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?.

those with an F877L mutation, those with another undisclosed androgen receptor point mutation, and those with another basis for resistance to Xtandi or Erleada.

While the data early and not mature, the available data indicate a lower than expected initial response rate to therapy in patients with F877L andro receptor mutation and the lower than expected prevalence of that mutation.

Based on the completion of accrual, we now expect to deliver Phase II proof-of-concept data on all currently enrolled patients to Janssen in the first half of 2020.

Recall that TRACON license TRC253 from Jansen and if they exercise their opt-in right to re-acquire the asset from the Phase II proof-of-concept data, TRACON is entitled to receive a $45 million upfront payment, up to $137.5 million in success-based milestones and a low single-digit royalty on sales.

If Janssen does not opt-in, TRACON can advance TRC253 independently or with a partner in the U.S. and abroad. Our fourth clinical stage asset is the CD73 antibody TJ004309, which is being studied in a Phase 1 dose escalation study as a single agent and in combination with Tecentriq, a marketed PD-L1 antibody being supplied by Roche.

We're developing TJ004309 in collaboration with I-Mab Biopharma. Through our first agreement with them and we anticipate completing dose escalation and presenting top line data from this Phase 1 trial in the second half of 2020. In this collaboration, TRACON is responsible for the regulatory and clinical development of TJ004309 in the U.S. and Europe.

And TRACON is escalating portions of non-royalty and royalty payments, if I-Mab elect to out license TJ004309 to a third party. Our second agreement with I-Mab is a multi-product collaboration to develop up to five I-Mab's bispecific antibodies in North America.

We believe that bispecific antibodies, especially those that have the potential to direct T-cells to the tumor micro environment, in other words to make cold tumors hot or one of the most exciting therapeutic approaches for cancer treatments. Further, we view our access to a multiproduct pipeline as a viable source of continued innovation.

At this time, I-Mab has disclosed their advancing seven preclinical bispecific antibodies.

We are particularly interested in the I-Mab bispecifics that engage T-cells through the 41BB T-cell receptor, including one that targets the tumor through PD-L1 expression and another that targets the tumor through expression of an undisclosed tumor associated antigen. For any bispecific antibody becomes subject to the collaboration.

TRACON will lead clinical development and commercialization in the U.S. and bear the cost of early phase clinical trials. TRACON and I-Mab will share the costs for more advanced development stages and for U.S. commercialization and the two companies will also equally share in profits from U.S. commercialization.

Another element of this agreement worth noting is TRACON's right to in license each bispecific antibody that becomes subject to the collaboration from I-Mab at any time prior to conclusion of the pivotal study. Exercising this option would expand our rights include all territories outside of Greater China.

The opt-in payments escalate to reflect the advancing phase of development. For example, an opt-in payment of $10 million is due to TRACON exercises its option prior to IND enabling studies. We expect to file an IND for the first bispecific antibody from I-Mab in the U.S. in 2020.

From our financial perspective, our capital resources are expected to be sufficient to fund our currently planned operations into the third quarter of 2020 and through multiple potential bad creating clinical and business development milestones.

As we discussed our run rate may be further extended through use of the equity line recently established with Aspire Capital. At this time, Scott will provide an update on our financial financials..

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 year General 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..

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..

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

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?.

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..

Okay, thank you.

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

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..

Okay, great. Thank you..

Thank you. Appreciate the questions..

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

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?.

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..

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?.

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..

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?.

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..

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?.

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..

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

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

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..

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

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