Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals' First Quarter 2021 Earnings Conference Call.

[Operator Instructions.] 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 31st, 2020, 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?.

a 15% response rate as a single agent and a 30% response rate when combined with Yervoy, which will compare favorably to the 4% objective response rate of the one approved treatment for refractory UPS and MFS patients.

Envafolimab sales revenue could increase further through label expansion or compendia listings into other refractory sarcoma subtypes that have been shown to be responsive to checkpoint inhibition such as angiosarcoma, alveolar soft part sarcoma and dedifferentiated liposarcoma, which our market assessment study indicated could generate an additional $100 million in peak annual revenue in the U.S.

for a total of $300 million when combined with UPS and MFS. We believe dual checkpoint inhibition with the combination of envafolimab and Yervoy should also be advanced into first-line treatment. Notably, the response rate for dual checkpoint inhibition with Opdivo and Yervoy in refractory sarcoma subtypes other than UPS and MFS was 16%.

Given the response rate of first-line chemotherapy in sarcoma is only 17%, we expect to dose envafolimab with doxorubicin in a Phase 1 trial later this year to assess safety of the combination and then move quickly into a potential pivotal trial. The trial could include a combination of doxorubicin, envafolimab and a CTLA-4 inhibitor.

The CTLA-4 inhibitor could be Yervoy or another proprietary CTLA-4 inhibitor as one of our business development priorities is licensing another immuno-oncology asset. We are also discussing a clinical trial of envafolimab with an approved c-KIT inhibitor in Gastrointestinal Stromal Tumor, or GIST.

We believe thorough label expansion in sarcoma including in the first-line setting in just as well as for neoadjuvant treatment prior to surgical resection and for adjuvant treatment following surgical resection could substantially increase sales revenues to over $1 billion in sarcoma.

Our envafolimab is our most advanced product candidate, we continue to progress two other clinical stage assets. We expect TRC102 to continue to advance to NCI sponsorship in lung cancer, in combination with chemotherapy and radiation therapy.

Data presented at ASCO show that TRC102 in combination with chemoradiation resulted in a 100% response rate into 15 patients with advanced localized non-squamous non-small cell lung cancer including in three patients who had a complete response to treatment. These data compare favorably to prior trials of chemoradiation therapy in these patients.

The IMFINZI, a PD-L1 checkpoint inhibitor is now approved for patients with unresectable localized non-small cell lung cancer, whose disease has not progressed following chemoradiation. And we believe a randomized trial of TRC102 with chemoradiation and IMFINZI in these patients is warranted.

Based on NCI data reported in Cancer Cell in December 2020 and Phase 2 data and refractory glioblastoma patients treated with TRC102 and Temodar, inhibiting basic excision repair with TRC102 is able to reduce synthetic lethality in MGMT methylated patients. When we found these data, we expect further development by the NCI in glioblastoma.

Including our trial in the first-line setting, a Temodar, radiation therapy and TRC102. Notably in October 2022 and excuse me, notably on October 2020 TRC102 was granted orphan drug designation by the FDA in malignant glioma that includes glioblastoma.

Our third clinical-stage asset is the CD73 antibody, TJ4309 that is being evaluated in an ongoing Phase 1 dose-escalation study as a single agent and in combination with a checkpoint inhibitor Tecentriq. Data from the ongoing phase and trial were accepted for poster presentation at 2021 ASCO Virtual Meeting in June.

We are developing TJ4309 in collaboration with I-Mab Biopharma through one of our two strategic agreements with them, whereby we are responsible for the regulatory and clinical development of TJ4309 in the U.S. and Europe.

Per the license agreement with them, we are entitled to receive escalating portions of non-royalty and royalty payments if I-Mab elects to license TJ4309 to a third party in any region outside of China, Macau or Taiwan. From the completion of Phase 1, I-Mab has the option to terminate the agreement for a payment of $9 million.

From a business development perspective, I would like to note that we continue to evaluate additional clinical stage assets to potentially add to our pipeline this year in order to leverage our CRO independent product development platform, and 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. At this time, Scott will provide an update on our financials..

Thank you, Charles. And good afternoon, everyone. TRACON's research and development expenses were $2.3 million for the first quarter of 2021 compared to $2 million for the comparable period of 2020. Increase was related to enrollment in the pivotal ENVASARC trial in 2021.

General and administrative expenses were $2.7 million for the first quarter of 2021 compared to $1.9 million for the comparable period at 2020. Our net loss was $5.1 million for the first quarter of 2021 compared to $4 million for the comparable period of 2020. Turning to the balance sheet.

At March 31st 2021, our cash, cash equivalents and investments totaled $30.4 million compared to $36.1 million at December 31st 2020. We expect our current capital resources to be sufficient to fund our planned operations into the second half of 2022. With that, I'll 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 have made substantial progress in the ENVASARC pivotal trial. We have now initiated 22 of the 25 ENVASARC sites and have enrolled more than 20 patients which triggers the initial DMC safety review.

We expect safety updates this quarter and in the third quarter, orphan drug designation this quarter. And an interim efficacy assessment in the second half of this year. One of our key goals is to request breakthrough designation or fast-track resignation by year-end based on interim ENVASARC efficacy data.

We believe the ENVASARC trial provides a potential faster market opportunity to provide envafolimab to use sarcoma patients in significant need of a new therapy as expeditiously as possible.

Addressing its high unmet clinical need is clearly important to investigators and they remain excited about envafolimab's convenient and rapidly delivered subcutaneous route of administration. As evidenced by the robust ENVASARC accrual seen to-date despite the COVID pandemic.

We credit this robust accrual in part to our zero independent developmental capabilities. Importantly, we believe our capital will be sufficient to fund the company past the expected ENVASARC's final efficacy data. Which could demonstrate the potential for envafolimab to rapidly transform the standard of care for therapy sarcoma patients.

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 a development and business plans for the benefit of patients and shareholders. Thank you for your time and attention and we are now available to answer your questions..

[Operator Instructions] Your first question is from the line of Maury Raycroft from Jefferies. Your line is open..

Hi Charles and everyone. Congrats on the progress and thanks for taking my questions. First question, I just wanted to check on enrollment. It sounds like you've got greater than 20 patients in the study. Just wondering if you can comment on if your enrollment rate has been better than expected or in line with expectations.

And then, anything else you're saying about the patient characteristics. Are those in line with expectations and how do they compare with the patients from the historical studies that we're benchmarking..

Hi Maury, I appreciate the question. So, despite to accrual, we're on track with respect to our goal which is to fully enroll the patients in an 18 month period time, meaning full enrollment by mid next year. So, we're very pleased with that and I should mention we're on-track despite the fact that we haven’t even opened up all the sites yet.

So, that's where we consider the enrollment robust at this point. Yes, I think also importantly you bring up the great point about the fact that this trial on all those patients who are in the who have filled one or two prior therapies. So, third line setting or second line setting.

And that actually compares quite favorably to prior studies of checkpoint inhibitors in refract the UPS and MFS patients where the majority of those patients were in the third and fourth line setting and in some cases had as many as six prior therapies.

So, we try to create a more if you will homogenous population of refractor UPS and MFS patients to carefully define the response rate of both envafolimab as a single agent and also in combination with Yervoy..

Got it, that's helpful Charles. And then, other question that I another question I had is based on the DMC reviews. So, for the DMC review at this quarter and next quarter and 4Q, I'm wondering if you could access to the overall response data.

And if you do, if it's better than expected, is there any chance that you would provide an early update on what you're seeing in either one of the cohorts?.

Thanks for the question, Maury. Yes, the DMC take reviews were really the exclusively focused with respect to the one expected this quarter and third quarter on safety.

And the expectation you should have is that the DMC will review the safety data and if everything looks as we expect it will look the communication to the street would be that the trial will continue as planned with just a general statement from me around the safety about the envafolimab as a single agent and also in combination with the ipilimumab.

Yes, in that regard Maury I would say with respect envafolimab single agent data, we feel quite confident of the known safety profile, given it's been those over 700 patients. This is the first time know that envafolimab is being dosed with ipilimumab.

So, I think from our perspective the most important part of both the DMC safety where we're issuing this quarter and the subsequent one in quarter three will be to define that envafolimab combined with ipilimumab is also well tolerated.

And then, by end of the year though you should expect an update with respect to interim efficacy data that we will report either to a topline release or a scientific meeting..

Got it, okay. And so, with maybe last question is just for the 3Q, the DMC review for next quarter. I just wanted to make sure that I got it right. So, that's going to be three or 46 Asians in each cohort. If you've seeing responses there and the study continues that means that the utility wasn’t triggered.

Is that that the right way to think about it?.

No, so let me go through it carefully just to make sure I'm crystal clear. So, this quarter will be initial safety review. There is one more safety review next quarter and then following the two initial safety reviewers there'll be two fidelity analysis as you point out.

And those are done after 18 patients are enrolled in each cohort and in each cohort after 18 patients were enrolled, we need to see one response. But to be clear, that's only three months after the 18 patient is enrolled because we want to give patients' time to get CT scans so we can define the preliminary response rate.

So, that's why we expect that will be 2nd half and we will report those data as an interim efficacy and assessment in second half of this year is the expectation.

As we also point out there's a second fidelity announces that's when 46 patients were enrolled in each cohort but also that 46 patients has to be on therapy for excuse me have to have scans for at least three months so we can again define the preliminary objective response rate. So, based on that there'll be a second interim analysis for fidelity.

And we haven’t guided on the exact timing of that. It could be this year but again because there's a three month delay in assessments after enrollment of the 46 patient, it also could be quarter one of 2022..

Got it, that's really helpful and that helps clarify how this is going to work out. So, this fidelity analysis are independent of the DMC reviews, maybe done in different time..

Well, to be clear Maury. So, the DMC will make the decision on fidelity analysis and we provide the general guidelines that we need one response out of at least 18 patients in each cohort and three responses out at 46 patients in each cohort.

But it is a DMC decision and the reason we leave, leave right to the DMC more is because it is preliminary data. We only give you three months of response data on the last patient in that cohort. So, it could be the DMC sees data says well this is there are three patients that put partial responses but we haven’t confirmed them yet.

So, they're not confirmed responses but we think we should wait a little longer and give these patients more time to fully respond as an example. So, it is a DMC decision, those are the general rules but the DMC has full levy to consider the totality of the data including what the ongoing patients were actually doing on trial..

Got it, okay. Thanks for taking my questions..

That was a question, Maury thank you..

Your next question is from Jason McCarthy from Maxim Group. Your line is open..

Hey, it's Dave on the line for Jason. Thanks for taking my question. So, we know there's an activity with envafolimab in China yesterday, actually it was been defining hepatitis B and it seems like the drug was well tolerated in patients over there. So, I just wanted to see if you had any comments on that..

Thank you for the question, Dave. Yes, was an interesting press release from a partner acquired us in China that is studying envafolimab in a trial of hepatitis B patients. And as I think people who know hepatitis B infection is a significant problem in China; in the U.S. it's becoming less of a problem given routine childhood vaccination.

But what was meaningful to us in that press release was the fact that envafolimab was given to patients with active hepatitis B infection. So, they have significant underlying liver disease and envafolimab is very well tolerated in those patients. And notably in ENVASARC we don’t have patients with underlying liver disease is the specific exclusion.

But it just gives you an idea of how well-tolerated envafolimab is that you can dose it very effectively to patients even with known viral hepatitis. And note, there was also sign of activity in those patients in the sense that viral loads decreased in response when performed our therapy.

So, it really have to reaffirm for us that envafolimab is a very safe therapy. We did patients with underlying liver disease which should work well for ENVASARC. And that some patients do have liver metastases as you might expect when they come into our trial..

Great, thanks for the additional color. I appreciate it..

Thank you, Dave..

Your next question is from Soumit Roy from Jones Trading. Your line is open..

Hi, everyone. Congratulations on all the progress. Question around expansion beyond sarcoma. As how you're thinking of expanding in the GIST or other indication. If you're getting more inbounds from collaborators or investigators and given that one of the company has started turning to do or make inhibitor combinations.

So, how what kind of traction you're getting. And second is, just take a BMS presenting a subcu newer formulation, some preliminary data at ASCO. How are you viewing this as a competition or any color would be appreciated..

And I appreciate the comments, Soumit. I'll first take on the question around sarcoma expansion. That is with respect I think three indications. First, with respect to combining with doxorubicin in frontline therapy..

So, we are planning before end of this year to dose in the form of a combination with doxorubicin therapy. And likely that trial will also include doxorubicin into the formula of and a CTLA-4 inhibitor. As we mentioned briefly, that could be ipilimumab or potentially another CTLA-4 inhibitor.

That combination also could be very relevant in the neoadjuvant and adjuvant therapy space within sarcoma as an example. Most patients with sarcoma present with an extremity lesion and it's resected surgically.

But those lesions are large like five to 10 centimeters, typically they get neoadjuvant chemotherapy to try to shrink them down before the resection. And then they get adjuvant therapy after the resection. That's another trial where we're seeing significant interest about developing and the ipi and the dox or and the ipi and dox as an example.

Mainly, if it could be substituted for another CTLA-4 inhibiter as pre-operative therapy. It's something we've seen extreme interest, and again I think it places back that those patients currently get a significant chemotherapy regimen. It's called AIM chemotherapy, Adriamycin Ifosfamide Mesna, that's quite myelosuppressive.

So, we could dial down the chemotherapy or replace it with immunotherapy. I think the best way to see is that as a major advance. So, expect those two trials to run forward this year.

And that if frontline dox and metastatic disease combining with enva or enva and a CTLA-4 and also the same combination at neoadjuvant therapy followed by adjuvant treatment with continued enva dosing. And just to your point, there is interesting data that just with combining UPS with the MEK inhibitor was announced out in the past day or so.

I think that’s an interesting combination and I think combining a c-KIT inhibitor with envafolimab makes a lot of sense. And it could be multiple tariffs in kind as we've seen with envafolimab. The current data of envafolimab is that it is very well tolerated.

I mean that was confirmed with respect to the dosing in hepatitis B patients and it's been confirmed and inspected with 700 patients dosing that we've had to rush our studies and our partner studies.

And they'd indicate and before and seems to be safer than some checkpoint inhibitors with respect in immunizing colitis and clearly there's no risk evident fusion reaction which makes it safer than any intravenously immunotherapy. Very much with respect to BMS and subcu dosing.

I think it's important that what makes enva different is that I don’t think any full length antibody can mimic what envafolimab does as a single domain antibody.

I know that companies are dosing for example with full-length antibodies combining with and adjuvant like for instance how you run a base, that's more the standard I think most well-proven subcutaneous dosing mechanism to try to elect antibodies go from IV to subcu. And let's think about what that means versus how you give envafolimab.

If you're giving an antibody for instance with how you run a base, you're giving a large volume 10 to 20 cc's and you're giving it over minutes. With envafolimab, literally you're giving an injection of about 1.5 cc's in 30 seconds but there's nothing easier than that.

And that's why this is so easily dosed in the clinic and that's why potentially home dosing is a real option within envafolimab in a way that could not ever be attained with a full-length antibody that will -- that requires an adjuvant..

Thank you, Scott. I really appreciate the color..

Thank you, Soumit..

Your next question is from Bert Hazlett from BTIG. Your line is open..

Yes, thank you. Thank you for taking the questions, Charles and all. Just a quick follow-up with regard to the last one. Charles, could you give us a sense of the gating items for move in the first-line sarcoma or just or additional efforts.

Is it really dependent upon looking at the fidelity analysis or what are the gating items there?.

Yes, great question, Bert. Yes, I think with respect to moving in the front-line, we're actively planning front-line trial. Initially I will start with the Phase 1 tolerability study. But and it will be gated in the sense that we want to see activity clearly done for that single agent and also the combination with Yervoy in the ENVASARC trial.

Now, I think we should expect to see that evidence of activity by second half clearly and our plans are to basically start the front-line trial by end of the year. So, it's a typical kind of straight on timeline. We will move aggressively. The sites that are already in ENVASARC will be sites that do the front-line trial.

Cannot underestimate the enthusiasm and that's guide us to move this drug forward. As evidenced by the new antigen study which we were kind of thinking about the back burn of it that right now there's incredible enthusiasm for that study as well. So, we expect that toward the second half.

If we saw fidelity as an example, in one cohort we probably advanced the other cohort. That said, our expectation again based on really good data for checkpoint inhibition in these indications. And refractory UPS and MFS make it clear that checkpoints are quite active in this disease.

So, based on what we expect to see do expect us to be in front-line trials before end of the year and we're excited to see that move forward..

Okay, thank you for the clarity. And the other question I had is with regard to the CTLA-4 combination molecule. Just you've mentioned a couple of times with regard to end licensing and potential for that. And always difficult to predict but you've had some notable success.

Can you put a little meat on that bone, what you know are you moving in the direction of Yervoy or another molecule?.

Well I appreciate the question, Bert. I mean, I think we feel it would be a very attractive and strategically aligned business development opportunity, first the license on CTLA-4. We're very active in terms of looking for new molecules to plug into our CRO-independent engine.

And I think as evidenced by the ENVASARC trial and get how quickly we move that forward into a pivotal or I should say move it and the format helps quickly move that forward from Phase 1 data in U.S. in the pivotal study, plus and you have to have licensed, speaks volumes about how we move.

So, for us to own both legs if you will, dual inhibitor checkpoint franchise, dual checkpoint inhibitor franchise would be very attractive. We're also into an another immune-oncology targets we might build upon envafolimab.

And then, beyond that we're interested in assets that might just standalone with respect to their ability to proceed and when the populations in the U.S. But to your point, I think from a strategic point-of-view we think turning both ends of a dual checkpoint inhibitor franchise would be quite an attractive proposition for TRACON..

Okay. Look forward to that and congrats on all the progress. Great, thank you..

I appreciate it, Bert. Thank you..

[Operator Instructions] Your next question is from Nick Abbott from Wells Fargo. Your line is open..

Great. Thanks for taking my question. Good afternoon, and our Charles and team. First question, Charles, there is in the prepared remarks for the application orphan drug resubmission could requesting FDA on preclinical or preclinical evidence of activity and the -- might as well what data did you actually submit for orphan drug..

Hi Nick, I appreciate the question. Yes, so when we initially threw in the orphan drug designation application, we kind of submitted it with respect to the prevalence of sarcoma which made it clear that this is an orphan drug.

And the FDA indicated they wanted more data, they wanted evidence the preclinically or clinically that this drug in reform have been active in sarcoma. We will fully disclose I think what we've submitted with respect to that updated application at the time when we see the FDA correspondence, Nick.

And I just ask you to be patient until that time that which we will be fully forthcoming..

Okay, fair enough..

I appreciate it..

And then just following-on on both question.

And how feasible is that you can get a CTLA-4 and get an IND approved ahead of that study start?.

Yes. That's a great question, Nick. So, with respect to our current ENVASARC trial to be crystal clear, we will continue that as designed; meaning we'll continue that trail moving forward envafolimab plus ipilimumab. We are quite aggressive on the business development front and our track record has been that we execute deals.

We did four deals between 2016 and 2019. We did not consummated a deal last year and I think COVID had an impact on that but we did make a lot of context that allow us to feel confident of for the business development opportunities this year.

And ideally, these circumstance would permit us to begin our first-line trial with envafolimab in another immuno-oncology asset in combination with that service into your point..

Okay, perfect. Thanks, Charles. I'll look forward to..

Thank you, Nick..

I am showing no further questions at this time. I would now like to turn the conference back to Dr. Theuer..

Well thank you, everyone for the questions and your attention. And we look forward to talking with you again next quarter. Stay safe and have a great day..

Ladies and gentlemen and this concludes today's conference. Thank you, for your participation and have a wonderful day. You may all disconnect..