TRACON Pharmaceuticals, Inc.

Good day, ladies and gentlemen, and welcome to Trach and Pharmaceuticals' fourth quarter and year-end 2020 earnings conference call. At this time, all callers are in the listen-only mode. After the speaker's prepared remarks, we will conduct a question-and-answer session, and instructions will be given at that time. During today's call, we will be making certain forward-looking statements, including statements regarding expected timing of clinical trials and results, regulatory activities, future expenses and cash one way, and our development plans and strategy. These statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2019, and subsequent quarterly reports on Form 10-Q. We are cautioned not to place any reliance on these forward-looking statements, and we disclaim any obligation to update such statements. Now I would like to turn the call over to Dr. Charles Sewer, President and CEO of Tracon Pharmaceuticals. Dr. Sewer?

Thank you for joining Tracon's fourth quarter and full year 2020 financial results and business update call. I will begin with an update on our pipeline and then review our recent activities. Following that, Scott Brown, our Chief Financial Officer, will review our financial results for the three months and year-ended December 31, 2020. Thank you. Finally, we will conclude by taking your questions. Our development efforts continue to focus on the pivotal Envisarc trial. Envisarc is designed to allow potential approval of Envifolumab in the sarcoma subtypes of undifferentiated pleomorphic sarcoma, or UPS, and myxofibrosarcoma, or MFS. During December, we initiated dosing of multiple patients that has continued this year. Currently, we have initiated 16 U.S. sites, where we have enrolled multiple patients at multiple sites. We expect to achieve our goal of initiating 25 US sites by April. As a reminder, Envifolmab is a potential best-in-class PD-L1 checkpoint inhibitor which may confer additional clinical benefit by virtue of its convenient and rapidly delivered subcutaneous route of administration. The Envisarc pivotal trial includes two cohorts of 80 patients each. One cohort receives single-agent Envifolimab, and a second cohort receives Envifolimab in combination with Yervoy, a second checkpoint inhibitor targeting the CTLA-4 receptor that is marketed by BMS. The trial enrolls patients with UPS and MFS who have progressed on one or two lines of prior treatment and have not received prior checkpoint inhibitor therapy. The primary endpoint in both cohorts is objective response rate by RESIST. as confirmed by blinded independent central review, with duration of response being a key secondary endpoint. In each cohort, the demonstration of nine out of 80 objective responses, or an 11.25% objective response rate confirmed by independent radiographic review, defines the level of response that satisfies the primary objective of the study, which is to statistically exclude the known 4% response rate of Votrien, the only approved treatment for refractory UPS and MFS. To reiterate, unfortunately the one approved treatment for refractory UPS and MFS has only a 4% objective response rate. This is a clear example of an indication with high unmet clinical need. We are studying the sarcoma subtypes of UPS and MFS because they are responsive to checkpoint inhibition based on data presented at ASCO 2019 and ASCO 2020. At ASCO 2020, investigators from the Alliance for Clinical Trials and Oncology reported an impressive 29% confirmed objective response rate in patients with highly refractory UPS who received Opdivo in combination with Yervoy. These data build upon data presented at ASCO 2019 showing that single agent Keytruda demonstrated a 23% response rate in highly refractory UPS and MFS patients. The NVSARC trial was designed based on activity reported for PD-1 and PD-L1 antibodies as single agents and in combination with Urovoi in the soft tissue sarcoma subtypes of UPS and MFS. From a financial perspective, we estimate that the cost of conducting this pivotal trial using TRACON's CRO-independent product development platform, including paying for Urovoi, will be less than $20 million and will be spent over the next eight to ten quarters. We expect multiple Envifolumab milestones this year. First, we intend to report recommendations by the independent data monitoring committee following interim safety evaluations expected in the first half of 2021. Second, we anticipate submitting early response assessment data to the FDA in the first half of this year as part of our ARFN drug designation application. Third, we expect the availability of interim Envisarc efficacy data in the second half of this year. These data could be presented at a scientific conference or could be summarized in a top-line data release. Fourth, we expect those interim efficacy data will be the basis for submitting a request to the FDA for breakthrough therapy designation. Looking forward, we anticipate reporting final response assessment data in 2022 and assuming positive data, submitting a BLA for accelerated approval that, if approved, could allow for product launch in the U.S. in 2023. In parallel, our corporate partners, 3D Medicines and AlphaMab Oncology, are conducting multiple clinical trials, including two pivotal trials in China in additional indications. In December 2020, they submitted EnvifolMab for approval in MSI-high cancer in China, and the application was accepted for priority review by the NMPA earlier this year. We believe Envifolimab could be approved in China later this year. Returning to Tracon's development in sarcoma in the US, our market assessment concluded that Envifolimab, if FDA approved for refractory UPS and MFS, could generate peak annual revenue of approximately $200 million in the US, assuming parity pricing to Keytruda or Opdivo. The adoption rate is forecasted to be relatively rapid, using Envifolimab's target product profile, a 15% response rate as a single agent, and a 30% response rate when combined with Yervoy, which would compare favorably to the 4% objective response rate of the one approved treatment for refractory UPS and MFS. Envifolimab's sales revenue could increase further through label expansion or compendia listings into other refractory sarcoma subtypes that have been shown to be responsive to checkpoint inhibitions. such as angiosarcoma, alveolar soft part sarcoma, and dedifferentiated liposarcoma, which our market assessment could generate an additional $100 million in peak annual revenue in the U.S. for a total of $300 million when combined with UPS and MFS. We believe dual checkpoint inhibition with a combination of Envapol, MEV, and Urovoi should also be advanced into first-line treatment. Notably, the response rate for dual checkpoint inhibition with Opdivo and Yervoy in refractory sarcoma subtypes other than UPS and MFS was 16%. Given the response rate of first-line chemotherapy in sarcoma is only 17%, we expect to dose Envavolumab with doxorubicin in a limited-scope Phase I trial later this year to assess safety of the combination and then move quickly into a potential pivotal trial. The trial could include a combination of doxorubicin, Envifolimab, and a CTLA-4 inhibitor. The CTLA-4 inhibitor could be Urovoi, or another proprietary CTLA-4 inhibitor, as one of our business development priorities is licensing another immuno-oncology asset. We are also discussing a clinical trial of Envifolimab with an approved CKIT inhibitor in gastrointestinal stromal tumor, or GIST, that may be funded by third parties. We believe thorough label expansion in sarcoma, including in GIST, in the first-line setting, as well as for neoadjuvant treatment prior to surgical resection and adjuvant treatment following surgical resection, could substantially increase sales revenues to over $1 billion just in sarcoma. While Imfofolimab is our most advanced product candidate, we continue to progress to other clinical stage assets. TRC-102, our second clinical stage asset, is a novel small molecule inhibitor of the DNA-based excision repair pathway that is intended to reverse resistance to certain chemotherapeutics. The NCI reported notable data for TRC-102 as part of a publication on exceptional responders in the journal Cancer Cell in December 2020. The article profiled a colorectal cancer patient treated with Temodar and TRC-102 with an ongoing near-complete response for nearly four years. Detailed molecular analyses of the patient's tumor showed silencing of alternative DNA repair pathways, including the MGMT pathway, that may have resulted in sensitivity to inhibition of DNA-based excision repair by TRC-102. Inhibiting base excision repair with TRC-102 was postulated to induce synthetic lethality, meaning a combination of deficiencies in DNA repair led to cell death. and this effect caused the prolonged response to Temodar and TRC-102 treatment, as single-agent Temodar is typically inactive in colorectal cancer. Further support for the NCI hypothesis was demonstrated in 11 colorectal cancer patients who subsequently enrolled. While none of the 10 MGMT-expressing patients demonstrated a response, the single patient with deficient MGMT also responded to treatment with Temodar and TRC-102. MGMT deficiency is observed in about one-third of glioblastoma patients, and a prior study of Temodar and TRC102 reported at the Society for Neuro-Oncology in 2018 demonstrated that two MGMT-deficient glioblastoma patients had prolonged survival when treated with Temodar and TRC102 after progressing previously on Temodar and radiation therapy. We expect further development by the NCI in glioblastoma based on these data and believe a trial in the first-line setting of Teminar, radiation therapy, and TRC-102 is warranted. Notably, in October 2020, TRC-102 was granted orphan drug designation by the FDA in malignant glioma. That includes glioblastoma. We also expect TRC-102 to continue to advance through NCI sponsorship in lung cancer in combination with chemotherapy and radiation therapy, based on data presented at ASCO 2020, showing that TRC-102 in combination with chemoradiation resulted in a 100% response rate in 15 patients with advanced localized nonsuicide, including in three patients who had a complete response to treatment. These data compare favorably to prior trials of chemoradiation therapy in advanced localized non-small cell lung cancer. The PROCLAIN clinical trial reported an objective response rate of 36%, and the PACIFIC clinical trial reported an objective response rate of 51% in these patients using a lympha, cisplatin, and thoracic radiations. Mfinzi, a PD-L1 checkpoint inhibitor, is now approved for patients with unresectable localized non-small cell lung cancer whose disease has not progressed following concurrent chemoradiation. We believe a study of TRC102 with chemoradiation and Mfinzi in these patients is warranted. In ongoing and future trials, we will continue to focus on the assessment of biomarkers of response, like MGMT and double-strand DNA repair status, with the goal of identifying a protein or gene expression profile that correlates with clinical response. Our third clinical stage asset is the CD73 antibody, TJ4309, that is being evaluated in an ongoing phase one dose escalation study as a single agent and in combination with a checkpoint inhibitor, Ticentric. We are developing TJ4309 in collaboration with IMAP Biopharma through one of our two strategic agreements with them, whereby we are responsible for the regulatory and clinical development of TJ4309 in the U.S. and Europe. Earlier this month, IMAP sent us a notice purporting to terminate the TJ4309 agreement, which would result in IMAP owing us a pre-specified early termination fee of $9 million. However, IMAP does not have a right to terminate the TJ4309 agreement without cause until the ongoing phase-on trial of TJ4309 is complete. We therefore believe the TJ-4309 agreement has not been terminated and continue to perform our contractual obligations. Per the license agreement with them, we are entitled to receive escalating portions of non-royalty and royalty payments if IMAP elects to license TJ-4309 to a third party in any region outside China, Macau, or Taiwan. We anticipate presenting interim data from the ongoing phase one trial at a scientific conference in mid-2021. During the fourth quarter, we raised a total of approximately $14 million at market prices and welcomed the new fund to our shareholder base. This was accomplished through a registered direct placement that included existing investors Icarian, Opel I Capital, Aspire Capital, and Watermill Asset Management, and the new investor, 5T, who collectively purchased common stock at market price for aggregate proceeds of approximately $14 million. Collectively, these transactions are expected to extend our cash runway past the anticipated interim analysis for the Pivotal and the SARC trial and into the second half of 2022. In addition, institutional index funds initiated positions in TRACON in the fourth quarter of 2020 for the 13F filings. At this time, Scott will provide an update on our financials.

Thank you, Charles, and good afternoon, everyone. TRACON's research and development expenses were $2.2 million for the fourth quarter and $8.2 million for the year ended December 31, 2020, compared to $1.9 million and $14.5 million for the comparable periods of 2019. The decrease was primarily attributable to lower manufacturing and clinical trial expenses related to the termination of the TRC-105 program in April of 2019. General and administrative expenses were $2 million for the fourth quarter and $8 million for the year ended December 31, 2020 compared to $1.9 million and $7.8 million for the comparable periods of 2019. Our net loss was $4.3 million for the fourth quarter and $16.8 million for the year ended December 31, 2020 compared to $3.9 million and $22.7 million for the comparable periods of 2019. Turning to the balance sheet, at December 31, 2020, our cash equivalents and investments totaled $36.1 million, compared to $16.4 million at December 31, 2019. We expect our current capital resources to be sufficient to fund our planned operations into the second half of 2022. With that, I will turn the call back over to Charles.