Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals' Fourth Quarter and Year-end 2020 Earnings Conference Call.

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/or 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, 2019, 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. .

Thank you for joining TRACON's fourth quarter and full year 2020 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 3 months and year ended December 31, 2020.

Finally, we will conclude by taking your questions. Our development efforts continue to focus on the pivotal ENVASARC trial. ENVASARC is designed to allow potential approval of envafolimab in the sarcoma subtypes of undifferentiated pleomorphic sarcoma or UPS, and myxofibrosarcoma or MFS.

During December, we initiated dosing of multiple patients that has continued this year. Currently, we have initiated 16 U.S. sites where we have enrolled multiple patients at multiple sites. We expect to achieve our goal of initiating 25 U.S. sites by April.

As a reminder, envafolimab is a potential best-in-class PD-L1 checkpoint inhibitor, which may convert additional clinical benefit by virtue of its convenient and rapidly delivered subcutaneous route of administration. The ENVASARC pivotal trial includes 2 cohorts of 80 patients each.

One cohort receives single-agent envafolimab, and a second cohort receives envafolimab in combination with Yervoy, a second checkpoint inhibitor targeting the CTLA-4 receptor that is marketed by BMS.

The trial enrolls patients with UPS and MFS, who have progressed on 1 or 2 lines of prior treatment and have not received prior checkpoint inhibitor therapy. The primary endpoint in both cohorts is objective response rate by RECIST, as confirmed by blinded independent central review, with duration of response being a key secondary endpoint.

In each cohort, the demonstration of 9 out of 80 objective responses or an 11.25% objective response rate confirmed by independent radiographic review defines the level of response satisfies the primary objective of the study, which is to specifically exclude the known 4% response rate of Votrient, the only approved treatment for refractory UPS and MFS.

To reiterate, unfortunately, the one approved treatment for refractory UPS and MFS has only a 4% objective response rate. This is a clear example of an indication with high unmet clinical need. We are studying the sarcoma subtypes of UPS and MFS because they're responsive to checkpoint inhibition based on data presented at ASCO 2019 and ASCO 2020.

At ASCO 2020, investigators from the Alliance for Clinical Trials in Oncology reported an impressive 29% confirmed objective response rate in patients with highly refractory UPS, who received Opdivo in combination with Yervoy.

These data build upon data presented at ASCO 2019, showing that single-agent Keytruda demonstrated a 23% response rate in highly refractory UPS and MFS patients. The ENVASARC trial was designed based on activity reported for PD-1 and PD-L1 antibodies as single agents and in combination with Yervoy in the soft tissue sarcoma subtypes of UPS and MFS. .

Thank you, Charles, and good afternoon, everyone. TRACON's research and development expenses were $2.2 million for the fourth quarter and $8.2 million for the year ended December 31, 2020, compared to $1.9 million and $14.5 million for the comparable periods of 2019.

The decrease was primarily attributable to lower manufacturing and clinical trial expenses related to the termination of the TRC105 program in April of 2019.

General and administrative expenses were $2 million for the fourth quarter and $8 million for the year ended December 31, 2020, compared to $1.9 million and $7.8 million for the comparable periods of 2019.

Our net loss was $4.3 million for the fourth quarter and $16.8 million for the year ended December 31, 2020, compared to $3.9 million and 22.7 million for the comparable periods of 2019. Turning to the balance sheet. At December 31, 2020, our cash, cash equivalents and investments totaled $36.1 million compared to $16.4 million at December 31, 2019.

We expect our current capital resources to be sufficient to fund our planned operations into the second half of 2022. With that, I will turn the call back over to Charles..

Thank you, Scott. To recap, we continue to execute our clinical development plan around our lead product candidate, envafolimab, and recently further diversified our shareholder base and extended our cash runway through capital raised from existing investors and a new investor.

We have now initiated most of the approximately 25 ENVASARC sites and enrolled multiple patients at multiple sites, which represent top U.S. clinical cancer centers. We expect safety updates in the first half of the year and an interim efficacy assessment in the second half of this year.

One of our key goals is to request breakthrough therapy designation by year-end based on interim ENVASARC efficacy data. We believe the ENVASARC trial provides a potential fast-to-market opportunity to provide envafolimab to sarcoma patients in significant need of a new therapy as expeditiously as possible.

Addressing this high unmet clinical need is clearly important to investigators, and they remain excited about envafolimab's convenient and rapidly delivered subcutaneous route of administration.

Importantly, we believe our recent capital raise will be sufficient to fund the capital past the expected ENVASARC interim efficacy data, which could demonstrate the potential for envafolimab to rapidly transform the standard of care for refractory sarcoma patients. .

Our first question comes from the line of Maury Raycroft with Jefferies..

Charles and team, congrats on the progress. First question is just on whether it's a certain amount of patients enrolled and a certain amount of follow-up that triggers the DMC review.

I guess what triggers the review? And what specific information will the DMC share with you after the review?.

Maury, as always, thanks for your question. Yes, for the ENVASARC trial, there are several kind of interim assessments, if you will, and the first ones, as you point out, are based on safety.

And the independent data monitor committee will evaluate approximately 10% to 20% of patients from each cohort, cohort A being enva single agent, cohort B enva plus ipi, just to ensure that there's no significant new safety signal. They'll do that after those patients have been on study for a set period of time, about 1 month and also about 3 months.

And what we report to the public is their overall recommendation. Our anticipation would be that they'll indicate that the trials should proceed as planned. And if there's any further disclosure around any safety signal, we would disclose that as well..

Got it. Okay. And then if you can talk about how a site decides whether the patient should go into the monotherapy cohort or the combo cohort. And if you can provide any more perspective into how enrollment is going for each cohort..

Sure. Yes. So it's a randomized study, Maury, whereby when a patient is enrolled in the study, as soon as we sign off on the eligibility criteria, they are formally randomized to either cohort A or cohort B. And then -- so you'll have equal allocation of patients across both cohorts at all times based on that 1:1 randomization..

Got it. Okay.

And each site is enrolling for both cohorts hence?.

Correct. Yes, so each site independently will assess patients. Once they assess the patient, the next patient sequence will be randomized and have an equal chance of going to either cohort and the randomization is done as it would be for a randomized control study.

What's unique about ENVASARC, it's randomized, but each cohort is independently compared to that 4% response rate of Votrient.

But in terms of how the actual machinations of the trial go forward, it would be like any typical randomized trial, except you don't compare cohort versus cohort, you compare both cohorts to that 4% low response rate of Votrient..

Got it. Okay.

And then last question is just on whether you're getting a good balance of UPS and MFS patients, or is it skewed to either subtype and does this matter?.

Yes. Great question, Maury. So yes, we're actually enrolling both UPS and MFS in patients with each type of histology enrolled thus far. Overall, I would say the rough balance I would expect would be about 3:1 in favor of UPS over MFS. And that relates to the overall prevalence of the diseases and also the overall aggressiveness of the 2 diseases.

So again, expect about 3:1 ratio of UPS to MFS. And one other important point on that is that their patients are stratified based on the histology. So there will be equal numbers or balanced numbers, I should say, of UPS and MFS patients in both cohort A and cohort B..

Our next question comes from the line of Jason McCarthy with Maxim Group..

It's Dave on the line for Jason.

Can you guys just shed some light on if you guys have any plans on setting up or initiating a trial perhaps evaluating TRC102 and like in the near term? I know you guys had that like a while ago, but I was just wondering if you guys plan on maybe setting up new trial in the near term, or if this is maybe an idea that you guys might have still further down the line..

I appreciate the question, Dave. Yes. So TRC102 continues to be very enthusiastically embraced by the NCI. And so we continue to have an ongoing CRADA. In fact, we just renewed the CRADA with them, showing the continued interest by NCI to develop 102. And with respect to the 2 indications that there's significant interest, one of those is GBM.

In terms of the trial that really sparked that interest, it was the trial in refractory GBM where Temodar-failure patients retreated with Temodar plus TRC102, we saw some activity there. And what was remarkable is that activity was seen in patients with certain biomarkers, they were MGMT negative.

So based on that data, we do expect NCI will continue to advance TRC102 in GBM, and our goal would be to see it move into the first-line setting. That's where we really need to make an impact on GBM patients. So the trial design, we think, makes a lot of sense.

And I would say that this is also shared by several investigators would be first-line GBM patients, who are getting Temodar and radiotherapy, which is standard of care, to those patients you would add TRC102. And you would initially do a pilot study, say, in 25 patients who are MGMT non-expressors and assess the response rate.

And based on that response rate, that would potentially then lead to a pivotal randomized study, where it would be Temodar radiotherapy with or without TRC102.

So that's our expectation to see some trial of that typical -- that type of design, a pilot setting of about 25 patients in first-line GBM to see something like that move forward this year would be our expectation..

So that's -- so we can expect that to happen at some point in 2021, then that's a fair expectation to have then, it sounds like, right?.

Yes. We expect that those types of ideas will be advanced through CTEP, and we can't guarantee anything. To be clear, the CTEP has to make those decisions. But given the unmet need, GBM remains quite severe. I would say there are some new therapies there.

I would say there's still an incredible need for a therapy like what TRC102 potentially offers those patients. Our expectation would be to see that move forward this year..

Okay. Great. And then just one additional question, if I could just switch gears here to envafolimab.

Are you considering the possibility of any potential combination trials with any other checkpoint inhibitors down the line besides Yervoy?.

Yes. I think we look at envafolimab as kind of a backbone therapy that we feel is a best-in-class therapy. It's a subcutaneously administered injection. It literally takes 30 seconds and it's a 1.5 cc. So it is really like getting a flu shot. And having that therapy in our portfolio then allows us to build upon that.

So for instance, we're combined with Yervoy currently. But in terms of other checkpoint inhibitors, either proven or unproven mechanisms, I think we are now a very attractive partner for companies with those type of therapies who want to see those develop with envafolimab.

And I think the fact that we have our CRO independent product development platform that's been really the basis for deals that we've done now around that platform makes it an even more attractive prospect for a partner. We can combine with enva and we can do it with our platform, which will, in most cases, greatly speed the course of development.

And I'll give you an example on how we speed development. I think it's important to remember, we only licensed envafolimab in December 2019. It had completed just Phase I testing in the United States. Less than a year later, in December 2020, we are dosing a pivotal trial. That is, I would call, evidence of performance.

And so now that we have envafolimab in our portfolio, we have a path towards registration. We're very eager to add additional assets to our portfolio that could complement enva and to do it with our partnering platform that we feel is a major advantage for potential partners..

And our next question, again, from Jason McCarthy with Maxim..

Dave and I got our signals crossed. So yes, he actually -- he asked some good questions.

Just sticking with TRC102, when you start thinking about the trials going forward, what we've seen is this new -- not new, but a category of patients that not stratified by MGMT, but physicians knowing that they're not likely going to respond to Temodar after just one cycle and that they can move them to an experimental drug.

They're doing a lot of this in the Agile program. That's -- it's -- they call it Agile therapy, whatever that means.

Is that something that you would consider the TRC102 to try to separate yourselves from the just purely recurrent versus purely newly diagnosed?.

It's a great thought, Jason. We haven't done a trial in that design yet. But we clearly have seen with respect to TRC102 that patients that fail certain chemotherapy like Temodar can be resensitized at Temodar plus TRC102. We've also seen that with Alimta patients.

There were data reported at ASCO last year that Alimta failures could be resensitized when you retreat it with Alimta plus TRC102. So in a sense that, in a clunky way, sort of addresses what you're talking about. But to do it more as an integrated trial would make perfect sense, and it's something we should definitely discuss with investigators..

And just as a follow-up to all the ENVASARC-related questions.

Can you just remind everybody about the opportunity, having 2 shots on goal and what those response rates need to look like? Because my understanding was that in the combo with Yervoy, even if you're still above Votrient and looking like the mono, you could still get there, but you -- even though you're going for double.

Just can you help us understand that just a little bit more?.

Sure, Jason.

No, I think it's really important -- we consider an important risk mitigation within the trial that each cohort is independently -- I should say the response rate for each cohort is independently compared to the 4% response rate of Votrient, which means that, that bar for a positive trial, which is 9 of 80 responses or an 11.25% response rate, that bar exists for each cohort independently.

So we do expect both cohorts to be positive, but it could be that cohort A does not meet the endpoint and cohort B does meet the endpoint and that would be the basis still for a positive trial and actually be the basis for approval of what we feel will be the way enva is used in refractory UPS and MFS, which is with Yervoy, given it is expected to have a higher response rate.

But to your point, there's risk mitigation built into that trial because each cohort is compared to Votrient, not to each other..

Our next question comes from the line of Bert Hazlett with BTIG..

Yes, it does look like a busy '21.

Charles, could you give a little bit more detail? You've started to talk about it during your prepared comments, and I think even during the Q&A, but just a little more detail beyond the opportunities with enva in refractory sarcoma, beyond the kind of the $300 million you framed and moving towards the $1 billion? Could you just get a little bit more granular in terms of how you're thinking about those various opportunities and the kind of the pacing of it?.

No, I appreciate it, Bert. Yes, we really feel that UPS, MFS is what we feel is the faster market strategy, but we do feel there's great potential for enva to penetrate other sarcoma subtypes. And the one area that's probably the most exciting would be first-line therapy. I think the Alliance data to us show 2 really important points.

One is that in refractory UPS, MFS, dual checkpoint inhibition generates a 29% response rate. I mean that's maybe the best response we've ever seen in sarcoma. But beyond that, that was just UPS, MFS. But in all sarcoma, refractory all sarcoma subtypes, it was a 16% response rate.

And as I mentioned briefly in my comments here, that's as good as first-line doxorubicin chemotherapy. The nice thing about checkpoints is generally they combine fairly well with chemotherapy.

So we do expect before end of this year to be starting a trial combining enva with dox and likely would be enva plus ipi or potentially another CTLA-4 antibody with dox, with the objective to show tolerability that would then lead into a potential pivotal study of, say, dox with or without enva or could be dox with or without enva-ipi, or dox with or without enva and another proprietary CTLA-4 antibody.

So that is actually the real goal of our entire program. It's to get to market. And clearly, the indication within sarcoma, the subtypes in the sarcoma that are very highly responsive to checkpoint inhibition and that you can do through a response rate-driven trial. But first line, those are a lot of patients and require, to be clear, randomized study.

But it's, in our view, a trial that needs to be done, given you know dual checkpoint inhibition in all sarcoma is actually very effective. It's as effective as first-line chemotherapy from a response rate perspective. So expect to see that trial roll out this year. The other area we have a lot of interest is in GIST.

And in GIST, c-KIT inhibitors are the dominant standard of care, and they're very effective, they prolong survival. They actually don't generate a very high response rate, though. And so our view is we combine with the c-KIT inhibitor in GIST.

Through a single-arm study, we target response rate as an indication of interest, and then we potentially could move forward into a pivotal study there as well. So we will thoroughly penetrate sarcoma.

I guess if you ask me what our goal is, it's to really make sure every sarcoma patient deserves a checkpoint inhibitor, and I think the majority do, has the opportunity to be dosed with enva, either with ipi, another CTLA-4 or chemotherapy or all 3..

And then just in terms of timing, how -- what do you frame this? Is this a '21 effort, late '21, after you see the data? Is this further out? Just in terms of the timing..

Sure. Yes. No, I think the 2 trials that we expect to start in sarcoma on top of ENVASARC this year, one would be in GIST and the other would be with doxorubicin. So those would be Phase I trials with expanded cohort of some particular number to really get a better understanding not just safety, but also early efficacy.

But do expect to see those open either through our sponsorship or an investigator sponsorship this year. And I would just say, when I say investigator sponsored, there's a lot of interest in enva in the sarcoma community. It's because 2 things. We've committed to really sarcoma patients, that's one thing.

But the other thing is, once you use enva and you realize how easy it is to give, it is just -- it's a complete paradigm shift for these investigators..

As there are no further questions, I would like to turn the call back over to Dr. Theuer for closing remarks..

Well, I'd just like to thank everyone for your time and attention. We really appreciate the questions, and we look forward to talking with you next quarter. Stay safe..

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