TRACON Pharmaceuticals Inc (TCON) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals First Quarter 2016 Earnings Conference Call. At this time, all participants 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 runway; and our developmental plans and strategy. These statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2015, 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 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 First Quarter 2016 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 financial results for the three months ended March 31, 2016. Finally, we will conclude by taking questions from call participants.

Since the beginning of 2016, we have achieved a number of key milestones across our entire pipeline. We are particularly excited about a [recent] receive of orphan drug designation from the European Medicines Agency or EMA for TRC105 in soft tissue sarcoma. The EMA designation complements the orphan drug designation we received from the FDA earlier this year. These designations will allow us to work closely with U.S. and European regulators as we implement TRACON's initial Phase 3 trial in patients with angiosarcoma. As a reminder, we expect to begin this study later this year.

With that, let's begin with the detailed update on TRC105. Because our product candidates have broad potential, TRACON is executing a tiered development strategy. In order to potentially provide a more rapid and cost-effective path to approval and commercialization, we have focused our initial development efforts on orphan drug indications. Importantly, we have seen encouraging signals in patients with both angiosarcoma and choriocarcinoma, and we remain on-track to initiate global studies that have the potential to be registration enabling in these indications this year.

Next, in our tiered development strategy, our mid-size market indications were short time to event endpoints. We currently have multiple Phase 2 trials ongoing in these indications including kidney and liver cancer, and expect data readouts in 2016 that could enable further Phase 3 developments.

Finally, we have begun exploring large indications and initiated dosing of TRC105 in lung cancer patients in February and in breast cancer patients in May. We believe this tiered drug development approach will help us achieve our goal of maximizing the commercial potential of TRACON's TRC105 oncology franchise while minimizing your term cost.

We will have two TRC105 related presentations at ASCO in June. The first presentation will focus on soft tissue sarcoma. We will present updated data on the initial five patients in angiosarcoma, a sarcoma subtype known to highly express endoglin, evaluated for response in a Phase 1/2 study that initially enrolled 81 soft tissue sarcoma patients. We previously reported that as of February 18, 2016, all five angiosarcoma patients had radiographic tumor reductions. Median progression-free survival or PFS for this subgroup was at least 9.3 months. And two patients demonstrated durable complete responses by RECIST that were ongoing at weeks 45 and 75. We also expect to present data from additional patients currently enrolling in a 13-patient angiosarcoma specific cohort that was added to the Phase 1/2 study.

Given the activity of the combination of TRC105 and Votrient seen in angiosarcoma patient's to-date, we were planning a Phase 3 study of at least 124 patients that will utilize and adapt the design that will allow for the enrollment of as many as 200 patients. The initial sample size of 124 patients is anticipated to provide 80% power to detect a 67% improvement in PFS, assuming an output of 0.5. We expect the trial will enroll over two years and provide data that in 2018 that if positive should be registration enabling.

At ASCO, we also expect to report PFS stratified by tumor endoglin expression in the 76 patients with sarcoma subtypes other than angiosarcoma enrolled in the Phase 1/2 trial. These incremental data will include a patient with undifferentiated pleomorphic sarcoma who I previously reported durable complete response ongoing at 51 weeks of treatment. For comparison, no complete responses were reported in 388 sarcoma patients treated with[single-agent] Votrient in its Phase 2 and pivotal Phase 3 trials. If we determine that tumor endoglin expression correlates with PFS, it may allow expression to be used as a biomarker for enrollment of soft tissue sarcoma patients into a separate Phase 3 trial.

Finally, at ASCO, we expect to report overall survival data from a single arm study of TRC105 in combination with Avastin in glioblastoma patients who progressed on prior Avastin treatment. As a reminder, we have seen a durable complete response on treatment of patient with choriocarcinoma, another tumor type known to highly express endoglin, treated in a single patient protocol with the combination of TRC105 and Avastin.

An update on this patient was presented in March 2016 at the Society of Gynecologic Oncology Annual Meeting by Dr. Kevin Elias of the Dana-Farber Cancer Institute. The patient developed a complete response at month four treatment that remains ongoing more than one year following trial enrollment. Based on clinical activity and the high endoglin expression established in this tumor type, later this year, we intend to initiate a global Phase 2 trial with response rate as the primary endpoint in patients with gestational trophoblastic neoplasia, or GTN, which includes choriocarcinoma.

Patient enrollment in three other TRC105 Phase 2 trials in mid-sized market indications, two randomized and one open label, remains ongoing. The first randomized study is the TRACON sponsored Phase 2 TRAXAR trial in patients with clear cell kidney cancer. This study compares treatment with TRC105 and Inlyta to treatment with single agent Inlyta in patients who received one prior VEGF inhibitor. We currently expect initial data from this study to be available in late 2016, though the exact date will be dependent on the number and timing of progression events that occur.

The second randomized trial is the NCI-sponsored Phase 2 trial of TRC105 and Avastin in glioblastoma that has completed enrollment. And data are expected in late 2016. We believe positive data from these randomized trials would allow us to advance to Phase 3 development.

The third mid-sized indication trial is a multi-center Phase 1/2 trial in liver cancer patients with the primary endpoint of overall response rate. The goal of this study is to verify the robust 40% response rate that was observed in 10 patients treated at recommended Phase 2 doses of TRC105 with Nexavar that was reported by the NCI at ASCO in 2015. For comparison, this is a setting where the partial response rate of single agent Nexavar has historically been 2%. We believe the corroboration of the response rate reported by MCI will justify the initiation of a Phase 3 trial comparing the combination of TRC105 and Nexavar to single agent Nexavar in liver cancer.

Early this year, we also dosed initial patients in large market indication trials of Phase 1 trial TRC105 in combination with Avastin and chemotherapy for the first-line treatment of patients with lung cancer and the Phase 1/2 trial of TRC105 in combination with Afinitor and Femara for the neoadjuvant treatment of patients with breast cancer.

Finally, we also believe there is a significant opportunity for endoglin antibodies to improve patient options in areas beyond oncology such as wet AMD. For example, Eylea and Lucentis are the current standard of care treatments in wet AMD. And we believe they represent backbone therapies that could be improved upon by our endoglin antibody.

We have partnered global rights to develop endoglin antibodies in eye disease including wet AMD with Santen. Santen continues to recruit patients into a Phase 1/2 trial to the safety and bioactivity of DE-122 in refractory wet AMD patients. DE-122 is the ophthalmic formulation of TRC105.

Turning now to our second product candidate TRC102. TRC102 is a novel small molecule inhibitor for the DNA base excision repair pathway. Activation of this pathway triggers resistance to alkylating and anti-metabolic chemotherapeutics. As a result, inhibition of this pathway could lead to improved patient outcomes. The NCI will present safety, pharmacokinetic, pharmacodynamic and efficacy data from the Phase 1 trial of the combination of TRC102 and Temodar at ASCO including in patients enrolled in an expanded dose cohort. Additional NCI clinical trials of TRC102 are underway.

The NCI is currently enrolling a dual-arm 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 in patients with solid tumors. Ultimately, we expect a total of 58 patients to enroll in this trial. In addition, a Phase 2 trial of TRC102 with Temodar in 66 patients with glioblastoma was recently initiated.

Finally, we expect enrollment in a Phase 1 trial of TRC102 in combination with chemotherapy and radiation therapy in patients with lung cancer to begin in the second quarter. As you can see, we remain very active on the clinical development front and we look forward to a highly productive 2016 with multiple potential value-enhancing events including a number of key pipeline related milestones.

Importantly, we continue to achieve our progress in a cost-effective manner to the TRACON clinical operations team that manages domestic clinical trials without the significant cost or complexities associated with outsourcing to its CRO. Importantly, we are actively engaged in applying our highly efficient model to the European Union as well which will facilitate planned studies in angiosarcoma and GTN that maybe registration enabling.

Turning now to our preclinical studies. We recently completed preclinical studies of our endoglin antibodies in three fibrosis models in mice including models of chemically-induced liver fibrosis, chemically-induced pulmonary fibrosis, and a non-alcoholic steatohepatitis or NASH. In each study, one or more endoglin antibodies achieved a primary endpoint of the study compared to control. In the NASH study, the clinical candidate TRC205 significantly reduced the primary endpoint of non-alcoholic fatty liver disease activity score versus control and also reduced fibrotic gene expressions but did not significantly reduce the fibrotic area by visual inspection. We expect to report full data from each study at a scientific conference in the second half of the year.

While our clinical development activities are robust, TRACONs financial position remains strong. We continue to anticipate that our current cash resources were sufficient to complete. The five ongoing Phase 2 studies, the TRC105, support manufacturing activities at Lonza required for regulatory approval, initiate Phase 3 clinical development, and to pursue additional programs that address important unmet medical needs including the development of endoglin antibodies for fibrosis.

Beyond our internal pipeline we also continue to evaluate product candidates to potentially license and intend to be opportunistic in this regard. Ideal candidates would leverage the cost effective internal clinical operations capacity at our company.

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

Thank you, Charles, and good afternoon, everyone. TRACON reported collaboration revenue of $1.2 million for the quarter ended March 31, 2016, compared to $1.1 million for the comparable period of 2015. Total operating expenses were $7.5 million for the quarter ended March 31, 2016, compared to $4.8 million with the comparable periods of 2015. These increases reflect higher expenses in both R&D and G&A.

Research and development expenses were $5.5 million for the quarter ended March 31, 2016, compared to $3.8 million for the comparable periods of 2015. This increase was primarily as 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 $2 million for the quarter ended March 31, 2016, compared to $1 million for the comparable period of 2015. This increase was primarily attributable to higher personnel costs resulting from increased headcount and increased cost associated with operating as a public company for the entire 2016 quarter.

Our net loss was $6.5 million for the quarter ended March 31, 2016, compared to $4 million for the comparable period of 2015.

Turning to the balance sheet, at March 31, 2016, our cash and cash equivalents and short-term investments totaled $45.5 million compared to $52.2 million at December 31, 2015. We expect our capital 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 a significant number of potential value-creating milestones in the near future. These include multiple data presentations at ASCO -- first, updated data on durable complete responders and newly enrolled angiosarcoma patients from our ongoing Phase 2 trials of TRC105 in combination with Votrient in soft tissue sarcoma patients; second, overall survival data from a Phase 2 trial with TRC105 and Avastin in refractory glioblastoma patients; and third, Phase 1 data from the NCI-sponsored trials of TRC102 and Temodar.

Later this quarter, we expect to initiate dosing of TRC105 in a second trial in liver cancer, as well as to initiate dosing in an additional TRC102 trial funded by the MCI. By the end of the year we expect randomized Phase 2 data from kidney cancer and glioblastoma trials. Most importantly, later this year, we also intend to initiate trials at angiosarcoma and in GTN that, if positive, we anticipate will be registration enabling.

I look forward to provide further updates regarding our upcoming key milestones throughout 2016. I am confident that we have the right strategy in place to deliver on our development and business plans for the benefit of patients and shareholders alike. With that, we will be happy to answer your questions.

Thank you. (Operator Instructions) The first question is from Tom Shrader of Stifel. Your line is open.

Good afternoon. How are you, Charles?

Hi, Tom, great. Thanks for your questions. Thanks for calling in.

It's quite a mouthful you go through every time. So just a little bit on the choriocarcinoma, did you update that? Is that a still 30-patient trial? And can you just -- what's the difference between choriocarcinoma and GTN? Is one much bigger than the other or is most of it choriocarcinoma?

Yes, great question, Tom, yes. So, GTN is a general category of which the most aggressive form is choriocarcinoma which we anticipate will make up well over 90% of the patients enrolled in that trial.

Okay.

And to your point that is a Phase 2 multi-center trial we anticipate opening in the U.S. and in Europe with 30 patients enrolled with the key endpoint being overall response rate based on the impressive response you saw in the initial patient dose with TRC105 and Avastin.

And so, this is -- this would be -- is that a registrational trial? Would that be some sort of breakthrough approval? Or how are you thinking about that?

So in our scenario, we project that this trial will enroll and complete enrollment of delivery endpoint roughly in the same time frame as the randomized trial in the angiosarcoma. So our expectation would be that with randomized data and that being positive randomized data in angiosarcoma and an impressive response rate of GTN, that potentially you could file for dual approval, randomized data in one indication and impressive response rate in the second indication (multiple speakers) --

And you said you're piggybacking off the endoglin expression link?

Exactly right. That will include the strategy we have to discuss with regulators as well. In that regard, we've really been encouraged with the orphan drug designation we've received in sarcoma both now in the U.S. and the EU, and would expect to pursue that same path in choriocarcinoma or GTN as well.

Okay. And then to move to the other end of the spectrum. The breast cancer trial. So this is hormone positive, HER2- minus people present with non-metastatic disease, is that the patient group?

It is exactly right. These are hormone positive, HER2-negative patients with advanced breast cancer who are planned to undergo curative resection who will first get neoadjuvant therapy with the objection, the objective rather being pathologically response rate at the time of curative-type resection.

And rapamycin and some sort of letrozole, one of that class, is that standard of care?

It is standard of care for that population; the HER2-negative population that is hormone positive, exactly right.

And so -- I mean don't these women do very well? I mean what -- isn't it hard to see a signal here?

Yes, I think women who are treated with the two agents you recommend, you thought about, the Afinitor and Femara, do have a defined pathologically response rate and our goal is to improve that to about 70% by adding TRC105 to the mix. So they do have clear evidence of pathologically response in many cases but our goal is to improve that beyond what the historical data would suggest.

So it's not in the 90s? t is something you can improve on, the PCR as -- for the standard of care is 50%?

That's approximately correct.

All right, okay, perfect. Thanks a lot. Good luck.

Thanks Tom, appreciate your questions.

Thank you. The next question is from Chad Messer of Needham & Company. Your line is open.

Great. Thanks for taking my questions. I'll reiterate Tom's statement that a lot to keep track of in a good way. Just looking forward to ASCO. Can you may be frame for us what to expect out of the tumor endoglin expression from the STS trials? This is the 81-patients minus I guess the sarcomas. And remind me and I think I've known this in the past or maybe just forgotten, why in sarcoma we're particularly interested in looking by endoglin expression while that's not necessarily the case in some of the other tumor types?

I appreciate the question, Chad. So, the sarcoma has always been an indication of particular interest to us because it's a tumor where you see an expression of endoglin on the tumor vessels which is seen across every solid tumor. But in case of sarcoma, because it's a mesenchymal tumor, you also see direct expression on tumor cells given endoglin and mesenchymal stem cell marker.

And I think the key with studying sarcomas is understanding the heterogeneity of the disease. And if you can find a way to identify response to subtypes, you will have a chance of being much more successful. I think we've shown that for example to angiosarcoma. In a pre-existing study based on our archival tissue from patients not enrolled in this trial, for example, we saw definitively very high expression of endoglin RNA angiosarcoma patients, and now we've seen very impressive activity in that particular population.

Within the other sarcoma subtypes, we're profiling each tumor enrolled, each patient's archival tumor was enrolled in the trial for tumor endoglin expression. And we will correlate that with PFS which is the endpoint for the trail in the hopes that tumor endoglin expression may predict other histologies that will be particularly responsive to the therapy in the same way that angiosarcoma, for example, has been very responsive. We do expect that full data presentation as part of the ASCO data. So, we'll see not just angiosarcoma data with new patients enrolled in angiosarcoma specific cohort but also the general PFS for the entire non-angiosarcoma patient population stratified by tumor endoglin expression and histology.

And so where can we eventually be headed in sarcoma possibly to a future pivotal trial in sarcoma by endoglin expression? And then how would that data complement or add or expand what you're doing just in angiosarcoma?

That's exactly what we would push forward, so we're committed based on the impressive activity we've seen in angiosarcoma for a randomized Phase 3 trial that we discussed of Votrient with or without TRC105 in that sarcoma subtype. However, if we can identify the tumor endoglin expression or another specific histology is also particularly responsive to treatment with TRC105, that would be separate Phase 3 trial. And it could be predicated on that separate histology as the means for inclusion or could be predicated on tumor endoglin expression as the means for inclusion to that separate trial which can then be for instance general soft tissue sarcoma patients profile based on tumor endoglin expression as the basis for enrollment in that trial. But it could be very similar to -- the treatments could be very similar, certainly the same design, Votrient versus Votrient plus TRC105, which is looking at patients based on their enrollment, based on their tumor endoglin expression or histology.

So if this high endoglin, high endoglin expression on the tumor cells hypothesis that you've got good evidence for and are pursuing pretty aggressively here continues to play out, are there other areas to look that are not currently being contemplated in a clinical trial?

They definitely are, Chad. So, for example, GTN or choriocarcinoma is another tumor that's known to highly expressed endoglin tumor as well as vessels; melanoma is also in that category; germ cell tumors are also in that category; a certain segment of myeloma called plasmacytoma is also in that category, and then also certain leukemias were in that category. So, there are definitely other tumor types that you could explore based on tumor endoglin expression that may potentially be highly responsive to therapy.

Hematological as well, that would be something new for 105. And then maybe just a couple for Patricia. One is on R&D spend. It bumped up a lot in the fourth quarter and kind of backed down in 1Q. I know you've got guidance that you give on cash lasting basically through -- I guess you kind of line it up in terms of what trials you've committed to that you're able to pay for. But just as I think going through this year and into next, was there something unusual in 4Q, I guess is my question.

Yes, so like we talked about in February, 4Q had some manufacturing expenses in it. Quarter one, quite honestly, Chad, was a little lower than we expected, again due to some timing of some manufacturing expenses.

Okay. So but -- 4Q had some extra stuff in it, 1Q may be locked out and missed (multiple speakers) --

Exactly. Although -- yes. And so, like we said, we don't expect the quarters in 2016 to be flat. If you wanted to put a bookend around it, I would expect quarter one of 2016 to be the lowest of our quarters, and the highest of our quarters would be something slightly lower on quarter four of 2015.

Okay, I guess with all the trial starts and ongoing (multiple speakers) --

Yes, as you said, there's a lot going on around here.

I know that -- I've been amazed that we haven't seen things more like fourth quarter just in general, but I guess it speaks to the highly efficient mark, the highly efficient drug developments that you (multiple speakers) --

Absolutely.

And then the other thing, I didn't see anything in 1Q just based on share count, but I just wanted to check if you haven't done anything with the ATM to date, have you?

Correct, nothing with the ATM.

All right, great. Thanks, guys. Thanks for taking my questions and looking forward to ASCO.

Thanks, Chad.

Thanks, Chad.

Thank you. The next question is from Jim Birchenough of Wells Fargo. Your line is open.

Hi, good afternoon, this is [Nick] in for Jim this afternoon. Can I just go back to the angiosarcoma? And obviously the orphan drug designation from Europe is very encouraging. Can you provide me with a frame of reference as to what data Europeans would be looking at for comparative purposes?

Sure, Nick, I appreciate the question. I think what was impressive about the data in angiosarcoma patients, the five patients we've initially dosed were the durable complete responders in two of those patients. One of them had previously received Votrient. And I think when you look at what VEGF inhibitors have done in that indication, you realize how tough a disease that is to treat. There have been collectively three trials of VEGF inhibitors in patients with angiosarcoma, one with pazopanib or Votrient, one with Nexavar and one with Avastin.

Collectively, you're talking about treating about 130 patients. That collective series of 130 patients, there are three documented complete responders. And now we're seeing two out of five, and I think what also impresses us is the durability of those responses.

If you look for example in the most recent data with Votrient in 30 patients with angiosarcoma, the medium PFS in that study was three months. The overall survival was about nine months. So it's a very tough disease, it's not been well addressed with VEGF inhibitors and hence the trial with TRC105 with Votrient was perceived as significant, and I think really was the key for us to obtaining more for drug designation in the EU.

Thank you. And moving to the Phase 3 design and I appreciate the detail, is there an opportunity for an interim, for early stoppage based on interim maybe of data for overwhelming superiority?

Yes, I think the key -- this one monitored by an independent data monitoring committee. And based on the collective data, they could stop the trial based on clear evidence that benefited in the treatment on TRC105 and the Votrient. So, that will be done independently through data monitoring committee recommending that with the company if that degree of benefit is appreciated.

Are they looking at the trial on an ongoing basis every quarter or six months or on an event basis?

It's really going to be on an event basis, Nick. So, yes, the first interim analysis will be the key. That will be the key both for looking at an efficacy of that point and also for potentially adapting the sample size with the initial sample size being 124. But at that initial interim analysis, the conditional probabilities will dictate whether that sample size should increase potentially to as many as 200 patients. So, the first analysis, the first interim is the key for that study. Following that, the following endpoint will be dictated based on progression events.

Okay. And then maybe just on a non-angio data. At ASCO, can you say how many are the different subtypes of the soft tissue sarcoma we might see later on? And I guess where I'm going, if there's 79 other different subtypes, there may not be compelling data to move forward?

Right. Yes, I think -- yes, no, great question, Nick. I think within the 76 patients with non-angiosarcoma, that will be profiled. You will see significant numbers of patients as they cross some of the large subtypes of sarcoma; for example, leiomyosarcoma, undifferentiated pleomorphic sarcoma, synovial sarcoma. I think for instance those groups which make up the majority of soft tissue sarcoma, there will be significant number of patients to have an idea of the effect of histology on PFS and then also the tumor endoglin expression on PFS.

Okay. And then just sort of one more, just following up on that, if you see the tumor endoglin level, endoglin level is important, obviously you're going to need a companion diagnostics. So would that become rate-limiting developing that before you could start confirmatory trial?

Great question again. I think there would definitely something we'd look into and maximize the development time on that. But that would clearly have to be developed, and that would definitely have to run into parallel with planning the Phase 3 study. And to your point, the potential would be rate-limiting for the general sarcoma trial.

Notably, to be clear on the angiosarcoma trial, because of that histology being so predictive of activity, we will not need a companion diagnostics. But in soft tissue sarcoma, if tumor endoglin expression [grows] with PFS and we use that as a prospective biomarker, the companion diagnostic developed program would begin in earnest, and that would take some time to get that to catch up with the clinical development to your point.

Okay. Thank you. I'll jump back in the queue.

Yes. Thanks, Nick. I appreciate the questions.

Thank you. And at this time, I'd like to turn the call back over for any closing remarks.

We want to thank the call participants for their time and questions. Have a nice day and we look forward to talking again soon in about three months. Thank you.

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