Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals Fourth Quarter and Year-End 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 the 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?.

First, better patient compliance due to greater convenience. The subcutaneous formulation enables much faster administration compared to an intravenous infusion and the potential for administration by patient self injection, which is more convenient for patients.

Second, relatively stable class of drug concentrations can be achieved without significant fluctuations due to the nature of subcutaneous administration, which may improve safety.

Third, a smaller molecule could penetrate better into tumors to improve efficacy.Enva has been administered to more than 650 patients in eight ongoing clinical studies, including Phase 1 dose escalation trials in the U.S., Japan, and China, a pivotal single-arm trial in MFS high cancer patients in China, and a Phase 3 randomized trials in biliary tract cancer in China.

In these dose escalation studies, exposure to Enva was dose-dependent and increased proportionally with a mean half-life of approximately 200 hours. That allowed for sustained serum levels for at least two weeks.

PK analyses suggest the half-life would support a less frequent dosing schedule, and every four-week dosing is currently being studied in ongoing U.S.

and Japanese Phase 1 trials.The safety profile and clinical trial testing consistent with that of other PDL-1 inhibitors, with low-grade anemia and low-grade liver function test increases, being the most common overall adverse events. We were impressed by the activity of the drug in Phase 1 trials.

Data from the Chinese Phase 1 trial were presented at ASCO 2019. Three of 15 of eval patients had confirmed partial responses, including patients with renal cell carcinoma and biliary tract cancer. Data from the U.S. Phase 1 trial were presented at ESMO 2018.

Two of 17 patients had confirmed partial responses, including one lung cancer patient, and one MSI High prostate cancer patient. Data from the Japanese Phase 1 trial were presented at ASCO 2019.

Two of nine eval patients had confirmed partial responses, and two patients had unconfirmed partial responses.Notably, our partner 3D Medicines intends to file a BLA in China for Enva in 2020, based on data from an ongoing pivotal trial, and patients with MSI-high tumors.

Importantly, the filing is predicated on the principle that the objective response required for approval in China must be similar to the objective response rate for PD-1 inhibitor products approved in the U.S.

for MSI-high cancer patients.The license agreement with 3D Medicines and Alphamab is a collaboration and clinical trial agreement to develop and commercialize Enva in sarcoma in North America.

Instead of paying a traditional upfront fee, TRACON's capital will be used directly to advance the clinical development of Enva as expeditiously as possible.As with our other two agreements with I-Mab signed in 2018, TRACON has again leveraged our CRO independent capability to lead clinical development and regulatory filings in the U.S., and we will bear the costs of all clinical trials in sarcoma.Alphamab will be responsible for supplying Enva to TRACON at pre-negotiated prices for clinical and commercial use.

3D Medicines and Alphamab retains the right to develop Enva in all territories outside of North America, as well as within North America for all indications other than sarcoma.TRACON will lead commercialization, which includes booking of sales, and will owe 3D and Alphamab [cheered] [ph] royalties on net sales in sarcoma ranging from the teens to mid-double digits.

UNLESS, and that was first approved in North America in an indication other than sarcoma, or Enva is supposed to present sarcoma and subsequently approved in a non-open indication in North America, in which case 3D Medicines with commercialization and book sales revenue.

If 3D Medicines leads commercialization, we have the option to co-market Enva and receive a 50% royalty on sarcoma sales, or if we do not [elect a] [ph] market, we will receive cheered royalties on sales in sarcoma from 3D Medicines ranging from the teens to mid-double digits.3D Medicines and Alphamab have the right to reacquire Enva in connection with the sale of the entire product in North America to a third-party.

Provided, however, that the sale will not occur prior to completion of the pivotal trial in sarcoma without our consent, and we will negotiate in good faith for a compensation for TRACON, given the value of the program at the time.Let's now turn to our four other clinical stage assets and beginning with our antibody DE-122.

Our licensee, Santen, completed enrollment in mid-2019 in the three-arm randomized Phase 2 AVANTE study that compares treatment with two different doses of DE-122, combined with Lucentis to treatment with single agent Lucentis. The trial grew patients at 10 sites in the U.S.

and top line data, including the primary endpoint of breast corrected visual acuity following six months of dosing are expected in the first-half of this year. On February 4, during their most recent earnings call Santen announced they're currently analyzing the clinical data from the Phase 2 AVANTE study.

TRACON retains significant financial rights with DE-122 including $145 million of remaining developmental, regulatory and commercialization success base milestones, and a high single-digit to low teen royalty on global net sales.We will turn now to TRC102, our third critical stage asset, which is another small molecule inhibitor of the DNA basic excision repair pathway that is intended to reverse resistance to certain chemotherapeutics.

The NCI is supporting four Phase 1 or Phase 2 trials that are focused on patients with mesothelioma or non-small cell lung cancer.

In addition, our academic laboratories continue to evaluate biomarkers and tumor specimens from glioblastoma patients treated in a completed Phase 2 trial, and in tumor specimens from patients in ongoing TRC102 trials with the goal of identifying our protein or gene expression profile that correlates with clinical response.

We expect clinical data from multiple TRC102 clinical trials will be presented at ASCO 2020.We will now move on to TRC253 or fourth clinical stage asset that we're studying in a Phase 1/2 trial in patients with prostate cancer, who developed applied resistance to treatment with Xtandi or Erleada.

In 2019, we announced that we completed the enrollment of more than 70 patients into one of three cohorts of metastatic castrate resistant prostate cancer, those with an F877L mutation, those with another undisclosed androgen receptor point mutation, and those with another basis for resistance to Xtandi or Erleada.

At that time, we indicated that available data indicate a lower-than-expected initial response rate to therapy in patients with the F877L mutation, and a lower-than-expected-prevalence of that mutation.We expect to deliver Phase 2 proof-of-concept data on all currently enrolled patients to Janssen in the first-half of 2020, which will trigger a 90-day period, during which Janssen exercise are often right to reacquire the assets.

In that case, 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 kind of advance TRC253 independently or with a partner in the U.S.

and abroad, including in China.Our fifth clinical stage asset is the CD73 antibody TJ4309, which has been studied in a Phase 1 dose escalation study as a single agent and in combination with tri-centric, a marketed checkpoint inhibitor being supplied by Roche.

We are developing TJ4309 in common in collaboration with I-Mab Biopharma through our first agreement with them, and we anticipate completing dose escalation and presenting top line data from the Phase 1 trial in the second-half of 2020. In this collaboration, TRACON is responsible for the regulatory and clinical development of TJ4309 in the U.S.

and Europe. And TRACON is entitled to receive escalating portions of non-royalty and royalty payments if I-Mab likes to out license TJ4309 to a third-party.Our second agreement with I-Mab is a multi-product collaboration to develop up to five of 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 in microenvironment, in other words, to make cold tumors hot, or the most exciting therapeutic approaches for cancer treatment.Further, we view a potential access to a multi-product pipeline as a viable source of continued innovation.

At this time, I-Mab has disclosed they're advancing seven preclinical bispecific antibodies. For any bispecific antibodies that becomes subject to the collaboration, TRACON will lead clinical development and commercialization in the U.S., and by the cost of early phase clinical trials.

TRACON and I-Mab will share the cost of more advanced development stages and for U.S. commercialization and the two companies will also equally share in the profits from U.S.

commercialization.Another element of disagreement worth noting is TRACON's right to in license each bispecific antibody that becomes subject to the collaboration from I-Mab at any point prior to the conclusion of the pivotal study. Exercising this option will expand our rights to 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 exercise this 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.

With respect to further potential business development activities, our goal remains to continue to establish new corporate partnerships or enlarge the scope of existing partnerships around first-in class, best-in-class, or fast-forward clinical stage assets.

Notably, we have completed four licenses of first or potential best-in-class asset, since 2016; in each case, without an upfront payment.

We continue to evaluate potential assets for license at this time using our novel risk, cost, and profit share model.From a financial perspective, we have improved our cash runway as a result of decreased expenses and capital raised for the use of our ATM in 2019, and earlier this year.

From a decreased expense point of view, it is noteworthy that we are currently creating significant clinical trial expenses for only one program. As TRC102 development is funded by the NCI, DE-122 development is funded by Santen, and TRC253 enrollment has been completed.

Enva clinical expenses are expected to begin in the second-half of this year, but expected to only marginally increase the second-half burn given the efficiencies of our product development platform.We also established compliance with the NASDAQ capital markets listing requirements in February as a result of increased shareholder equity and achieved the utilization of the ATM.

Our capital resources are expected to be sufficient to fund our currently plant operations into the first quarter of 2021, and through multiple potential bad creating political and business development milestones.Furthermore, we can potentially further extend our cash runway through our agreement with the Aspire Capital, under which they're committed to purchase up to $15 million over common stock at our request from time-to-time during the 30-month period of price [technical difficulty] is based on the market price, at the time of each sale, if fully utilized, we estimate this facility would extend our cash runway into the 3Q 2021.

Importantly, our financial runway could be further extended through non-dilutive capital from success-based milestones to partnerships with Janssen, Santen, and I-Mab.At this time, Scott will provide an update on our financials..

Thank you, Charles, and good afternoon, everyone. TRACON reported no collaboration revenue for the three months and year-ended December 31, 2019, compared to zero and $3 million comparable periods of 2018 respectively.

The decrease was due to the $3 million upfront payment receipts in connection with the prior Ambrx agreement that was recorded as revenue in 2018.Research and Development expenses was $1.9 million for the fourth quarter and $14.5 million for the year-ended December 31, 2019, compared to $5.9 million and $30.5 million for the comparable period of 2018.

The decrease was primarily attributable to lower manufacturing and clinical trial expenses related to the termination of the TRC105 program in April last year.General administrative expenses were $1.9 million for the fourth quarter and $7.8 million for the year-ended December 31, 2019, compared to $1.8 million and $7.3 million for the comparable periods of 2018.

Our net loss was $3.9 million for the fourth quarter and $22.7 million for the year-ended December 31, 2019, compared to $7.8 million and $35 million for the comparable periods of 2018.Turning to the balance sheet at December 31, 2019, our cash, cash equivalents and investments totaled $16.4 million, compared to $39.1 million at December 31, 2018.

As Charles said, we expect our current capital resources, which includes proceeds from additional use of the ATM facility in January, to be sufficient to fund our planned operations in the first quarter of 2021, which may be further centered through use of the equity lines the Aspire capital.With that, I will turn the call back over to Charles..

Thank you, Scott. To recap, end results for our quest to license an exciting late-stage asset repositions the company to forward integrate and potentially build our commercial capabilities, which we intend to leverage across multiple products over time.Enva is now our lead asset.

Given the demonstrated activity of checkpoint inhibitors and sarcoma, which de-risk clinical development, the opportunity to rapidly initiate and complete a potential registration enabling-study in sarcoma, by leveraging TRACON's unique and strong relationships within the sarcoma community, and then the opportunity for commercialization in North America.Of course, our pipeline is broad, with five clinical stage assets at this time, and we expect to deliver multiple potential value-creating clinical milestones in 2020.

These include, first to reiterate for Enva, meeting with the FDA, filing an IND and filing orphan drug designation in the first-half, and then dosing in the potential pivotal trial in the second-half of the year.

Second, reporting top line Phase 2 AVANTE trial results in wet AMD through our licensee Santen in the first-half of the year; third, delivering top line Phase 2 proof-of-concept data for TRC253 in prostate cancer to Janssen, which will attribute Janssen's option to reacquire in the first-half of the year.We also continue to evaluate ex-U.S.

companies with first-in-class potential 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. Your line is now open..

Hi, this is Swapnil Malekar on for Maury. Just a couple of questions, so the first one is regarding DE-122, so you said that Santen mentioned in their February 4th earnings call that they're analyzing data.

So, do you think we will be able to see any of this data in an upcoming medical conference like at RO maybe?.

Good question. So, the plan with Santen and TRACON is that they're analyzing the data, and we do expect to release a top line data release around the data in next steps. Beyond that, do expect to see the full data presentation added significant medical conference, although that has yet to be defined at this time..

Okay.

And then, for the Enva, before meeting with the FDA and initiation of the pivotal trial, is there anything else, or like ongoing activities that need to be completed before meeting with the FDA?.

Yes, our goal currently is to complete the pre-ID package, and then submit that requested meeting with the FDA, which we expect will be in quarter two, and then wet the plan with the FDA. At that time we'll also apply for open drug designation, and then with those items completed, we expect to dose a pivotal trial in the second-half.

So, a lot of preparations are going on currently to meet all those milestones around the Enva program..

Okay, thank you..

Appreciate the question. Thank you..

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

Thank you for taking the questions. Certainly a lot to consider in the coming months and quarters, we are excited for the data readouts.

Just in terms of the CD73 antibody with I-Mab and that collaboration, is there any particular focus in terms of tumor type that we should be thinking about for next steps, or is just too early to determine at this point?.

Hi, Brent, great question. So, with respect to CD73, we are currently evaluating not only our own data, but I think the nice thing about that target is there are several other players in the spaces, as you well know.

So, we plan to continue to evaluate the competitive landscape and the ongoing trials with our competitors, if you will, which includes BMS, for example, which includes MedImmune AZ to glean some insight into what tumor types might be most responsive, and then we'll look at our own data with that same regard.

So, that's an ongoing effort that will continue to evolve as data continues to become apparent both from competitor companies and also within our own database, and it will be an important decision.

I think taking not only the right indication, but the right combination is going to be critical for making that a valuable therapy, and then potentially selecting biomarkers that will be the basis for enrollment of patients in that indication could also be critical.

Our current focus is, as you know, is combining with the central dose PDL-1 therapy based on solid preclinical data, but the other opportunities to think about including to what combinations with chemotherapy or other targeted agents. So, that's going on as we speak, and we'll have further thoughts around that in the near future..

Thank you for that.

Charles, do you expect to announce that strategy as you announced the data, or is that kind of a two-step process?.

Yes, I think -- it's a good question, I think we will be discussing that and determining that in conjunction with our partner, I-Mab. So, in order for us to really make that a clear public announcement, both companies will want to agree and that may take a little bit longer than -- just at the time of the top line data for the Phase 1 trial..

Okay, and then just -- thank you for that, and then the I-Mab collaboration, the second part of it, what do you expect us to see which ones are actually moving forward initially in terms of….

Right, yes, good question. That's an exciting deal for us, and we do expect to be able to nominate and file IND on the initial bispecific by end of this year. So that would be the timeline to expect to know what that product is and our plan around development of that product..

Okay, terrific. Thanks..

Thank you, Bert..

Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Dr. Charles Theuer for closing remarks..

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

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