Q2 2020 TRACON Pharmaceuticals Inc Earnings Call

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Ladies and gentlemen, please stand by your conference calls scheduled to begin momentarily. Thank you for your patience in please continue to standby.

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This conference call at this time, all callers or 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 result, regulatory activities future expenses and cash on way and our development plans and strategies.

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 Dash K for the year ended December 31st 2019, and subsequent quarterly reports on form 10 Dash Q.

You are cautioned not to place undue reliance on these forward looking statements and we disclaim any obligation to update such statement.

Now I'd like to turn the call over to Dr., Charles store, President and CEO of trade Con pharmaceuticals doctors door.

Good afternoon, and thank you for joining tray kind of second quarter, 2020, <unk> financial results and business update call.

We'll begin with an update on our pipeline and then recent activities following that our Chief Accounting Officer, Scott Brown will review our financial results for the three and six months ended June 32020.

Finally, we will conclude by taking your questions.

We had a very productive quarter with our primary focus remaining on our recently in licensed PDL, one product and the pull them out a late stage potential best in class checkpoint inhibitor, which may confer a clinical benefit by virtue of its unique rapid subcutaneous route of administration.

As a reminder, Trey kind of license North American rights to Cliniqa develop and commercialize then before map in the indication of sarcoma.

As you will recall tracphone met with the U.S. Sta on May Eightth to review our plans for the pivotal MSR trial, then to pull map for the treatment of sarcoma.

Following that successful at the meeting on July 15, we filed the R&D for the pivotal invest our trial in the sarcoma subtypes of undifferentiated pleomorphic sarcoma or U P. S and the closely related subtype of mix, so fibrosis, arkoma or MFS with the FDA.

The 30 day after day review period will end August 14th.

The pivotal trial will include two cohorts of 80 patients each.

One core will recede single agent and before map and the second cohort, who was we wish the and before that in combination with Yervoy.

Second checkpoint inhibitor targeting this detail a four receptor that is marketed by BMS.

The trial will enroll patients with U.P.S. and MFS, who progressed on one or two lines of prior treatment, but have not received prior checkpoint inhibitor therapy.

The primary endpoint in both cohorts will be objective response rate by resist as confirmed by blinded independent Central review the duration of response being a key secondary endpoint.

In each cohort the demonstration of nine out of 80 objective responses for an 11.25% objective response rate confirmed by independent Regress review defines the level of response the satisfies the primary objective of study.

Which is to statistically exclude the known 4% response rate of both trends the only approved treatment for refractory you PS and MFS.

Yes, you heard me correctly. Unfortunately, the waterproof treatment for refractory you PS an MFS has only a 4% objective response rate.

This is a clear example of an indication with a high unmet clinical needs.

We are studying the sarcoma subtypes of EPS at MFS, because they are responsive to checkpoint inhibition based on data presented at ASCO 2019, and ASCO 2020.

At ESCO 2020 investigators from the alliance for clinical trials in oncology reported an impressive 29% confirmed objective response rate in patients with highly refractory Upi US who received opdivo in combination with Yervoy.

These data build upon data released at ASCO 2019, showing that single agent Keytruda demonstrated a 23% response rate in highly refractory you PS and MFS patients.

The end the start pivotal trial was designed on the basis of activity reported for PD, one and PD, one antibodies as single agents and in combination with yervoy in certain ways to certain soft tissue sarcoma subtypes that include GPS and MFS.

While the activity of checkpoint inhibition of new PS and MFS appears clear.

We had not previously reported phase two response rate data for into full maben indications that were also evaluated in separate clinical trials for the checkpoint inhibitors Opdivo and Keytruda.

However, at ASCO 2020 investigators from the pivotal trial of enrollment in colorectal cancer showed that single agent and before May have demonstrated a 28.2% confirmed objective response rate and 39 patients with MSR high colorectal cancer, who feel three approved chemotherapy.

A floor permitting accelerate plan and arena can.

This level of response was nearly identical to the 28% confirmed objective response rate reported for Opdivo in the Checkmate 142 trial.

And the 27.9% confirmed objective response rate reported for Keytruda in the keynote 164 trial.

Each of these trials similarly enrolled MSR high colorectal cancer patients who filled those same three standard of care Chemotherapies.

Of note and before that caused typical immune related toxicities like rash hyperthyroidism and liver inflammation at rates and severities typically thing with checkpoint inhibitors. However, there were no cases of infusion related reactions no were there any cases of Columbus or pneumonitis in the more than 100 patients.

Is treated with end before Matt presented at ASCO.

Which is consistent with the overall safety profile and the full amount in the more than 650 treated patients.

Infusion reactions humanized and clients are potentially serious complications of keytruda.

Okay, and other intravenously administered checkpoint inhibitors.

And before them as rapid subcutaneous route of administration achieves low variability in serum without the P. concentration effects noted intravenously administered checkpoint inhibitors.

This may result in a safety advantage for the combination of and before Allomap and yervoy compared to the combination of Opdivo and Yervoy.

Collectively we believe these data bode well for the end to start trial, which will assess the potential than before that as a single agent and in combination with yervoy to achieve an 11.25% objective response rate were good tolerability in each cohort.

One additional bands reflects the fact that MSR enrolls patients who have progressed fall in only one or two prior lines of treatment.

Which makes them potentially less refractory than the EPS and MFS patients who enrolled in the single agent Keytruda or Opdivo plus yervoy combination trials.

Those patients received two three or four lines of prior therapy and in some cases up to six.

Notably our goal based on data for other checkpoint inhibitors and sarcoma is to achieve a 15% response rate within before them have single agent.

And a 30% response rate and before that have combined with yervoy.

To provide data to gain FCC approval for end before as a single agent and also in combination with Yervoy.

The dual on design also provides for risk mitigation should combination treatment, we required for robust responses.

We are particularly enthusiastic based on the ASKO 2020 data about the prospects for dual checkpoint inhibition, which may result in more frequent deeper and more drover responses in single agent and Buffalo map treatment.

Given the 4% objective responses to vote trend the only approved therapy for refractory you PS and MFS.

We will then reform have combined with you avoid could provide a transformative new standard care freestor coma patients.

Notably BMS executed a similar dual cohort clinical trial strategy for Opdivo in MSR high colorectal cancer that resulted none of the Eagles approval as both the single agent and in combination with Yervoy and both approvals were based on objective response rate.

I can confirm that key opinion leaders and investigators are enthusiastic about initiating the MSR trial based on addressing a significant unmet need.

We've also learned that these physicians are motivated to participate in the MSR trial due to the unique convenience of enviable lamps rapid subcutaneous dosing.

Especially in this time of Cobot 19.

For reference and before that can be dosed in less than 30 seconds in a volume of less than two milliliters and it doesnt car the use of hyaluronidase or any adjutant.

Contrast, this will patients into were to receive an intravenous checkpoint inhibitor in that case, they need to book in appointment in the infusion center receive pre medication.

I have an ivy inserted or require accessing a central line or port which could become infected.

Wait at least 30 minutes for the infusion to be completed.

Briskin infusion reaction, which may need further medical treatment and then visit their physician in the clinic.

Likely the morning afternoon, or perhaps the entire day has been spent at the infusion center.

In contrast, dosing with and before Matt is similar to receiving a flu shot.

The pacing it simply be dose in the clinic.

Following their physician visits a nurse can enter the room and administer enrollment in 30 seconds under the skin of the upper arm.

Following that the patient can immediately go home to due to no risk of an infusion reactions.

Dr Standard in tangible attending physician at Memorial Sloan Kettering Cancer Center and lead investigator for the Alliance clinical trial said quote. It has been shown that you PS is one of the sarcoma subtypes with the highest responses to checkpoint inhibitors to date and given these encouraging combination therapy data the upcoming invest our pivotal trial is a potential.

Early promising study for patients and quote.

We expect to open end to start at approximately 25 sites in us.

Also of note is that we estimate the total costs of the pivotal trial using trade Khan COO independent product development platform, including paying for Yervoy is approximately $15 million.

Spend will be spread out over the next eight to 10 quarters.

Following the recently completed filing with the MSR protocol with yesterday in July we expect six near term milestones first SD clearance of the under Saar protocol.

Second initiate dosing in the MSR trial in the fourth quarter this year.

Submit early response assessment data to the FDA in first quarter 2021, as part of our orphan drug designation application.

Fourth conducted interim response assessment that we expect to disclose to the public around the time of ask a 2021 and could be the basis for breakthrough designation.

Fifth provide final response assessment date in 2022, and six assuming positive data submitted via replay for accelerated approval that if approved could allow for product launch in the us in 2023.

In parallel our corporate partners Threed medicines, and Alpha Mab oncology are conducting clinical trials in the us in China in additional indications and we expect them to submit enrollment for approval in MSR high colorectal cancer in China later this year.

We recently received the result of a third party market assessment of tray Con commissioned the study concluded and Buffalo map, if FDA approved for refractory you PS and MFS could generate peak annual revenue of approximately $200 million in the us assuming parity pricing to keytruda for Opdivo.

The adoption rate is forecasted to be relatively rapid using end performance target product profile.

Which subsume the clinical results I discussed earlier interim in my remarks, and importantly, the very high unmet clinical need in this setting which we have also discussed.

Of course, and before US sales revenue could increase further if treatment has expanded to label expansion or compendia listing to other refractory sarcoma subtypes that was shown to be responsive to checkpoint inhibition such as angiosarcoma.

Cellular soft parts Arkoma and differentiated label sarcoma.

Which our market assessment study indicated could generate an additional $100 million in peak annual revenue in the us for a total of $300 million when combined with EPS and MFS.

Of course, our goal to expand the use of enrollment into the first line setting in many other sarcoma subtypes.

Could substantially increased sales revenue.

Yes.

Well end before map is our most advanced product candidate we continued to progress three other clinical stage assets Trc, one or two our second clinical stage asset is a novel small molecule inhibitor of the DNA basic Susan repair pathway that is intended to reverse resistance to certain chemotherapeutics.

The NCR supporting for phase, one or phase two trials that are focused on patients with mesothelioma or non small cell lung cancer.

In addition, our academic collaborators continue to evaluate biomarkers in tumor specimens from Glioblastoma patients treated in a completed phase two trial.

And in tumor specimens from patients in ongoing Trc, one or two trials.

With the goal of identifying a protein or gene expression profile that correlates with clinical response.

Positive data from multiple Trc, one or two clinical trials were presented at ASCO 2020.

In the phase two study to a 14 mesothelioma patients who had progressed previously on Ellipta had objective responses following treatment with Atlanta, and Trc, one or two.

In a phase one study Trc, one or two in combination with chemo radiation resulted in a 100% response rate in 15 patients with non squamous non small cell lung cancer, including in three patients who achieved a complete response to treatment.

These data compare favorably to historical data of the same combination of chemo radiation without Trc, one or two and advanced lung cancer.

Specifically the proclaim clinical trial reported an objective response rate of 36% and the Pacific clinical trial reported objective response rate of 51% and non squamous non small cell lung cancer patients using with us as planned and thoracic radiation.

As a result, we are now discussing further development of Trc, one or two in combination with chemo radiation with Cetip investigators.

We'll now move on to Trc to 53, a phase three ready asset based on preclinical data indicate a trc to 53 is as active as expanding in prostate cancer cell lines and in patient derived xenograft models. We believe there is an opportunity for that product candidate to be developed and commercialized.

Countries were prostate cancer, surpassing generally do not have ready access to expanding.

We have an outlining process underway to identify a corporate partner to develop and commercialize trc two feet to 53 with our primary focus being rights for greater China.

Our fourth clinical stage asset is the CD 70 to antibody TJ for 309 also known as TJ de five that we are developing in a phase one dose escalation study as a single agent and in combination with to centric marketed checkpoint inhibitor being supplied by Roche.

We are developing TJ for thing going on in collaboration with IMS Biopharma through one of our two strategic agreements with them whereby we are response with the regulatory and clinical development of TJ fourth year nine in the us in Europe and are entitled to receive escalating portions of non royalty and royalty payments if I remember likes to license TJ fourth year nine to it.

Third party in any region outside of China, Macau, our Taiwan.

We anticipate completing dose escalation in presenting topline data from this phase one trial this year.

As you will recall, we initiated a dispute process. If I may have in April as we believe we are due a payment based on their strategic partnership with Calvin next and biologics around TJ fourth you are nine and as of today. This dispute has not been resolved.

I can report that while we pursue a resolution to this dispute we continued to fulfill our obligations under the TJ fourth year nine agreements.

In addition, the dispute we initiated regarding IMS alleged breach of the bi specific agreement also has not been resolved as of today.

And we therefore cannot provide a timeline as to when or if we will file an R&D for any hi, Matt by specific antibody.

At this time, Scott will provide an update on our financials.

Thank you Charles and good afternoon, everyone.

Take on research and development expenses for 2.2 million and 4.2 million for the three six months ended June Thirtyth, 2020, secondly, compared to 4.3 million and 9.6 million for the comparable periods of 2019.

The decrease was primarily attributable to lower manufacturing and clinical trial expenses related to the termination of the Trc 105 program in April of last year, along with lower manufacturing expenses for Trc to 53.

General and administrative expenses for 2.1 million and 4.0 million for the three and six months ended June Thirtyth 2020, respectively at 1.9 million at 3.8 million for the comparable periods of 2019.

Our net loss was 4.5 million and $8.5 million for the 306 months ended June Thirtyth 2020, respectively, compared to 6.3 million and 13.5 million for the comparable periods of 2019.

Turning to the balance sheet at June Thirtyth, 2020, our cash and cash equivalents totaled 14.5 million compared to 14.1 million and 16.4 million at March 30, Onest 2020, and December 30, Onest 2019, respectively.

We expect our current capital resources to be sufficient to fund our planned operations into mid second quarter of 2021, which could be further extended through use of the equity line aspire capital under which subject to certain conditions. They are committed to purchase up to $15 million of our common stock at our request from time to time during a 30 month period based on market price.

Time of each sale and we estimate this facility could extend our cash runway into late Q3 2021, it fully utilized.

Importantly, our financial runway could be further extended through non dilutive capital from the license of rights Trc to 53.

Milestones associated with our TT for 309 partnership with imap or entering into a synthetic royalty arrangement and the full of NAV North American sales to a third party.

We are forecasting a cash burn for operations of approximately 4 million to 5 million per quarter for the remainder of 2020.

Increasing to 6 million to 7 million per quarter in 2021, as we continue to enrolled and the start pivotal study.

Which we could offset with additional sales the stock from the equity line with aspire capital and our ATM with Jones trading.

In Q2, 2020, we raised a total of 4.4 million through our equity line, and ATM, which more than balanced our quarterly cash outflow of 4 million.

We believe these facilities represent the most in expenses cost of capital available to us as the sales are made at a slight discount to market price and resulted in modest dilution to shareholders.

With that I'll turn the call back over to Charles.

Thank you Scott.

To recap we have filed the invest our pivotal trial with the FDA and expect FDA clearance this quarter and expect to dose the pivotal trial multiple sites being getting in the fourth quarter of this year.

We believe the NSR trial provides multiple near term milestones as a potential fast to market strategy to provide enviable amount to sarcoma patients and significant need of a new therapy as expeditiously as possible.

Addressing this high unmet need is clearly important to investigators and they are very enthusiastic about initiating the under start trial.

They are additionally, excited about envelope labs unique and convenient rapid continuous route of administration.

And before we have Salter quest to license and exciting late stage asset and Repositions the company to forward integrate and potentially build our commercial capabilities, which we eventually could leverage across multiple products.

Importantly, we have access to capital to deliver the expected MSR interim data in mid 2021, which could demonstrate the potential for and perform up to transform the standard of care for refractory sarcoma patients.

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.

Ladies and gentlemen, and general question at this time.

On the one key on your telephone.

In terms of yourself from the Q. Please press the pound.

Next question comes from.

Jefferies.

Hi, this is stopping them from R&D. Thanks for taking my questions. So first question is on electric for the patients that you plan to enrolling phase two you said that Dave and be in late may be on ARPU lines. Prior therapies versus other agents that have been test and then or patients that had been called.

Six pilot lines, so based upon those differences.

Do you anticipate to see any differences.

A lot Oz phase three.

Hi, So I'm no. Thanks for your question. So I think when you think about the MSR trial, we're clearly trying to demonstrate robust response rate and I think there's several things that I think potentially allow us to general busters bonds, we have it could be superior to what we've seen for other checkpoint inhibitors.

In similar patient populations and the first is the eligible patients. So I think if we enrolled patients who are less refractory there's a chance that.

For drug Thats, just as active which seems to be the case based on the colorectal cancer data you might be able to increase the response rate. So second and third line patients may be more responsive brincis in fifth or sixth line patients.

I think another important factor in this study is could we be safer than some of the other checkpoint inhibitors and that's important when you think about combining and bus full amount with Yervoy. When you look at the Opdivo Yervoy data I mentioned that robust response, a 29% and thats impressive, but you also have to remember.

That about 14% of patients in that trial couldnt, even tolerate the combination. So in other words, you had a 29% response rate across all patients, even though more than one in 10 couldn't even take therapy now imagine if every patient can take and plus yervoy in other words every patient has a chance respond not just nine out of 10 patients.

Even based on similar activity, we might see a higher response rate so based on potentially a safety profile this better than opdivo that permits more patients receiving end the yervoy as dictated by the protocol and not discontinuing for toxicity and based on patients potentially being less refractory we think.

There's a potential we might see a more robust response rate than even what's been reported previously in trials of dual checkpoint inhibitors.

Very helpful and I just had one follow up question.

Related to the tail end given that your host no that'll be feed.

Within the of them Pembro combination and soft tissue sarcoma lines that is a PFS was not the dependent on PDL one expression.

So just given mccanna stake so ill hold their drugs will or do you think is driving the efficacy and then lake fog and.

And before the my bottom that any plans to initiate the combo trial.

Cash.

Great question. So on this I think when you look at the totality of data that Dr., Bob Mac you discuss that the Kalo then I think you it's clear that PDL one is nada.

Accurate predictor of patients who respond to checkpoint inhibition.

In fact, the Theres data that.

What's called their sarcoma immune classification, maybe a better predictor of the patients that are most likely to respond to these therapies. Now importantly, NSR trial, we don't mandate that patients to fulfill any criteria to come into the trial other than having you PS and MFS, but we will carefully assess for potential biomarkers that could help direct therapy to other patients where we wouldn't.

Based on histology alone expect such robust response rate. So for example, we will check PDL one status, we will check the sarcoma immune classification status as well as the tumor mutational burden status of each patient and will correlate that with response with the hopes that we may develop a predictive biomarkers allows expanding.

And before that to many more sarcoma subtypes.

Another way to think about expansion is what you just touched on combining with Teekay eyes as an example.

Just just as an area, where we have discussed in general terms with potential investigators about moving into the full amount now if you look at just.

Dual checkpoint inhibition is not very effective there, but as you will note teekay eyes are quite effective and kit inhibitors or are the standard of care in that indication. So one logical design would be to combined with a kit inhibitor with end format and just.

You mentioned.

Hi, Jeff receptor tyrosine kinase inhibitors, those also could be a basis for combination and other sarcoma subtypes. So clearly I think the playing field and sarcoma is quite large were initially exploring and the single agent and but plus yervoy in the most responsive sub types, but we could think about combined with chemotherapy, specifically anthracyclines info.

First line sarcoma, we could also combined with as I mentioned, teekays, including a secret inhibitor and just and also potentially VEGF inhibitor and other sarcoma subtypes. So theres a lot of work to be done and I think a lot of patients that could benefit from end, but beyond just those that will benefit we expect to benefit I should say based in new PS and MFS based on the initial and.

Yes, our trial.

Okay got it very helpful. Thank you Sean I think you saw interruptions my pleasure. Thank you.

Thank you I once again, ladies and gentlemen that star one question sorry.

Yes.

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Right.

I'm not sure any further.

We do have a question from the line.

Your line is open.

Hi, guys can you hear me okay.

Hi, Ed Good afternoon, yes.

Okay great.

So.

Maybe just a question and we spent some time talking about the our targets.

Maybe talk a little bit about.

Durability targets.

So just on imap.

So I understand you you have that the next potential asset but you're in.

Yes treatments with them right now is that for just the bias specifics can you get another.

Compound other that partnership or everything.

Stock right now into the disagreements our results. Thanks.

Sure I. Appreciate your question. So I'll talk initially about the your question around overall response rate so.

The primary objective of vendors target is to demonstrate an objective response rate confirmed by reserves by Central review of 11.25% in each of the cohorts.

And while that's the primary objective the real important secondary objective, which is also in critical to patient benefit and will be seen is critical from the agency is the durability of response.

Unfortunately, most checkpoint members have quite durable response.

And the general bar for that is six months. So what we're looking for is there's a six month durable response in the majority of patients.

I will say from previous studies within a format for instance in colorectal cancer. We saw durability response beyond six months of over 70%, which again is fairly standard for checkpoint inhibitors. So I think the bar is in the majority to 70% range, Ed but thats a.

Appropriately wide range, because Thats, an agency review decision, but I think thats been roughly the stand you've seen that's been achieved by most of the checkpoint inhibitors that have been approved based on response rate and then durability of response of the secondary consideration.

So thats, what we're shooting for and that's what our expectation would be which again is something we've seen with end been previous studies in other indications and has been the general.

Percentage, we seen for checkpoint hovers in general whether it be sarcoma or other indications.

With respect to to Imap, we had two agreements with imap, we have the agreement with T.J.D. for 309 and their dispute resolves around.

Potential payment we are.

We are entitled to based on a strategic agreement they made with a company Calvi generics in the second agreements on the bi specifics whereby we expect to cooperate them to develop multiple vibes specifics and in each case, we feel there's been a breach that is in.

As few process as we speak Thats, probably the extent to which I can discuss that at this time.

Okay. Thanks.

Thank you I appreciate the question.

Thank you.

Hello.

With Jefferies. Your line is open.

Hey, Charles Thank you just one more follow up questions I'd call currently the object service on screen initially on.

Uhhuh, 15% and value 11 on site is that like something just related to change the statistics I would like has something changed.

Changed fundamentally mcclaren design.

Yes, it's actually the exact same trial design and nothing's changed other than making it clear that one thing is what's required for positive trials swab nil and then the other thing is what we really expect will happen as the target product profile. The drug so to be clear the statistics around the trial define a positive trial and achieve.

During the primary objective of a response rate that excludes with 95% certainty for 4% known response rate of both trim.

And that is nine of 80 responses so that satisfies the statistical.

We'll have the study in other words, if we see nine of 80 responses, we reject the no hypothesis and show that our drug is statistically superior to the historical response rate for poultry.

So thats the minimum Mitch will to generate a positive trial that's been the statistical rule since we first proposes trial to the agency.

Hi separate equity is what do we really expect so we hope to see is a fifth teams our sponsor a single agent and a 30% response rate combo and Thats based on what we've seen with checkpoint inhibitors in EPS and MFS based on data at ASCO 19 and 20.

Okay, Hey, insulin so thank you very much my pleasure. So thank you for the question.

Thank you and at this time I'm not showing any further questions I'd now like to turn call back your speakers for any further.

Thank you for your attention and we look forward to speaking with you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you.

You may now disconnect.

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