TRACON Pharmaceuticals Inc (TCON) 2015 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the TRACON Pharmaceuticals third quarter 2015 earnings conference call.

At this time, all calls are in a listen-only mode. After the speakers' 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 runaway, and their 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, 2014, subsequent quarterly report on Form 10-Q, 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 thank you for joining us today for TRACON's third quarter 2015 financial results and business update conference call. I will begin with an update on our pipeline and recent activities. Following that, our Chief Financial Officer, Patricia Bitar, will review our third quarter financial results. Finally, we will conclude by taking questions from call participants.

The third quarter was marked by progress across our entire pipeline. We presented data on TRC105, our endoglin antibody, and announced the IND filing by our partner, Santen for DE-122 and wet AMD, resulting a $3 million milestone payment to TRACON.

In addition, two weeks ago we orphan drug designation for TRC105 in soft tissue sarcoma. As well, enrollment continued in a number of clinical trials for both TRC105 and our second clinical stage product candidate, TRC102, which is the novel small molecule inhibitor of the DNA base excision repair pathway.

Let's begin with the detailed update on the TRC105. In September, we reported positive results from two oral presentations at the 18th World Congress on Gestational Trophoblastic Diseases in Bali, Indonesia. The presentation made by Dr. Kevin Elias and Dr. Neil Horowitz, both of the Dana-Farber Cancer Institute.

Dr. Elias highlighted the pre-clinical rationale for developing TRC105 in patients with gestational neoplasia, and further discussed translational biomarker data which demonstrated that elevated serum levels of endoglin and its key ligand, bone morphogenetic protein predict resistance to standard chemotherapy.

Dr. Horowitz then detailed clinical data from single patient [compassionate] use phase 2 trial that enrolled a 37 year old woman with persistent and unrespectable metastatic choriocarcinoma. As a reminder, choriocarcinoma is the most aggressive form of gestational neoplasia.

Prior to entering into the trial, the patient have progressed following multiple treatments including hysterectomy, five [para] chemotherapy regimens, and stem cell transplants.

The patient was treated with TRC105 in combination with Avastin and achieved a complete response in the fourth month of treatment that is ongoing as of the seventh month of treatment.

We expect Dr. Horowitz to enroll an additional highly refractive patient with choriocarcinoma and we plan to initiate a multicenter global phase 2 trial of TRC105 in gestational neoplasia before year end and will include treatment with TRC105 as a single agent, and a combination with Avastin.

We plan to discuss clinical development in [TRC105] with the FDA in the first half of 2016.

Choriocarcinoma is the second tumor type that expresses high levels of endoglins in which we have seen durable, complete responses following treatment with the combination of TRC105 and a VEGF inhibitor.

In June 2015, Dr. Steven Attia of the Mayo Clinic reported a complete response in two patients with angiosarcoma treated with TRC105 and Votrient. This data will be updated in an oral presentation at the Connective Tissue Oncology Society meeting in Salt Lake City on November 5th.

Going forward, we intend to initiate a phase 2 trial comparing the combination of Votrient and TRC105 to Votrient alone in angiosarcoma following discussions which we expect to have with the FDA in the first half of 2016.

Patient enrollment in each of our five TRC105 related phase 2 trials remains ongoing. And we believe positive data from each of these trials would allow us to proceed with phase 3 developments.

In each of the ongoing trials, TRC105 is being dosed in combination with an approved VEGF inhibitor, with the expectation of delivering topline data in the next six to 12 months. Two of these trials are randomized studies, and data from both trials is expected in late 2016.

The first is the TRACON sponsored phase 2 randomized [TRACSAR] trial in patients with clear cell renal cell cancer. This study compares treatments with TRC105 and Inlyta, to treat with Inlyta alone in patients who received one prior VEGF inhibitor.

A more detailed description of the TRACSAR trial design and updated data from the phase 1b portion of the study of the TRC105 and Inlyta will be presented by Dr. Toni Choueiri of the Dana-Farber Cancer Institute at the Kidney Cancer Association meeting in Miami on November 6th and 7th.

The second trial is the National Cancer Institute-sponsored phase 2 randomized trial of TRC105 and Avastin in glioblastoma.

We have also nearly completed enrollment of a 63 patient phase 2 trial of TRC105 and Votrient in soft tissue sarcoma. And expect to report topline data including the key endpoint of progression-free survival or PFS, stratified by tumor endoglin expression in the first half of 2016.

Note that this trial was amended to enroll a separate cohort of 13 patients with angiosarcoma that remains open for enrollment at this time.

In addition, we recently applied for [auto] drug designation for TRC105 in this indication.

In hepatocellular cancer, we plan to initiate a multi-centered phase 2 trial by the end of 2015 with the primary endpoint of overall response rate. The goal of this study is to reproduce the robust response rate of 40% reported by the NCI at ASCO 2015 in patients treated at the recommended phase 2 doses of TRC105 with Nexavar.

For comparison, this is a setting where the expected partial response rate of single agent Nexavar has historically been 2%. We believe that corroboration of the robust response rate reported by the NCI would justify the initiation of a phase 3 trial comparing the combination of TRC105 and Nexavar, to Nexavar alone in hepatocellular cancer.

In large marking indications, we initiated a phase 1 trial of TRC105 in combination with Avastin and chemotherapy for the first line treatment of patients with lung cancer. Going forward, we intend to initiate two additional trials of TRC105 in combination with existing VEGF inhibitor treatments in 2016. These include a phase 1/2 trial of patients with breast cancer, and a phase 1 trial of patients with colorectal cancer.

We expect topline data in each of our ongoing phase 2 multicenter trials in 2016. And if results are positive, we expect again dosing patients in phase 3 trials in one or more indications beginning with angiosarcoma in the second half of 2016.

In order to ensure we remain on track with this development timelines and in conjunction with our manufacturing partner, Lonza, we're continuing manufacturing activities that will support the initiation of phase 3 trial and subsequent submission of a marketing application.

Beyond oncology, we believe that there's a significant opportunity for our technology to improve treatment options for patients with wet AMD. VEGF inhibitor drugs such as Eylea and Lucentis are the current standard of care treatments in wet AMD and we believe they represent a backbone therapy upon which anti-endoglin therapy could be added.

The market opportunity here is significant, as annual sales of VEGF inhibitors for ophthalmic indications have reached $7 billion. We have partner global rights to develop our endoglin antibody in eye disease, including wet AMD, with Santen.

Santen filed an IND with the FDA in June 2015 to initiate clinical development of DE-122 in wet AMD. Importantly, the filing of the IND triggered a $3 million milestone payment from Santen to TRACON, which we received in July. As a reminder, DE-122 is the ophthalmic formulation of TRC105.

Our antibodies, endoglin could also have potential beyond oncology and ophthalmology. Recent preclinical data indicate that endoglin is a key driver of fibrosis and that antibodies to endoglin have the potential to inhibit cardiac and liver fibrosis. We have designated a separate endoglin antibody specifically for fibrosis that is undergoing additional preclinical at testing this time.

Turning now to our second product candidate, which has commenced phase 2 clinical development. TRC102 is a novel clinical stage small molecule inhibitor for the DNA-based excision repair pathway. Activation of this pathway causes resistance to alkylating and antimetabolic chemotherapeutics and its inhibition may result in improved outcomes. We've reported positive clinical data combining TRC102 with Fludara at ASH in 2014, and with Temodar at AACR and ASCO in 2015.

A dual-arm NCI sponsored phase 1/2 trial consisting of a phase 2 cohort of TRC102 with Alimta in patients with mesothelioma; and a Phase 1 cohort of TRC102 with Alimta and Cisplatin with patients with cell tumors is currently accruing. Ultimately, we expect to enroll 58 patients in this trial.

We also expect two additional trials funded by the NCI to begin within the next six months. These include the phase 2 trial of TRC102 and Temodar in with patients with glioblastoma, and a phase 1 trial of TRC102 with Alimta, Cisplatin and radiation therapy in patients with lung cancer.

As you can see, we have been and remain quite active on the clinical development front. Our progress continues to be achieved in a cost-effective manner through the TRACON clinical operations team that manages domestic trials without the significant cost associated with outsourcing to a contract research organization. In addition, our collaboration with the NCI allows us to broaden the development path for both of our clinical stage assets beyond one or two lead indications.

Our financial position remains strong and we anticipate our current cash resources will be sufficient to complete the five ongoing Phase 2 studies of TRC105, to support manufacturing activities at Lonza required for regulatory approval, to initiate Phase 2 clinical development, to initiate additional trials with TRC105 in large market indications, to provide TRC102 for study in clinical trials sponsored by the NCI, and to pursue additional programs addressing important unmet medical needs, including the development with antibodies to endoglin for fibrosis.

We also continue to evaluate product candidates to potentially in-license and intend to be opportunistic in this regard. Ideal candidates would 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 provide an update on our financials.

Thank you9, Charles, and good afternoon, everyone.

TRACON reported collaboration revenue of $1.2 million for the quarter ended September 30, 2015, and $6.5 million for the nine months ended September 30, 2015, compared to $1.1 million and $2.6 million for the comparable periods of 2014.

The increases were results to the Santen agreement being signed in March 2014 and a $3 million milestone that was triggered by Santen's filing of an IND in wet AMD June 2015.

Total operating expenses were $7.4 million for the quarter ended September 30, 2015, and $19.1 million for the nine months ended September 30, 2015, compared to $2.8 million and $6.5 million for the comparable periods of 2014. These increases reflect higher expenses in both R&D and G&A.

Research and development expenses were $5.9 million for the quarter ended September 30, 2015, and $15.1 million for the nine months ended September 30, 2015, compared to $2.3 million and $5.1 million for the comparable periods of 2014. These increases were primarily the result of increased manufacturing expenses and clinical study-related expenses for TRC105 and higher personnel costs resulting from increased headcount.

General and administrative expenses were $1.5 million for the quarter ended September 30, 2015, and $4 million for the nine months ended September 30, 2015, compared to $600,000 and $1.4 million for the comparable periods of 2014. These increases were primarily attributable to increased costs associated with becoming a publicly traded company and higher personnel costs resulting from increased headcount.

Our net loss was $6.4 million for the quarter ended September 30, 2015, and $13.4 million for the nine months ended September 30, 2015, compared to $1.9 million and $4.3 million for the comparable periods of 2014.

Turning to the balance sheet, at September 30, 2015, our cash and cash equivalents and short term investments totaled $57.7 million compared to $61.2 million at June 30, 2015. We expect our cash front to increase in the fourth quarter due primarily to manufacturing activities and we continue expect our current resources to be sufficient to fund our currently planned operations for at least the next 12 months.

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

Thank you Patricia.

As we noted, we expect to have a significant number of potential value-creating milestones in the near future. These include updated results from a Phase 1b trial of TRC105 in Votrient and sarcoma; updated results from a phase 1b trial of TRC105 and in [light immunocell] cancer; determination of orphan drug designation by the FDA for TRC105 in one or more indications before the end of the year; initiation of multiple TRC105 clinical trials in hepatocellular cancer by the end of the year; as well as the initiation of additional TRC102 trials funded by the NCI.

We also expect initial Phase 2 top-line data from our ongoing trial of TRC105 and Votrient in sarcoma by the first half of 2016, including data from the key endpoint of progression free survival in sarcoma subtypes that highly express endoglin, including angiosarcoma.

I appreciate the support of our investors during an exciting first nine months of 2015 and look forward to reporting further updates regarding our upcoming key milestones. I'm confident that we have the resources in place to deliver on our development and business plans for the benefit of shareholders and patients alike.

Finally, I would like to take this opportunity to mention that we will be hosting an investor meeting in New York on November 13th, that will feature key opinion leaders in the area of sarcoma, Dr. Steven Attia of the Mayo Clinic and Dr. Robert Maki, Chief of the Sarcoma Service at Mt. Sinai. Dr. Attia and Dr. Maki will provide their thoughts on the potential for TRC105 and sarcoma.

With that, we will be happy to answer questions.

(Operator Instructions)

Our first question comes from the line of Tom Shrader with Stifel. Your line is open.

Good afternoon and congratulations on very busy quarter. I just had a quick question on the sarcoma package now, I guess. So is it -- because of the NGO addition, it's delayed, or what -- was it -- is that what's going on? Is the rest of the data complete? Or can you just give us a sense of -- I know you've added a cohort and I think the timeline is pushed out a little bit. So can you just -- will we see all the data at the same time?

No, great question, Tom. And thanks for the question.

So our initial soft tissue sarcoma trial was the 18-patient phase 1b data that we'll update at CTOS in next week -- or excuse me, this week, on Thursday. And then the second portion of the trial is the phase 2 trial, 63 patients, that is nearly completely enrolled. And that's the dataset that we anticipate delivering data in the first half of 2016. And part of that plays into the work needed to correlate the progression-free survival with the endoglin expression on the tumor types which is being done through our collaboration with Mayo Clinic.

Beyond that though, there is the additional cohort that's been added, 13, that we will report from time to time if you will. That cohort time really serves as a way for patients with angiosarcoma to get the drug, because we're waiting, as we talk about the start of phase 3 trial anticipated for 2016. But until that trial starts, there will be no place for those patients to go given the phase 2 trial is nearly completely approved.

So that 13 patient additional cohort really is a way for patients with angiosarcoma to get the drug, we could deal with some important add to investigators given response to what we've seen to date.

Okay. And then just kind of a subtlety at sarcoma, I think most things are approved for all sarcomas, correct? They're not differentiated. Do you expect to run into that where endoglin expression will run with clashes of sarcoma? Or do you expect the expression will be kind of independent of class? I'm just wondering if you will be getting into a new labeling ...

Yeah, it's interesting how -- it's a great question. It's interesting how things will play out.

For [pazopanib] for example is approved in soft tissue sarcoma, but it's approved in many subtypes but not every single one; for example they're not approved in liposarcoma, they chose not to include that population in their pivotal study. So there are drugs that are approved in say the majority of soft tissue sarcoma, but not in every subtype. And so that delineation has been seen previously with other drugs in this indication.

You would expect that TRC105 and endoglin expression. Yeah, I think what's been important for us thus far is we knew going into this trial that angiosarcoma would be subtype of sarcoma that densely expressed endoglin in the majority of cases, and that's also been the sarcoma where you've seen some very impressive durable complete responses.

With respect to other sarcoma subtypes, from the preexisting data, profiling numerous types, we know that endoglins express on a tumor types of certain proportion of those subtypes, but not in every single case. And so that is why the stratification of progression-free survival by endoglin tumor expression which is part of the phase 2 trial will be so important. It may allow us to identify other sarcoma subtypes beyond angiosarcoma that are particularly responsive to therapy, and it may also allow us to identify that endoglin expression on the tumor is predictive of response which would have the other -- the additional advantage as you -- of using that potentially as a biomarker to select patients for a phase 3 trial of general soft tissue sarcoma.

Right, Okay. And a little quickly on the Santen trial. Is that monotherapy, or is that with the VEGF drug? And you have -- the [support] clinical data suggests that it will work as monotherapy, or is this -- is it -- what I'm really asking is, is this a straight, safety trial?

Right. Yeah, no, great question, Tom.

So this is primarily a safety trial. But the drug is given to patients that will be receiving VEGF inhibitor therapy, and some of the details posted on clinicaltrials.gov to get further detail. It was not anticipated that it will be given as a concurring injection, given it is a safety trial. But it will be given if you will on the backbone of VEGF inhibitor therapy. And that we feel it's the preferred path. There is preclinical data indicating [series one to five] is active as a single agent in preclinical models of AMD. However as with oncology, we believe the best way to develop this drug is in combination with established VEGF inhibitors both from a biologic rationale, but also from a commercial rationale.

Okay, perfect. Thanks a lot.

Thank you, Tom.

(Operator Instructions)

Our next question comes from the line of Matthew Andrews with Wells Fargo Securities. Your line is open.

Hey, good afternoon. Thanks for taking a couple of questions.

So Charles, are we going to see anything -- any data related -- any initial data related to the 63 patient STS cohort and anything on those additional 13 angiosarcoma patients on Thursday?

Two, I realize that the data set from ASCO is only from 18 patients and there are different subtypes represented there. But for the three patients who remained on study, at least through the summer, have you identified any similarities across these patients that may explain their responses?

And then lastly, for the planned choriocarcinoma study, is this pivotal or do you expect you're going to have to run a follow up study once you identify the right dose for the combination if that's how you perceive? Thanks.

They're great questions, Matt. Thank you.

Yeah, at CTOS, we will update primarily the experience in the 18 patients from the phase 1b trial. And as part of that update, you will look at the general PFS across different histology to see if potentially histology predicts response. But we'd also remind that, you know, the audience that importantly the phase 2 -- so you'll have a much larger sample size to allow potentially identifying response to histology, and also add the advantage of the immunocytochemical analysis to look at endoglin expression on tumor as a way of potentially predicting responsive patients.

We will however given the complete response to reported ASCO update with respect to the angiosarcoma patients treated thus far in the phase 1 and phase 2 portions of the trial.

With respect to choriocarcinoma, we are planning a multicenter, global phase 2 study. We will plan to discuss this trial with the FDA. We -- it's possible this trial could be registration-enabling given that it is a very rare disease. But we cannot comment just go beyond that until we discuss the trial with the FDA. It's possible a second trial would be needed beyond the initial phase 2 trial. We just don't have that clarity at this time.

Okay. And then when may we know what the study size will be for choriocarcinoma? Will you announce that when the study actually opens?

We will, Matt. Once the final protocol is distributed to site, so we'll post in on clinicaltrials.gov and the final study size will be published at that time.

And then anything -- any comments you can make relative to similarities amongst the three patients that were responding over the summer from the initial 18 patients at ASCO? Any general, I don't know, baseline characteristics across those patients that may suggest why they respond?

Yeah, I think, you know, we definitely have [kept] from long time responders. I think that's exciting for us and for the investigators seeing those patients.

Yeah, I think with 3 out of 18, it's still a little early to try this -- make those associations. I think once we have the full sample size of 18 plus 63 which will be a total of 81 patients, we will be able to better make those associations.

Okay, great. Thank you.

Yeah. Thank you for the question, Matt.

Our next question comes from the line of Debjit Chattopadhyay with ROTH Capital Partners. Your line is open.

Hey, thank you. Thank you for taking my questions.

First on choriocarcinoma. Do you think you need to, you know, validate the beta hCG [posse] for the drug diagnostic combination? Or beta hCG is a very widely used and available asset that you don't need to worry about from a label perspective?

Great point, Debjit.

Yeah, beta hCG fortunately is a tried and true test that has been used as the basis for assessing response in gestational neoplasia for years. And so it's a huge advantage we have it there. We can assess response test that was done in the current patients that we reported using beta hCG. It's a tried and true method. And albeit the need for instance for CT scans and sensory responsiveness population. So don't feel that that we will need to validate that test given it's widely used already to evaluate response in this disease.

So the potential [interval] study that's being planned for choriocarcinoma, is there any way to strengthen the study further other than just using beta hCG as a marker in terms of real hard clinical endpoints which would make that potentially a registration study?

Yeah, I think it's important that -- beta hCG, you know, is the hard clinical endpoint. You know, we do plan on assessing patients by CT scans as a secondary endpoint. But to be clear, it's important to understand, beta hCG is the clinical endpoint. Current patient is treated with chemotherapy who respond to chemotherapy by normalizing their beta hCG for example, they will be judged based on hCG response. And so they will stop there and be based on for instance normalization of beta hCG, and there would be follow up with beta hCG going forward to see if they relapse and require further therapy.

So it is a tried and true marker of responsive disease that is the gold standard.

And just a quick rehash of the anticipated study design here, so do you intend to start the patient first on Avastin, then if you don't see a rapid beta hCG normalization or a response, you move them to single agent TRC105, and if you don't see a response there, then you use a combination? That's the way to understand this going forward?

Yeah. It is a sequential design, Debjit. What our thought is, you know, Avastin has been studied in this disease previously. And if you look at the published literature, you know, there's no documentation of it causing dramatic activity in this disease. So our view is to start with TRC105 first given the dramatic activity we've seen in the patient that we reported at the World Congress.

If the patient is not responding to single agent TRC105, we would then try single agent Avastin. And if there's no response there, then we'd use the agents together concurrently.

But I think the consensus of our investigators is trying TRC105 as a single agent given how densely and it expressed on choriocarcinoma and given the dramatic response that you've seen in the absence of prior activity of Avastin in this indication.

Great. And one last stuff, question. Did you update the potential timeline for the [exited] combination and [RCC]? And how do you see the space evolving given the PD-1 approvals, and all the other noise that's happening in the first and second line settings?

Right. We have updated the delivery of data in the randomized space to track our trial, as well as the randomized [GBM] trial to late 2016.

PD-1 inhibitors will make an impact in the renal cell cancer. There's no question about it. And we do feel that we're positioned with Inlyta which is approved following prior therapy in renal cell cancer as a second line agent, takes into account what we predicted as the inevitable acceptance of PD-1 inhibitors for renal cell cancer.

We feel PD-1 inhibitors will be used at the first line setting. They may be used in combination with the VEGF inhibitor where we feel the patients have progressed on VEGF inhibitors and PD-1 inhibitors where they're given sequentially or given together. Will be great candidates to take Inlyta. And will be great candidates to take Inlyta and approve the TRC105 as well.

I would want to point out in the phase 1b trial, we had five partial responders in that trial with 17 patients treated. Two of those patients progressed with not just VEGF TKI therapy, but also progressed on a PD-1 therapy. So we have far evidence that Inlyta and TRC105 is active in patients who progressed on VEGF and PD-1 inhibitors. And so if they adopted this first line of standard of care, we feel very confident we'll remain in a good position treating those failures with Inlyta and TRC105.

Just one more thing, the Santen program for wet AMD, pretty significant number of patients become eventually resistant to both Eylea and Lucentis. So the question is are you thinking about enrolling a maybe a separate cohort in the safety study or follow up on once you have those established, patients who are already resistant?

Yeah, I think that design really needs to be further discussed by Santen in terms of how the phase 2 design. You know, my general view on patients treated with Lucentis and Eylea first line is, you know, some patients are very well in a therapy, the patients especially have very -- had a lot of edema in the macula. You know, they'll respond quite well many times to Eylea or Lucentis.

Several patients will not, and they may have, you know, edema but they may also have other things going on in the eye that require additional therapeutics.

I think where you address your therapies is a question in phase 2 development. You know, some companies have not stratified it because [there is a single patient] when they respond to first line VEGF inhibitors, whether they don't. So there's a lot of potential trial designs to think about and really that would be Santen's call as they move into Phase 2.

Thank you so much, Charles. Good luck.

Likewise. Thank you Debjit.

Thank you. (Operator Instructions)

Our next question comes from the line of Matthew Andrews with Wells Fargo Securities. Your line is open.

Hey, thanks for a couple of follow ups.

So Charles, should we expect any updates from NCI on the hepatocellular carcinoma study for 105 plus Nexavar? I have my notes. Essentially they're being updated later this year from that phase 1/2.

And then secondly, for your soon to start HCC study, what is the dose for 105 going to be? Is it 10 milligrams, or 15? And the reason I asked is because the 15 milligram data from earlier this year would suggest that maybe a little bit more efficacious than 10 milligrams. Thanks.

Thanks Matt. Appreciate the questions.

And NCI continues to roll into the ongoing phase 1b/2 trial. You know, our expectation is that GI ASCO would be a logical place for them to update the data in January 2016.

With respect to our home multicenter phase 2, for hepatocellular cancer trial, we will be dosing at 15 [milligrams] in combination with Nexavar which is the same dose that was the top dose of cohort use in the NCI trial where they did see very robust response rate.

Got it, thank you.

Thank you.

Thank you. And I am showing no further questions at this time. I'd like to turn the call back to Dr. Theuer for closing remarks.

Thank you. We want to thank the call participants for their time, and thanks for the questions as well. Have a nice day and we look forward to speaking with you again soon.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.