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spk00: Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals' third quarter 2021 earnings conference call. At this time, all callers are in a listen-only mode. After the speakers prepare 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, and future expenses and cash runway, 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, 2020, and subsequent quarterly reports on Form 10-Q. 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 Thur, President and CEO of Tracon Pharmaceuticals. Dr. Thur?
spk03: Good afternoon, and thank you for joining Tracon's third 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, We'll review our financial results for the three and nine months ended September 30th, 2021. Finally, we will conclude by taking your questions. I'd like to begin with details on our recent in-license of YH001, a potential best-in-class CTLA-4 antibody from U-Cure Biopharma. We have discussed for some time our objective of adding another immune oncology asset to our portfolio that complements Envifolamab. In October, we accomplished this goal through a collaboration with a science-driven company, Ucure Biopharma, headquartered in Beijing. A significant advantage of this license is the potential for TRACON to market two separate in-licensed immunotherapy assets as a treatment combination for sarcoma patients. This therapeutic strategy is complementary to our ongoing Envifolimab registration strategy in sarcoma through the pivotal Envisarc trial. Notably, we received a broad license for Y8001 to develop and commercialize in North America in sarcoma and in other indications, including microsatellite-stable colorectal cancer, renal cell carcinoma, and KRAS-positive lung cancer. And we can substitute any one of those indications for bladder cancer, endometrial cancer, or melanoma at our election. In these non-sarcoma indications, Y8001 could be combined with existing standard of care agents including marketed PD-1 antibodies. TRACA are now responsible for the cost of the clinical trials in these indications, while UCURE is responsible for the manufacturing and supplying Y8001 for clinical trials. We will owe UCURE royalties, ranging from the mid-20s to the mid-double digits on net sales, except for the period through the first full calendar year of commercialization, during which the rates are reduced. Based on preclinical data, Y8001 is a CTLA-4 antibody with best-in-class potential. In these preclinical experiments, the antibody was more potent and active than ipilimumab at blocking CTLA-4 inhibition of CD80 and CD86 activity and at inducing T-cell proliferation. The SC portion of the antibody has been designed for superior antibody-dependent cell-mediated cytotoxicity compared to ipilimumab. which may more effectively deplete regulatory T-cells. Y8001 also demonstrated superior antitumor activity as a single agent and when combined with the PD-1 antibody compared to ipilimumab in syngeneic mouse tumor models. U-Cure is currently dosing Y8001 in two Phase I trials, one as a single agent and one in combination with the PD-1 antibody toripalimab. for which UCHER presented data at ASCO and Cisco this year. Notably, as of the data cutoff of August 9th, the combination of Y8001 and toripalamab have been well tolerated in 18 patients with advanced cancer, dosed with Y8001 up to 2 milligrams per kilogram every three weeks. Dose escalation continues at this time to determine the recommended Phase II dose of Y8001. To date, There have been no unexpected toxicities, and the most common related adverse event has been grade 1 rash. A single patient had a grade 3 related toxicity, that of colitis, that remitted with treatment. Two patients demonstrated objective tumor responses, including one patient with bladder cancer who had failed prior treatment with a PD-1 antibody. Our initial development plan for Y001 is to study the drug in combination with envefolumab and sarcoma early next year. That trial is expected to also study a triplet that includes doxorubicin chemotherapy, which is the frontline standard of care treatment for soft tissue sarcoma. While development in sarcoma is straightforward due to the lack of any approved immunotherapies, we also see a path forward in other indications where there is clear evidence of activity with dual checkpoint inhibition. For example, the combination of Opdivo and Yervoy is approved for the first-line treatment of intermediate and high-risk patients with advanced renal cell carcinoma. However, our discussions with key opinion leaders indicate that most patients receive front-line treatment with a PD-1 antibody and VEGF inhibitor rather than with Yervoy. Therefore, we believe the unmet need in advanced renal cell carcinoma patients is in the PD-1 refractory setting. Data presented at ASCO indicate that PD-1 refractory patients can be resensitized to immunotherapy and we expect to test Y001 in this line of treatment. This strategy of second-line dual-checkpoint inhibition may be relevant for many tumor types, where PD-1-directed treatment is given in combination with chemotherapy or a VEGF inhibitor, but without Urovoi in the first-line setting. Transitioning now to Envifolimab, which remains our most important development program. As a reminder, Envifolimab is a potential best-in-class BDL1 checkpoint inhibitor given by rapid subcutaneous injection that confers a safety advantage by eliminating the risk of infusion reactions and may confer additional clinical benefit given it obviates treatment in an infusion center. We continue to make good progress in enrolling patients in the Envisarc pivotal trial. We have now initiated 26 clinical sites and enrolled more than 50 patients into the trial. we continue to expect the availability of interim NVSARC efficacy data by the end of this year in a top-line data release. This initial DMC-mandated interim efficacy analysis occurs following the second CT scan in the 36th enrolled patient that occurs 12 weeks after enrollment to allow for determination of the preliminary objective response rate. We know from prior studies of checkpoint inhibitors in sarcoma that responses may take 20 or more weeks to develop, including in the case of patients treated with the dual checkpoint inhibitors, Opdivo and Yervoy. Our goal, therefore, is to overcome the futility bar that requires at least one objective response by blinded central review in each cohort and to report at least a 10% objective response rate by blinded central review across the two cohorts, knowing that the response rate is preliminary and will be based on a maximum of only two scans for many of the 36 patients analyzed. As a reminder, The NVISARC trial includes two cohorts of 80 patients each. One cohort receives single-agent Envifolimab, and a second cohort receives Envifolimab in combination with Yervoy. The primary endpoint in both cohorts is objective response rate by resist, as confirmed by blinded independent central review, with duration response being a key secondary endpoint. In each cohort, the demonstration of nine of 80 objective responses by blinded central review 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 treatment for refractory UPS and MFS. Based on ongoing safety assessments, we also expect endofolamide to have a superior safety profile compared to Votrien, a drug with a black box warning for severe and fatal hepatotoxicity. We continue to expect that if the interim efficacy data later this year is positive, it would be the basis for submitting a request to the FDA for fast-track designation or breakthrough therapy designation, as either designation prevents a rolling BLA submission that would facilitate an earlier review of a BLA. Looking forward, we anticipate the second interim efficacy assessment as well as the final response assessment in 2022. And assuming positive data, we expect to submit a BLA for accelerated approval that, if approved, could allow for product launch in the U.S. by the end of 2023. As I have noted previously, peak sales of envifolamab and sarcoma could reach $1 billion across multiple sarcoma indications. This sarcoma-driven sales potential could be further enhanced by marketing Y8001 as part of the treatment combination. It is important to understand that the extent of the sales potential in sarcoma with Envifolimab at parity pricing is not just the forecasted initial $200 million in estimated potential revenues in UPS and MFS. Combined sales could potentially exceed $1 billion if Envifolimab and Y0001 broadly penetrate sarcoma in the frontline, adjuvant, and neoadjuvant settings. In parallel, our corporate partners, 3D Medicines and AlphaMap 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 NMPA in January. We believe Envifolimab could be approved in China before year end. In addition to Envifolimab and Y001, our newly acquired asset, we continue to expect TRC102 to continue to advance through NCI sponsorship in lung cancer in combination with chemotherapy and radiation therapy. We believe a randomized trial of chemoradiation with or without TRC-102, followed by Infinzi maintenance, is warranted in these patients, and expect this concept to advance for NCI funding consideration this year. This would continue our close collaboration with the NCI on the development of TRC-102, whereby the NCI has funded five trials of this drug candidate. The NCI also continues to study the combination of TRC-102 with Teminar chemotherapy and reported data at the AACR NCI EORTC Virtual International Conference on Molecular Targets and Cancer Therapeutics in October. While we have reported on the activity of the combination of Temodar and TRC102 in MGMT-methylated patients with brain cancer and colorectal cancer, the new NCI data report encouraging data of the combination in lung cancer, a disease not associated with MGMT methylation. Notably, TRC102 in Temodar was well-tolerated in squamous histology lung cancer patients who were heavily pretreated and refractory to immunotherapy. The majority of patients derived clinical benefit, including stable disease noted beyond 24 weeks in 4 of 12 patients. The authors concluded that Teminar in combination with TRC-102 was a reasonable option for patients with limited second-line options. Our fourth 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, Dicentric. As we have noted in the past, in March 2020, IMAP issued a press release announcing a strategic partnership with KG Bio, whereby KG Bio received what the press release described as a right of first negotiation for exclusive rights to commercialize TGA4309 in multiple Asian, African, and Middle Eastern countries for up to $340 million in potential payments to IMAP. We believe that based on the KG Biotransaction, TRACON is entitled to receive a payment under the TJ4309 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. Pending resolution of the disputes on TJ4309 and the bispecific antibody agreement we continue to perform our obligations under the terms of both agreements. From a business development perspective, we continue to leverage our CRO independent product development platform and U.S. commercialization expertise to add first or best-in-class drug candidates and pursue additional external clinical stage assets that would complement our now expanded pipeline. Second-generation immunology targets continue to be of particular interest. With the U-Cure deal, we have now closed five deals using our platform that can enable rapid and high-quality development of novel drug candidates. We believe our platform has earned additional credibility as a compelling solution for companies who wish to access the U.S. pharmaceutical market and retain a meaningful share of their product's profitability. Our capabilities have been recently profiled in Unnecessary Expense, an antidote to the billion-dollar drug problem published by Forbes Books, that is available from Amazon and other retailers. In July, we raised approximately $13.4 million in net proceeds in an underwritten common stock offering. With the capital raised, we estimate our cash runway extends into 2023. This provides us with a cash runway for more than a year past interim NVISARC efficacy data, which is expected by the end of this year, and beyond the final NVISARC data expected in 2022. We expect that our enhanced balance sheet will increase the impact of important milestones and also provide capital to advance clinical trials of Y001, as well as other new potential drug candidates we may add to our pipeline. At this time, Scott will provide an update on our financials.
spk02: Thank you, Charles, and good afternoon, everyone. TRACON's research and development expenses were $2.7 million and $8.1 million for the three and nine months ended September 30, 2021, respectively, compared to $1.8 million and $6 million for the comparable periods of 2020. Increases were related to enrollment in the Pivotal and the SARC trial in 2021. General and administrative expenses were $4.2 million and $12.9 million for the three and nine months ended September 30th, 2021, respectively, compared to $2.1 million and $6 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. Our net loss was $7 million and $21 million for the three and nine months ended September 30, 2021, respectively, compared to $4 million and $12.5 million for the comparable periods of 2020. Turning to the balance sheet, at September 30, 2021, our cash, cash equivalents, and investments totaled $29.9 million. compared to $25.6 million and $36.1 million at June 30, 2021 and December 31, 2020, respectively. With the net proceeds of $13.4 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.
spk03: To recap, we continue to execute our clinical development plan around our lead product candidate, Envifolumab, and have made substantial progress advancing the pivotal ENVASARC trial. We expect to complete the first interim efficacy assessment and summarize the aggregate preliminary response rate prior to year end. We also continue to leverage our unique product development platform and added the clinical stage and potential best-in-class CTLA-4 antibody Y8001 to our pipeline, including rights to develop and commercialize with envefolumab and sarcoma, as well as in multiple other cancer types in North America. Our recent capital raise is expected to fund the company into 2023, which is more than a year following expected initial interim ENVASARC efficacy data and past expected final ENVASARC data, which could demonstrate the potential for ENVAPOLMAP 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 to address unmet needs throughout through our ability to execute clinical trials at low cost, and therefore 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.
spk00: Thank you. And ladies and gentlemen, to ask a question, simply press star 1 on your telephone. To withdraw the question, press the pound or hash key. Please stand by while we compile the Q&A roster. Our first question is from Nick Abbott with Wells Fargo. Your line is open.
spk04: Great. Thanks for taking my questions, and congratulations on the TTLA-4 inhibitor. The first question is on the new trial that you're talking about for the combination in sarcoma. Is that going to still be in angiosarcoma, ASPS, and DDLS?
spk03: Nick, thanks for the question. Our thoughts are the following, Nick. So we expect to initiate a trial combining Enviformab with YH001 and with doxorubicin chemotherapy. And once we determine that that combination is tolerable, We do expect to enroll multiple expanded cohorts, which could be considered the Phase II portion of a Phase I-II trial. As you mentioned, that will include many of the subtypes you specified. D-differential liposarcoma is one example. Lyomyosarcoma would be another example. Angiosarcoma and alveolar soft part sarcoma would be another example. And then, following completion of the ENVASAR trial, we also potentially could enroll UPS and MFS. You know, our eventual goal is to try to address these patients as early as possible, which is ideally in that first-line setting. And there are certain subtypes of sarcoma, like UPS and MFS, where dual checkpoint inhibition seems to be sufficient for significant activity. But there are other ones, like leiomyosarcoma, where clearly we're going to have to add immunotherapy to a standard of care agent like chemotherapy. And that's really the goal of this upcoming trial of triple therapy.
spk04: Great. Thanks, Charles, and I'll pop back in the queue.
spk03: Thank you, Nick.
spk00: Our next question is from Amori Raycroft with Jefferies. Your question, please.
spk01: Hi, everyone. Congrats on the update this quarter, and thanks for taking my questions. Charles, for the Envis Arc interim, I think I heard that you're expecting at least 10% aggregate overall response rate in this update. Just clarifying, this 10% is informed by the Alliance study results, and if you can comment on just what your expectations are for the above or below that 10%, I guess, what could the potential range be if you're commenting on that?
spk03: Hi, Maury. Thanks for the question. Yeah, I think, you know, if we look at precedent data, you know, the response rates are in patients with UPS treated in a refractory setting with either single or dual checkpoint inhibitions of range between 8% and 29%. But I would point out those are the final response rates. If you look carefully at those posters more, you'll discern that the preliminary response rate or the response rate after just 12 weeks of therapy has actually been significantly lower than that. So our goal remains to achieve the final response rates demonstrated in the Alliance trial, for example. But I'm making clear also that we won't have final data at this interim analysis. What we'll have is data that includes 12 weeks of data on all the patients, which is the six-week scan and the 12-week scan, and that it may be possible that certain patients haven't had a formal response at that time. So we feel that if we have a double-digit response rate based on this preliminary response assessment, That puts us in good shape because, as you recall, the actual primary endpoint of this study is to achieve an 11.25% response rate in either cohort in order to achieve the primary endpoint of the study.
spk01: Got it. Yeah, that makes sense. But that 10%, that's informed by the swimmer's plot from Alliance where you can see some responses happen early, but most of them happen later on.
spk03: It is, Maury. I would say if you look carefully at that Alliance data, I would say that the response rate at 12 weeks was actually lower than that. It's interesting. So, again, we're hoping and expecting to see a double-digit response rate. But if you actually look carefully at those swimmer plots, in the specialty dual checkpoint inhibition cohort, each of the four responses, they had four out of 14, each of those actually took more than 12 weeks to develop. And so that's why I think it's important to understand that this is a preliminary report that we will make and not the final data.
spk01: Okay. Okay. And then I was wondering for the Breakthrough Therapy designation filing by year end, are you going to break out the data when you submit that filing? And I guess will it be the cut that you report in the interim, or could there be some additional data that you include in that Breakthrough Therapy filings?
spk03: Yeah, our plan this year is to apply through the fast track or breakthrough designation based on the actual data, which we will carefully interrogate. And as I mentioned, the 36 patients having gone at least 12 weeks is mandated by the protocol as a DMC review. But if we were to submit an application, which, again, is our expectation at the end of the year, either fast track or breakthrough, we would submit the totality of the data. I think that would be the fairest way to inform the FDA about what we're seeing. So... you have enrolled more than 36 patients, as I mentioned, we're well over 50 now.
spk01: Got it. Okay, and maybe last question, just with the in-licensing of YH-001, you've talked about pursuing some, potentially pursuing additional indications with YH-001. I'm just wondering if you can talk about prioritization with the one-line sarcoma expansions with ENVA, versus pursuing additional opportunities with YH01, and maybe talk about how that could impact expenses too going forward.
spk03: Yeah, no, I appreciate the question. So I profiled briefly, you know, we have rights now to three indications outside sarcoma. You know, I profiled briefly renal cell carcinoma, which is our old friend from way back in Pfizer days when we were developing SUTEN, which is one of our near and dear assets to many of our hearts here, as many of us were part of that SUTEN team. We have a lot of connections with renal cell investigators, and as I profile briefly, I think there's still a significant unmet need for those patients. Most of them are not getting a CTLA-4 frontline. They're getting PD-1 plus a VEGF inhibitor, and then when they progress on those therapies, there are actually very few approved therapies that are actually that valuable. What's approved on label are single-agent VEGF inhibitors, as an example, or a PD-1 inhibitor by itself, which is you likely would not use in someone who's already filled PD-1 plus VEGF frontline. So we really think that's an unmet need after discussions with key opinion leaders, and that's a place for us to potentially develop YH001 with approved therapy of PD-1 or VEGF or both. And in terms of expenses, you know, that would be a Phase I study with expanded cohort of patients moving into Phase II. And, you know, our budgets remain, you know, very low and, you know, lower than I think any other company in the industry given our zero independence. So we're generally budgeting about $100,000 to run a trial. So for us to run a 20-patient phase one trial, which takes about eight quarters, you can do the math. The burn is incremental and almost not material to our bottom line. So that continues to be the The key, I'd say, special sauce of TRACON that we continue to leverage to develop a pipeline and to deliver data at much lower costs than most companies that are CRO beholden.
spk01: Okay. That's helpful. Thanks for taking my questions. Thanks, Maury. Always a pleasure.
spk00: Thank you. Our next question comes from Ed White with HC Wainwright.
spk06: Good afternoon. Thanks for taking my questions. Just on 001, What else do you have to do to file an IND? Do you have to run any preclinical studies, or are you pretty much set to go and just have to gather the information to file for the IND?
spk03: Hi, I appreciate the question. Fortunately, this drug is already being studied both in China and in Australia, and so we don't have to do any additional preclinical work. is our expectation to move forward with the IND. And we can also leverage the existing clinical data. And I think that's the other kind of important part of your question. So, you know, we already have seen that Y0 is well-towered up to two milligrams per kilograms with a standard PD-1 antibody. And based on that, we can take that data and either quickly move into phase two or do a very brief, complete the dose escalation if needed, and then do the phase two expanded cohorts which in sarcoma would also include combining with doxorubicin. So that's the big advantage. So our goal is to get the IND filed by early next year and to begin trials both in sarcoma and potentially in another indication with the renal cell carcinoma being high on our list. Thanks, Charles.
spk06: And, you know, I did miss it. What were the other two indications that you have rights to besides renal cell?
spk03: Sure, yes. We also have rights in microsatellite. stable colorectal cancer, KRAS positive lung cancer, with the election to substitute for any of those three indications, either bladder cancer, melanoma, and endometrial cancer.
spk05: Okay. Thank you. Thank you, Ed.
spk00: And thank you. As a reminder, if you have a question, press star 1 to get in the queue. Our next question is from Bert Haslett with BTIG.
spk05: Thank you, and thank you for taking the question. Just along the lines of Maury's question, I just want to make sure I'm understanding this as well. So, Charles, you're basically saying that the successful ORR for the end of the study is 9 of 80 or 11.25 percent response rate for either arm. but we really shouldn't be expecting anything quite that robust now simply because the patients only have 12 weeks' worth of scans. Is that saying it the way you mean it, maybe slightly differently?
spk03: Yeah, but I think that's a good way to say it. I think we would be happy if we see a double-digit response rate for two reasons. One is that it's already at or exceeds the goal of the study, which is the 11.25% response rate, And second of all, it would be preliminary and has some potential to grow. So I think that's how we look at it.
spk05: Okay. And then how much detail are we actually going to see out of this look? You know, we're going to get this level of data in terms of response rates. You know, we're going to get significant amounts of information on the 36 patients or just in terms of framing what types of detail we might see.
spk03: But our goal is to be pretty general. We don't want to bias accrual from one cohort versus the other cohort, which could be the case if we're too detailed in our disclosure. So our general goal is to disclose safety data similar to what we disclosed in the past, if there are any safety issues, to disclose that to the public. And then also to disclose the aggregated response rate by central review that's aggregated across the cohorts without specifying specifying the exact response rate in each cohort in order not to bias accrual, which could occur if, say, one cohort has a superior response rate and that were to influence how patients perceive allocation in the trial.
spk05: Got it. Okay, that's helpful as well. And then just, you know, kind of moving to the combination of O1 along with ENVA or others, would you expect that combination to be better tolerated than other CTLA-4 PD-L1 approaches, just based on the molecules themselves?
spk03: Great question, Bert. So I would say overall, the history of ENVA is that it has been a very well-tolerated PD-1 slash PD-L1 therapy. You know, that's based on data from our partners. You know, for instance, in their pivotal trial in MSI high cancer, they had a response rate that was on par with both Abivo and Yervoy in that cancer indication, yet they had no cases of colitis or pneumonitis of the grade 3 severity at all. So, yeah, I thought that was a very encouraging side effect profile. You know, we have to further study Y001 to identify its side effect profile, but if ENVA is well-tolerated and Y001 is well-tolerated, you know, it could be the combination is better tolerated than Opdivo and Yervoy. You know, it's clearly an experiment we have to do. I would say the existing data with Y001 and the PD-1 antibody torpalimab support you know, a very favorable side effect profile. That said, it's still in dose escalation, so there's a lot more data that needs to be seen. But I think we are very encouraged by the combination's potential. I also think, Bert, that using it in the refractory setting could be the spot to really use a dual checkpoint inhibitory strategy. You know, other companies have really focused, in many cases, in the frontline setting, which I think if you talk to community physicians and they are talking about a frontline setting, you know, they want a therapy that may emphasize tolerability a little bit more in the frontline setting than, say, in the refractory setting. You know, once you get in the refractory setting and you're talking to a patient that has really very poor treatment options, I do think physicians are more likely to say we'll take a little bit more of a less benign side effect profile because the option otherwise is just a therapy that has very limited activity, and really you're dosing to the patient with very little hope, frankly, of response. So I think to answer your question, Y0 is one end, but could be better tolerated. And second of all, I think targeting to a refractory setting could make it a much more ideal positioning compared to other dual checkpoint inhibitor combinations.
spk05: Got it. Thank you very much. Look forward to the data coming in and the accommodation data down the road. Thanks. Thank you, Bert.
spk00: Thank you, sir, and I'm not showing any further questions in the queue.
spk03: Thank you very much. Appreciate your questions, and we look forward to updating you at the end of the year. Have a great day.
spk00: Thank you, ladies and gentlemen, for participating in today's call. You may now disconnect.
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