TRACON Pharmaceuticals, Inc.
Q4 2016 Earnings Call Transcript

Published: 1 Mar 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals Fourth Quarter and Full Year 2016 Earnings Conference Call. At this time, all callers are in a listen-only mode. After 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, and our development plans and strategy. 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, 2016. 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 us today for TRACON’s fourth quarter 2016 financial results and business update conference call. I will begin with an update on our pipeline and recent activities. Following that, our Chief Financial Officer, Patricia Bitar, will review our financial results for the three months and year ended December 31, 2016. Finally, we will conclude by taking your questions. Let’s begin with our lead product candidate TRC105, which is also known as carotuximab, as received orphan drug designation in sarcoma including angiosarcoma in both the EU and the U.S. As a reminder, we received valuable protocol systems from the EMA and have a special protocol assessment agreement from the FDA regarding Phase 3 development in angiosarcoma and orphan indication with high unmet need. Following these very positive regulatory tractions, we initiated the randomized Phase 3 TAPPAS trial of TRC105 in angiosarcoma and very recently began dosing patients. Several trials, these goals are noteworthy. First, PFS rather than overall survival is the primary endpoint. Second, the trial enrolled treatment naïve patients in addition to patients were received prior therapy. Third, the trial corporates and adapted design, which preserve Type 1 error and protects the power to detect the clinically meaningful survival benefit. The initial sample size of 124 patients provides more than 80% power to detect an improvement and meeting PFS from 4.0 to 7.3 months using a two tilde alpha of 0.05. We expect to conduct an interim analysis when 40 events occurred in approximately 70 patients. At that time, the results of the categorize just long to either the favorable promising, enrichment or unfavorable zones based on conditional power. The sample size in TF events (2

[Patricia Bitar:]

Thank you, Charles, and good afternoon, everyone. TRACON reported collaboration revenue of $0.6 million for the three months ended December 31, 2016, and $3.4 million for the year ended December 31, 2016, compared to $1.4 million and $7.9 million respectively for the comparable periods of 2015. The decrease in the full year amounts is primarily attributable to a $3 million cash milestone triggered by Santen’s filing of an IND and wet AMD received in 2015. Research and development expenses were $4.8 million for the fourth quarter and $21.6 million for the year ended December 31, 2016, compared to $10.6 million and $25.7 million respectively for the comparable periods of 2015. The decrease in R&D expenses in the fourth quarter and full year 2016, compared to the corresponding 2015 period reflects lower TRC105 drug manufacturing cost in the 2016 period. The decrease in R&D expenses in the year ended December 31, 2016 was offset and part by increased TRC105 clinical study related expenses entire personal cost resulting from increased headcount. General and administrative expenses were $1.9 million for the fourth quarter and $7.9 million for the year ended December 31, 2016, compared to $1.7 million and $5.7 million respectively for the comparable periods of 2015. These increases were primarily attributable to higher personnel cost resulting from increased headcount in 2016. Our net loss was $6.3 million for the fourth quarter and $27 million for the year ended December 31, 2016, compared to $11 million and $24.4 million respectively for the comparable periods of 2015. Turning to the balance sheet at December 31, 2016, our cash, cash equivalents and short-term investments totaled $44.4 million compared to $35.1 million and $52.2 million at September 30, 2016 and December 31, 2016 respectively. In November, we received net proceeds of approximately $16.1 million from the sale of approximately 3 million shares at our common stock in follow on financing. In addition in January 2017, we entered into an agreement with Silicon Valley Bank to revert to interest on payments on our $8 million of debt outstanding until December 31, 2017 with the possibility of a six-month extension upon the achievement of certain clinical and capital milestone. As Charles mentioned, we expect our capital resources to be sufficient to fund our currently planned operations into the second quarter of 2018. With that, I’ll turn the call back over to Charles.

[Charles Theuer:]

Thank you, Patricia. As we noted 2017 will be an eventful year to a multiple potential value creating milestones. We recently initiated those things in the pivotal Phase 3 TAPPAS trial of TRC105 in angiosarcoma as soon as expect initiate dosing in a Phase 1/2 study of TRC253 and prostate cancer. We expect to report TRC102 data mid-year and report randomized TRC105 data in renal cell cancer in the second half of the year. We also expect Santen to report Phase 1/2 data from the PAVE trial and to initiate dosing of the Phase 2 AVANTE wet AMD trial later this year. I look forward to providing further updates regarding our upcoming key milestones and I am confident we have the right strategy in place to deliver on our development and business plans for the benefits of stock patients and stockholders. With that, we will be happy to answer your questions.

[Operator:]

[Operator Instructions] Our first question comes from Brian Abrahams with Jefferies. Your line is now open.

[Unidentified Analyst:]

Hi, this is [indiscernible] (17

[Charles Theuer:]

Hi Mory [ph], first of all, thanks very much for the question. We don’t have insight into the data, it’s really CTEP data package and we do all see that data midyear. What we can say as we didn’t see a prolongation of PFS. We did see a non-significant improvement in overall survival, which I think is interesting. And in terms of why PFS was not prolonged in OS again non-statistically significant was prolonged we’ll have to really investigate that it carefully and hope we can do that at ASCO. I would point out that in GBM compared to other indications, we are to spectrum of disease indications with this drug. We’re in what we call lowers indications and angiosarcoma is a perfect example of that it’s a blood vessel tumor and as you know – well know, endoglins of blood vessel, target and so that’s the indication where we expect the most robust activity and that’s where we see durable complete responses in the trial TRC105 and Votrient. Your GBM is on the exact opposite of that spectrum it’s an incredibly tough disease to treat. There’s one approved drug in GBM Temodar based on a survival advantage in the past 20 years. We didn’t have any preliminary evidence of activity in GBM based on preexisting data and the trial was a small underpowered trial. So we know it’s a tough indication. I think because it’s a high unmet need and we want to support the NCI and try to advance therapeutics and indication we explored it. And the data will be interesting and then we hope to see that midyear, but we just don’t have insight into that data quite yet.

[Unidentified Analyst:]

Sure, okay. And then for the Phase 3 trial, I was wondering if cutaneous patients sometimes progress to become systemic and does it mean anything on efficacy if you show difference in preventing cutaneous patients from becoming systemic.

[Charles Theuer:]

So cutaneous patients to your point, the cutaneous patient is defined based on the primary disease starts in the skin. And it came at fast many times you have cutaneous patients that are represented for instance local lymph nodes capacities and they can also [indiscernible] (20

[Unidentified Analyst:]

Got it, okay. And then last for the Phase 2 trial with the DE-122, I was wondering if you can comment more on the trial size design and if any specific effects on endoglin or biomarkers will be measured.

[Charles Theuer:]

Yes. So the design of the study is now posted and I will send you the link after the study, but the initial design is a randomized study, which I think is important. So it’s DE-122 lesions versus the fences alone. And I think I have to look carefully at the sample size, but we’re expecting I think in the 50 to 100 patients rough sample size, but we will send you the link more, so you can have that exact information. In terms of biomarkers this will be a classic AMD trial, which I think in the typical to expect that OCT will be employed to assess macular edema as an example, visual acuity clearly will be at best. I think those will be two of the most important end points coming out of that Phase 2 trial. And also those are being assessed even for the Phase 1/2 PAVE study that we expect to see data later this year.

[Unidentified Analyst:]

Okay. Great, thank you.

[Charles Theuer:]

Thank you.

[Operator:]

Our next question comes from Tom Shrader with Stifel. Your line is now open.

[Tom Shrader:]

Good afternoon. Thanks for the update.

[Charles Theuer:]

Hi, Tom.

[Tom Shrader:]

I had one question. I just want to make sure I heard it correctly, the TAPPAS trial will have treatment naïve patients as well.

[Charles Theuer:]

Yes, it will - it was actually where we thought Tom, it was a great recognition of the unmet need in that indication. So there is a classic first line therapy for angiosarcoma. And frequently as chemotherapy and the two chemotherapeutics that are frequently used first liner either tax aims or adriamycin. That said the response rate is poor and the PFS is poor. And based on the fact we’ve seen durable complete responses, we were able to argue persuasively that if patients are eligible for a clinical trial and have not seen chemotherapy, they should have the opportunity to enroll in the trial and not have to go through a round of chemotherapy just to get into the trial. And I think that was again and – a find from regulators that there is a need for new therapy in this disease to the point that that treatment naïve patients should come straight into the trial.

[Tom Shrader:]

And then there is – we stratify on treatment naïve or they all lumped together just to become two trials.

[Charles Theuer:]

It is one of the key stratification factors in the trial. So the two stratification factors in the trial, one is cutaneous versus non-cutaneous as the side of origin of the angiosarcoma. And second is treatment naïve versus patients have been treated previously for the clarification.

[Tom Shrader:]

Okay, okay. That is a complicated trial. What do you want? You want an award?

[Charles Theuer:]

You actually – once beautiful about the design though, it really gives us the flexibility to do one trial, the right way in angiosarcoma and prove benefit in the entire population if that’s where the benefit is or to prove patients – the benefit in the cutaneous patients, that’s what the benefit is. So it’s really a nicely designed in flexible trial that really let’s say – let the drug direct us to the patients that are most likely to benefit.

[Tom Shrader:]

Okay, perfect. And the TRC253 program, so if you’re going to start dosing soon, is there any guidance on when J&J might have to make a decision? Is it a year or is it longer than that?

[Charles Theuer:]

So it is a Phase 1/2 trial Tom, our general expectation of that trial that we hope to report the Phase 1 portion of the study and complete that portion this year. And then to complete the Phase 2 proof of concept portion from an efficacy perspective by the end of 2018. And then that would define the opt in period, although it has the ability to opt in at any time up until that time.

[Tom Shrader:]

Okay, okay. And just any thoughts about hepatic HCC, what’s the timeline to…

[Charles Theuer:]

Sure.

[Tom Shrader:]

…start to think about a pivotal trial and what would it look like today? Is it same thing a trial like that would look like five years ago or things changing?

[Charles Theuer:]

There are definitely our new agents being studied in liver cancer.

[Tom Shrader:]

Yes.

[Charles Theuer:]

That will probably based on associated proven second line. Our current trial focuses on first line combined with Nexavar, which remains the only approved first line drug. That said Nexavar is being taken head to head against the volume having an ongoing trial. And we’ll see how that plays out. So the landscape could change, but right now we haven’t seen as robust responsive rate at least in the Phase 2 study with nivolumab in liver that we have in other indication. So where that trial plays out, time will tell. So based on what we know write now, next remains the standard care of first line agent in liver cancer and our preview is that we can replicate response rate that we saw in the NCI study and show that that also has encouraging survival data, would be to pair with next of the pivotal Phase 3 study compared to next of our single agent. That said, we’ll continue to monitor the landscape.

[Tom Shrader:]

And could that trial start in 2018?

[Charles Theuer:]

So we expect the data from normalcy centre study in 2018, which could allow a Phase 3 study to start in 2018.

[Tom Shrader:]

All right, okay. Okay, great. Thanks a lot.

[Charles Theuer:]

Yes, thanks, Tom.

[Operator:]

[Operator Instruction] Our next question comes from Bert Hazlett with BTIG. Your line is now open.

[Bert Hazlett:]

Thanks, congratulations on the progress, so thanks for taking the question.

[Charles Theuer:]

Hey, Bert.

[Bert Hazlett:]

Could you just – Hello. Could you just discuss some of the potential material inflection points for TRC253 that change a program? Obviously, significant program for you, significant licensing, but how important is the safety data with this program?

[Charles Theuer:]

Yes, great question, Bert. I think the safety data is absolutely critical for this program. When you think about this asset, Xtandi is the standard-of-care currently in this space. Xtandi works very well on the wild type androgen receptor. This drug TRC253 based on pre-clinical data, we expect it to work just as well in the wild type receptor, so it could directly complete with Xtandior drugs that are in the pipeline that are very similar to Xtandiand also inhibit the wild type receptor without inhibiting mutants. So our view is that if this drug is safe, it immediately becomes potential best-in-class in the space of androgen receptor antagonist, and that means it competes with any product that’s currently out there. So if it’s safe, we think the chances of J&J will opt in or increase substantially, but to be clear the opt-in period extends to the completion of the Phase 2 pivotal study, which will then trigger the $45 million opt-in payment.

[Bert Hazlett:]

Okay. And we should get a view on the safety right around year – this year early 2018, is that correct?

[Charles Theuer:]

Yes, we expect that, but we have really moved quickly on that program. IND was – we just licensed in September. We had IND before into the year, we have cleared IND. So expect those thing in the near-term and expect safety data this year, correct.

[Bert Hazlett:]

Terrific. Then a couple of just blocking and tackling questions. Could you discuss may be the phasing of R&D expense throughout 2017. There is a lot going on here, lot in the clinic, but you are very efficient. Could you just – how should we think about modelling it? And does the Santen start a Phase 2; trigger a milestone with the DE-122?

[Charles Theuer:]

So I’ll take your last question first. We can’t disclose the exact milestones that are tied to exact clinical trials at Santen. We can’t say there is $17 million in development stage milestones which we’ve disclosed publicly. With respect to the phase of the trial enrolment I think we gave a general idea of the burn going into Q2 of 2018, we spent $27 million last year roughly – actually, $29 million last year roughly, about $25 million the year before. So I think we’re roughly going to stay with a little bit higher burn rate, but we’re still well within I think with very limited burn compared to similar companies doing this extent of work. But I think you can use the Q2 runway that we’ve given at 2018 as the general guidance on the pace of burn moving forward.

[Bert Hazlett:]

Okay. And just want one other one, you mentioned the neurofibromatosis program. Could you just describe a bit more about the effort and the types of patients you expect to enrol there?

[Charles Theuer:]

It’s a great question, Bret. We really were interested in certain inhibitors response we started in the sarcoma trial that enrolled patient with continuous neurofibromatosis or neurofibromatosis type 1 which is the continuous form of disease, which is a more common disease that many people expected and those patients are marked reduction in the kinase disease, they’re treated with TRC105 to be clear. So based on that there are clinical consortium that treat neurofibromatosis patients. So our goal is to explore a potential relationship with a consortium and to consider doing a pilot study for example where we would study TRC105 with or without VEGF inhibitor in patients that contains neurofibromatosis to see if we can replicate that pan-inhibitor finding that we saw as part of a sarcoma study.

[Bert Hazlett:]

Is that – should we be able to get visibility? Is that a 2018 potential visibility for the indication or is that earlier than that potentially?

[Charles Theuer:]

Yes, is to exploit opportunity in terms of when we try to see clinical data. Yes, it’s hard to say we’re just in the early stage of potentially exploring that clinical opportunity. Yes, it’s hard for me to comment on the time frame at this point.

[Bert Hazlett:]

Okay. Thank you very much.

[Charles Theuer:]

Yes, appreciate your questions.

[Operator:]

And I’m showing no further questions. I would now like to turn the call back over to Dr. Theuer for any further remarks.

[Charles Theuer:]

Great, thank you so much. Thanks for your time and interest. Have a nice day. We look forward to speaking with you again soon.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. You may all disconnect. Everyone have a great day.