TRACON Pharmaceuticals Inc (TCON) 2017 Q2 法說會逐字稿

Welcome to the TRACON Pharmaceuticals Second Quarter 2017 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 activity, future expenses and cash runway, and our development plans and strategy. These statements are subject to various risk that are described in our filings made with the Securities and Exchange Commission, including our annual report Form 10-K for the year ended December 31, 2016 and subsequent quarterly reports on form 10-Q. You are cautioned not to be placed undo reliance on these forward reliance on these forward looking statements and we disclaim any obligation to update these 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 second quarter 2017 financial results and business update conference call. I will begin with an update on our pipeline in recent activities, following that, our Chief Financial Officer, Patricia Bitar will review our financial results for the three and six months ended June 30, 2017.

Finally, we will conclude by taking your questions. Let's begin with our lead product candidate TRC105 which has the nonproprietary name carotuximab. We continue to open sites and enroll angiosarcoma patients in our randomized Phase 3 TAPPAS trial. The initial TAPPAS sample size of 124 patients is designed to detect an improvement in PFS from four to seven months. However, the trial uses an adaptive design that allows for expansion of patient numbers while preserving Type 1 error. This adaptation protects the power to detect a clinically meaningful survival benefit and provides greater flexibility and efficiency than a standard trial with a fixed sample size.

Importantly, we expect to conduct an interim analysis in mid 2018. At that time, results will be categorized as belonging to one of four zones based on conditional power. The zones are labeled as favorable, promising, enrichment and unfavorable. The sample size in PFS events needed to complete the trial will be left unchanged if the interim results lie in the favorable and unfavorable zones but will be increased to a total of 200 patients in the promising zone. This will allow more than 80% power to detect a less robust but still clinically meaningful improvement in PFS between the two arms.

If the interim results lie in the enrichment zone, the trial would enroll an additional 100 patients who have cutaneous disease. This would result in a total of 135 patients with cutaneous disease which preserve the power to detect the desired treatment effect in these patients. We believe that TRC105 has broad potential and TRACON continues to execute on its tier development strategy that includes orphan drug indications, midsized market indications and large market indications. In addition to the pivotal TAPPAS trial in angiosarcoma, TRC105 continues to advance in Phase 2 studies in two midmarket indications.

First, we've recruited 147 of the 150 patients into the Phase 2 randomized TRAXAR trial that compares treatment with TRC105 and Inlyta to treatment with single agent Inlyta in patients with clear cell renal cell cancer. A planned [facility] analysis was canceled by the Independent Data Monitoring Committee given the near completion of enrollment.

We expect to report top line PFS data from this trial later this year with the exact timing driven by the number of progression events or deaths that define progression free survival. We are actively tracking the total number of events confirmed by central review. At the present time, we believe the trial will produce fewer than 110 events confirmed by central review, which will decrease the power of the trial to less than the planned 80% to detect the desired improvement in PFC from 4.8 months with Inlyta to 7.2 months with the combination of Inlyta and TRC105.

For example, a decrease in the number of events from 110 to 80 would decrease the power from 80 percent to 70 percent. As we discussed at ASCO 2017, we will also assess PFS in patients with pre-defined levels of two soluble bio-markers that correlated with response in the phase 1-b portion of the trial. In that phase 1-b study, we observed that patients with a partial response (Inaudible - microphone inaccessible) following treatment with TRC105 and Inlyta were statistically more likely to have lower baseline levels of osteopontin and higher baseline levels of [TJF-beta receptor-3].

Second, we are rolling the multi-center phase-2 trial of TRS-105 and Nexavar in liver cancer where we expect to report initial response rate data in early 2018. The goal of this trial is to reproduce the response rate of a completed phase-1/2 trial of TRS-105 and Nexavar in patients with liver cancer that was conducted by the NCI.

Data from this NCI trial e-published in Clinical Cancer Research demonstrated median overall survival of 15.5 months in all patients. Overall response [was assessed by resist] across four dose groups. All observed response occurred in the two highest dose groups in which five of 15 or 33 percent of patients demonstrated a response.

Both of these data points compare favorably with historical single-agent Nexavar pivotal trial data that showed a response rate of two to three percent [by resist] and overall survival of 10.7 months or less. As well, we continue to roll a handful of patients with GTN at sites in the U.S. and in the E.U., with the expectation of presenting data in 2018.

In addition, based on the rationale provided in a paper published by Dr. Rita Perlingeiro, professor of medicine at the University of Minnesota, we have begun discussions with clinical experts to assess development opportunities for TRC105 in acute myelogenous leukemia or AML, where publication in the journal Blood demonstrated endoglin expression on a majority of [blots] from AML patients and that endoglin expressing blots had superior leukemogenic activity.

Importantly, her research team showed that TRC105 prevented the engraftment of primary human AML blots and inhibited progression following disease establishment in mouse models.

TRC105 also demonstrated synergy with reduced-intensity myeloablative chemotherapy. AML is a hematological that (Inaudible - microphone inaccessible) high unmet needs that may represent an additional development opportunity for TRC105.

Finally, we expect to initiate a phase-1 trial of TRC105 in combination with Opdivo in patients with non-small cell lung cancer before year end, the details of which are now posted on clinicaltrials.gov. Endoglin is expressed on activated, [mylo-derived] suppressor cells, a cell type implicated in tumor resistance to immunotherapy. And we've observed encouraging activity of endoglin antibodies in combination with [PD-1] inhibitors in pre-clinical syngeneic mouse tumor models. We expect these pre-clinical data will be presented at a scientific conference next year.

Turning now to DE-122, ophthalmic formulation of TRC105. Considerable progress has been achieved this year in the product candidate development for Wet AMD by our partner Santen. In July, Santen initiated dosing in the phase-2 randomized AVANTE study that compares treatment with DE-122 and Lucentis to treatment with single-agent Lucentis in patients with wet AMD.

Trial initiation triggered a $7 million milestone payment obligation to Tracon, and further details of the trial are available on clinicaltrials.gov.

We also expect that Santen report data from the phase-1/2 [paid] trial that assessed safety and bio-activity of DE-122 in refractive Wet AMD patients at the American Academy of Ophthalmology annual meeting in November. We believe there is a substantial opportunity for agents that target essential endogenic pathways like (Inaudible - microphone inaccessible) to be developed in combination with [VEGF] inhibitors for Wet AMD.

Recent negative data from companies conducting two separate late-stage studies targeting the PDGF pathway in combination with VEGF inhibitors in Wet AMD underscore the high unmet need remaining in this indication.

We will turn now to our second product candidate TRC102. TRC102 is a novel small molecule inhibitor of DNA basic excision pathway. That is intended to reverse resistance to certain chemotherapeutics. Importantly TRC102 has demonstrated the ability to potentiate the activity of PARP inhibitors in pre clinical tumor models. The [inside] presented positive safety, PK, and efficacy data [promise] all comers based on trial of the combination of TRC102, Temodar, and ASCO earlier this year.

Partial responses were observed in patients with ovarian, lung, and Kreft positive colorectal cancer. Expansion [cards] are crumbling, rolling, in each of these 3 tumor types. After recommended Phase 2 oral dose of TRC102. Notably DNA damage was observed in 4 of 5 paired colonic biopsies following treatment with TRC102 Temodar. We will continue to assess bio markers in this study. But the goal identifying a base line bio marker could effect activity of the combination.

Enrollment in additional NCI funded trials of TRC102 is also underway. The NCI funding of a Phase 2 trial of [TSR] and phases of glioblastoma that has completed the first stage of accrual. In addition a dual arm Phase 1 and 2 trial consisting of a Phase 2 cohort of TRC102 with [lympnant] patients with mesothelioma. And a Phase 1 cohort of TRC102 with [lymphoma anthem platin] in patients with child tumors is also enrolling. We expect the NCI to present data from all three trials in 2018. Finally our collaborators at Case Western recently began dosing patients at a Phase 1 trial of TRC102 and combination of chemotherapy and radiation therapy in patients with lung cancer.

Late last year we In-Licensed two oncology assets from Janssen. The first at TRC253.

A novel potential best in class treatment for prostate cancer. It is a small molecule completive inhibitor of wild type androgen receptor and androgen receptor mutations that can form resistance to Xtandi and other drugs approved to treat prostate cancer.

We have moved quickly on TRC253 since In-Licensing it in September 2016. Tracon filed the IND in December. The IND was cleared by the FDA in January. And dosing began in May.

The primary objectives of the Phase 1 and 2 study are to access the safety of TRC253. Determine its recommended Phase 2 dose. And access response by PSA levels. In the Phase 2 portion of the trial we will incorporate circulating tumor DNA testing in order to allow for biomarker directed therapy of Phase 2 progress upon treatment with an androgen receptor inhibitor.

We expect to complete dose escalation this year and complete Phase 2 dosing next year. If Janssen opts to reacquire the asset prior to or following completion of the Phase 1 and 2 trial, Tracon will be entitled to receive a $45 million dollar upfront payment in addition to $137.5 million dollars in potential milestones, and a low single digit royalty on any sales.

The Janssen transaction also brought TRC694 a novel small molecule potent inhibitor of NF-kB or NIK. That is in tended for the treatment of patients with hematologic malignancies including myeloma. Tracon owns TRC694. And Janssen retains a right of first negotiation, should we decide to partner the asset. We continue to perform IND enabling studies with TRC694, and expect to find [d] in 2018.

As you can see we remain very active on the development front and look forward to a highly productive remainder of 2017 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. By leveraging the Tracon product development platform that is managing our international Phase 3 TAPPAS trial for TRC105 in angiosarcoma with out the significant cost or complexity associated with outsourcing to a global CRO.

We believe the Janssen licensing agreement provided validation of our drug development model. And we continue to evaluate additional assets that can leverage our product development platform for the benefit of Tracon and its shareholders.

From a financial perspective we believe that our current cash resources will fund currently planned operations to mid 2018. It will be sufficient to deliver final data for the randomized Phase 2 TRAXAR [wino] cell cancer trial. It is responsory data from the multicenter Phase 2 trial of TRC105 in liver cancer

Final data from the Phase One Two pay study on WebMD to accept Galician data from the Phase 1 two trial of TRC253 and prostate cancer and support plan manufacture activities at (Inaudible - microphone inaccessible) for TRC105.

In addition, available financing from our agreement with a [spire] provides flexibility to further extend our cash runaway. 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 you, Charles and good afternoon everyone. TRACON reported collaboration revenue of $.6 million and $1.3 million for the three and six month ended June 30, 2017 respectively compared to $.8 million and $2 million for the comparable periods of 2016. The decrease in the six month 2017 period compared to the 2015 period is primarily attributable to a change in the expected term over which we were advertising the $10 million up front payment received in 2014 from Santen.

In 2016 we increased the expected term over which we will provide technical and regulatory support [expansion]. Research and development expenses were $4.9 million and $10.5 million for the three and six month end of June 30, 2017 respectively compared to $6.8 million and $12.3 million for comparable periods of 2016.

These decreases were primarily the result of decreased manufacturing expenses related to TRC105 in both of the 2017 periods. General and administrative expenses were $2.1 million and $4 million dollars for the three and six month end of June 30, 2017 respectively, essentially flat when compared to $2 million and $4.1 million for the comparable periods of 2016.

Our net loss was $6.6 million and $13.7 million for the three and six month end of June 30, 2017 respectively compared to $8.3 million and $14.8 for the comparable periods of 2016. Turning to the ballot sheet at June 30, 2017 our cash-cash equivalent to short term investments totaled $32 million compared to $36.7 million and $44.4 million at March 31, 2017 and December 31, 2016 respectively.

As Charles mentioned the initiation of the Avante Trial by Stanton triggered at $7 million cash milestone payment obligation which we expect to receive this quarter. As a result this amount is not included in our reported $32 cash and cash equivalent (Inaudible - microphone inaccessible). We continue to expect our capital resources to be sufficient to fund our currently planned operations to mid 2018 and with that I'll turn the call back over to Charles.

Thank you, Patricia. As we noted the next twelve months will be eventful and full of multiple potentially value creating milestones. We anticipate top line faith to track our results that [we don't sell cancer] by year end; faith set a response date and liver cancer in early 2018 and the key interim analysis to determine the final study size of the pivotal Phase 3 TRACON trial Tier105 and adenosarcoma in mid 2018.

We've substantial report Phase One Two pay trial data for D122 and AMD at the American Academy of Ophthalmology meeting in November. And expect to complete [growth] escalation for TRC253 this year. We look forward to providing further updates regarding our upcoming key milestones and remain confident that we have the right strategy in place to deliver on our development and business plans for the benefits of patients and share holders. With that, we will be happy to answer your questions.

(Operator Instructions)

Tom Shrader from Stifel.

I have just a couple of quick questions. The TRAXAR Trial, you're still just saying second half, do you know closer than that, are you waiting for a meeting? Why so broad?

It should seem like, just your thoughts, do you have better resolution than that?

Yes I mean, you know the key on that trial it's an adventure of a trial so were tracking the events in real time, Tom, and based on where we think we will get to in terms of the total number of events will be kind of basis for reporting the exact data, and the time frame for that. So, you know, right now we closed thinking second half meaning quarter 4 to be more precise. And that's just based on looking at the slope of the curve of events as they come in, in real time. You know were blinded with respect to events per arm but we do know the total number of events and that would be the basis for triggering the analysis for the top line data.

And did you tell us what the total number is?

Our goal is 110 events. As I mention on the script I think were going to be somewhere between 80 and 110. And the difference there is at one hundred and ten we would have 80% power to see a--

-- right, right -

-- 2.4 month improvement. Yes again likely it will be somewhere between 78 and 80% power at the time of the final analysis.

Okay, and then just remind us for TRC253 what's the earliest you could see the big milestone or the big buy in?

So it can happen at any time up to the delivery of the definitive Phase 1 2 data. And we are projecting the Phase 1 portion [escalation] to be completed this year and the Phase 2 portion to be completed in 2018. So any time up until that point would be when Janssen could opt in and that would trigger the 45 million dollar payment.

Okay perfect. Thanks a lot.

Thanks, Tom.

Thank you. Our next question comes from the line of Chad Messer of Needham company. Your line is open.

Great let me add my thanks, for the update that keeping track of everything, you are doing is a high quality challenge.

I appreciate it Chad.

Yes, maybe just a clarifying question on TRAXAR. Normally event driven trials go up until the stated number of events, but you might stop earlier than that. Was that, is that a change from protocol cause the trials going on to long or how did it come about that that is the situation? And if I missed that earlier I apologize.

So it's a great question Chad. No I think what we are saying is that ideally we would have one hundred ten and then we would call the trial at the one hundred tenth event and do the analysis. Each event in this trial must be confirmed by central review in order to count with the structure of the final analysis. And as we look at the trial, central review doesn't always confirm our, a investigators individual decision that the patient has progressive disease. So when we look at the trial we think we think that likely the events won't quite get to 110, and how close it gets to that, obviously the closer the better in terms of reserving power. But I think what we will do is look at real time, see at what point the events seem to be tapering off, if you will.

And at that point we'd we appropriate to call the trial. Knowing that maybe fewer than one hundred and ten events. So if we get to one hundred ten, perfect then we call the trial. But if we realize we are going to get to a number somewhat shorter then that, and we can be pretty confident that the plateau has been reached, then we would call the trial at that number of events and perform the finial analysis.

And when you say tapering off, is this a characteristic of RSCC patients that there is a long tail or something like that?

No I think it's a standard consideration across all clinical trials. Yes independent of the exact indication that at some point you will start seeing the events tick off at point where it's rarer and rarer. And at that point you realize if you have one event or two events more you're really not changing the power to detect your effect size. And at that point it is appropriate to do the analysis.

All right I guess if you can just hope you have as much power as we can.

(Multiple Speakers)

-- twenty two -

Chad maybe just on that point on track, so I think it's important this is not a huge difference in power. Weather its 70% or 80% or some where in between, were not making a big, were not having a huge effect on power in this study by having say for example eighty events vs. one hundred and ten. And I think that is an important point to consider. Yeah on D 122 please.

Actually maybe just on TRAXXOR remind us I think you said in the call that there's a specific change that you are looking at. Can you just take us back through the rationale of what you were powering to?

Sure, so initially we were trying to go from a control -- expected [PFS] of 4.8 months, which was what (Inaudible - microphone inaccessible) reported in their phase-3 study and trying to pull on the 7.2 months, which is a 2.4 month treatment effect, and the trail was designed with 80% power to detect that treatment effect. And if for instance, instead of 110 events we only would have events in trial, and the power to detect that treatment effect would go from 80% to 70%.

All right, but the rationale for the 7.2, is that based on your clinical data or what you thought was clinically meaningful, or how'd you come up with that?

Yes, we thought that was clinically meaningful it was an improvement of 50% from the base line expectation of PFS's 4.8 months. So, we thought that was clinically meaningful. I mean the phase one [vdated] to be clear that the PFS, was much longer. Our phase one PFS was over eleven months -- so, we clearly had a nice affect in the phase one [V-study]. But the phase two study was really powered based on seeing a 50% improvement in PFS, which we thought was quite meaningful.

Okay, so it may be fair to call it a -- a conservative assumption based on the limited data you had going in. All right, so on 122, you said we can see safety and bio activity. Maybe just walk us through in a little more detail, what we should expect to see -- towards year end in November, from that phase one study.

Yes, appreciate that. So, the safety data I think speaks for itself. The productivity data -- you would really think about three different potential assessments. One is visual equity. Yes, I think the most important productivity assessment is through the OCT -- Or, optical coherence tomography -- which really gives you a really nice picture of the anatomy of the eye.

And it allows you to appreciate the macular edema patients and whether that's affected, for instance by treatment with d122, and or treatment with the d122, as well as the VEGF inhibitor therapy that the patient has been receiving as a chronic therapy.

Ideally, what we like to see, is that d122 falls by the standard VEGF immunotherapy these patients are on -- would have an effect on macular edema, and ideally even on visually equity. You have to understand, these are tough patients. These are patients who are refractory, they're on VEGF inhibitor -- not getting the classic three line visual improvement. They're on the VEGF inhibitor because frankly, that's all you can offer a patient with this disease, in order to kind of maintain the status quo. So, on the backbone of a basic VEGF inhibitor, that's not giving the patient great benefit -- we can see effects when you had d122 dosing and then follow that with a standard VEGF inhibitor.

That, in our view, would be very meaningful data, whether it were to potentially cause improvements of visual equity, or potentially cause improvements in macular edema. Those are the bioactivity indices that would be important as part of that trial.

All right, thanks. That's quite a bit to look forward to, even -- even between know and year end.

Appreciate it Chad, thank you.

(Operator Instructions)

Maury Raycroft of Jefferies.

Hi, good afternoon. Thanks for taking my question. I -- I had a question for -- about RCC, and so you mentioned in the press release that there was some trends with biomarkers, that were reported at ASCO. I was just wondering if you could remind what the biomarkers are, and maybe a little bit about the kinetics of how the biomarkers work. I guess -- do they change after first dose? Or does it take several cycles of treatment, and then for the data that we're going to see in the second half of the year, if -- you're going to have any biopsies from those patients?

Sure -- first from on the biomarker is -- you know with the respect to biomarkers, there are several biomarkers that change with respect to change with treatment to TRC105.

You know they give a single agent or give them with the VEGF inhibitor. And when you see those changes, they happen quite quickly, within two weeks of therapy.

What we really focused on with respect to these two biomarkers is the approach to try to find a baseline biomarker that would predict response. And that would be the Holy Grail with respect to Renal Cell Cancer.

You know, currently, you know therapies are used in this disease without really interrogation of the tumor. I think, potentially, with the exception of some of the PD-1 therapies. But that VEGF inhibitors, for instance, are used in Renal Cell without really any idea if it's going to work in patient x or patient y.

So our goal with respect to our biomarker program with TRC105 in Renal Cell is find a baseline biomarker that would predict response in a patient.

And in the Phase 1b study, we found two that did correlate with response. So one was [Oxipod] one was TGF beta receptor 3. You know, particularly interested in TGF beta receptor 3. That was a very strong statistical correlation between that - expression of that receptor in plasma and response.

And biologically, it's interesting. You know, TGF beta receptor 3 is a receptor that kind of maintains a reservoir of the TGF beta ligand that influences the end of a pathway. So biologically it made sense that that could correlate with response. And again, the statistical association was quite strong.

So we're very interested to see if that biomarker baseline values will correlate with PFS, the endpoint in the TRAXAR trial. And if we can make that association, that could be the basis of using a baseline soluble biomarker as a way to enroll responsive patients, for instance, in a pivotal Phase 3 study. So that's - that's an exciting prospect that will develop with respect to the - the TRAXAR data as we move forward.

I'm sorry - yes? Those --

And then for --

Yes, did you have a --

Well, so I was wondering, for the NCI TRC102 trial --

Yes.

-- just how big the expansion cohorts were going to be --

Sure.

-- after the three different groups, and then any idea on the timeline to readout for that trial?

Yes. No, I - yes, so the Phase 1 trial, now really a Phase 1, 2 trial, Temodar plus TRC102, there were like 15 patients in each of the three tumor types where they saw partial response; ovarian cancer, colorectal cancer and lung cancer. And I do expect to see data in that - for that study. Typically they've been presenting those data at ASCO. So my expectation would be that they'll present data at ASCO '18 with respect to that cohort of data.

And I think importantly in that study too, they are looking carefully at biomarkers and I do think in TRC102, I think the ability to identify a baseline biomarker that predicts response, will make that a very valuable program. And that's really the emphasis at this time.

Got it. And then the last question was just on the Non-Small Cell Lung Cancer trial --

Yes.

-- where you're [running] TRC105 with Opdivo--

Yes.

-- maybe if you can just provide a little bit more context about --

Sure.

-- some prior data in Non-Small Cell Lung Cancer and then what your expectations are.

Yes, I think it's an exciting potential prospect. I mean our current, you know, theme has been combining TRC105 with VEGF inhibitors. You know, biologically that makes sense. [Anti globulins] are regulated and mediates escape or resistance to VEGF inhibitor therapies. And that really depends on the expression on the endothelial cells that are directly on the tumors in the case of Angiosarcoma.

You know, our observation that endocrines expressed on myeloid derived suppressor cells led us to investigate the potential to combine this therapy with PD-1 inhibitors. And within the indication of if PD-1 inhibitors are approved, you know, lung cancer, it seems like a nice path in the sense that Opdivo in second line lung cancer is an effective therapy, but the response rate is limited in the 10 to 15 percent range.

So if we can do a Phase 1 trial, with the dose expansion [camp] cohort, which is what's planned with the TRC105 plus Opdivo trial, we could look in the expansion cohort and see if we have a more robust response rate than you'd expect with Opdivo as a single agent.

Importantly in that trial, we'll also be performing biopsies with the expectation of identifying whether certain characteristics of the tumor will predict response to TRC105 and Opdivo. You know, specifically if there're myeloid derived suppressor cells in that biopsy and that correlates with response. That would be a huge breakthrough for a potential new path for TRC105, not building upon just VEGF inhibitors, potentially building upon the PD-1 franchises of multiple companies.

So it's an important initial trial. It's substantiated in terms of very encouraging preclinical data that will be presented next year and another nice path for TRC105.

Great, thank you.

Thanks, Maury.

I'm showing no further questions at this time. Please proceed with any further remarks, sir.

Appreciate the questions. Thank you very much for your time and interest. Have a nice a day and we look forward to updating you again next quarter.

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