TRACON Pharmaceuticals, Inc.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals third quarter 2022 earnings conference call. At this time, all callers are in a listen-only mode. After the speaker's prepared remarks, we will conduct the 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, our development plans and strategy, and the timing and results of our arbitration with IMAP. 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 31st, 2021, and subsequent quarterly reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, and unless required by applicable law, 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?

Thank you for joining TRACON's third quarter 2022 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 nine months ended September 30th, 2022. Finally, we will conclude by taking your questions. I'll begin with an update on our continued progress with the NVISARC pivotal trial. We have now enrolled 68 patients with refractory UPS or MFS into NVISARC, which is accruing at 29 sites in the U.S. and one site in the U.K. Accrual continues to exceed projections, and the completion of enrollment of 160 patients dosed at the 600-milligram NVIDOS is anticipated to occur before the end of 2023. In October, we announced that the DMC reviewed 12 weeks of safety data from more than 20 patients and recommended the trial continue as planned at the 600 milligram ENVA dose. We remain on track for the DMC to review interim efficacy data later this year. During the interim efficacy assessment, the committee will apply a futility rule that requires at least one response in 18 patients in each of the two cohorts, monotherapy and combination therapy, at the 600 milligram NVidose. An identical futility threshold was achieved at the interim analysis performed last year in 36 patients who received the 300 milligram NVidose. At that time, a significantly higher response rate was observed in lighter weight patients, which prompted the DMC to recommend increasing the NVidose to 600 milligrams. This DMC-mandated interim efficacy analysis occurs following the 12-week CT scan in the 18th patient treated with single-agent ENVA and in the 18th patient treated with ENVA and urovoi to allow for determination of the preliminary response rate. I note that the interim analysis will assess the preliminary response rate by blinded independent central review. We know that from prior studies of checkpoint inhibitors in sarcoma, their responses may take 20 or more weeks to develop. especially in the case of patients treated with two checkpoint inhibitors. Our goal at the time of interim analysis, therefore, is to overcome the fertility bar and to report a double-digit preliminary response rate across the two cohorts, irrespective of patient weight, knowing that the preliminary response rate will be based on a maximum of only two scans for many of the 36 patients analyzed and may increase with additional follow-up. As a reminder, the primary endpoint in each cohort is objective response rate by resist confirmed by blinded independent central review. And nine out of 80 objective responses, or an 11.25% objective response rate, defines the level of response that satisfies the primary endpoint of the study to statistically exceed the 4% objective response rate of Votrien, the only approved treatment for patients with a fracture UPS and MFS. A double-digit response rate at the time of interim analysis would be very meaningful, indicating that we are on track to achieve the primary endpoint of the study. Notably, Votrien is a drug with a black box warning for fatal liver toxicity. Our goal in ENVASARC, therefore, is to demonstrate that ENVA is both safer and more efficacious than Votrien. Based on data from trials of other checkpoint inhibitors in refractory UPS and MFS, We are targeting a 15% response rate for single-agent ENVA and up to a 30% response rate for ENVA given with Yervoy. Furthermore, we plan to approach the FDA to discuss a VLA filing strategy as soon as we determine nine responses in either cohort. We were very pleased to recently receive Fast-Track designation for ENVA in the sarcoma subtypes of UPS and MFS that have progressed on one or two prior lines of therapy based on activity already observed in ENVA-SARC. This designation holds important advantages that might expedite the development and regulatory review of ENVA. Moving on to our second checkpoint inhibitor, Y8001, a potentially best-in-class CTLA-4 antibody we licensed from U-Cure Biopharma in October of last year. In August, the FDA approved our IND to initiate a Phase I-II trial of Y8001 for the treatment of sarcoma patients including patients who have not received prior therapy. In October, we initiated the first site in the trial. We expect to dose initial patients in the Phase I-II trial using TRACON's product development platform of CRO independent research before the end of this year. Our initial Y001 trial leverages data from two Phase I trials conducted by our partner, Ucure. These two trials demonstrated the recommended Phase II dose of Y001 as a single agent, and in combination with the PD-1 antibody toripalamab. Our sponsored Phase I-II clinical trial will evaluate a triplet that includes Y001, ENVA, and doxorubicin chemotherapy, as doxorubicin is the current frontline standard of care treatment for sarcoma. Following the Phase I portion of the trial to assess the tolerability of the combination of the ENVA and Y001 doublet, as well as the triplet therapy that includes doxorubicin, we plan to assess the response rate in common and rare sarcoma subtypes to combination treatment, with the intent of demonstrating superior response rates compared to historical data using standard of care agents. In leiomyosarcoma and liposarcoma, we plan to compare the response rate of tripled therapy to the historical 10 to 15% response rate of single agent doxorubicin. In the case of rare sarcoma subtypes like chondrosarcoma and alveolar softbar sarcoma, where chemotherapy is not highly effective, We intend to study the doublet of Y8001 and ENVA to assess the response rate compared to the historical response rates with chemotherapy or single-agent checkpoint inhibition. One of the objectives of this Phase I-II trial is to determine the subtypes of sarcoma that best respond to the combination of ENVA, Y8001, and doxorubicin. Assuming positive trial results in the ENVASARC PIDMAL trial and potential accelerated approval of ENVA, the FDA will require a randomized trial to demonstrate a survival benefit. We expect this phase three post-approval trial will compare single agent doxorubicin to the triplet combination of doxorubicin with ENVA and Y001 with PFS at the endpoint. This trial would be expected to enroll patients with UPS and MFS as well as other sarcoma subtypes shown to respond to triplet therapy based on data from the phase one, two trial that I described earlier. We expect to discuss the design of a frontline trial with the FDA and initiate accrual prior to our planned BLA submission of ENVA for accelerated approval in refractory sarcoma based on data from ENVA-SARC. The ability for Tracon to commercialize two in-license immunoncology therapies together in sarcoma is of great strategic benefit. It is important to understand the sales potential in sarcoma with ENVA at parity pricing is not solely the forecasted $200 million in peak annual ENVA revenues expected in the initial indications of refractory UPS and MFS, and the $100 million in annual revenue in rarer sarcoma subtypes where the activity of checkpoint inhibition has been demonstrated. Our clinical development strategy is designed to create the opportunity for ENVA to broadly benefit patients with sarcoma in the frontline, adjuvant, at neoadjuvant settings by seeking supplemental indications. Moreover, we believe TRACON's total sarcoma-driven sales revenue would be significantly enhanced by marketing Y001 and ENVA together as part of a treatment combination in sarcoma. In addition to our two checkpoint inhibitors, we are pleased that the NCI continues to fund development of our DNA damage repair inhibitor, TRC102. The NCI has initiated a randomized phase two trial assessing TRC102 in stage three, non-squamous, non-small cell lung cancer in combination with chemoradiation. The two-arm trial enrolled 78 patients to assess the benefit of adding TRC102 to current standard of care treatment of pemetrexed, cisplatin, and radiation therapy, followed by consolidated dervalumab 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%. 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 a checkpoint inhibitor, Tocentric. Completion of data analysis of the clinical trial is expected this month, which triggers IMAP's option to reacquire TJ4309. As a reminder, IMAP has indicated the desire to exercise their option to terminate the TJ4309 license following completion of the Phase I trial for a payment to TRACON of $9 million. Next, I will provide an update on our legal disputes with IMAP. As a reminder, IMAP commenced arbitration in June 2020 after TRACON invoked contractual dispute resolution provisions asserting that IMAP had breached its contractual obligations concerning both of our agreements entered into in November 2018. IMAP initiated the arbitration to declare they were not in breach of either agreement. We filed counterclaims in the arbitration seeking to recover over $200 million in damages from IMAP based on the alleged breaches. Under the applicable rules of the arbitration, the prevailing party may also be awarded attorney's fees at the tribunal's discretion. In February of this year, arguments for alleged breaches of both of our agreements with IMAP were heard before an international Chamber of Commerce arbitration tribunal under New York law, and a final post-hearing briefs were submitted to the tribunal in late May. On June 2nd, the International Court of Arbitration of the ICC notified us to expect a final decision by September 30th, which was then extended until November 30th. On November 8th, 2022, the tribunal invited the parties to submit an additional limited briefing on two discrete issues by December 9th. Following that submission, the parties are to agree on a schedule for the respective cost submissions. The tribunal did not indicate it when it expects to render its award. However, the tribunal did note they are far along in their deliberations and preparation of a final award. and we expect the tribunal to provide their final award in the first quarter of 2023. We therefore are encouraged that the final steps of the arbitration, including a consideration of arbitration costs, are expected soon. The claims under the arbitration are complex. Accordingly, we cannot predict the outcome of the arbitration, and we are unable to estimate the amount of recovery of damages, if any, that may be awarded by the tribunal. Depending on results of the arbitration, we continue to meet our obligations under the terms of both agreements. We will promptly provide an update when the tribunal announced their award. Given the challenging capital markets, the expectation to secure non-dilutive capital from existing and new corporate partners is important. In the meantime, we recently secured capital through another source. In September, we entered into a $35 million non-dilutive long-term debt facility with runway growth capital. $10 million of the $35 million loan was funded upon closing. The additional $25 million available under the facility may be funded upon achievement of certain events and at runway's discretion. The loan has a 24-month interest-only period followed by 24 monthly payments of principal and interest. This financing extends our cash runway to support the robust accrual of the pivotal NVSARC trial while we await the outcome of the NVSARC interim efficacy analysis the binding arbitration with IMAP, and notification from IMAP regarding their option to terminate the TJ4309 agreement for $9 million. As we've noted in the past, we expect to further supplement our CAST position through opportunities for non-dilutive capital enabled through our CRO-independent product development platform that we believe positions us as one of the most efficient clinical development organizations. We expect to continue to leverage our platform in two ways to provide for potential non-dilutive capital to TRACON. First, we are evaluating drug candidates whereby TRACON performs clinical trials at a lower fixed cost compared to ACERO, but still at a premium to our costs using a pay-for-performance model. And TRACON further benefits by earning a share of the revenue, including sub-licensing fees and our royalties from commercialization. This is an aligned structure we used in the past, for example, with Johnson & Johnson. Second, we are exploring a franchise model whereby we are paid to share our proprietary capabilities and know-how to enable another company to independently internalize clinical operations and use these new capabilities to avoid contracting with CROs to execute clinical trials. As has been the experience at TRACON, we believe such an investment would be expected to result in substantial time and cost savings for our partner. We believe that over time, our product development platform has earned strong credibility as a compelling solution for companies who wish to become CRO independent and reap the rewards of conducting trials faster, at higher quality, and at lower costs compared to trials typically contracted to CROs. 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 $4.1 million and $10 million for the three and nine months ended September 30, 2022, respectively, compared to $2.7 million and $8.1 million for the comparable periods of 2021. The increase in both periods was related to robust enrollment in the PIVOTL and the SARC trial. General and administrative expenses were $2.3 million and $12 million for the three and nine months ended September 30, 2022, respectively, compared to $4.2 million and $12.9 million for the comparable periods of 2021. The decrease in both periods was due to lower legal expenses as the arbitration hearing is now complete. We expect G&A expenses to remain relatively consistent for the remainder of the year. However, there may be increases to the extent we must expend additional legal fees in connection with enforcing and collecting any arbitration award from IMAP. Our net loss was $6.4 million and $22.1 million for the three and nine months ended September 30, 2022, respectively, compared to $7 million and $21 million for the comparable periods of 2021. Turning to the balance sheet, at September 30, 2022, our cash and cash equivalents totaled $17 million, compared to $24.1 million at December 31, 2021. We expect our current capital resources to be sufficient to fund our planned operations into mid-2023. With that, I will turn the call back over to Charles.