TRACON Pharmaceuticals Inc (TCON) 2015 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the TRACON Pharmaceuticals First Quarter 2015 Earnings Conference Call.

(Operator Instructions)

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 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 our development plans and strategy. These statements are subject to various risks that are described in our filings made at the Securities and Exchange Commission including our annual report on Form 10-K for the year ended December 31, 2014, the second quarterly reports on Form 10-K and our current reports on Form 8-K. 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?

Good afternoon and welcome to TRACON's First Quarter 2015 Financial Results and Business Update Conference Call, which is our first conference call as a public company.

I will start by providing review of our corporate strategy and then provide an update on our pipeline and recent corporate activities. Our Chief Financial Officer, Patricia Bitar will then review our first quarter financials and recent financing activity. Finally, we will finish by answering questions from the call participants.

Even though it is still early, 2015 has been a breakout year for TRACON as we reported positive data for our lead antibody TRC105 in two different indications and significantly improved our cash resources upon completion of our IPO in February. We continue to make progress across our pipeline in a cost-effective manner providing validation of our differentiated business strategy.

TRACON is a leader in endoglin biology, which we believe is an important escape pathway from VEGF inhibition. We have used our expertise to develop [antibodies] endoglin that complement VEGF inhibitors, a class of therapies that accounts for approximately $17 billion in sales collectively across oncology indications and age-related macular degeneration or AMD.

[Antibodies] endoglin are relevant in 3 significant therapeutic areas, oncology, ophthalmology especially AMD and fibrosis. We believe our anti-endoglin antibody as combination therapy with existing VEGF inhibitor treatments could address markets of up to $10 billion in oncology and up to $7 billion in AMD.

Our lead product, TRC105 is an anti-endoglin antibody that is being studied and the initial indications are renal cell cancer, sarcoma, hepatocellular cancer, glioblastoma and choriocarcinoma. Patient enrollment in each of 5 Phase II trials remains ongoing that could enable Phase III developments.

We plan to pursue orphan drug designation for 3 of these indications, sarcoma, glioblastoma and choriocarcinoma. In each trial, we combine TRC105 with approved VEGF inhibitor with the expectation of delivering top line data within the next 9 to 15 months. We believe that these data could provide significant varying flexion points for TRACON and our shareholders.

As I mentioned earlier, we recently released positive data for two studies. The first trial was in renal cell cancer where data from the dose escalation and expansion Phase I study of TRC105 and Inlyta in patients with advanced or metastatic renal cell cancer were presented at [UASCO] in February 2015.

Eligible patients had received at least 1 prior VEGF inhibitor and most received 3 or more prior therapies. All patients in the trial received the combination of TRC105 and Inlyta. The objective response rate was 29% according to RECIST and median progression-free survival for the subset of clear cell renal cell cancer patients was 11.3 months.

For comparison, the Inlyta AXIS Phase III trial reported an objective response rate of 11% in the large subgroup of 194 patients who received 1 prior VEGF inhibitor and the median progression-free survival in clear cell renal cell cancer was 4.8 months.

We expect the California Cancer Consortium to present updated data at ASCO from a randomized trial of Avastin with or without TRC105 that included renal cell cancer patients treated with up to four VEGF inhibitors that included non-clear cell histology. We reported previously the enrollment in this trial was closed after interim analysis concluded the trial would be unable to achieve the endpoint of a 100% increase in progression-free survival.

Notably we are encouraged by the data from the Phase I trial of TRC105 with Inlyta in clear cell renal cell cancer presented at [UASCO]. As a result, TRACON is sponsoring a Phase II randomized [tracsar] trial of TRC105 with Inlyta only in phases of clear cell renal cell cancer who have been treated with only 1 prior VEGF inhibitor. The endpoint is a 50% increase in progression-free survival and we expect top line data in mid-2016 from this 150-patient trial.

The second indication where positive data was reported is hepatocellular cancer. Data from the dose escalation portion of a Phase II clinical trial of TRC105 with Nexavar in patients with hepatocellular cancer were presented by the National Cancer Institute at GISCO in January 2015. 3 of 11 patients or 27% treated recommended Phase II doses of TRC105 at 10 or 15 mix per kilogram every 2 weeks demonstrated partial responses by RECIST. In the setting with the expected partial response rate of Nexavar alone is 2%.

Updated data from the dose escalation and Phase II portions of the study of TRC105 and Nexavar in patients with advanced or metastatic hepatocellular cancer have been accepted for presentation at ASCO. There will be an additional TRC105 presentation at ASCO of data from the dose escalation and expansion Phase I study of TRC105 and Votrient in patients with advanced or metastatic soft tissue sarcoma.

Several patients in this study have experienced tumor reductions and the patient with angiosarcoma has an ongoing complete response to treatment. A Phase II trial of [STS] patients treated with TRC105 and Votrient is now enrolling and the top line data including the primary endpoint of progression-free survival stratified by biomarker expression are expected by end of this year. Assuming the biomarker expression correlates with efficacy, our plan would be to use the biomarker as the basis for selecting patients for a pivotal Phase III study.

TRC105 is also being studied in a randomized controlled trial with Avastin in glioblastoma sponsored by the National Cancer Institute that includes more than 50 sites in United States. Part 1 of the trial was a dose escalation study of TRC105 in combination with Avastin that completed enrollment in January 2014. In Part 2 of the trial, 86 glioblastoma patients who have received chemotherapy and radiation therapy and have not been treated previously with Avastin or another VEGF inhibitor are expected to be randomized to receive TRC105 and Avastin or Avastin alone.

The primary endpoint of this trial is progression-free survival and we expect the National Cancer Institute will have top line data in mid-2016. We consider our initial indications of renal cell cancer, sarcoma, hepatocellular cancer and glioblastoma attractive because the endpoints for regulatory approval may be attained more quickly than endpoints for other indications. We expect top line data in each of our ongoing Phase II multi-center trials by late 2015 or mid-2016 and if results are positive, we expect to initiate Phase III clinical trials in 1 or more initial indications by the end of 2016.

We are also pursuing fast track designation by DST for multiple indications and plan to pursue orphan drug status in 1 or more indications including sarcoma. We also plan to initiate 4 additional clinical trials of TRC105 in combination with the existing treatments later this year, an additional Phase II clinical trial in patients with hepatocellular cancer, a Phase I and II clinical trial in patients with breast cancer, a Phase I clinical trial in patients with lung cancer and a Phase I trial in patients with colorectal cancer.

Finally, TRC105 is being studied with Avastin and a compassionate use study of a single patient with metastatic choriocarcinoma. Data from this trial are expected later this year.

As I mentioned earlier, we are also looking to improve treatment in AMD. VEGF inhibitor drugs such as Eylea and Lucentis are the treatments of choice in AMD with $7 billion in annual sales and we believe represent a backbone therapy upon which to add additional treatment.

We have partnered global rights to develop our endoglin antibody in eye disease including AMD with Santen. For those of you who may be unfamiliar with the name, Santen is a global ophthalmology company with more than $1 billion annual sales and they co-commercialize Eylea in Japan. This is an important partnership for TRACON where we retain significant value in the form of near-term milestones and royalties.

We continue to actively support Santen's efforts to initiate clinical development of DE-122 in AMD later this year. As a reminder, DE-122 is the ophthalmic formulation of TRC105.

Outside of the oncology and ophthalmic areas, recent preclinical data indicate that endoglin is a key driver of fibrosis and that [antibody] endoglin have the potential to inhibit cardiac and liver fibrosis. We have designated a separate anti-endoglin antibody specifically for fibrosis that is undergoing additional preclinical testing at this time.

Turning now to our second product candidate, TRC102 is a noble clinical phase small molecule inhibitor of the DNA base excision repair pathway that causes resistance to alkylating and antimetabolite chemotherapeutics. We have amended our agreement with Case Western University last month to strengthen the intellectual properties state around TRC102. We license additional issued patents and patent applications covering combinations of TRC102 with certain approved chemotherapeutic agents as well as patents covering the use of biomarkers that may predict which patients are most likely to respond to treatment with TRC102.

In addition, we entered into a sponsored research agreement whereby Case Western will further assess biomarkers that may predict the activity of regimens combining TRC102 with specific chemotherapeutics including Alimta. TRC102 is currently being studied in combination with the approved chemotherapy drug Temodar in 2 Phase I clinical trials.

The National Cancer Institute presented clinical data from a Phase I trial of oral TRC102 and Temodar at AACR last month indicating the combinations are well tolerated. There was no pharmacologic interaction between the 2 drugs and TRC102 target concentrations were achieved. 2 patients had partial responses and the maximum tolerated dose has not yet been reached.

Case Western will report data on the combination of TRC102 and Temodar at ASCO that includes patients with tumors of the central nervous system. We previously reported Phase I data showing the combination of TRC102 with Alimta was also well tolerated and achieved 60% persistent stable disease responses.

Case Western previously reported Phase I data showing the combination of TRC102 and fludarabine was well tolerated and demonstrated signs of activity. TRC102 has been accepted into the CTEP Program of the National Cancers Institute and we expect the NCI to sponsor 4 additional trials. These include a Phase I and II clinical trial of TRC102 with Temodar in patients with glioblastoma, a Phase I clinical trial of TRC102 with Alimta and cisplatin, a Phase II clinical trial of TRC102 with Alimta in patients with [mesothelioma] and a Phase I clinical trial of TRC102 with Alimta, cisplatin and radiation therapy in patients with lung cancer.

As you can see, we have been and remained very active. We have made significant progress executing on our clinical development plan and all this progress has been carried out in a cost-effective manner to the TRACON clinical operations team that manages trials without the high cost associated with outsourcing to a Contract Research Organization or CRO.

In addition, our collaboration with the National Cancer Institute allows us to broaden development for both of our clinical stage assets beyond 1 or 2 lead indications. Our successful IPO and concurrent private placement completed in February raised gross proceeds totaling $41 million.

These funds together with proceeds from our $27 million financing in September 2014 put the company in a very strong financial position to complete a number of ongoing and future activities. These include the 5 ongoing Phase II studies of TRC105, support for manufacturing activities are required for regulatory approval, initiation of Phase III clinical developments, initiation of additional trials of TRC105 in large market oncology indications, providing TRC102 for study in clinical trials sponsored by the National Cancer Institute and Case Western and pursuing additional programs addressing important unmet needs including the development of antibodies endoglin for fibrosis. We also continue to evaluate product candidates for in license that will leverage the cost effective internal operations capacity at our company.

At this time, I will turn the call over to Patricia Bitar, our Chief Financial Officer who will give you an update on our financials.

Thank you Charles and good afternoon everyone. As Charles mentioned, we significantly strengthened our financial position with the successful completion of our IPO and concurrent private placement in February that raised gross proceeds of $41 million.

For the quarter ended March 31, 2015, TRACON reported collaboration revenue of $1.1 million compared to $400,000 in the first quarter of 2014. The increase was due to the Santen agreement being signed in March 2014.

Total operating expenses in the first quarter of 2015 were $4.8 million compared to $1.7 million for the first quarter of 2014. This increase reflects higher expenses in both R&D and G&A. Research and development expenses in the first quarter of 2015 were $3.8 million compared to $1.3 million in the first quarter of 2014. The increase was primarily the result of increased manufacturing expenses and clinical study related expenses for TRC105 and higher personnel cost due to increased headcount.

General and administrative expenses increase to $1 million in the first quarter of 2015 compared to $400,000 in the first quarter of 2014. This increase was mainly attributable to increased cost associated with becoming a publicly traded company and higher personnel cost due to increased headcount.

Our net loss for the first quarter of 2015 was $4 million compared to $1.4 million for the first quarter of 2014. Turning to the balance sheet of March 31, 2015, our cash and cash equivalents totaled $65.3 million compared to $35 million of December 31, 2014.

Yesterday, we entered into an agreement with Silicon Valley Bank to revert to interest-only payments on our approximate $8 million of debt outstanding until July of 2016 with the possibility of a 3-month extension with the delivery of favorable Phase II clinical trial results. In addition, we have $2 million available for additional borrowings through December 31, 2015.

The maturity date of the amended agreement is December 2018. With this, we expect our current resources to be sufficient to fund our currently planned operations for at least the next 18 months.

And with that, I'll turn the call back over to Charles.

Thank you Patricia. As we noted, we expect to have a significant milestones in the near future including multiple ASCO presentations. These include Phase I clinical results for TRC105 with Votrient in sarcoma, Phase I and II clinical trial -- clinical results for TRC105 with Nexavar in hepatocellular cancer and Phase I clinical results for TRC102, our second clinical stage asset in combination with Temodar.

Later this year, we expect an [I&D] filing for DE-122 for the treatment of AMD by our corporate partner, Santen. We are also pursuing fast track and orphan drug designation by the FDA for TRC105 in 1 or more indications and expect to receive [these designations] before the end of this year.

We also expect to initiate -- We also expect initial Phase II top line data from our ongoing trial of TRC105 and Votrient by yearend including the key endpoint of progression-free survival stratified by biomarker expression as well as data from our single patient compassionate use trial of TRC105 and Avastin in choriocarcinoma.

In summary, I appreciate the support of our investors during an exciting early 2015 and look forward to reporting updates regarding our significant upcoming milestones. I'm confident we have the resources to deliver on our development and business plans to the benefit of shareholders and patients alike. With that, we will be happy to answer your questions.

Thank you.

(Operator Instructions)

Ladies and gentlemen if you have a question at this time, please press star followed by the number 1 key on your touchtone telephone. If your question has been answered or if you'd like to remove your line from the queue, you may press the pound key.

Again, if you do have a question, please press star and then 1 at this time.

Our first question comes from the line of Chad Besser from Needham & Company.

Chad, your line is open. Could you check your mute button?

[Base], can you hear me now?

Hi Chad. Charles of the TRACON team.

Hi. Great. Thanks. Sorry about that. Thanks for taking my question. Charles, you know, to date you, you know, got an awful lot done amazingly efficiently from a -- from a capital standpoint of course as you choose programs to move in Phase III this probably only so much -- only so much that can be done in terms of containing expenses. With 4 lead programs in the sarcoma first, but RCC, HCC and glioblastoma pretty quickly on their heels with data that, you know, could potentially give you an idea what you wanted into Phase I to move into Phase III with each of those and you're saying 1 or more in 16, can you just walk us a little bit through what the -- the kind of key decision points are, you know, as you -- as you read out that date and obviously it will be -- it will be dated dependent, but you know, what the key points in time were when you need to make decisions about things and then, you know, 1 or more Phase III trials, I mean what -- what really is a practical limit let's say all of these look -- look fantastic, I mean how much can you really expect to get done next year in terms of Phase III initiations.

A great, great question Chad. I appreciate -- I appreciate the question. So you know we do have a bold vision for the drug and the drug does have a large potential in that it has the potential to build upon any approved VEGF inhibitor. You know the initial indications you point that out before the initial one that will be -- the first read out would be sarcoma and, you know, we believe that would be the first stage indication predicated on the clinical data with the note that the clinical data also incorporate or that Phase II trial incorporates the biomarker strategy, which I think will increase our chances to move forward into a Phase III trial.

To support that, you know, we're in the process of scaling up manufacturing so that we can support multiple Phase III studies as an important caveat as we discuss the clinical programs. It's kind of in the background of CMC aspect of -- of TRACON and that's a significant [standard] for us as we disclose in our S1 moving forward this year.

Following the initial sarcoma Phase II data, which we hope will be sufficient to push us into a Phase III trial, you know, the other indications that could be very interesting include choriocarcinoma. It's a single-patient study, but it's a tumor type like angiosarcoma for example we have [dense] endoglin expression where you potentially have a much more responses to subtype of tumors that could also potentially allow for Phase II development in a shorter timeframe.

With respect to the mid-2016 timeframe, as you noted there'll be several data points and the most important I think are randomized data with renal cell and also randomized data with respect to -- to liver cancer. Those will be data driven in terms of our decision moving to Phase III, but I would point out the fact that our NCI collaboration does give us flexibility beyond the flexibility that's inherent in our own clinical operations capabilities namely that we can run Phase II trials, but also potentially NCI can support other Phase II trials in a manner very similar for example to the way the NCI supported Avastin development whereby Genentech sponsored trials, but an NCI sponsored (inaudible) many of the Phase II trials that were up [screens] for label expansion of Avastin so our view is that we will continue to evaluate each indication on a data-driven basis and if the data drives us to Phase III, we will look to execute a Phase III trial based on our resources or potentially collaborations to the NCI.

Great thanks and, you know, good luck for the date at ASCO yearend and in the next year.

I appreciate that. Thank you.

Thank you and our next question comes from the line of Tom [Shrader] from [Stifel].

Good afternoon. Congratulations as well. It's a remarkable going on for a little company I had to say. To Chad's question so GBM NCI is likely to pick up Phase III, is -- is hepatocellular the other one where they're most likely to pick up -- pick up those trials?

First of all, Tom thanks for your questions. Good to hear your voice and I think it's really indication by indication. I mean the fact that NCI is already doing the GBM study as a Phase II sponsor I think that would [pass] the data, I think they would be potentially very interested in moving that forward into Phase III.

I also think the fact that NCI is strongly sponsoring the hepatocellular cancer trial also would make it logical that they may want to potentially sponsor a Phase III trial, but I would point out that they could potentially sponsor any Phase III trial of the drug and that for instance could include Phase III studies that we predicate upon some of the additional trials to start this year in some of the larger tumor types so there's no restriction with respect to what they potentially would be interested in funding and also no guarantee. It really would be data driven and we hope it will be similar if you will to the way they supported the Avastin franchise if you will based on positive Phase II data.

So you would get Phase II data and then you would apply, what's the -- what's the time course for applying and hearing?

You know we have the advantage that the -- that the TRACON Program TRC105 is already we have an established [crater] with the NCI. So with respect to additional data, we would directly discuss with the NCI future trials and that's a formal process that would be better through the NCI. In addition to that, the NCI will accept letters of intent from external investigators for additional trials, but with respect to the [crater] the big advantage is that we already have a -- an arrangement with the NCI that would facilitate discussions in terms of further clinical development.

OK and I have a handful of little questions.

Sure.

How much more HCC data are we going to see at ASCO? We've seen 13 patients. The trial done, will we see all whatever it was 23 or?

Yes, we don't have access to that [answer. I guess it's an] inside abstract, you know, our expectation is we'll see additional Phase II data whereby patients especially will be treated at the 15 mix per kilo every 2-week dose level, which is the recommended Phase II dose in that trial. I don't think we'll see an additional 23 Phase II patients, but we do expect to see more patients than were presented at the GI ASCO Conference in January.

OK and then if you can on DE-122 so you're going to file an [I&D], is the first step say -- is Phase I in that indication healthy patients and would it be monotherapy?

The Phase I we anticipate will be in patients with AMD.

OK.

And we do anticipate that with patients who will be treated in the context of a VEGF inhibitor. That does not mean necessarily simultaneous injection in the first trial, but they will be treated in the context of receiving a prior VEGF inhibitor.

OK and it would be presumably Eylea because that's the 1 they control or is that still up in the air?

I think it potentially especially for Phase I could be very broad in terms of what the previous or concurrent VEGF inhibitor treatment would be.

OK and then if I can switch to TRC102, which I don't think we talked about enough, this case cancer center trial, it looks almost identical to the AACR trial, is that correct? Just more all [commerce] on tumor data.

I think the big difference is -- is that the oral TRC102 terminal trial presented at ACR did not address patients with CNS disease whereas the case cancer center, Case Western trial that will be presented at ASCO does include patients with CNS disease, which I think is important because 1 of the key Phase II studies that the NCI plans to start is the glioblastoma trial, Temodar plus TRC102.

OK and on most -- so the 4 trials, when do you think they would start and how long till we'd see some data?

Yes, I hope would be that they would start this year and then in terms of data, we do think the data is hard to predict exactly when it will be available. I would say in general it would be after the important endpoints we talked about with TRC102 in mid-2016.

OK and the last question I promise. Is TRC102 is that potentially another biomarker drug? Is it reasonable to look at [topo II] levels?

You know TRC102 is another potential biomarker drug. With respect to [topo II], that's 1 option. The 1 option -- The path [where it's for] in most detail currently is the first step and the basic decision [will clear our] pathway is -- is through the action of an enzyme called [d-glycosylase].

Yes.

And patients that [express d-glycosylase] presumably will be resistant to the companion chemotherapy as a single agent whether it's Alimta for instance, whether it's Temodar and so profiling tumors with respect [d-glycosylase] levels may select patients that will be most responsive to adding TRC102 on to that companion chemotherapy and that for instance is -- is the prime focus of the sponsored research that we're currently performing with Case Western that we referenced in the call.

And does glioblastoma make the most sense there because you'll have the tumor?

Glioblastoma makes sense. You know I think other tumors were Alimta is used standard of care especially versus first-line lung cancer where you should have sufficient tumor to make that determination also would make sense.

All right. Thank you very much.

Thank you Tom.

Thank you and our next question comes from the line of [Matt Caplan] from [Lindbergh Balmain].

Hi. Good afternoon guys.

Good afternoon. Thanks for joining.

You bet. So can you give us a little bit more color on the Santen deal for AMD, its potential value for -- for TRACON?

Well let me, Matt at this point Casey Logan is our Chief Business Officer who has joined us on this call who can give you more details.

That will be great.

Hi Matt. This is Casey. So yes as we have disclosed in our -- our public filings that deal included a $10 million upfront payment, which as we noted was executed in March of 2014 and there's a total milestone package of $155 million of which $20 million of those milestones are, you know, development focused milestones, $52.5 million is related to the submission and approval of the drug and then 82.5 relate to commercialization activities for the -- for the drug and then the royalties range from the high single digit to -- low [ten] so we -- we think of it as a very nice robust deal that allows us to keep substantial portion of value.

OK. Sounds good. And then in terms of the combination of TRC105 with the VEGF inhibitor and how is that going to be administered? Is it going to be a co-administration or co-formulation or how -- how is it going to be done?

Great, great questions. You know currently with respect to studying the drug in combination with the VEGF inhibitor in AMD, it will be an intravitreal administration and [are be] with the initial trials would be co-administration if you will under the same anesthetic, which is very similar for example to how Fovista has been administered with respect to its -- its trials with -- with VEGF inhibitors; however, for the future, you know, co-formulation is clearly something to consider and is an antibody building upon for instance another protein biologic with respect to the formulation. You one would think that it should be something that's manageable and would be a great benefit to patients to make it a co-formulation and single injection if you will.

OK. Fair enough. Great. Thanks and congrats on -- on the progress during the quarter.

Thank you Matt.

Thank you and that concludes our question and answer session for today. I would like to turn the conference back over to management for any closing comments.

Thank you very much for joining us. I appreciate the questions and look forward to talking to you again in about 3 months.

Thank you. Ladies and gentlemen thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.

Thank you.

Thank you.