TRACON Pharmaceuticals, Inc.

Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals' second quarter 2021 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 runaway, 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 2021. ended December 31, 2020. In subsequent quarterly reports on Form 10Q, you are cautioned not to place undue 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 Tuor, President and CEO of Kraken Pharmaceuticals. Dr. Tuor, you may begin.

Thank you for joining TRACON's second quarter 2021 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 and six months ended June 30, 2021. Finally, we will conclude by taking your questions. Our development efforts continue to focus on the pivotal NVISARC trial. Envisarc is designed to allow potential approval of envifolumab in the sarcoma subtypes of undifferentiated pleomorphic sarcoma, or UPS, and myxofibrosarcoma, or MFS. As a reminder, envifolumab is a potential best-in-class PD-L1 checkpoint inhibitor without the risk of infusion reactions that may confer additional clinical benefit by virtue of its convenient and rapidly delivered subcutaneous route of administration. We continue to make progress with Envifolimab and the Envisarc Pivotal Trial. First, the Data Monitoring Committee completed its second review of Envisarc safety data last week and recommended that the trial proceed as planned following the review of more than three months of safety data from the more than 20 patients enrolled into the trial as of May. The review included data from more than 10 patients enrolled into cohort A of treatment with single agent Envifolimab, and more than 10 patients enrolled into cohort B of treatment with Envifolimab and Yervoy. Second, in June we announced that the FDA had granted orphan drug designation for Envifolimab in soft tissue sarcoma. The FDA Orphan Drug Division had requested an amended application that included preclinical or clinical evidence of activity of Envifolimab in sarcoma. Given Envifolimab has been dosed to over 700 patients, our partners, 3D Medicines and AlphaMap Oncology, were able to supplement our application with data from their clinical database, which included patients with alveolar soft part sarcoma, or ASPS, treated with endofolimab in prior phase one studies. The data were quite compelling, as two of five patients with ASPS demonstrated confirmed objective responses with duration of response beyond six months. while the other three patients demonstrated stable disease. These response rates are consistent with the known activity of other checkpoint inhibitors in this sarcoma subtype. For example, the PD-L1 checkpoint inhibitor Ticentric, marketed by Roche, demonstrated partial responses in 37% of ASPS patients treated in a trial sponsored by the National Cancer Institute. Third, We have initiated 26 clinical trial sites and continue to expect the availability of interim MVSARC efficacy data by the end of this year. The initial DMC-mandated interim efficacy analysis occurs following the 12-week CT scans in the 36th enrolled patient to allow for determination of the preliminary objective response rate. For the futility rules of the study, there must be at least one response among the initial 18 patients enrolled into each cohort to continue enrollment of that cohort. We expect to summarize the efficacy data from the initial 36 patients by the end of this year in a top-line data release that includes the aggregate initial response rate across the two cohorts. Fourth, we expect positive interim efficacy data would be the basis for submitting a request to the FDA for fast-track designation and or breakthrough therapy designation. as either designation permits a rolling BLA submission that would facilitate a timely review of a BLA. Looking forward, we anticipate a second interim efficacy assessment and final response assessment in 2022. And assuming positive data, submitting a BLA for accelerated approval, that if approved, could allow for product launch in the U.S. by the end of 2023. Additionally, we reviewed the design of the InfoSarc trial in a poster at ASCO in June. As a reminder, the ENVISARC trial includes two cohorts of 80 patients each. One cohort receives single-agent envifolumab, and a second cohort receives envifolumab in combination with Urovoi. 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, defines the level of response that satisfies the primary objective of the study, which is to statistically exceed the 4% response rate of Votrien, the only approved therapy for refractory UPS and MFS. In parallel, our corporate partners, 3D Medicines and Alpha Mammal Oncology, submitted Envifolimab data from the completed pivotal trial in MSI high cancer in China as part of an NDA that was accepted for priority review by the Chinese NMPA in January. We believe Envifolimab could be approved in China later this year. We believe dual checkpoint inhibition that includes Envifolimab should also be studied in first-line treatment because a prior study indicated the response rate for dual checkpoint inhibition with Opdivo and Yervoy across all refractory soft tissue sarcoma subtypes was similar to the response rate for first-line chemotherapy. We therefore expect to begin a new trial of Envifolimab and doxorubicin this year to assess safety of the combination. The trial could include a combination of doxorubicin, Envifolimab, and an antibody to a second target, such as CTLA-4 or LAG-3. as one of our business development priorities is in licensing another immuno-oncology asset. The clear advantage of this strategy is the potential to market two proprietary immunotherapy assets for the treatment of sarcoma patients. We believe sales of Envifolmep in sarcoma could eventually reach $1 billion, which could be further enhanced through marketing a second immunotherapy by Tracon in this indication. It is important to understand that the extent of our market opportunity in sarcoma with envapolimab at parity pricing is not just the initial $200 million in expected annual revenues in UPS and MFS, but potentially $1 billion as envapolimab could be broadly penetrate sarcoma in the first line, adjuvant, and neoadjuvant settings. If we are able to also license a second immunology asset that pairs as a combination treatment with envapolimab in sarcoma, and also is developed in other cancer indications, TRACON's total potential revenue could vastly increase. While EnvifolMap is our most advanced product candidate, we continue to progress two other promising clinical stage assets. We expect TRC102 to continue to advance through NCI sponsorship in lung cancer in combination with chemotherapy and radiation therapy. Data presented at ASCO show that TRC102 in combination with chemoradiation resulted in a 100% response rate in 15 patients with advanced localized lung cancer, including in three patients who had a complete response to treatment. These data compare favorably to the 51% response rate seen in prior trials of chemoradiation therapy for this disease. In ThinZ, a PD-L1 checkpoint inhibitor is now approved as maintenance therapy for patients with advanced localized lung cancer whose disease has not progressed following chemoradiation. We therefore believe a randomized trial of chemoradiation with or without TRC102, followed by infinity maintenance, is warranted in these patients and expect this concept to advance for CTEP consideration this year. Based on NCI data reported in the publication Cancer Cell in December 2020 and Phase II data from refractory glioblastoma patients treated with Temodar and TRC102, Inhibiting base excision repair with TRC102 is able to induce synthetic lethality in MGMT-methylated patients. We expect the NCI to report further data this year of the combination of TRC102 and Temodar in an expanded cohort of lung cancer patients. However, we believe the primary focus of further study of the combination is in glioblastoma, where MGMT methylation occurs in approximately one-third of cases. We continue to discuss a potential trial of Temodar radiation therapy, and TRC-102 in first-line glioblastoma with CTAP investigators. Our third clinical stage asset is the CD73 antibody TJ4309 that is being evaluated in an ongoing Phase I dose escalation study as a single agent and in combination with a checkpoint inhibitor to Centric. Data from the ongoing Phase I trial presented at the 2021 ASCO virtual meeting indicated that TJ4309 was safe, and well-tolerated as a monotherapy and in combination with Ticentric. Exposure was dose-dependent, and TJ4309 saturated its CD73 target in the blood at all dose levels. Further, there was evidence of clinical activity in both PD-1 treatment naive and refractory cancer patients following treatment with TJ4309 given with Ticentric. We are developing TJ4309 in collaboration with IMAP Biopharma through one of our two strategic agreements with them, one for TJ4309 and one for a pipeline of biospecific antibodies. In the TJ4309 agreement, we are responsible for the regulatory and clinical development of TJ4309 in the U.S. and Europe. Following the completion of the Phase I trial, which is expected in 2022, IMAP has the right to terminate the agreement for a payment of $9 million. For the license agreement, if IVAB elects to license, as that term is defined in the agreement, TJ4309 to a third party in any region outside China, Macau, or Taiwan, we are entitled to receive escalating portions of non-royalty and royalty payments. These range from a high single digit to a mid-teen percentage of non-royalty consideration, as well as a double digit percentage of royalty consideration, depending on the phase of development we complete under the TJ4309 agreement. As we have noted in the past, in March 2020, IMAP issued a press release announcing a strategic partnership with KGBio, whereby KGBio received what the press release described as a right of first negotiation for exclusive rights to commercialize TJ4039 in multiple Asian, African, and Middle Eastern countries for up to $340 million in potential payments to IMAP. We believe that based on the KGBio transaction, Treycon is entitled to receive a payment under the TJ439 agreement, although IMAP has disputed that this payment is due. The dispute is being heard before an international Chamber of Commerce arbitration tribunal seated in New York City and will be arbitrated under New York law with the hearing set for February 2022. In February 2021, IMAP sent us a notice purporting to terminate the TJ439 agreement which, as I mentioned, would result in IMF owing us a pre-specified termination fee of $9 million. However, IMF does not have an option to terminate the TJ439 agreement without cause until the ongoing phase on clinical trial is complete, as that term is defined in the agreement. And therefore, Tragen responded by disputing the basis for IMF's reported termination. In March 2021, IMAP filed a lawsuit in the Delaware Court of Chancery seeking an order of specific performance requiring TRACON to comply with IMAP's purported termination notice. The lawsuit was stayed in May, and subsequently this matter was included in the dispute before the Arbitration Tribunal, which will be hearing this matter in February 2022, along with our claim with respect to the biosecific antibody agreement. Pending the resolution of the dispute, we continued to perform our obligations under the terms of both agreements. Moving on, in the second quarter, we enhanced our senior management team with three new hires. Dr. Brenda Marcy was appointed as Senior Vice President and Head of Regulatory Affairs. She was recently Vice President of Regulatory Affairs at Faring, where she oversaw all U.S. regulatory activities, including the BLA filing for Faring's bladder cancer gene therapy that received both fast-track and breakthrough designations. Her appointment complements the appointment of Drs. Dongliang Zhuang as Vice President of Statistics and Biometrics and Mr. Yao Wang as Executive Director of Statistical Programming. With these appointments, we have assembled a highly experienced team to lead the filing for the expected envifolamab VLA. From a business development perspective, we continue to evaluate and pursue additional external clinical stage assets which would complement our pipeline this year in order to leverage our CRO-independent product development platform and second-generation immunology targets are of particular interest. We believe our product development platform will continue to allow us to establish key new partnerships that will drive significant long-term shareholder value. Additionally, in September, Forbes Books will publish the book Unnecessary Expense, an antidote to the billion-dollar drug problem that is authored by Tracon Senior Management and is now available for pre-order on Amazon. The book details the advantages of TRACON's CRO-independent product development platform and profit share deal structure that provides for rapid and high-quality development of novel drug candidates. We believe our platform serves as a compelling solution for companies who wish to access the U.S. pharmaceutical market and retain a substantial share of their product's profitability. In July, we raised approximately $13.5 million in net proceeds in an underwritten common stock offering With the capital raised, we estimate that our cash runway now extends into 2023. This provides us with a cash runway for more than a year past initial interim NVSARC efficacy data expected at the end of this year and past expected final NVSARC data expected in 2022. We expect our enhanced balance sheet will increase the impact of important 2021 milestones and provide capital to execute clinical trials of potential new drug candidates we may add to our pipelines. 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 $3.1 million and $5.4 million for the three and six months ended June 30th, 2021, respectively, compared to $2.2 million and $4.2 million for the comparable periods of 2020. The increase was related to enrollment in the pivotal NBISARC trial in 2021. General and administrative expenses were $6.1 million and $8.8 million for the three and six months ended June 30, 2021, respectively, compared to $2.1 million and $4 million for the comparable periods of 2020. The increase was related to legal expenses for the now-stayed Delaware case and ongoing arbitration with IMAP. Importantly, we expect Q2 of 2021 to be the high point for G&A expenses this year. Our net loss was $8.9 million and $14 million for the three and six months ended 2021, respectively, compared to $4.5 million and $8.5 million for the comparable periods of 2020. Turning to the balance sheet, at June 30, 2021, our cash, cash equivalents, and investments totaled $25.6 million, compared to $30.4 million and $36.1 million at March 31, 2021, and December 31st, 2020, respectively. With the net proceeds of approximately $13.5 million raised in July, we expect our current capital resources to be sufficient to fund our planned operations into 2023. With that, I will turn the call back over to Charles.

Thank you, Scott. To recap, we continue to execute our clinical development plan around our lead product candidate, Envifolumab, and have made substantial progress in the Envisarc pivotal trial. We have now completed each of the two DMC safety reviews and expect to complete the initial interim efficacy assessment and summarize top-line data prior to year-end. We believe the NVISARC trial provides a potential fast-to-market opportunity to deliver Envifolimab to sarcoma patients in significant need of a new therapy as expeditiously as possible. Importantly, we believe our recent capital raise will be sufficient to fund the company into 2023. which is more than a year following expected initial interim Envisarc efficacy data and past expected final Envisarc data, which could demonstrate the potential for Envifolimab to rapidly transform the standard of care for refractory sarcoma patients. We also continue to expect to leverage our unique product development platform and profit share deal structure to further enhance our pipeline and leverage our ability to execute clinical trials at low cost and thereby avoid the unnecessary expense of CRO-conducted clinical trials. We look forward to providing further updates in the coming months and remain confident that we have the right strategy in place to deliver on our development and business plans for the benefit of patients and shareholders. Thank you for your time and attention, and we are now available to answer your questions.

Thank you, sir. At this time, I would like to remind every participant, if you would like to ask a question, you will need to press star 1 on your telephone keypad. Again, that is star one to ask a question. And if your question has been answered, you may press the, to withdraw yourself from the queue, you may press the pound key. Our first question comes from the line of Maury Rakaroff of Jefferies. Your line is open.

Hi, Charles and team. Thanks for taking my questions and congrats on the progress. Maybe first question is just I think on the first quarter call, you said that you plan to have all 25 sites open for Envis Arc by the end of 2Q. And so I'm just checking to see if you have opened all the remaining sites, and is there anything else you can say on enrollment and maybe discontinuation rate or safety at this point?

Sure, Martin. I appreciate the question. Yeah, so we've been opening sites as we speak. We actually have 26 sites initiated, which is actually our target for the entire study. I will say more, there has been a lot of interest at some sites that were not initially included in the 26, so you actually might see some more sites come on beyond that. But right now, we've opened 26 sites. Our goal is 25. We did open 26 so far. And in terms of accrual, we're on track with respect to having 36 patients in this quarter, which would then allow the interim efficacy analysis to be delivered by end of this year. In terms of safety, I can tell you that, you know, we've had now two safety reviews. There were no comments with respect to changing the study protocol at either the three-week or 12-week period after enrollment of the 20th patient. I would say, in general, we've seen Envifolumab as expected to be well-tolerated as a single agent. And also, I would say it's been very well-tolerated with Urovoid as a dual checkpoint inhibitor strategy.

Okay, that's helpful. Are you seeing any difference on the profile versus, I guess, with potentially some benefit on colitis or even ISRs?

Yeah, I would say just overall, both as a single agent, Maury, and in combination with Yervoy, both cohorts, it's been a very tolerable regimen. I won't get into specific details other than to say As expected, envifolumab as a single agent and also with urovoid has been a very tolerable drug.

Got it. Okay, that's helpful. Sorry, go ahead.

No, no, I appreciate the question. Yeah, go ahead.

And then the other question I had was just on, we noticed on ct.gov that two new phase 2s posted by 3D, one's in solid tumors and the other one's in biliary tract cancers. And just wondering if you can provide any more insight into the strategy behind those studies, and if they could factor into TRACON's development plans, and will they be enrolling any patients in the United States?

Yeah, no, I think, great question, Mario. I think, so the biliary tract cancer trial, I think, is relevant for the following reasons. So they are currently enrolling a trial in biliary tract cancer in China. And they have orphan drug designation for biliary tract cancer designation in the U.S. So we expect that they'll probably have a readout on that trial in China maybe in a year or two years. And I think on that clinicaltrials.gov posting that you mentioned, I think the initial start of data is roughly in the time period where you would expect final data from the Chinese study. So, you know, we don't think it will have a major impact anytime soon as respect to a U.S. label. and I think it will be important to see what the data is coming out of China initially in order to assess the impact of the U.S. potential plane trial.

Got it. Okay. Thanks for taking my questions.

Appreciate it, Maury. Thank you.

Our next question comes from the line of Jason McCarthy of Maxin Group. You may ask your question.

Hi. This is Joanne Lee on the call for Jason McCarthy. Thanks for taking my questions. For my first question regarding the positive DNC review announced last week, I'm just wondering if you could comment on whether you guys saw any differences observed in terms of safety and tolerability between the subset of patients treated with emofolimab in a single-agent capacity versus those treated with the combination of Enva and Durovoi.

Hi, Joanne. Thanks for your question. Yeah, I would just say in both cases, the drug as a single-agent or in combination with Durovoi was very well tolerated You know, I would also mention that as expected, when you're receiving two checkpoint errors rather than one, you're going to see some more adverse events with respect to your voice known side effect profile. And that was expected, and given it was expected, didn't change with respect to how the protocol is being implemented.

Great. Thank you. And can you just show some color in when we might potentially be expected to see additional data readouts with respect to your TRC-102 platform?

Sure. Yeah, so I think with respect to TRC-102, I think in fourth quarter we'll see the NCI present data from a study that's been ongoing for a couple years, which is a study of TRC-102 and Temodar in patients with solid tumors. It was initially a Phase I study, but based on activity seen in ovarian cancer, colorectal cancer, and lung cancer in the Phase I portion, They enrolled three separate expanded cohorts, and they reported already in the colorectal cancer cohort, which was actually very nice data that helped really confirm the fact that MGMT methylated patients seemed to be particularly sensitive to Temadar plus TRC102, and that was the data published in Cancer Cell last year, that corroborated data we had in GBM from earlier in 2019. This year, before the end of the year, I would expect to report data on the lung cancer cohort, of treatment with Tamadar TRC-102. So that's the data I expect to see. I'm not sure which conference, but I do expect to see those data this year.

Got it. Thanks for the addition of color, and congrats on all the progress.

Thank you, Joanne.

Our next question comes from the line of Ed White of HC Wainwright. You may ask your question now.

Thanks. Good evening, Charles and Scott. Hi, Ed. Hi. So just a question on the TJ4309 arbitration and the impact on SG&A expenses. What were the legal expenses, if you could break those out? And you said that the second quarter should be the high point of the year. Do we expect to continue to see litigation expenses throughout the year, and this is the highest quarter, or do they go away? How should we be thinking of that?

Yeah, thanks, Ed. Yeah, so to answer your first part, we haven't broken them out, but, you know, you could assume an increase from last year, the majority of that would be related to legal expenses in Q2. And then going forward, you know, we expect Q3 and Q4 to be more similar to Q1 because the majority of those expenses were due to the Delaware lawsuit. And since that was stayed, we won't have expenses for that going forward. And the ongoing ones are just related to arbitration as they were in Q1.

Okay. Thanks, Scott. And how should we be thinking about arbitration? It sounds like it's a timing matter and a question of $9 million. It seems as if they do, you know, want to get out of the agreement, in which case they would owe you $9 million, you know, according to the contract, according to you guys. Is that the end of it, or is there a chance that you can continue to develop, you know, past phase one?

Yeah, so with TJ4309, As we mentioned in the call, you know, there's a revenue-sharing provision with respect to any deal that IMAP does around TJ4309, you know, prior to terminating the agreement. And, for instance, we believe that the deal they did with KGBio has triggered a payment under that stipulation in the agreement. But then at some point, for instance, at the completion of Phase 1, they do have the – they're entitled to terminate the agreement and If they serve a termination notice that's valid at that time, we will obviously respect that. And until that time, we would expect to be part of any revenue sharing deals that they would do, including the previous one they did with KGBio.

Okay. Thanks, Charles. Sure. And just a question on enrollment. So you gave a nice timeline there. I was just wondering, you know, with the 26 centers, sites, and maybe more, have any of them been impacted by the Delta variant? Do you expect to see any kind of impact to them before you get reachable enrollment?

It's a great question. Yeah, I would say right now we haven't seen a significant impact of COVID. I'd say whether it was COVID Alpha or COVID Delta. And I would say that because You know, these are sarcoma patients that have very few treatment options that need therapy. And so, you know, the centers have been used to dealing with COVID restrictions in terms of how they space out patients in the waiting room, for example. But they have to continue to treat these patients. And so I don't think we've seen a major impact, either COVID-alpha during the initial portion of startup for Envisarc or even more recently COVID-delta. It just hasn't come up with investigators yet. I haven't specifically asked about it, but it just hasn't even come up on investigator calls as an example. That said, we'll keep a close eye on things, but right now it hasn't been an issue. We have protocol guidelines to allow patients to be vaccinated on study, and we encourage that. So we're doing everything we can to protect patients as well.

Okay. Thanks, Charles, for taking my questions. Thank you, Ed.

Our next question comes from the line of Matthew Cross of Alliance Global Partners. You may ask your question now.

Hey, guys. Good afternoon, and thanks for the update. I had two quick questions related to Envisarc. First, I'll kind of ask a different question directed at enrollment, building on these guys. You know, I was curious to get some additional granularity, given that, you know, both this week and I think back in June, that at least 10 patients per arm or at least 20 patients total had been analyzed for safety in Envisarc. And that's, I guess, just over half of that 36 patients that you ultimately need for this first interim. Curious if the similarity in terms of numbers between those two safety updates over a couple of months You know, it seems like the differentiating factor is the time for follow-up, but now that's three months. I was just hoping we could break that down a little bit. You know, have more than, I guess, that number, if we say 20-plus, been enrolled but simply not followed for the three months that's been most recently alluded to in the safety analysis? Or should we expect kind of a bolus of patients to be enrolled imminently to support the 36 patients that you're hoping to get by the end of this quarter? And then secondly, I just wanted to clarify, related to the interim efficacy assessments, that these are effectively futility determinations, more or less, I would imagine. If ORR is above 11% for either arm at either of these readouts, and we'll start with the first, obviously, that would, in my view, be essentially a positive indicator for the outcome of the full trial. I'm imagining that that wouldn't be sufficient to file or that you wouldn't take data on 36 patients to the FDA for an approval.

Thanks, Matt, for your question. So just to clarify on the safety review, these are mandated reviews by the protocol such that they occur at specific time points after enrollment of the 20th patient. So to be clear, we've enrolled far more than 20 patients as of the current date, and we've done that so that allows us to then present the interim efficacy data on 36 patients by year end given the three-month delay in getting all the scans for those patients. So to be just crystal clear, 20 patients were enrolled as of May. And once the 20th patient enrolled, three weeks after that patient was enrolled was the first DMC safety analysis. Twelve weeks after the 20th patient was enrolled was the second DMC safety analysis. So it's done on the 20 patients enrolled with a fixed time period between that patient enrolling and then aggregating all the safety data from the treatment that they have received. So to be clear, patients have been enrolling since May after 20 patients were in to the point where we can confidently project that we'll have 36 patients in this quarter for which we'll have efficacy data that will allow us to then do the first interim efficacy assessment and report those data publicly. With respect to the efficacy analysis, as I alluded to in the script, the futility rule is again specified by the protocol that we have to have at least one confirmed response in the first 18 patients who've had at least three months of scans within each of the two cohorts in order to continue that cohort. As you pointed out, the efficacy bar to continue enrollment is different from the primary endpoint goal, which is an 11% response rate. The only way we would terminate this trial early would be if we achieved the nine anticipated responses minimum bar. before we enroll 80 patients. And then only in that case would it be after we discuss those data with the FDA. So, for example, we have nine responses, let's just say for sake of argument, in 40 or 50 patients, which obviously would meet the bar of the study because nine of 80 is an 11% response rate, then we could think about approaching the FDA. So that will be determined in real time.

Perfect. I appreciate the clarity on both fronts, Charles, and looking forward to the data later this year. Thanks. Thank you, Matt.

As a reminder, if you have questions, you may press star 1. Again, that is star 1 to ask a question. Our next question comes from the line of Nick Abbott of Wells Fargo. You may ask your question now.

Nick Abbott Great. Thank you very much. Congrats on the progress, Charles. If I place a preorder for the book, can I get the first question next quarter?

Only if you buy one for every family member and relative. Okay.

Fair enough. So really, just in relation to that last question, and just to make sure I understood your answer clearly, is you do see a potential opportunity for early filing. In relation to that, can you talk about securing – you know, supply of commercial ENVA in the U.S., and also, presumably, you intend to reference the safety data that's been submitted to the regulatory body in China.

Yeah, great questions, Nick. You know, I think, so with respect to the commercial production, you know, our partners in China, and AlphaMab is really the commercial production partner, you know, they're in the process of producing commercial-scale ENVA, for their anticipated launch in China. They filed for approval in December, they got priority review in January, so we expect they'll be approved this year, and then that will launch. Actually, their commercialization partner in China is Sincere, which has a large commercial sales force there already. So we would expect to use the product that they will produce at commercial sale from China as part of our commercial, if you will, supply at the appropriate time, which again is late 2023. as the earliest projected launch period. So that will, I think, is a big advantage for us because it should already be commercially available in China well in advance of when we would market it and need supplies in the United States. So that's, I think, an important consideration. And then, sorry, your second question was about the

About the safety database.

Yes, sorry, the VLA calling. Actually, that's a great question. We're actually discussing that internally, that there's an incredible safety database available. Our partners have those 700 patients with the drug as a single agent, some with chemotherapy as an example. That said, our new head of regulatory, Brenda Marcy, has made it clear that you don't have to necessarily include every patient data point from studies done outside your IND in order to successfully file a BLA. So we're discussing what would actually be the optimal BLA filing package. And because we have orphan drug designation especially, we may not need to, for instance, include every safety data point from trials done outside of our IND. So that's something that, you know, stay tuned on that discussion. But I think it's an important point that we're discussing in light of our our new head of regulatory, Brenda Marcy, who has a lot of experience filing and interacting with the FDA around these types of questions.

Okay, thanks, Charles. And then just going back to AlphaMAP, has that facility been subject to an FDA visit and review?

Yeah, you could assume it hasn't been FDA inspected with respect to because it hasn't been a basis for filing for approval. I would say without breaching confidentiality, it has been inspected by international regulatory authorities, so I could tell you that, Nick, and we remain confident of their ability to produce commercial supplies for us as well.

Okay, terrific. And then in terms of the second immunotherapy asset you're considering, can you provide any commentary about how far along you are in securing that asset? And also you kind of mentioned that you might want to use that for the DOCS combo trial starting this year, which clearly would need to have an IND approved in the U.S., I'm assuming, or at least be IND ready unless you consider adding that arm later.

Great point, Nick. Yeah, so we're looking at several assets at this time, and we've been in discussions with several companies for a prolonged period of time. I would say our goal still remains to get one or two deals done this year, To your point, it could be that it's an IND-ready asset whereby we'd still do an initial safety trial before combining, for instance, with ENVA and DOCS. So if that's the case, we could do the ENVA-DOCS initial combo and then add that on in a little bit later timeframe. Some assets that may already, for instance, have clinical data, whether it's an open U.S. IND or an IND, for instance, in Australia, could more logically plug straight into a combination trial with DOCS and ENVA. So I think there are potential assets on the board that are in both those categories, Nick, and, you know, we're excited to continue those discussions with the hope of licensing one or two more assets this year.

Okay, terrific. And then next one for me, and it sort of builds on a previous conversation. You know, do you wish that you'd just sort of given – 4309 back and collected the $9 million. I know there's not a, I mean, I'm assuming you have the option to do that. Obviously IMAP doesn't have a contractual right to do that. Or do you feel like that the potential payments you can get if they enter into additional commercial collaborations are considerably, you know, are of considerable value and perhaps, you know, what you think that might be?

Yeah, that's a good question, Dick. I think, you know, the disputes are around two agreements, you know, the TGA4309 agreement and the bisive antibody agreement. And our position is to respect the agreements, to respect the contractual, you know, requirements and obligations in the agreement. And that's going to be our position going forward, and we'll continue to move in that direction. To your point, I think that if you think of it from a pure business standpoint, just from TGA4309, it's Yeah, you could potentially terminate and take $9 million, but it wouldn't be a legal termination. So given there's a dispute already going on with that agreement and also the BICIP agreement, we just didn't feel that was the right course of action for our company.

Okay. Thanks, Dan. Last one from me, Charles. On the basic decision on repair and hitherto, given this resurgence of interest in synthetic lethality, I'm kind of surprised there's not been more interest inbound interest in companies wanting to add, you know, what is a clinical asset with a known safety profile, or the alternative that you've not looked to bring in an asset to pair with a base excision repair inhibitor?

Yeah. No, it's a good question. I mean, I think we really want to see with TRC-102, and I think what will really distinguish the asset is randomized data. And I I do feel good about what will happen this year with respect to TRC102 being advanced into a randomized trial in advanced localized lung cancer that will definitively prove whether it's active or not. I think we've had very encouraging single arm data, but we need randomized data. I think those data will then elevate the profile of that asset, both with respect to external potential partners, but also internally in terms of how we prioritize the asset. So I think To your point, it's an undervalued asset, but I do think the wheels are turning, which will generate data that could make it much more appreciated by potential external partners. Okay. Terrific.

Thanks, Charles.

Much appreciated the questions, Nick. Thank you.

Our next question comes from the line of Samit Roy of Jones Trading. Your line is open. Again, Sharma Twain.

Sharman, you might be on mute. Hi, thank you for taking the question. I was on mute. The first one is on the ENVA and DOCSAN. Apologies if I missed that point. Are you planning to start the frontline trial this year? And are you – and another one is on the burn and the financial guidance. You're thinking cash into 2023, but it looks like you're burning about, you know, 2018. to $30 million a year, and you're also considering analyzing further IO assets. So are there any milestones we should be modeling in our model? Thank you.

Sure, show me. Yeah, so with respect to your first question about Envidox, we do expect to see that trial open this year with respect to Envidox. And, again, it could be a third agent in there as well, you know, for Nick's question. But the initial study of Envidox first line, we do expect to initiate sites this year. You know, I think there's a lot of interest in that trial. I will say from initial sites that are part of the Envisarc trial, a lot of them would like to be part of a frontline trial. And those would be subtypes of sarcoma beyond UPS MFS to be clear. And so, you know, that's definitely something of keen interest to investigators. You know, with respect to spending, I think as Scott pointed out, you know, we expect the peak in GNA to be this year related to the now state Delaware Chancery Court case. And then Following that, in quarter three, quarter four, we'll see the spend be more similar to quarter one. And so, you know, we've taken that into account to project the current cash position to get us to 2023. Now, you did mention we are looking for new assets, but, you know, we're looking for new assets. We're looking to do it in a way that leverages our product development platform of zero independent research that would be consistent with prior agreements, whereby we We haven't paid significant upfronts, and we haven't paid significant milestones, but what we give our partners is that really, really beneficial profit share on the back end and our motivation to move their product forward very quickly. So really the cost, when we think about a new asset, is the cost of actually doing the trial. And that brings in play what we have in terms of capabilities here, and our special sauce, so to speak, is our ability to execute trials. You know, to do a 30-patient trial, we estimate the cost is about $3 million, and that's spent over about eight quarters. So when you start breaking that down, you're talking about incremental spend that's almost immaterial with respect to our overall cash expenditure. So we can still license assets in, employ our platform, do phase one and early stage development without a significant spend in terms of the burn. I would point out that we're not including any non-diluted capital that could come in, as we discussed earlier, for instance, from partners opting to terminate current agreements around TJ4309. But even without those non-diluted capital payments, we're confident of our position to get into 2023. And I know a lot of companies couldn't make that statement, Shomit, but, again, it plays into the fact when you're zero independent and you have really no significant manufacturing responsibilities because those are done by your partner, your developmental expenses become incredibly low.

Got it. Now this is really helpful. Thank you again, and congrats on the progress. Thank you, Shoman.

Once again, as a reminder, if you have questions, you may press star 1. There are no further questions at this time. I will now turn the call over back to Dr. Charles Stewart, President and CEO of Tracon Pharmaceuticals, for closing remarks.

Thank you, everybody, for your attention and for your questions. We look forward to speaking with you again next quarter. Stay safe.

This concludes today's conference call. Thank you again for participating. You may now disconnect.