TRACON Pharmaceuticals, Inc.

Good day, ladies and gentlemen, and welcome to the Tracon Pharmaceuticals first quarter 2023 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, financing opportunities, future expenses and cash runway, our development plans and strategy, and with the potential recovery of the award from our arbitration with IMAP. These savings 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, 2022, 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 Feuer, President and CEO of Tracon Pharmaceuticals. Dr. Feuer?

Good afternoon, and thank you for joining Tracon's first quarter 2023 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 discuss our financial results for the three months ended March 31st, 2023. Finally, we will conclude by taking your questions. I'll begin with an update on our continued progress with the ongoing NVISARC pivotal trial, evaluating Envifolumab as a single agent and in combination with Urovoid. We have now enrolled more than 92 patients with refractory UPS or MFS into Enva-SARC, which is occurring 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 treated at the 600-milligram Enva dose is anticipated to occur before the end of 2023. In December, we announced that the DMC reviewed interim safety and efficacy data from 18 patients enrolled into each of the two cohorts who completed a minimum of 12 weeks of efficacy evaluations that included two on-treatment scans. The double-digit objective response rate assessed by blinded independent central review in each cohort more than satisfied the pre-specified futility rule. ENVA monotherapy and ENVA dose in combination with Urovoi was well tolerated, with only a single related serious adverse event reported in 36 patients. Responses were noted in patients irregardless of weight at the 600 milligram dose of ENVA that was instituted following the previous DMC review of interim safety and efficacy data in the initial ENVASARC trial treated at the 300 milligram dose of ENVA. The DMC recommended the trial continue as planned at the 600 milligram ENVA dose. 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 in either cohort, 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 FDA-approved treatment for patients with refractory UPS or MFS. Therefore, a double-digit response rate at the time of interim analysis is 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 EnvaSocket, therefore, is to demonstrate that Enva is both safer and more efficacious than Votrien. Given the robust accrual of more than 92 patients into the NVSARC trial, we are on track for the DMC to perform the mandated second and final interim efficacy analysis in the third quarter. At that time, the DMC will review safety and efficacy data from 46 patients in each cohort who have been followed for at least three months to prevent two on-study scans for evaluation by blinded independent central review. During the interim efficacy assessment, the committee will apply a futility rule that requires at least three responses in 46 patients in order to continue accrual into that cohort. In addition to the mandated DMC efficacy review in the third quarter, there will be an ad hoc DMC review in the second quarter. The DMC charter stipulates that available safety and efficacy data be reviewed at a minimum of every six months. Since the last DMC review occurred in December, we have scheduled a meeting in the second quarter to assess safety and efficacy in each of the two cohorts. This review will not invoke a formal futility rule and will not include central review of all available scans. Based on data from trials of other checkpoint inhibitors in refractory UPS or MFS, we are targeting a 15% response rate for single agent ENVA and up to a 30% response rate for ENVA in combination with Yervoy. Furthermore, we plan to approach the FDA to discuss a BLA filing strategy as soon as we determine nine responses in either cohort. As a reminder, we have received fast-track designation for ENVA in the sarcoma subtypes of UPS and MFS that have progressed on one or two prior lines of therapy and have received orphan drug designation in soft tissue sarcoma based on activity observed in ENVA-SARC. These designations provide important advantages that might expedite regulatory review and commercialization of ENVA. Moving on to our second checkpoint inhibitor, Y8001, a potentially best-in-class CTLA-4 antibody that we licensed from U-Pure Biopharma in October of 2021. In August 2022, the FDA approved our IND to initiate a Phase I-II clinical trial of Y8001 for the treatment of sarcoma patients including patients who have not received prior therapy. Last October, we initiated the first site in the trial. Several sites are now open, and we have dosed multiple patients using TRACON's product development platform of CRO-independent research. Our initial Y001 trial leverages data from two completed 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 response to the Phase I-II clinical trial is evaluating a triplet that includes Y001, ENVA, and doxorubicin chemotherapy, as doxorubicin is the current frontline standard of care treatment for sarcoma. The Phase I portion of the trial assesses the tolerability of the combination of ENVA and Y001 doublet, as well as the triplet therapy that includes doxorubicin, and we expect to report Phase I data in the second half of this year. Thereafter, the Phase II portion of the trial will 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 triplet therapy to the historical 10% to 15% response rate of single-agent doxorubicin. In the case of rare sarcoma subtypes like chondrosarcoma and alveolar softpart 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 results in the ENVASARC pivotal trial and potential accelerated approval of ENVA, we expect the FDA will require a randomized trial to demonstrate a survival benefit. We expect this Phase III post-approval trial will compare single-agent doxorubicin to the TRIPA combination of doxorubicin with ENVA and with Y001, with PFS as the endpoint. This trial would be expected to enroll patients with UPS and MFS, as well as other sarcoma subtypes shown to respond to TRIPA therapy based on data from the Phase I-II 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. Our strategic goal is to commercialize two unlicensed immune oncology therapies together in sarcoma. 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 anticipated 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, and neoadjuvant settings by seeking supplemental indications. Moreover, we believe TRACON's total sarcoma-driven sales revenue would be significantly enhanced by marketing ENVA and Y001 together as part of a treatment combination in sarcoma. In addition to our two checkpoint inhibitors, we are pleased that the National Cancer Institute continues to fund development of our DNA damage repair inhibitor, TRC102. The NCI has initiated a randomized Phase II trial assessing TRC102 in Stage III non-squamous, non-small-cell lung cancer in combination with chemoradiation. The two-armed trial will enroll 78 patients to assess the benefit of adding TRC-102 to current standard of care treatment of pemetrexid, cisplatin, and radiation therapy, followed by a consolidated dervalumab maintenance 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%. Multiple sites in the U.S. are open for enrollment, which was initiated in 2022, and final results are expected in 2025. Next, I will provide an update on our arbitration with IMAP. On April 24th, we were informed the International Chamber of Commerce Tribunal ruled in our favor for certain claims and rendered an award to TRACON in the aggregate amount of approximately $23 million. Among other findings, the tribunal declared the TJ-439 trial complete as of January 2022, which entitled TRACA to $9 million plus interest and also awarded legal fees and costs to TRACON. The award is made pursuant to a binding arbitration and both the TJ-4309 agreement and the BICIVIC agreement are now terminated. We expect payment promptly and the award includes a high single-digit interest on the awarded amounts. The award did not exceed the pre-specified threshold under the non-recourse financing agreement entered into in December 2022 and therefore we will not receive any additional funds under such agreements. Given the challenging capital markets, the arbitration award is important. Our current cash funds the company into quarter three, and given our capital efficiency, net proceeds from the arbitration award, when collected, are expected to fund the company into early 2024. Our runway may be further extended by the equity credit line we recently entered into with Linkin Park Capital that yields, at our request, $1 million when all conditions to commencement are met, including that a resale registration statement is filed and declared effective, and the equity line can provide, subject to compliance with its terms and at our discretion, a further $25 million to support the robust accrual of the pivotal NVISARC trial. As we've noted in the past, we expect to further supplement our CASP position through opportunities for capital enabled through our CRO-independent product development platform. that we believe positions us as one of the most efficient clinical development organizations. In particular, we believe a company with an emerging pipeline who plans to conduct multiple trials would be an ideal collaboration partner given our ability to execute multiple trials using our team and advanced clinical trial management, data management, and safety reporting system infrastructure. 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 $5 MILLION FOR THE FIRST QUARTER OF 2023 COMPARED TO $3 MILLION FOR THE COMPARABLE PERIOD OF 2022. THE INCREASE WAS RELATED TO ENVEFOLIMAB DRUG PURCHASED IN THE FIRST QUARTER OF 2023 FOR USE IN ENVASARC AND THE YH-001 AND ENVEFOLIMAB TRIAL. GENERAL AND ADMINISTRATIVE EXPENSES WERE $2.3 MILLION FOR THE FIRST QUARTER OF 2023 COMPARED TO $6.5 MILLION FOR THE COMPARABLE PERIOD OF 2022. The decrease was due to lower legal expenses in the first quarter of 2023. Our net loss was $8.5 million for the first quarter of 2023 compared to $9.5 million for the comparable period of 2022. Turning to the balance sheet, at March 31, 2023, our cash and cash equivalents totaled $6.6 million compared to $17.4 million at December 31, 2022. We expect our current capital resources to fund the company into Q3 and with net proceeds from the arbitration award when collected into early 2024. With that, I will turn the call back over to Charles.

Thank you, Scott. As you have heard, our corporate strategy is proceeding as planned. Allow me to recap. First, in the second quarter, we expect to report an ad hoc DMC safety and efficacy assessment of available NVISARC data to comply with the six-month review requirements specified by the DMC charter. Second, in the third quarter, we expect to report the second and final mandated DMC interim efficacy assessment for each of the two NVISARC cohorts of 46 patients dosed with 600 milligrams of ENVA that includes a formal futility rule. Third, in the second half of the year, we expect to report phase one data of the combination of ENVA and our CTLA-4 antibody Y8001, as well as a triple therapy that includes doxorubicin. Fourth, this year we also expect to further leverage our unique product development platform to enable companies tired of being beholden to seros to potentially benefit from our capabilities and realize for themselves the substantial time and cost savings we enjoy at TRACON. Thank you for your time and attention, and we are now available to answer your questions.

Thank you. To ask a question, please press star 1 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Stand by as we compile the Q&A roster. One moment, please, for our first question. Our first question will come from Ed White of HC Wainwright. Your line is open.

Good afternoon. Thanks for taking my question.

So, Charles, just the first question is on the arbitration. Is there any thoughts you can give us about the timing to receiving the $23 million in payments And how is that going to be recorded on the company's income statements or balance sheet, you know, the $9 million and the $13.5 million?

Yeah, I can answer the first portion, and Scott can take the second portion. Thanks for the question. So we do expect payment in the near term. IMF indicated they will confirm the award, which is binding on both parties. And I would also point out in the meantime, the award is accruing interest. And Scott can comment on the accounting issues.

Yeah. Hi, Ed. So the $9 million should be recorded as collaboration revenue, since that was due to the termination of TJ4309. And the rest will be recorded as other income below the line.

Okay, great. Thanks, Scott. And then, Charles, just a question on the product development platform.

You know, you've mentioned this several times in the past.

I'm just wondering, Has there been any investor interest in it or anything you can tell us about, you know, do you think that you're going to have your first client this year or is this something later in the future?

That's a great question, Ed. You know, I can't specify an exact time table, but I will just say that there's extreme interest in what Tracon does that's very different than other companies that are beholden to CROs. You know, when you think about TRACON, I think about two major value propositions. You know, first is ENVA, you know, a late-stage clinical asset being studied in an indication where the standard care is absolutely abhorrent, whereby we know the mechanism of action is relevant in those sarcoma subtypes that are enrolling in the ENVA-SARC trial. And that's a late-stage asset with near-term commercialization potential. The other major value proposition is the platform. And just to be clear, a company that accesses the TRACON platform literally would save approximately 70% to 80% of every trial they ever do. That's not lost on companies, especially in this environment where capital efficiency is so important. So, again, I can't exactly give you a timetable, but I would just say that there's – interest in the platform, and that's regarded as a significant part of the TRACON value proposition, as is our late-stage clinical asset.

Okay. Thanks, Charles. And my last question is just concerning the ad hoc analysis in the second quarter. Since it's not based on futility, what can you actually tell us after this ad hoc analysis? Will you just tell us that the study is going to continue as planned, or is there any data point that we'll be releasing?

Great point, Ed. Yeah, our goal with the ad hoc analysis you mentioned that's coming up this quarter would be to be able to report similar to what we reported in December, that the drug is tolerated as a single agent and tolerated when combined with your boy, and that we remain with a double-digit response rate in each cohort, knowing that We won't have two months of data on every single patient enrolled at this time, but we'll be able to report on the available data for patients, but it will be short of 46 patients in each cohort, to be clear.

Okay.

Thanks for taking my questions.

Appreciate the questions, Ed. Thank you.

Thank you. As a reminder, to ask a question, please press star 1-1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

One moment for our next question. Our next question will come from Joel Beatty of Beard.

Your line is open.

Great. Thanks for the update and for taking the question. The first one is a follow-up on the efficacy analyses from or analyses coming from NVISARC in this quarter and next quarter. From an efficacy point of view, I mean, would we think about both of them as similar to the December update in the amount of data provided and the main difference is just kind of the number of patients, or are there other differences in the level of detail that will be provided to you to consider?

Hi, Joel. I appreciate the question. So, you know, the formal interim efficacy analysis in third quarter is a very regimented data set, if you will. So it's 46 patients in each cohort. and each of those patients is followed for at least three months so that they each have at least two scans on study so that you can get a reasonable understanding of what the general response rate will be, knowing it still could grow with time, but you'll at least have the ability to assess response rate based on at least two scans in each of those 46 patients. The assessment this quarter will not have that degree of follow-up on these patients, so we'll have all the available data, Not every scan will have undergone central review, for example, in the second quarter analysis. So what we expect to report is data on patients, up to 46 patients, knowing that many of them may not have been followed for three months, and knowing that not all those patients will have had two scans, nor will all those scans have been assessed by central review. So we'll caveat, if you will, the expected pressure release in quarter two with respect to safety, but also efficacy, to give an understanding of what the response rate is in patients that have had, for instance, two scans, knowing that not every scan will have undergone central review and knowing that that denominator will not be 46 patients as it will be in third quarter.

Yeah, I appreciate that. And then a question on the potential for collaborations regarding the CRO independent model. In light of the IMAP arbitration that seems somewhat lengthy, is there a way to kind of form the future agreements regarding the CRO independent model in such a way to kind of help minimize the possibility of kind of future arbitration that might be cumbersome for TRACON as well as potentially deter potential partners?

Yeah. You know, we have multiple partners, Joel, and going forward, we expect to work with partners as well that will be similar to the partners we're currently engaged with, includes Alpha Mammal Ecology, includes 3D Medicines, includes Yerko BioPharma. You know, I think we're an excellent partner, and I think the efficiency with which we conduct trials and the manner of this team makes us an incredibly attractive partner for people who are looking to accelerate the timeline of decrease the cost, and improve the quality of their clinical trials. You know, to point out in the past, we've had collaborations around our platform with companies like Johnson & Johnson, and that was a very fruitful, productive collaboration for both us and for them.

Great. Thank you.

Appreciate the questions, Joel. Thank you.

Thank you. Again, to ask a question, please press star 1-1 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Stand by as we compile the Q&A roster. I am seeing no further questions in the queue.

I would now like to turn the conference back to Dr. Charles Feuer for closing remarks.

I'd like to thank the participants for your time and attention, and we look forward to speaking and updating you at their next quarterly call. Have a good day.

This concludes today's conference call. Thank you all for participating.

You may now disconnect and have a pleasant day. Thank you. Thank you. you Thank you.

Thank you. Thank you.

Good day, ladies and gentlemen, and welcome to the Tracon Pharmaceuticals first quarter 2023 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, financing opportunities, future expenses and cash runway, our development plans and strategy, and with the potential recovery of the award from our arbitration with IMAP. These savings 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, 2022, 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 Feuer, President and CEO of Tracon Pharmaceuticals. Dr. Feuer?

Good afternoon, and thank you for joining Tracon's first quarter 2023 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 discuss our financial results for the three months ended March 31st, 2023. Finally, we will conclude by taking your questions. I'll begin with an update on our continued progress with the ongoing NVISARC pivotal trial, evaluating Envifolumab as a single agent and in combination with Urovoid. We have now enrolled more than 92 patients with refractory UPS or MFS into ENVASARC, which is occurring 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 treated at the 600 milligram ENVA dose is anticipated to occur before the end of 2023. In December, we announced that the DMC reviewed interim safety and efficacy data from 18 patients enrolled into each of the two cohorts who completed a minimum of 12 weeks of efficacy evaluations that included two on-treatment scans. The double-digit objective response rate assessed by blinded independent central review in each cohort more than satisfied the pre-specified futility rule. ENVA monotherapy and ENVA dose in combination with Yervoy was well tolerated, with only a single related serious adverse event reported in 36 patients. Responses were noted in patients irregardless of weight at the 600 milligram dose of ENVA that was instituted following the previous DMC review of interim safety and efficacy data in the initial ENVA-SARC trial treated at the 300 milligram dose of ENVA. The DMC recommended the trial continue as planned at the 600 milligram ENVA dose. 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 in either cohort, 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 FDA-approved treatment for patients with refractory UPS or MFS. Therefore, a double-digit response rate at the time of interim analysis is 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. Given the robust accrual of more than 92 patients into the NVSARC trial, we are on track for the DMC to perform the mandated second and final interim efficacy analysis in the third quarter. At that time, the DMC will review safety and efficacy data from 46 patients in each cohort who have been followed for at least three months to prevent two on-study scans for evaluation by blinded independent central review. During the interim efficacy assessment, the committee will apply a futility rule that requires at least three responses in 46 patients in order to continue accrual into that cohort. In addition to the mandated DMC efficacy review in the third quarter, there will be an ad hoc DMC review in the second quarter. The DMC charter stipulates that available safety and efficacy data be reviewed at a minimum of every six months. Since the last DMC review occurred in December, we have scheduled a meeting in the second quarter to assess safety and efficacy in each of the two cohorts. This review will not invoke a formal futility rule and will not include central review of all available scans. Based on data from trials of other checkpoint inhibitors in refractory UPS or MFS, we are targeting a 15% response rate for single agent ENVA and up to a 30% response rate for ENVA in combination with Yervoy. Furthermore, we plan to approach the FDA to discuss a BLA filing strategy as soon as we determine nine responses in either cohort. As a reminder, we have received fast track designation for ENVA in the sarcoma subtypes of UPS and MFS that have progressed on one or two prior lines of therapy and have received orphan drug designation in soft tissue sarcoma based on activity observed in ENVA-SARC. These designations provide important advantages that might expedite regulatory review and commercialization of ENVA. Moving on to our second checkpoint inhibitor, Y8001, a potentially best-in-class CTLA-4 antibody that we licensed from U-Cure Biopharma in October of 2021. In August 2022, the FDA approved our IND to initiate a Phase I-II clinical trial of Y8001 for the treatment of sarcoma patients including patients who have not received prior therapy. Last October, we initiated the first site in the trial. Several sites are now open, and we have dosed multiple patients using TRACON's product development platform of CRO-independent research. Our initial Y001 trial leverages data from two completed phase 1 trials conducted by our partner, Ucure. These two trials demonstrated the recommended phase 2 dose of Y001 as a single agent and in combination with the PD-1 antibody toripalamab. Our response to the Phase I-II clinical trial is evaluating a triplet that includes Y001, ENVA, and doxorubicin chemotherapy, as doxorubicin is the current frontline standard of care treatment for sarcoma. The Phase I portion of the trial assesses the tolerability of the combination of ENVA and Y001 doublet, as well as the triplet therapy that includes doxorubicin. And we expect to report Phase I data in the second half of this year. Thereafter, the Phase II portion of the trial will 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 triplet therapy to the historical 10% to 15% response rate of single-agent doxorubicin. In the case of rare sarcoma subtypes like chondrosarcoma and alveolar softpart 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 results in the ENVASARC pivotal trial and potential accelerated approval of ENVA, we expect the FDA will require a randomized trial to demonstrate a survival benefit. We expect this phase three post-approval trial will compare a single agent doxorubicin to the TRIPA combination of doxorubicin with ENVA and with Y001 with PFS as the endpoint. This trial would be expected to enroll patients with UPS and MFS as well as other sarcoma subtypes shown to respond to TRIPA 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. Our strategic goal is to commercialize two in-license immunoncology therapies together in sarcoma. 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 anticipated 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, and neoadjuvant settings by seeking supplemental indications. Moreover, we believe TRACON's total sarcoma-driven sales revenue would be significantly enhanced by marketing ENVA and Y001 together as part of a treatment combination in sarcoma. In addition to our two checkpoint inhibitors, we are pleased that the National Cancer Institute 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 pemetrexid, cisplatin, and radiation therapy, followed by a consolidated dervalumab maintenance 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%. Multiple sites in the U.S. are open for enrollment, which was initiated in 2022, and final results are expected in 2025. Next, I will provide an update on our arbitration with IMAP. On April 24th, we were informed the International Chamber of Commerce Tribunal ruled in our favor for certain claims and rendered an award to TRACON in the aggregate amount of approximately $23 million. Among other findings, the tribunal declared the TJ-409 trial complete as of January 2022 which entitled TRACON to $9 million plus interest and also awarded legal fees and costs to TRACON. The award is made pursuant to a binding arbitration and both the TJ-4309 agreement and the BICIVIC agreement are now terminated. We expect payment promptly and the award includes a high single digit interest on the awarded amounts. The award did not exceed the pre-specified threshold under the non-recourse financing agreement entered into in December 2022 and therefore we will not receive any additional funds under such agreements. Given the challenging capital markets, the arbitration award is important. Our current cash funds the company into quarter three, and given our capital efficiency, net proceeds from the arbitration award, when collected, are expected to fund the company into early 2024. Our runway may be further extended by the equity credit line we recently entered into with Lincoln Park Capital that yields, at our request, $1 million when all conditions to commencement are met, including that a resale registration statement is filed and declared effective, and the equity line can provide, subject to compliance with its terms and at our discretion, a further $25 million to support the robust accrual of the pivotal NVISARC trial. As we've noted in the past, we expect to further supplement our CASP position through opportunities for capital enabled through our CRO-independent product development platform. that we believe positions us as one of the most efficient clinical development organizations. In particular, we believe a company with an emerging pipeline who plans to conduct multiple trials would be an ideal collaboration partner given our ability to execute multiple trials using our team and advanced clinical trial management, data management, and safety reporting system infrastructure.

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 $5 million for the first quarter of 2023, compared to $3 million for the comparable period of 2022. The increase was related to Envifolamab drug purchased in the first quarter of 2023 for use in Envisarc and the YH-001 and Envifolamab trial. General and administrative expenses were $2.3 million for the first quarter of 2023, compared to $6.5 million for the comparable period of 2022. The decrease was due to lower legal expenses in the first quarter of 2023. Our net loss was $8.5 million for the first quarter of 2023 compared to $9.5 million for the comparable period of 2022. Turning to the balance sheet, at March 31, 2023, our cash and cash equivalents totaled $6.6 million compared to $17.4 million at December 31, 2022. We expect our current capital resources to fund the company into Q3 and with net proceeds from the arbitration award when collected into early 2024. With that, I will turn the call back over to Charles.

Thank you, Scott. As you have heard, our corporate strategy is proceeding as planned. Allow me to recap. First, in the second quarter, we expect to report an ad hoc DMC safety and efficacy assessment of available NVISARC data to comply with the six-month review requirements specified by the DMC Charter. Second, in the third quarter, we expect to report the second and final mandated DMC interim efficacy assessment for each of the two NVISARC cohorts of 46 patients dosed with 600 milligrams of ENVA that includes a formal futility rule. Third, in the second half of the year, we expect to report phase one data of the combination of ENVA and our CTLA-4 antibody Y8001, as well as a triple therapy that includes doxorubicin. Fourth, this year we also expect to further leverage our unique product development platform to enable companies tired of being beholden to seros to potentially benefit from our capabilities and realize for themselves the substantial time and cost savings we enjoy at TRACON. Thank you for your time and attention, and we are now available to answer your questions.

Thank you. To ask a question, please press star 1 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Stand by as we compile the Q&A roster. One moment, please, for our first question. Our first question will come from Ed White of HC Wainwright. Your line is open.

Good afternoon. Thanks for taking my question.

So, Charles, just the first question is on the arbitration. Is there any thoughts you can give us about the timing to receiving the $23 million in payments And how is that going to be recorded on the company's income statements or balance sheet? You know, the 9 million and the 13.5.

Yeah, I can answer the first portion. Scott can take the second portion. Thanks for the question. So we do expect payment in the near term. IMF indicated they will confirm the award, which is binding on both parties. And I would also point out in the meantime, the award is accruing interest. And Scott can comment on the accounting issues.

Yeah. Hi, Ed. So the $9 million should be recorded as collaboration revenue, since that was due to the termination of TJ4309. And the rest will be recorded as other income below the line.

Okay, great. Thanks, Scott. And then, Charles, just a question on the product development platform.

You know, you've mentioned this several times in the past.

I'm just wondering, has there been any investor interest in it or anything you can tell us about, you know, do you think that you're going to have your first client this year or is this something later in the future?

That's a great question, Ed. You know, I can't specify an exact time table, but I will just say that there's extreme interest in what Tracon does that's very different than other companies that are beholden to CROs. You know, when you think about TRACON, I think about two major value propositions. You know, first is ENVA, you know, a late-stage clinical asset being studied in an indication where the standard care is absolutely abhorrent, whereby we know the mechanism of action is relevant in those sarcoma subtypes that are enrolling in the ENVA-SARC trial. And that's a late-stage asset with near-term commercialization potential. The other major value proposition is the platform. And just to be clear, a company that accesses the TRACON platform literally would save approximately 70% to 80% of every trial they ever do. That's not lost on companies, especially in this environment where capital efficiency is so important. So, again, I can't exactly give you a timetable, but I would just say that there's – interest in the platform, and that's regarded as a significant part of the TRACON value proposition, as is our late-stage clinical asset.

Okay. Thanks, Charles. And my last question is just concerning the ad hoc analysis in the second quarter. Since it's not based on futility, what can you actually tell us after this ad hoc analysis? Will you just tell us that the study is going to continue as planned, or is there any data point that we'll be releasing?

Great point, Ed. Yeah, our goal with the ad hoc analysis you mentioned that's coming up this quarter would be to be able to report similar to what we reported in December, that the drug is tolerated as a single agent and tolerated when combined with your boy, and that we remain with a double-digit response rate in each cohort, knowing that We won't have two months of data on every single patient enrolled at this time, but we'll be able to report on the available data for patients, but it will be short of 46 patients in each cohort, to be clear.

Okay.

Thanks for taking my questions.

Appreciate the questions, Ed. Thank you.

Thank you. As a reminder, to ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again.

One moment for our next question. Our next question will come from Joel Beatty of Beard. Your line is open.

Great. Thanks for the update and for taking the question. The first one is a follow-up on the efficacy analyses from or analyses coming from NVISARC in this quarter and next quarter. From an efficacy point of view, I mean, would we think about both of them as similar to the December update in the amount of data provided and the main difference is just kind of the number of patients, or are there other differences in the level of detail that will be provided to you to consider?

Hi, Joel. I appreciate the question. So, you know, the formal interim efficacy analysis in third quarter is a very regimented data set, if you will. So it's 46 patients in each cohort. and each of those patients is followed for at least three months so that they each have at least two scans on study so that you can get a reasonable understanding of what the general response rate will be, knowing it still could grow with time, but you'll at least have the ability to assess response rate based on at least two scans in each of those 46 patients. The assessment this quarter will not have that degree of follow-up on these patients, so we'll have all the available data Not every scan will have undergone central review, for example, in the second quarter analysis. So what we expect to report is data on patients, up to 46 patients, knowing that many of them may not have been followed for three months, and knowing that not all those patients will have had two scans, nor will all those scans have been assessed by central review. So we'll caveat, if you will, the expected pressure release in quarter two with respect to safety, but also efficacy, to give an understanding of what the response rate is in patients that have had, for instance, two scans, knowing that not every scan will have undergone central review and knowing that that denominator will not be 46 patients as it will be in third quarter.

Yeah, I appreciate that. And then a question on the potential for collaborations regarding the CRO independent model. In light of the IMAP arbitration that seems somewhat lengthy, is there a way to kind of form the future agreements regarding the CRO independent model in such a way to kind of help minimize the possibility of kind of future arbitration that might be cumbersome for TRACON as well as potentially deter potential partners?

Yeah. You know, we have multiple partners, Joel, and going forward, we expect to work with partners as well that will be similar to the partners we're currently engaged with, includes Alpha Mammal Ecology, includes 3D Medicines, includes Yerko Biopharma. You know, I think we're an excellent partner, and I think the efficiency with which we conduct trials and the manner of this team makes us an incredibly attractive partner for people who are looking to accelerate the timeline decrease the cost, and improve the quality of their clinical trials. You know, to point out in the past, we've had collaborations around our platform with companies like Johnson & Johnson, and that was a very fruitful, productive collaboration for both us and for them.

Great. Thank you.

Appreciate the questions, Joel. Thank you.

Thank you. Again, to ask a question, please press star 1-1 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Stand by as we compile the Q&A roster. I am seeing no further questions in the queue.

I would now like to turn the conference back to Dr. Charles Feuer for closing remarks.

I'd like to thank the participants for your time and attention, and we look forward to speaking and updating you at their next quarterly call. Have a good day.

This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.