Q3 2022 TRACON Pharmaceuticals Inc Earnings Call
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Yeah.
Okay.
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.
The speakers 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 our development plans our strategy and the timing of results of our arbitration with I Mab.
These statements are subject to various risks that are described in our filings made with the securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2021, and subsequent quarterly reports on Form 10-Q.
You are cautioned not to place undue reliance on these forward looking statements 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 <unk>, President and CEO of Tracon Pharmaceuticals, Dr. Thor.
Yeah.
Thank you for joining <unk> 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 32022. Finally, we will conclude by taking your questions.
I'll begin with an update on our continued progress with the <unk> pivotal trial, we have now enrolled 68 patients with refractory UBS, where MFS into <unk>, which is accruing at 29 sites in the U S and one site in the UK.
Accrual continues to exceed projections and the completion of enrollment of 160 patients dosed at the 600 milligram <unk> dose is anticipated to occur before the end of 2023.
In October we announced that the DMC review 12 weeks of safety data for more than 20 patients and recommended the trial continuous planned at the 600 milligram bid 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 and 18 patients in each of the two cohorts monotherapy and combination therapy at the 600 milligram and the dose and.
An identical futility threshold was achieved at the interim analysis performed last year and 36 patients who received the 300 milligram bid dose.
At that time, a significantly higher response rate was observed in lighter weight patients, which prompted the DMC to recommend increasing the dose to 600 milligrams.
This DMC mandated interim efficacy analysis occurs following the 12 week scan in the 18th patient treated with single agent <unk>.
And in the 18 patients treated with <unk> in your voice.
To allow for determination of the preliminary response rate.
I note that the interim analysis will assess the preliminary response rates pipeline did independent Central review.
We know that from prior studies of checkpoint inhibitors in sarcoma that responses may take 20 or more weeks to develop especially.
Especially in the case of patients treated with two checkpoint inhibitors.
Our goal at the time of interim analysis, therefore is to overcome the futility bar and to report a double digit risk 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 it may increase.
<unk> 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 were $11. Two 5% objective response rate defined as the level of response that satisfies the primary endpoint of the study.
Two statistically exceed the 4% objective response rate of <unk>, the only approved treatment for patients with refractory <unk> and MFS.
Therefore, a double digit response rate at the time of interim analysis would be very meaningful in.
Indicating that we are on track to achieve the primary endpoint of the study.
Notably <unk> is a drug with a black box warning for fatal liver toxicity.
Our goal in <unk>. Therefore is to demonstrate that <unk> is both safer and more efficacious than <unk>.
Based on data from trials of other checkpoint inhibitors in refractory <unk> MFS were targeting a 15% response rate for single agent <unk> and up to a 30% response rate for Evan <unk> given with your voice.
Furthermore, we plan to approach the FDA to discuss a BLA filing strategy as soon as we determine nine responses in either cohort.
We were very pleased to recently received fast track designation for <unk> in the sarcoma subtypes of Ups's MFS that have progressed on one or two prior lines of therapy based on activity already observed in <unk>.
This designation holds important advantages that might expedite the development and regulatory review.
But.
Moving onto our second checkpoint inhibitor wide 001, a potentially best in class <unk> <unk> antibody, we licensed from <unk> Biopharma in October of last year.
In August the FDA approved our IND to initiate a phase one two trial of <unk> <unk>, one 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 one two trial using tracon product development platform of CRO Independent research before the end of this year.
Our initial <unk> trial Leverages data from two phase one trials conducted by our partner <unk>. These two trials demonstrated a recommended phase II dose of <unk> as a single agent and in combination with a PD one antibody Tory Parliament.
Our sponsored phase <unk> clinical trial will evaluate a triplet that includes weitzner zero, one and <unk>.
<unk> and chemotherapy.
As Dr. <unk> is the current frontline standard of care treatment for sarcoma.
Following the phase one portion of the trial to assess the tolerability of the combination of the <unk> and <unk> doublet as well as the triplet therapy that includes doxorubicin.
We plan to assess the response rate in common and rare sarcoma subtypes two combination treatment.
With the intent of demonstrating superior response rates compared to historical data using standard of care agents.
And Leiomyosarcoma and LIFO sarcoma, we plan to compare the response rate a triple therapy.
The historical 10% to 15% response rate of single agent Doxorubicin and.
In the case of rare sarcoma subtypes, like Chondrosarcoma and Avi Oler software sarcoma, where chemotherapy is not highly effective we intend to study the doublet of <unk> zero, one and Denver to assess the response rate compared to historical response rate with chemotherapy, where single agent checkpoint inhibition.
One of the objectives of this phase one two trial to determine the subtypes of sarcoma that best respond to the combination of <unk> <unk> and doxorubicin.
Assuming positive trial results in the <unk> pivotal trial and potential accelerated approval Denver.
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 triplet combination of <unk> with <unk> and <unk> zero, one with PFS at the endpoint.
This trial would be expected to enroll patients with UBS and MFS as well as other sarcoma subtypes shown to respond to triple 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 <unk> for accelerated approval and refractory sarcoma based on data from <unk>.
The ability for Tracon to commercialize to in license immuno oncology therapies together in sarcoma is a great strategic benefit it.
It is important to understand the sales potential in Stockholm with NV at parity pricing is that solely the forecast of $200 million in peak annual Enver revenues expected in the initial indications of refractory ups's in MFS and the $100 million in annual revenue and rare sarcoma subtypes, where the activity of checkpoint inhibition has been demonstrated.
<unk>.
Our clinical development strategy is designed to create the ERP for NV to broadly benefit patients with sarcoma in the frontline adjuvant and neo adjuvant settings by seeking supplemental indications.
Moreover, we believe <unk> total sarcoma, driven sales revenue would be significantly enhanced by marketing <unk> and <unk> together as part of a treatment combination.
In sarcoma.
In addition to our two checkpoint inhibition inhibitors. We are pleased that the NCI continues to fund development of our DNA damage repair inhibitor Trc 102.
The NCI has initiated a randomized phase II trial, assessing Trc 102 in stage III non squamous non small cell lung cancer in combination with chemo radiation.
The two arm trial enrolled 78 patients to assess the benefit of adding Trc 102 to current standard of care treatment of Pemetrexed cisplatin and radiation therapy.
<unk> by consolidated <unk> treatment.
The primary endpoint of the trial's PFS in 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 <unk> 73 antibody T. J fourth Eni that Tracon is evaluating in a phase one study as a single agent and in combination with the checkpoint inhibitor to centric.
<unk> of data analysis of the clinical trial is expected this month, which triggers <unk> option two we acquired T J <unk> hundred nine.
As a reminder, <unk> has indicated the desire to exercise their option to terminate the T. J <unk> license following completion of the phase one trial for a payment to tracon of $9 million.
Next I will provide an update or a legal disputes with imap.
As a reminder, I mab <unk> commenced arbitration in June 2020, after Tracon invoke contractual dispute resolution provisions assuming that <unk> breached its contractual obligations concerning both of our agreements entered into in November 2018.
<unk> initiated the arbitration to declare they were not in breach of either agreement.
We filed carrier claims in the arbitration seeking to recover over $200 million in damages from I Mab based on the alleged breaches.
Under the applicable rules of the arbitration the prevailing party may also be awarded attorney's fees at the tribunals discretion.
In February of this year arguments for alleged breaches of both of our agreements with IMF were heard before in 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 30.
Which was then extended until November 30th.
On November eight 2022 of the tribunal invited the parties to submit an additional limited briefing on two discrete issues by December nights.
Following that submission the parties are to agree on a schedule for the respective cost submissions.
The tribunal did not indicated when and 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 to drive yield to provide their final award in the first quarter of 2023.
We therefore are encouraged that the final steps of the arbitration, including our consideration of arbitration costs are expected soon.
The claims under the arbitration of our complex.
Accordingly, we cannot predict the outcome of the arbitration, we are unable to estimate the amount of recovery of damages if any that may be awarded by the tribunal.
Pending results of the arbitration, we continued to meet our obligations under the terms of both agreements we will promptly provide an update when the tribunal announce their award.
Given the challenging capital markets, the expectation to secure non dilutive capital from existing or 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 run rate 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 runways 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 <unk> trial, while we await the outcome of the <unk> interim efficacy analysis, the binding arbitration with I Mab and notification from <unk> regarding their option to terminate the T J <unk> agreement for $9 million.
As we've noted in the past we expect to further supplement our cash 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 our sorrow, 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 royalties from commercialization.
This is an aligned structure, we used in the past for example, with Johnson <unk> Johnson.
Second we are exploring a franchise model whereby we are paid to share our proprietary capabilities and knowhow to enable another company to independently internalized clinical operations and use these new capabilities to avoid contracting with zeros to execute clinical trials.
As has been the experience of 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 zero independent and reap the rewards of conducting trials faster at higher quality at lower cost competitive trials typically contracted to cross.
At this time, Scott will provide an update on our financials.
Thank you Charles and good afternoon, everyone.
<unk> research and development expenses were $4 1 million and $10 million for the three and nine months ended September 32022, respectively, compared to $2 7 million and $8 1 million for the comparable periods of 2021.
The increase in both periods was related to a robust enrollment in the pivotal <unk> trial.
General and administrative expenses were $2 3 million and 12 million for the three and nine months ended September 32022, 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.
There may be increases to the extent, we must extend additional legal fees in connection with enforcing and collecting any arbitration award for my math.
Our net loss was $6 4 million and $22 1 million for the three and nine months ended September 32022, respectively, compared to $7 million and $21 million for the comparable periods of 2021.
Turning to the balance sheet at September 32022, 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.
Thank you Scott.
As you have heard our corporate strategy is proceeding as planned allow me to recap four key events first this month, we expect to complete the T. J <unk> phase one trial permitting I've had the opportunity to exercise their stated desire to terminate the agreement for a payment to tracon of $9 million.
Second this year expect to report the DMC interim efficacy assessment for the two <unk> cohorts dosed with 600 milligrams of <unk>.
Third in the first quarter of 2023, we expect to report the arbitration panels binding decision, including potential damage awards regarding our legal disputes with imap.
Fourth we also expect to further leverage our unique product development platform to provide tracon non dilutive capital in exchange for enabling companies tired of being beholden to crows potentially benefit from our capabilities and realized first themselves the substantial time and cost savings we enjoyed tracon.
As Scott indicated our current cash runway extends into mid 2023 and passed each of these expected upcoming key milestones.
Thank you for your time and attention and we are now available to answer your questions.
Thank you.
To ask a question at this time, please press star one one on your Touchtone telephone.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Joe <unk> with Baird. Your line is now open.
Hey, great. Thanks for taking the question.
Congrats on the.
My first question is on.
On the interim analysis and the AMETEK pilot coming up later this quarter well information could we get.
The go no go no go no go decision or can be learned more about weather.
We're seeing the goal double digit response rates.
Joel Thanks for the question, yes, the interim analysis I think both those are our key expectations that investors should expect so first is too.
Exceed the futility threshold, which requires a single response in each cohort among the first 18 patients, but also we expect to report an aggregate response rate with the expectation being that.
The Doubletree response rate will be perceived by management is very encouraging given thats basically the endpoint of the study is a very low double digit response at 11, 5% and knowing that that will be reported as a preliminary response rate and I think that's such an important concept.
Many of these patients have had two scans and it get scanned at six weeks and they get scanned at 12 weeks, we know from prior studies with check labors that many patients will have decreases in tumor burden at six and 12 weeks, but it may not reach that threshold of 30% to define.
An objective response.
And so seeing that we have risk.
Responses by Central review in the double digit range based on the limited data we have in those 36 patients.
What we would perceive as very positive and that would be our goal in terms of you're going to report that.
Before ended the year at that interim assessment.
Okay, Great that's helpful.
A follow up question.
Arbitration with Nextgen that.
$200 million in damages.
From I Mab.
Hey, Scott.
Anything I mab seeking penetrate.
Vacation.
So the arbitrations interesting in that.
<unk> initiated the arbitration.
What happened in terms of sequence of events, we invoke the dispute resolution provisions in the actual agreements we had with them in each of the two agreements.
In response to.
Beth I Mab initiated arbitration to ask the panel to declare they were not in breach of either agreement.
So thats, what theyre claim as to claim that they are not in breach.
Our counterclaims were much more detailed and specific.
With respect to each agreement, we claimed breach with respect to the T. J <unk> agreement.
We claim.
Claim that they had done a deal with a company in Korea kg bio in March of 2020 that triggered a payment to tracon under the revenue share obligations with that agreement.
And then with respect to the Bispecific antibody agreement that was a detailed strategic transaction whereby I mab was obligated to nominate two by six to Tracon annually for each of five years to a total of 10 of which we would take.
1% to two per year for a total of <unk> into the clinic.
We learned.
Prior to our agreement Unbeknownst to us at that time has signed a deal with another Korean company.
For <unk>.
By specific at that time in that.
<unk>.
Influenced that and that was relevant with respect to their ability to perform with respect to the agreement. So those are our counterclaims around those breaches one of each agreement.
The damages around those counter claims as noted in the script and in our filings is over $200 million in damage.
Got it thank you.
Thank you Bill.
Thank you.
Our next question comes from the line of Ed White with H C. Wainwright. Your line is now open.
Good evening, Thanks for taking my questions.
So those are my question.
It's actually for Scott.
Scott E R&D expenses were up.
About 40% sequentially.
Just curious if there's anything onetime in nature in there or if this is going to be the sort of base run rate going forward.
As you move through the end of the Star trial.
Hi, Ed Thanks for the question.
Hanging back I think.
It was last quarter that I gave you. The response that we would expect in the low $3 to three and a half on R&D and we are hit $4. One this quarter.
And so the real reason for that was we had enrollment that was much higher than we expected in <unk> and so I mean this is probably the upper limit is what I would expect going forward it would probably be a little bit lower but but this is this is on the upper upper end of what I would expect on R&D.
Okay. Thanks, Scott and then another question just with your.
Cash runway that you mentioned into the middle of 2023.
Does that include.
Any more.
Of the $25 million.
That you have left on your debt facility.
It doesn't now so just the time that we drew at closing.
Okay.
And then the other question I had was just a big picture strategic question when you.
You have mentioned.
The outlook now for.
Trying to to use here.
Product development platform.
As a CRO alternatives for others either.
We're running the trials or our franchise it.
Has there been any interest from outside companies as of yet.
And is this something we should consider Q.
C deals announced in 2023 or 2024 is it really too early to tell.
I appreciate the question.
Interest on both of our offerings in that regard so.
One offering as we call pay per performance, we're willing to do the trial in lieu of a CRO take on that responsibilities.
But we do it in a pay per performance, meaning we get paid based on accruing patients not just on sitting on our hands and collecting project management fees.
And we can do it at a lower cost than the zero and we can do it more quickly because we have no incentive to delay the trial the way of <unk>.
Zero dose by being paid frankly for an activity.
The payback for Tracon is we still make a profit because we can do trials with solo so such a low cost, but we also share in the revenue, which further aligns us with our partner to see the drug more quickly through the clinical trial process. So we have a lot of interest in that model.
We do carefully select what we would take into.
Our portfolio around that model.
We want to be excited about the molecule. So we do have a high bar on that but we are evaluating several opportunities in that regard.
The second opportunity is really what we call, giving the keys to the kingdom to a partner and Thats. The franchise model imagine a company had our capabilities with respect to executing clinical trials the amount of money. They could say is incredible.
I'll give you. An example, we feel we do trials at about a third the cost of the CRO.
III trial cost to do with the Cerro imagine that cost was a third and thats what would be enabled if a company actually receive the keys to the kingdom from Tracon and we taught them how to do trials themselves and the amount of money. They would save on a per trial basis would be incredible. So we do have interest. There also I think theyre also we need to pick.
Our partner very carefully, but I would say in general in terms of what you can think about with respect to tracon strategically would be for us to execute a franchise model partner and a pay for performance model partner one per year of each of those models for the next several years would be our goal.
It would help us in terms of gaining capital into our company. It would help our partners incredibly by freemium.
The shackles of zero reimbursement system, and then it would actually help the entire ecosystem by moving more good products through the clinical trial process more quickly.
Great. Thanks Charles.
My last question, if I could just add.
Ask on.
Trc 102.
Correctly, stating that you think you'll have data from the NCI trial in 2024.
And if that data is positive what are the next steps that the company will take.
Yes, great question and thanks for asking so so trc 102, we feel little bit underappreciated asset at Tracon, but it's that.
It's in the class of DNA damage repair inhibitors, which I think people understand it could be very very valuable in terms of additional therapies to build on chemotherapy and even Io therapy. So if we see positive data for that phase II study, we would plan to move that forward immediately into a pivotal trial and likely trigger would sponsor of that trial using its zero in <unk>.
Dependent product development platform and that could be a very important therapy for patients because of the frontline lung cancer localized lung cancer trial that would combine tears. He went to what standard of care therapy basically would be repeating the phase II study going on currently just with a larger sample size as.
As a phase III trial, so expect that we would take that over and run that as a phase III pivotal study for approval Trc 102.
And you had expected data from the NCI in 2024.
Sorry, Yes, we do expect the 2024 from the NCI, which is.
Noted in the clinical trials that go posting as well.
Okay. Thanks Charles.
Thank you Ed.
Thank you our.
Next question comes from the line of Sumit Roy with Jones trading your line is now open.
Hi, everyone. Thank you for it.
Providing all the updates.
Quick question on.
If you are going to look at the mutational status of these patients.
Patient and bus cycle or other.
Sarcoma trials like MDM too.
The 53, our CDK <unk>.
To get a sense, if responders or non responders or specific funding into having these mutations.
So in <unk>, we're looking at Biomarkers from archival tumor specimen show Mitch.
I'd say the markets were most focused on or.
So im going to feedback, but the March markers where folks.
Can everyone mute, maybe I'm getting a lot of feedback here sorry.
<unk> so to answer your question, we are looking at markers for the <unk> pivotal trial with respect to archival tumor specimens I would say the majority of assessments are markets. We're looking at are more of the immuno oncology flavor for instance, tumor mutational burden.
<unk> status as examples.
We could look at additional markers that you mentioned, including MDM too.
It is high on their priority list in the sense that they haven't correlated as well with response to immune therapy, but.
We do have the broad ability to interrogate the archival tumor tissue as we see fit and can do additional analysis.
You mentioned the higher rate of enrollment are you seeing it broadly or specific sites are enrolling better and do you see enrollment completion ahead of time on is to maintaining at year end 2003.
Yes. Thanks for the question no. We are seeing very broad accrual across multiple sites, which are which we're very encouraged by and based on the current level of accrual we will beat the projected accrual which was at the end of 2023.
We will continue to monitor that to try to give a more specific data on expected to complete accrual, but right now I'd say, we're well ahead of schedule, which would put us sometimes still in the second half of 'twenty, three but but ahead of the initial projections, which was the end of 'twenty three.
But how many patients have been enrolled so far sorry, if I missed it.
Sure No we've enrolled 68 patients.
Our last update I think we had updated.
The street of 36 patients.
And that was at the end of July and we're at 68 patients now.
In mid November so we are seeing accrual of about.
<unk> 30 patients.
And about a quarter every three to four months. So you start doing the math that's about 90 to 100 patients a year as an example, when we estimated it would be about 80 patients a year. So we're ahead of accrual by about that factor.
Okay.
Okay.
Thank you Sherman.
Thank you as a reminder to ask a question at this time. Please press star one one touchstone telephone.
Our next question comes from the line of.
Robert Hazlett with <unk>. Your line is now open.
Sure sorry, having connection difficulties my apologies for this.
Maybe you've touched on this Charles if you did my apologies.
As we get the interim efficacy data will we see data that emerges.
For both arms.
Collecting data.
In terms of both arms together.
Hi, Barry I. Appreciate your question our thought is that we don't want to if you will bias pace.
Patients who may go from we may be assigned to an arm that.
If theres a high response rate reported would say well I don't want to be on the studies I didn't get the Rmi wanted so.
Expect it would be in aggregate response rate I think thats, the best way to preserve the integrity of the trial.
Makes sense. Thank you and then just want to thank you Barton the arbitration hearing.
With regard to agitation.
Alright.
The word binding.
And we've talked about this I think offline I'd love, just a little bit more.
Clarity.
<unk>.
Yes.
Yes.
Is there any appeals process and then.
In terms of.
The award timing assuming.
Enough.
So.
Payments or other compensation might be rendered one way or another.
To that.
Sure. Yes. So this is binding arbitration, which is recognized internationally and so based on the award we expect that <unk> will pay the award.
You can confirm the award in the U S Court is a further kind of.
Legal process and we've been told that it's it's standard procedure that the U S Court will confirm in International Arbitration Award and in almost every case.
In terms of.
The ability of <unk>.
Conant to pay based on the balance sheet. So we don't see that as an issue.
<unk>.
Yeah.
Despite if you will the large amount of damage that we were that we are requesting based off of the tribunal.
Sorry, you're a little scratchy does that answer your question.
It does thank you very much look forward to the data update and the.
The results of the.
Thank you.
Thank you Mark.
Thank you and I'm currently showing no further questions at this time I'd like to hand, the conference back over to Douglas <unk> for closing remarks.
But I'd like to thank our listeners and also the analysts for the questions. We appreciate them and look forward to updating you next.
Our next quarterly call have a good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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