Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals First Quarter 2024 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, plans for future clinical trials, financing opportunities, our development plans and strategies, potential cost savings and other benefits deliverable through our product development platform or PDP, ability to enter into additional licensing agreements, ability to generate nondilutive capital using the PDP, market size estimates and whether the company's stock will remain listed on NASDAQ.

.

These statements are subject to various risks that are described in our filings made with the Securities Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2023, and subsequent quarterly reports on Form 10-Q. .

You are cautioned not to place undue reliance on these forward-looking statements and unless required by applicable law. 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?.

Good afternoon, and thank you for joining TRACON's First Quarter 2024 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 discuss our financial results for the 3 months ended March 31, 2024.

Finally, we will conclude by taking your questions. .

I will begin with an update on our continued progress with the ongoing Phase II ENVASARC pivotal trial. In April, the independent data monitoring committee recommended the trial continue as planned following a review of interim safety and efficacy data from 73 patients in Cohort C of single-agent NVA treatment.

The objective response rate in patients treated with single-agent ENVA was 11% by investigator review and 5.5% by blinded independent central review or 4 responses. .

Enva monotherapy was generally well tolerated without a single drug-related serious adverse event. Importantly, median duration response by independent central review was greater than 6 months. We have completed accrual of 82 patients dosed with ENVA as a single agent at 600 milligrams and expect to report final data in the third quarter. .

As a reminder, in order to statistically exceed the 4% objective response rate of Votrient, the only FDA-approved treatment for patients with refractory UPS or MFS, the primary endpoint in ENVASARC must show objective responses in 9 out of 82 patients or an 11% objective response rate confirmed by independent central review. .

Median duration of response of greater than 6 months is a key secondary endpoint. Our goal in ENVASARC is to demonstrate that ENVA has the potential to be both safer and more efficacious than Votrient, a drug with a black box warning for fatal liver toxicity..

We plan to approach the FDA to discuss a BLA filing strategy if we determine 9 responses by independent central review.

As a reminder, we have received Fast Track designation for ENVA in the sarcoma subtypes of UPS and MFS that have progressed on 1 or 2 prior lines of therapy and received orphan drug designation in soft tissue sarcoma based on activity observed in ENVASARC. These designations provide important advantages that might expedite regulatory review of ENVA..

ENVASARC is designed to provide safety and efficacy data in the refractory sarcoma subtypes of UPS and MFS. We also have a strategy to pursue the approval of ENVA in frontline sarcoma. Doxorubicin is the most commonly approved therapy used for the treatment of newly diagnosed sarcoma patients.

We, therefore, plan to initiate a trial of ENVA and doxorubicin in the frontline setting of the common sarcoma subtypes including UPS and MFS, following the completion of enrollment in the pivotal ENVASARC trial and prior to the expected BLA submission, subject to positive results from ENVASARC, including achieving the primary endpoint..

The goal of that trial will be to determine the subtypes of sarcoma that best respond to the combination of ENVA and doxorubicin. Assuming positive results in the ENVASARC pivotal trial, we expect the FDA will require a randomized trial to demonstrate a survival benefit.

We expect this potential Phase III post-approval trial will compare single agent doxorubicin to doxorubicin with ENVA, with progression-free survival as the endpoint..

This trial would be expected to enroll patients with UPS and MFS as well as other sarcoma subtypes expected to respond to therapy with ENVA and doxorubicin.

We expect to discuss the design of a frontline trial with the FDA at the time of a pre-BLA meeting to review the expected submission of data from ENVASARC for potential accelerated approval of ENVA in refractory sarcoma, assuming positive results from the ENVASARC pivotal trial..

It is important to understand the sales potential in sarcoma with ENVA at parity pricing is not solely the forecasted $200 million in peak annual revenues anticipated if approved in refractory UPS and MFS. .

Our clinical development strategy is designed to create the opportunity for ENVA to broadly benefit patients with sarcoma in the frontline, adjuvant and neoadjuvant settings by seeking supplemental BLAs..

We will now turn to our DNA damage repair inhibitor TRC102 that is financially supported through a cooperative research and development agreement with the National Cancer Institute. The NCI is sponsoring an ongoing randomized Phase II trial assessing TRC102 in Stage III, non-squamous non-small cell lung cancer in combination with chemo radiation.

The 2-arm trial will enroll 78 patients to assess the benefit of adding TRC102 to current standard of care treatment of pemetrexed, cisplatin and radiation therapy followed by consolidated durvalumab maintenance treatment.

The primary endpoint of the trial is progression-free survival and the trial is designed to detect an improvement in PFS at 1 year from 56% to 75%. 15 sites are now open for enrollment in the U.S. and final results are expected in 2025..

I will now shift from our pipeline update to discuss our product development platform or PDP of CRO independent research.

We executed a license of our PDP for an upfront payment of $3 million in November of last year to a biotech company that recognized the value of internalizing its clinical operations, to reap the benefits of CRO independent clinical trial implementation that we enjoy at TRACON. .

The license of the PDP is expected to allow [ them for any ] clinical trials as we do at TRACON, for an estimated cost of approximately $100,000 per patient for oncology trials.

As a typical CRO charges $300,000 or more per patient in this indication, the potential savings from licensing our PDP on a 100-patient trial could be up to approximately $20 million for a partner in addition to expected advantages of increased speed of trial execution and pace of enrollment that we enjoy TRACON by running trials using our in-house team..

As we have noted in the past, we expect to further supplement our cash position through opportunities for nondilutive capital enabled through our CRO independent PDP that we believe positions us as one of the most efficient clinical development organizations.

We expect to continue to leverage our platform in 2 ways that provide potential nondilutive capital to TRACON..

First, we plan to continue to evaluate drug candidates, whereby TRACON captures revenue by performing clinical trials at a lower fixed cost compared to a CRO, but still at a premium to our cost using a pay-for-performance model. This is an aligned structure we used in the past, for example, with Johnson & Johnson..

Second, we plan to continue to execute nontransferable licenses to our PDP whereby we are paid to share our proprietary capabilities and know-how to enable another company independently, internalize clinical operations and use these new capabilities to avoid contracting with CROs to execute clinical trials.

As has been the experience at TRACON, we believe such an investment could result in substantial time and cost savings for our partner..

We believe that over time, our PDP has earned strong credibility as a compelling solution for companies who wish to become CRO-independent and reap the rewards of conducting trials faster at higher quality and at lower cost compared to trials typically contracted to CROs..

As previously announced, on March 7, 2024, we had a hearing with NASDAQ regarding a letter of noncompliance that we received on June 8, 2023, regarding 2 deficiencies. We presented a compliance plan to cure our deficiencies to NASDAQ at the hearing on March 7.

On March 20, the NASDAQ Hearings Panel granted our request for continued listing on the NASDAQ capital market, subject to us regaining compliance with all applicable contingent listing requirements. .

We effected a reverse stock split on April 9 to cure 1 of the NASDAQ deficiencies and are considering alternatives to secure the other NASDAQ deficiency which requires us to have a market value for listed securities of at least $35 million or meet the stockholders' equity requirement of $2.5 million by June 30..

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 $1.9 million for the 3 months ended March 31, 2024, compared to $5 million for the comparable period of 2023. The decrease was due to termination of Cohort D of the ENVASARC pivotal trial in 2023..

General and administrative expenses were $1.4 million for the 3 months ended March 31, 2024, compared to $2.3 million for the comparable period of 2023. The decrease was due to lower legal expenses..

Our net loss was $3.2 million for the 3 months ended March 31, 2024 compared to $8.5 million for the comparable period of 2023..

Turning to the balance sheet. At March 31, 2024, our cash, cash equivalents and restricted cash totaled $8 million compared to $8.6 million at December 31, 2023..

With that, I will turn the call back over to Charles. .

Thank you, Scott. As you have heard, our corporate strategy is proceeding as planned. Allow me to recap 2 key expected events..

First, in the third quarter, we expect to report final data from the ENVASARC pivotal trial.

Second, we expect to continue to leverage our product development platform to generate nondilutive capital to either an additional license or by capturing revenue by replacing a CRO and executing clinical trials for partners at a lower cost compared to a CRO but still at a premium to our cost using a pay-for-performance model..

Thank you for your time and attention, and we are now available to answer your questions. .

[Operator Instructions] And our first question comes from the line of James Molloy with Alliance Global Partners. .

This is Matt Venezia on for Jim Molloy. I just had a couple of questions. First, regarding the PDP.

Can you go over a little bit more about the margins you would expect on a clinical trial that you guys would run through PDP for you guys and for your clients?.

Appreciate the question. Thanks so much. I can give you an example that serves as a precedent case. For example, we have run in the past the Phase I trial for I-Mab, whereby we were paid $9 million to conduct a clinical trial, again, a Phase I trial. Our total expense for that trial was a bit under $3 million.

So in other words, we can run a trial at roughly $100,000 a patient in oncology. .

We know CROs are bidding those trials at roughly $300,000 per patient. So for example, for a 30-patient trial, we can do it at $3 million, which is $100,000 per patient, and we can guarantee the total cost of the trial to a partner at $300,000 a patient, which for 30 patients is about $9 million.

It's a benefit to our partner because that's a guaranteed price. It won't go up, which based on change orders, the 0 bid price of $300,000 a patient could go up substantially beyond that. We'll guarantee a $300,000 a patient knowing the profit margin there is about 200% for us. .

Got it. All right. So 200%.

And then could you go over the potential solutions in terms of regaining compliance with the minimums by early June, I think you had talked about and how that would align with the time line for the final ENVASARC data?.

Yes, great question. So with respect to the NASDAQ compliance to do 1 or 2 things, either increase the market cap to $35 million or regain compliance to increasing the stockholder equity to $2.5 million.

Our preferred approach is to leverage the PDP that if we can leverage the PDP and gain revenue by, for instance, as you just pointed out doing a trial for someone else, including a significant upfront payment to do that.

Or by licensing the PDP as we did in November, that's the preferred option for us to have capital come to the company that would potentially cure the stockholder equity deficit..

Other options would potentially be fundraising as well but our preferred approach clearly is leveraging the PDP through business development. .

Got you. Okay. And can you go over how that would align with like the time line for ENVASARC and whether... .

No, no, I appreciate the question. Sorry. Yes. So for ENVASARC data, we're expecting final data in Q3. So that's just past June is when Q3 starts. We haven't given a more definitive time within Q3. But I would expect it to be just after the NASDAQ compliance date of June 3. .

[Operator Instructions] I'm showing no more questions. So with that, I'll hand the call back over to CEO and President, Dr. Charles Theuer, for any closing remarks. .

I'd like to thank the audience for your time and attention and your questions, and we look forward to talking with you again next quarter. .

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect..