What happened

Shares of Mersana Therapeutics (MRSN 4.41%), a clinical-stage biotechnology company, are surging today after it raised more capital than expected in a secondary share offering. Seeing the company raise $65 million to develop novel cancer therapies pushed the stock 20.2% higher as of 2:18 p.m. EDT on Wednesday.

So what 

On March 31, Mersana released phase 1 results for the most advanced candidate in the company's development pipeline, XMT-1536. Investors reacting to the underwhelming data pushed the stock lower.

Person in a suit looking up at an upward sloping chart.

Image source: Getty Images.

Lackluster data probably should have made raising a significant sum in an at-the-market offering impossible, but the company still managed to sell 10.9 million shares at $5.59 and another 2 million shares at $7.74 on Tuesday. Altogether, the company raised $65 million before fees in an offering that pushed its outstanding share count about 30% higher.

Now what

Mersana will use the proceeds of its latest offering to advance its pipeline of therapies that aim for an unproven target, NaPi2b, a protein often found in cancer cells. At the moment XMT-1536 is the only new drug candidate the company has in clinical-stage testing.

During the phase 1 trial that disappointed in March, Mersana treated 59 patients with ascending doses of XMT-1536, and none achieved complete remission. Investigators reported tumor shrinkage for just five patients, and only three still have tumors smaller than when they began taking the experimental therapy.

Mersana finds the results of the ascending-dose phase encouraging enough to continue treating patients with lung and ovarian cancer using the highest tolerable dosage in an extension study. In the second half of the year, the company also expects to begin a proof-of-concept study with XMT-1592, another antibody that aims for NaPl2b usually found on cancer cells but uses a different chemotherapy agent to kill those cells. Given the results we've seen so far, the chances of Mersana's candidates showing a significant survival benefit in a larger, more-expensive trial seem very slim.