TRACON Pharmaceuticals, Inc.

Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals' fourth quarter and year-ended 2021 earnings conference call. At this time, all callers are in a 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 runway, and our development plans and strategy. These statements are subject to various risks that are described in our findings made with the Securities and Exchange Commission, including our annual report on Form 10-K for the year end of December 31, 2020, and subsequent quarterly reports on Form 10-Q. You are cautioned to not place undue reliance on these forward-looking statements and it would disclaim any obligation to update such statements. Now, let's turn the call over to Dr. Charles Thur, President and CEO of Tracon Pharmaceuticals. Dr. Thur.

Thank you for joining Tracon's fourth quarter and full year 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 months and you're into December 31st, 2021. Finally, we will conclude by taking your questions. In regards to the progress in the pivotal ENVISARC trial, I wanted to comment on the TRACON clinical and regulatory strategy as it relates to the February FDA Advisory Committee recommendation not to approve the application from Eli Lilly and InnoVent's PD-1 antibody to treat non-small cell lung cancer, until additional clinical trials demonstrate applicability to the U.S. population. Specifically, the FDA decision emphasizes development of checkpoint inhibitors should be prioritized for patients with unmet medical needs. That is, for cancer indications without approved checkpoint inhibitors or other suitable treatment options, and must demonstrate safety and efficacy in patients representative of the U.S. population. This is precisely what TRACON is doing with the products we enlicense from Chinese companies, including our most advanced product, the subcutaneous checkpoint inhibitor Envifolimab, being studied in the pivotal Envisarc trial. While Envifolimab is approved in China, making it the first subcutaneously administered checkpoint inhibitor approved anywhere in the world, we are not relying on Chinese data for our U.S. registration strategy. Rather, we expect approval in the U.S. based on data from Envisarc. where we expect to prove safety and efficacy of envafolumab in sarcoma patients representative of the U.S. population by virtue of the fact that envasarc patients enroll exclusively at more than 29 sites in the U.S. and one site in the United Kingdom. This plan is consistent with our development model to harness global innovation for the benefit of U.S. patients without suitable treatment options. Returning to the topic of our continued progress with the envasarc pivotal trial, In December 2021, the Data Monitoring Committee, or DMC, reviewed data from 36 patients who were equally enrolled into each of two cohorts. As a reminder, the NVSARC trial includes one cohort who received single-agent Envifolimab and a second cohort who received Envifolimab in combination with Yervoy. The primary endpoint in each cohort 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 by 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% objective response rate of Votrien, the only approved treatment for refractory UPS and MFS. At the December review, the objective response rate by central review in each cohort satisfied the pre-specified futility rule. The DMC noted that Envifolimab was well tolerated, with only a single grade three related adverse event reported in 36 patients, and observed that Envifolimab demonstrated a significantly higher objective response rate in lower weight patients. To provide additional perspective, The Envifolimab dose that produced a 45% objective response rate in the pivotal trial in MSI high cancer patients that resulted approval in China was 50% higher than the original Envisarc dose of 300 milligrams. And the Envifolimab dose that resulted in objective responses in two of five patients with alveolar soft part sarcoma in a phase one trial was double the original Envisarc dose. Therefore, given the high tolerability and increased activity in lower weight patients, the DMC recommended doubling the Envifolimab dose and continuing the Envisarc pivotal trial. We should also note that the new Envisarc dose is still four-fold lower than doses shown to be safe in Phase I testing. We agreed with the DMC that the increased dose of Envifolimab should optimize benefit to all patients, irrespective of weight, and expect a superior response rate and safety profile compared to Votriate. a drug with a 4% response rate, and a black box warning for fatal hepatotoxicity. Based on data from trials of other checkpoint inhibitors and refractory UPS and MFS, we are targeting a 15% response rate for single-agent Envifolimab and up to a 30% response rate for Envifolimab given with Yervoy, which would more than satisfy the primary objective of the trial of demonstrating a minimum 11.25% response rate in either cohort. The FDA has reviewed and approved the amended Endosar protocol with the dose increase to 600 milligrams recommended by the DMC. As we announced recently, this dose is now being given to patients. We are continuing the same trial design with the only change being doubling the Envifolamab dose and assessing up to 80 new patients in a cohort of single-agent Envifolamab at 600 milligrams and up to 80 new patients in a cohort of Envifolamab at 600 milligrams with Urovoid. The primary endpoint will be evaluated in the new courts receiving the higher envifolumab dose. However, patients enrolled prior to the amendment will continue on trial and are eligible to escalate their dose, which will be supportive data used in the anticipated BLA filing. We expect to complete and report two safety assessments and an interim efficacy assessment of 36 patients at the 600 milligram dose in the second half of this year. The amended trial is forecasted to increase the cost of the trial by $5 million to a total cost of approximately $25 million. We continue to plan on approaching the FDA to discuss a BLA filing strategy as soon as we determine nine responses in either cohort. With respect to Envifolimab's revenue potential, it is important to understand the sales potential in sarcoma with Envifolimab at parity pricing is not just the forecasted $200 million in revenues, from the initial indications and second line UPS and MFS. Our clinical development strategy is designed to create the opportunity for envafolumab to be broadly used in sarcoma in the frontline, adjuvant, and neoadjuvant settings by seeking supplemental indications. And TRACON's total sarcoma-driven sales revenue should be further enhanced by marketing envafolumab as part of the treatment combination in sarcoma with Y8001. Recall that Y001 is a potential best-in-class CTLA-4 antibody that we licensed from Ucure BioPharma in October last year. As a reminder, we received a broad license for Y001 to develop and commercialize in North America in sarcoma and in multiple other indications, including microsatellite-stable colorectal cancer, renal cell carcinoma, and KRAS-positive lung cancer. Note, with respect to our license, we can substitute any one of those indications for bladder cancer or 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. Our initial development plan for Y8001 is to initiate a clinical trial in sarcoma in combination with envefolumab later this year. That trial is expected to also study a triplet that includes doxorubicin chemotherapy, which is a frontline standard-of-care treatment for sarcoma. While development in sarcoma is straightforward due to the lack of any approved immunotherapies, we also see a path forward for YHGOS1 and other indications where there is clear evidence of activity with dual checkpoint inhibition. For example, the combination of Abdeeba and Yervoy is approved for the first-line treatment of intermediate and high-risk patients with renal cell carcinoma. Our discussions with key opinion leaders indicate that most patients receive frontline treatment with a PD-1 antibody and VEGF inhibitor rather than with Yervoy. Therefore, we believe the unmet medical 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 Y8001 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 uravoid in the frontline setting. Moving beyond our two checkpoint inhibitors, we are pleased that the National Cancer Institute continues to advance our DNA damage repair inhibitor, TRC-102. In February, the NCI initiated the first randomized phase two trial of TRC-102, which is assessing TRC-102 in stage three, non-squamous, non-small cell lung cancer, in combination with chemo-radiation. The two-arm trial will enroll 78 patients to assess the benefit of adding TRC-102 to current standard of care treatment of pemetrexan, cisplatin, and radiation therapy, followed by consolidated drivalumab treatment. The primary endpoint of the trial is PFS, and the trial is designed to detect an improvement in PFS at one year from 56%, to 75%. Enrollment is expected to begin in June of this year and results are expected in 2024. Our fourth clinical stage asset is the CD73 antibody, TJ4309, that TRACON is evaluating in a phase one study as a single agent and in combination with the checkpoint inhibitor, Tocentric. We are working to complete the trial, which has seen the last visit for the last enrolled patient. As a reminder, IMAP has indicated their desire to terminate the TJ439 license following completion of the phase one trial for a payment to TRACON of $9 million, which is expected later this year. This brings me to a legal update on the two disputes with our corporate partner, IMAP. In February, arguments relative to both of our agreements with IMAP were heard before an International Chamber of Commerce Arbitration Tribunal under New York law. 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 TJ4309 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 Bio license, Trey County was entitled to receive a payment at that time under the TGA 4309 agreement, although IMAP has disputed that this payment is due. Another dispute with IMAP regards our bi-specific antibody agreement with them. The dispute in this agreement includes issues related to IMAP's two license and collaboration agreements with ABL-BIO in July 2018 that preceded our agreement with IMAP in November 2018. On April 8, 2020, we issued a notice of dispute regarding possible breaches of the TJ4309 and biocific antibody agreements. As of today, the TJ4309 and biocific antibody agreement disputes are now under post-turing consideration by the Arbitration Tribunal, and we expect their decision later this year. These arbitration claims are substantial and complex, and the outcome is uncertain. Depending on results of arbitration, Trey can continue to meet our obligations under the terms of both agreements. We will promptly provide an update when the tribunal panel announces their findings. From a business development perspective, we intend to 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 expanding pipeline. Second-generation immuno-oncology targets continue to be of particular interest to us. With the UCARE license, which closed at the end of 2021, we have executed five deals leveraging our product development platform that is designed to enable rapid and high-quality development of our corporate partners' novel drug candidates. We believe our product development platform has earned additional credibility as a compelling solution for companies who wish to access the U.S. pharmaceutical market with TRACON taking on the clinical development cost and risk. and our partners able to retain a meaningful share of their product's commercial profitability. In addition to our profit-share deal structure, we are exploring revenue-sharing deal structures whereby we conduct trials at cost plus and, in turn, trade on share and royalty and sub-licensing revenues. We have also begun to explore a model whereby we share our proprietary clinical operations capabilities to enable other companies to internalize such operations and avoid contracting with CROs to execute clinical trials. This could converse substantial cost and time savings for these companies. 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 for the fourth quarter and $11.1 million for the year ended December 31, 2021, compared to $2.2 million and $8.2 million for the comparable periods of 2020. The increase was related to enrollment in the pivotal ENVISARC trial in 2021. General and administrative expenses were $4.6 million in the fourth quarter and $17.5 million for the year ended December 31, 2021, compared to $2 million and $8 million for the comparable periods of 2020. The increase was primarily related to legal expenses in connection with the arbitration with IMAP. Our net loss was $7.7 million for the fourth quarter and $28.7 million for the year ended December 31, 2021, compared to $4.3 million and $16.8 million for the comparable periods of 2020. Turning to the balance sheet, at December 31, 2021, our cash, cash equivalents, and investments totaled $24.1 million, compared to $36.1 million at December 31, 2020. 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.