TRACON Pharmaceuticals, Inc.
Q3 2019 Earnings Call Transcript

Published: 6 Nov 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals Third Quarter 2019 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'll be making certain forward-looking statements, including statements regarding expected timing of clinical trials and results, regulatory activities, future expenses and cash runway, and our development plans and strategy.These statements are subject to various risks that are described in our filings made with Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2018, and subsequent quarterly reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, and we disclaim any obligation to update such statements.Now, I would like to turn the call over to Dr. Charles Theuer, President and CEO of TRACON Pharmaceuticals. Dr. Theuer?

[Charles Theuer:]

Good afternoon, and thank you for joining TRACON's third quarter 2019 financial results and business update conference call. I will begin with an update on our pipeline and recent activities. Following that, our Chief Accounting Officer, Scott Brown, will review our financial results for the three and nine months ended September 30, 2019. Finally, we will conclude by taking your questions.Our efforts continue to be centered on three value propositions. First, we continue to develop a robust pipeline of clinical stage assets. Second, we are tracking the progress of IMF's pipeline of multiple preclinical biospecific antibodies with the intent of selecting at least one of these assets for clinical development in 2020. Third, we continue to evaluate additional external clinical stage assets to potentially add to our pipeline in 2019 and 2020 and leverage our CRO independent product development platform that includes U.S. commercialization expertise. We believe our product development platform will continue to allow us to establish key new partnerships that will drive significant long-term shareholder value.Let's begin with an important financial transaction we executed with Aspire Capital in October. We entered into an agreement by which Aspire committed to purchase up to $15 million of our common stock at TRACON's requests from time to time during a 30 month period beginning on or about the effective date of a registration statement related to the transaction and at prices based on the market price at the time of each sale. If fully utilized, we estimate this facility would extend our cash runway into Q2 2021, providing us with the financial resources for four significant 2020 clinical data points and the financial flexibility to continue to leverage our product development platform. With respect to business development, our goal remains to establish new corporate partnerships around first-in-class, best-in-class or fast follower clinical stage assets.Let's turn now to our four clinical stage assets and begin with DE-122, the ophthalmic formulation of carotuximab. Because the majority of patients do not experience meaningfully improved vision upon treatment with single-agent VEGF inhibitors, we believe there is a substantial unmet clinical need for agents that target essential angiogenetic pathways, like endoglin, to be developed in combination with VEGF inhibitors in wet AMD. Our licensee, Santen, completed enrollment last quarter in the three-arm randomized Phase II AVANTE study that compares treatment with two different doses of DE-122 combined with Lucentis to treatment with single-agent Lucentis.The trial accrued patients at 10 sites in the U.S. and top line data, including the primary endpoint of best corrected visual acuity following six months of dosing are expected in the first-half of 2020. This is expected to be our first significant clinical milestone of 2020.TRACON retains significant financial rights to DE-122, including $145 million in remaining developmental, regulatory, and commercialization success based milestones and a high single-digit to low teen royalty on global net sales.We'll turn now to TRC102, our second clinical stage asset that is a novel, small-molecule inhibitor of the DNA base excision repair pathway that is intended to reverse resistance to certain chemotherapeutics. Enrollment continues in four Phase I or Phase II trials sponsored by the NCI that are focused on patients with mesothelioma or non-small cell lung cancer. As well, our academic collaborators continue to evaluate biomarkers in tumor specimens from glioblastoma patients treated in the completed Phase II trial, as well as in tumor specimens from ongoing TRC102 trials with the goal of identifying a protein or gene expression profile that correlates with clinical response. We expect multiple clinical data presentations on TRC102 in 2020.We'll now move on to TRC253, our third clinical stage asset that we're studying in a Phase I/II trial in patients with prostate cancer, who have developed acquired resistance to treatment with Xtandi or Erleada. Earlier this month, we agreed with Janssen that more than 70 enrolled patients are sufficient to determine the risk-benefit profile of TRC253 in three cohorts of metastatic castrate-resistant prostate cancer patients

[Scott Brown:]

Thank you Charles and good afternoon everyone. TRACON reported no collaboration revenue for the three at nine months ended September 30, 2019 compared to zero and $3 million for the comparable periods of 2018 respectively.The decrease was due to the $3 million upfront payment received in connection with the Ambrx agreement that was recorded as revenue in 2018, compared to no corresponding revenue in 2019.Research and development expenses were $3.1 million and $12.6 million for the three and nine months ended September 30, 2019, respectively, compared to $7 million and $24.5 million for the comparable periods of 2018. The decrease was primarily attributable to lower manufacturing and clinical trial expenses related to the termination of the TRC105 program earlier this yearGeneral and administrative expenses were $2 million and $5 million for the three and nine months, ended September 30, 2019, respectively, compared to $2.1 million and $5.5 million for the comparable periods of 2018. Our net loss was $5.2 million and $18.7 million for the three and nine months ended September 30, 2019, respectively, compared to $9.1 million and $27.2 million for the comparable periods of 2018.Turning to the balance sheet, at September 30, 2019, our cash, cash equivalents, and short-term investments totaled $19.1 million compared to $26.3 million and $39.1 million at June 30, 2019 and December 31, 2018 respectively.As Charles said, we expect our current capital resources to be sufficient to fund our planned operations into the third quarter of 2020, which may be further extended through use of the equity line with Aspire Capital.With that, I will turn the call back over to Charles.

[Charles Theuer:]

Thank you, Scott. To recap, we have built a broad pipeline, and look forward to the four potentially value-creating clinical milestones that are expected in 2020.First top line Phase 2 AVANTE trial results in wet AMD through our licensee Santen in the first half of the year. Second, top line Phase 2 proof of concept data for TRC253 in prostate cancer, which will trigger the Janssen right to reacquire in the first half of the year and then in the second half of the year, Phase 1 data for TJ4309, our CD73 antibody and nomination and IND filing for the first bispecific antibody from our broad pipe partnership with I-Mab.The clinical readouts expected in the first half of 2020 could result in success based milestones which would further extend our cash runway. We also continue to identify ex-U.S. companies with first-in-class, best-in-class or fast follower clinical-stage assets, who would benefit from accessing the TRACON product development platform through a new corporate collaboration. 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 available to answer your questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Maury Raycroft with Jefferies. You may proceed with your question.

[Unidentified Analyst:]

Hi, there. This is a Mitchell on for Maury. Thank you for taking our questions. My first question is for the DE-122 study has that study been reviewed by DSMB? And if so have you gotten any feedback on those reviews?

[Charles Theuer:]

I appreciate your question. Yes, there's no DSMB interim look into that study. So we will not have an interim look at the data until the final day is available, which we expect in the first half of next year.

[Unidentified Analyst:]

Okay, thank you. And then for TRC253, are you seeing a higher prevalence of that androgen receptor mutation that you mentioned versus F877L?

[Charles Theuer:]

So yes, so we're looking at three cohorts of patients in the trial and yes, to be clear, those are the F877L point mutation where we've seen a lower than expected prevalence. There's a second undisclosed point mutation and receptor that we're enrolling that has a higher prevalence than F877L though we are currently exploring. And then the third cohort are the patients that fail without a defined point mutation as a basis for resistance. And so those are three separate cohorts that we'll report data on expecting the first half of next year.

[Unidentified Analyst:]

Okay, great. Thank you.

[Charles Theuer:]

Thank you. Appreciate the questions.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Bert Hazlett with BTIG. You may proceed with your question.

[Bert Hazlett:]

Thanks. I appreciate the update, Charles, and really intrigued by the comments with regard to the I-Mab pipeline, especially the 4-1BB program. Could you remind us how those programs – how the decision process works with regard to the selection of those antibodies and how they move forward? I know there's some discussion between you and I-Mab, but could you remind us how that bedding works?

[Charles Theuer:]

Sure, Bert. No, I really appreciate the question. It's such an important part of our future in terms of the long-term access to that pipeline. So the way that works is, as those bispecifics start moving through the IND enabling process and they reach a stage where they are formally presented to TRACON. And that includes the assets listed, the seven assets that are currently listed including the 4-1BB targeting assets, and also any future asset that continues to advance up to that kind of IND-enabling stage where there's enough preclinical data, manufacturing data to make it an IND-enabled compound. At that point we evaluated carefully and based on the existing data we can dominate that to come into our collaboration, and we are entitled to do that up to 5 times over the next five years at a pace of one to two per year over that five year period of time.And then once we nominate that, then I-Mab continues to move forward with the spec to perform the IND-enabling studies. We assemble the IND and file it as part of the response whether you continue the manufacturing activities, which is the responsibility through up until the time of BLA filing and commercialization. And then we take on the full responsibility not only by IND filing but also of running the clinical trials, including the initial Phase 1 and Phase 2 trial.With the thought being that in many cases with bispecific, the Phase 2 trial data maybe sufficient for approval. At the time that we actually commercialize the drugs, then we split the commercialization costs and we split the profits equally in the U.S. and they are fully entitled to commercialize the bispecifics all on their own in China. So that's kind of a general overview of how that relationship works. And we do stay in close touch with I-Mab in terms of quarterly JSC meetings to monitor the progress of bispecifics.

[Bert Hazlett:]

That's helpful. And then with regard to 4-1BB specifically, there's been some intriguing data that has risen with that particular target. What has lifted it above others that has really intrigued you?

[Charles Theuer:]

Yes. No, a great question Bert. So, when I look at bispecifics, I think in two broad categories, so either a bispecifics that truly bring T-cells to a tumor like – through the 4-1BB receptor or another play there would be through the CD3 receptor. But truly engaging with cell and trying to turn a cold tumor hot in my view is a very exciting prospect. The other class of bispecifics is – are engaging two separate for instance the immune checkpoint receptors for instance, PD-L1 and say another receptor like a TIGIT receptor.And there, those are less attractive inherently to me just because in that case you really have to prove that the bispecific is superior to targeting either of those receptors individually with a separate monoclonal antibody. Whereas when you're engaging a T-cell, you're really creating a paradigm that you can't recreate with two separate antibodies. So that's why inherently the bispecifics that are T-cell engagers to me make more sense as to potentially true cancer therapy breakthroughs as opposed to two separate immune checkpoint targets.

[Bert Hazlett:]

So there are a group of – subgroup of patients that you might be able to target with that antibody that you enrich potentially those with low TILs in the tumor microenvironment?

[Charles Theuer:]

Yes. I mean, I think with respect to bispecific, you definitely could think about enrichment strategies, for instance PD-L1/4-1BB antibody, you could definitely profile those tumors for PD-L1 expression as one mechanism for enriching for more responsive patients. For a second target that – right now there is an undisclosed tumor associated antigen, that's another target for 4-1BB bispecific I-Mab is developing. So for example, you could look for that target by immunohistochemistry on the tumor as another way to enrich for patients that might respond to that bispecific.So clearly biomarker enrichment is a prime focus of development of a bispecific that could make the difference between a successful therapy and an unsuccessful therapy.

[Bert Hazlett:]

Okay, thank you. And just one other follow-up on the Phase 2 data on 253. Just – is that due to patient selection? Is that due to the resistant criteria of the lower expected initial response rate? What's driving that set response? Do you think as you look at the trial?

[Charles Theuer:]

No, it's a great question. I think when we think about prostate cancer, when you look back for instance to Xtandi and Erleada and you saw that patients who are naive to those therapies, where the resistance was based on wild type androgen receptor, you saw PSA response rates to those drugs of 50% and higher. And as you didn't get to more – if you will elaborate mechanisms of resistance, for instance, the F877L point mutation, those tumors likely are more heterogeneous and so all F877L maybe one basis for mutation, there may be other mechanisms also that are the basis for resistance.So we're clearly not seeing that 50% PSA response rate in an F877L mutation patient than you would have expected for instance based on the Xtandi, Erleada data in wild-type AR patients.

[Bert Hazlett:]

Okay. Thank you. That's helpful. I'll get back in the queue.

[Charles Theuer:]

Yes. Appreciate the questions, Bert. Thank you very much.

[Operator:]

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Dr. Charles Theuer for any further remarks.

[Charles Theuer:]

Well, thank you for your attention and we look forward to speaking with you again next quarter. Have a good day.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.