leases (ASC 842) | Adjustment
New Accounting pronouncements
Lease liability		$ 4,778
Operating lease right-of-use assets		4,369
Deferred rent		$ (409)

Collaboration agreements - Merc

Collaboration agreements - Merck KGaA (Details) - Merck KGaA $ in Thousands	1 Months Ended
	Jun. 30, 2014USD ($)item	Mar. 31, 2019USD ($)item	Dec. 31, 2017item
Collaboration agreements
Upfront payment received	$ 12,000
Number of targets | item	6
Amount of additional fees receivable when target is designated and commercial license to target is granted	$ 0
Number of targets designated | item		6	6
Next potential development milestone payment eligible to receive		$ 500

Collaboration agreements - Me_2

Collaboration agreements - Merck KGaA - Accounting Analysis (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)item	Mar. 31, 2018USD ($)	Dec. 31, 2018USD ($)	Dec. 31, 2017item
Collaboration agreements
Collaboration revenue	$ 41,035	$ 3,064
Operating expense	19,586	15,827
Accounts receivable	468		$ 459
Deferred revenue	5,604		46,196
Merck KGaA Agreement and Merck KGaA Supply Agreement
Collaboration agreements
Deferred revenue	$ 5,440
Merck KGaA
Collaboration agreements
Number of targets designated | item	6			6
Collaboration revenue	$ 18	$ 332
Merck KGaA Supply Agreement
Collaboration agreements
Collaboration revenue	1,037
Operating expense	1,037
Accounts receivable	$ 427		$ 450
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-01-01 | Merck KGaA | Rights to future technological improvements
Collaboration agreements
Expected recognition period	10 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-01-01 | Merck KGaA | Joint research committee services
Collaboration agreements
Expected recognition period	5 years

Collaboration agreements - XMT-

Collaboration agreements - XMT-1522 Strategic Partnership (Details) - USD ($) $ in Thousands	Jan. 02, 2019	Mar. 31, 2019	Mar. 31, 2018
Collaboration agreements
Research and development		$ 15,143	$ 12,256
XMT-1522 Agreement
Collaboration agreements
Period of time until agreement terminated	30 days
Period of shared development costs following effective termination date	30 days
Research and development		$ 200

Collaboration agreements - Take

Collaboration agreements - Takeda strategic R & D partnership (Details) $ in Thousands	Jan. 02, 2019	Mar. 31, 2019USD ($)	Mar. 31, 2018USD ($)	Jan. 31, 2016item
Collaboration agreements
Research and development		$ 15,143	$ 12,256
2016 Restated Tokeda Agreement
Collaboration agreements
Number of targets | item				7
Period of time until agreement terminated	45 days
Research and development		$ 195

Collaboration agreements - 2016

Collaboration agreements - 2016 Takeda and XMT-1522 Agreements - Accounting Analysis (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Collaboration agreements
Deferred revenue recognized	$ 40,592
Collaboration revenue	41,035	$ 3,064
Accounts receivable	468		$ 459
Accounts payable	6,965		10,727
2016 Restated Tokeda Agreement and XMT-1522 Agreement
Collaboration agreements
Deferred revenue recognized	39,965
Accounts receivable	26		9
Accounts payable	$ 2,754		$ 2,749

Collaboration Agreements - Cont

Collaboration Agreements - Contract Assets and Liabilities (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Contract liabilities
Deferred revenue, Balance at Beginning of Period	$ 46,196
Deferred revenue, Deductions	40,592
Deferred revenue, Balance at End of Period	5,604
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period	$ 40,592

Collaboration Agreements - Othe

Collaboration Agreements - Other Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Collaboration agreements
Collaboration revenue	$ 41,035	$ 3,064
Type of Revenue	mrsn:CollaborationMember	mrsn:CollaborationMember
Accounts receivable	$ 468		$ 459
Asana BioSciences
Collaboration agreements
Collaboration revenue	$ 15	$ 195
Type of Revenue	mrsn:LimitedServicesMember	mrsn:LimitedServicesMember
Next potential milestone payment eligible to receive	$ 2,500
Accounts receivable	$ 15

Fair value measurements (Detail

Fair value measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Fair value measurements
Marketable securities	$ 0	$ 10,497
Total assets regularly measured and carried at fair value	0
Total liabilities regularly measured and carried at fair value	0
Transfers between fair value measurement level 1 to level 2	0		$ 0
Transfers between fair value measurement level 2 to level 1	$ 0		$ 0
Recurring basis
Fair value measurements
Total assets regularly measured and carried at fair value		10,497
U.S. Treasuries | Recurring basis
Fair value measurements
Marketable securities		10,497
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring basis
Fair value measurements
Total assets regularly measured and carried at fair value		10,497
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasuries | Recurring basis
Fair value measurements
Marketable securities		$ 10,497

Marketable securities (Details)

Marketable securities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Marketable securities
Amortized Cost			$ 10,505
Gross Unrealized Losses			(8)
Marketable securities	$ 0		10,497
Realized gains on available-for-sale securities	0	$ 0
Realized losses on available-for-sale securities	$ 0	$ 0
U.S. Treasuries
Marketable securities
Amortized Cost			10,505
Gross Unrealized Losses			(8)
Marketable securities			$ 10,497

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accrued expenses
Accrued payroll and related expenses	$ 1,532	$ 3,042
Accrued preclinical, manufacturing and clinical expenses	5,341	8,314
Accrued professional fees	693	567
Accrued other	372	452
Total	$ 7,938	$ 12,375

Earnings per share (Details)

Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Numerator
Net income (loss) - basic (in dollars)	$ 21,901	$ (12,403)
Net income (loss) - diluted (in dollars)	$ 21,901	$ (12,403)
Denominator
Weighted average number of shares - basic (in shares)	30,299,650	22,816,521
Dilutive securities - share-based awards (in shares)	1,052,730
Dilutive securities - common stock warrants (in shares)	109,316
Weighted average number of shares - diluted (in shares)	31,461,696	22,816,521
Net income (loss) per share - basic (in dollars per share)	$ 0.72	$ (0.54)
Net income (loss) per share - diluted (in dollars per share)	$ 0.70	$ (0.54)

Earnings per share - Antidiluti

Earnings per share - Antidilutive securities (Details)	3 Months Ended
	Mar. 31, 2019shares
Stock based awards
Anti-dilutive securities
Anti-dilutive securities	2,686,700

Stockholders' Equity - Preferre

Stockholders' Equity - Preferred stock (Details) - shares	Mar. 31, 2019	Dec. 31, 2018
Stockholders' equity (deficit)
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0

Stockholders' Equity - Common s

Stockholders' Equity - Common stock (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)Vote$ / sharesshares	Dec. 31, 2018shares
Common stock
Share price (in dollars per share) | $ / shares	$ 4
Net proceeds from public offering of common stock | $	$ 92,162
Stock options.
Common stock
Number of shares reserved for future issuance	4,682,411	3,746,567
Common stock
Common stock
Number of votes for each shares held | Vote	1
Issuance of common stock under public offering, net of issuance costs (in shares)	24,437,500
Warrants
Common stock
Number of shares reserved for future issuance	110,365	110,365
Warrants and options
Common stock
Number of shares reserved for future issuance	4,792,776	3,856,932

Stockholders' Equity - At-the-m

Stockholders' Equity - At-the-market equity offering program (Details) - ATM - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Jul. 02, 2018
Offering program
Amount of shares authorized to be offered and sold		$ 75,000
Number of shares sold	0

Stockholders' Equity - Warrants

Stockholders' Equity - Warrants (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2013
Warrants
Number of shares into which warrant issued during period may be converted		129,491
Warrant exercise price per share (in dollars per share)	$ 0.05
Contractual life of warrants	10 years
Number of shares of common stock into which warrants may be converted	110,365

Stock options - Plans (Details)

Stock options - Plans (Details) - shares	1 Months Ended		3 Months Ended
	Jan. 31, 2019	Jun. 30, 2017	Mar. 31, 2019	Dec. 31, 2018
Stock options
Number of shares outstanding			4,682,411	3,746,567
2007 Plan
Stock options
Number of shares outstanding		3,141,625
2017 Plan
Stock options
Number of shares authorized		2,255,000
Cumulative increase in number of shares issuable (as a percent)		4.00%
Additional shares authorized	929,378
Number of shares available for future issuance			2,066,390
Vesting period (in years)			4 years
2017 Plan | Maximum
Stock options
Expiration period			10 years

Stock options - Activity under

Stock options - Activity under stock option plan (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Number of Shares
Outstanding at beginning of period (in shares)	3,746,567
Granted (in shares)	1,058,833
Exercised (in shares)	(12,192)
Cancelled (in shares)	(110,797)
Outstanding at end of period (in shares)	4,682,411		3,746,567
Options exercisable, at end of period (in shares)	2,215,137
Weighted- Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 6.58
Granted (in dollars per share)	3.61
Exercised (in dollars per share)	3.32
Cancelled (in dollars per share)	10.67
Outstanding at end of period (in dollars per share)	5.82		$ 6.58
Options exercisable, at end of period (in dollars per share)	$ 4
Additional Disclosures
Remaining Contractual Life, Options outstanding	7 years 9 months 18 days		7 years 7 months 6 days
Remaining Contractual Life, Options exercisable	6 years 6 months
Aggregate Intrinsic Value, Options outstanding (in dollars)	$ 7,918		$ 3,897
Aggregate Intrinsic Value, Options exercisable (in dollars)	$ 5,688
Weighted-average grant date fair value of options granted (in dollars per share)	$ 2.39	$ 9.47
Cash received from the exercise of stock options (in dollars)	$ 42	$ 255

Stock options - Stock based com

Stock options - Stock based compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Stock options
Share-based compensation charge	$ 1,164	$ 745
Unrecognized stock compensation cost	$ 11,059
Weighted-average amortization period of unrecognized stock compensation cost	2 years 6 months

Stock options - Fair value assu

Stock options - Fair value assumptions (Details)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Weighted average fair value assumptions
Risk-free interest rate (as a percent)	2.60%	2.70%
Expected term	6 years	6 years 29 days
Expected stock price volatility (as a percent)	74.00%	73.00%

Stock options - Employee Stock

Stock options - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan - shares	1 Months Ended
	Jan. 31, 2019	Mar. 31, 2019	Dec. 31, 2017
Employee Stock Purchase Plan
Number of shares reserved for future issuance			225,000
Additional shares authorized	232,344
Number of shares available for future issuance		415,158

Leases - Description (Details)

Leases - Description (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Equipment, Finance lease
Finance leases
Property and equipment, gross	$ 429
Office space, Cambridge, MA
Leases
Renewal term	5 years
Equipment | Minimum
Leases
Remaining lease terms	3 years
Equipment | Maximum
Leases
Remaining lease terms	5 years

Leases - Components of Lease Ex

Leases - Components of Lease Expense (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Components of lease expense
Operating lease cost	$ 540

Leases - Supplemental balance s

Leases - Supplemental balance sheet information (Details) $ in Thousands	Mar. 31, 2019USD ($)
Operating leases:
Operating lease right-of-use assets	$ 3,944
Operating lease liabilities	2,005
Operating lease liabilities, net of current portion	2,375
Finance leases
Finance lease liability, current	$ 83
Finance Lease, Liability, Current, Statement of Financial Position	us-gaap:OtherLiabilitiesCurrent
Finance Lease, Liability, Noncurrent	$ 346
Finance Lease, Liability, Noncurrent, Statement of Financial Position	us-gaap:OtherLiabilitiesNoncurrent
Weighted-average remaining lease term: Operating leases	2 years
Weighted-average remaining lease term: Finance leases	4 years 6 months
Weighted-average discount rate: Operating leases (as a percent)	10.30%
Weighted-average discount rate: finance leases (as a percent)	6.90%
Equipment, Finance lease
Finance leases
Property and equipment, gross	$ 429

Leases - Supplemental cash flow

Leases - Supplemental cash flow information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Leases
Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases	$ 514
Right-of-use assets obtained in exchange for lease obligations: Operating leases	4,369
Right-of-use assets obtained in exchange for lease obligations: Finance leases	$ 429

Leases - Future minimum lease p

Leases - Future minimum lease payments (Details) $ in Thousands	Mar. 31, 2019USD ($)
Operating leases
2019 (excluding the three months ended March 31, 2019)	$ 1,757
2020	2,394
2021	687
Total minimum lease payments	4,838
Total operating lease liability	4,838
Finance leases
2019 (excluding the three months ended March 31, 2019)	87
2020	116
2021	116
2022	84
2023 and thereafter	92
Total minimum lease payments	495
Imputed interest	(66)
Total finance lease liability	$ 429

Commitments - License agreement

Commitments - License agreements (Details)	3 Months Ended
	Mar. 31, 2019item
License agreements
Commitments
Number of biotechnology companies where Company has licensed intellectual property	2

Subsequent events (Details)

Subsequent events (Details) - Subsequent event - Non-dilutive term loan agreement with Silicon Valley Bank $ in Millions	May 08, 2019USD ($)
Subsequent events
Maximum borrowing capacity	$ 20
Debt proceeds	$ 5