TRACON Pharmaceuticals Inc (TCON) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals Second Quarter 2018 Earnings Conference Call. (Operator Instructions)

During today's call, we'll 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 with Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2017, and subsequent quarterly reports on Form 10-Q. You are cautioned to not 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 TRACON's second quarter 2018 financial results and business update conference call. I will begin with an update on our pipeline and recent activities. Following that, our Controller, Scott Brown, will review our financial results for the three and six months ended June 30, 2018. Finally, we will conclude by taking your questions.

Let's begin with the brief update on our lead asset, TRC105, which is currently the subject of a randomized Phase 3 TAPPAS trial that is enrolling angiosarcoma patients at more than 30 sites in the U.S., United Kingdom, and France. The trial is enrolling at a higher rate than expected with more than 80 patients enrolled, which we expected to be sufficient to generate the 40 events that will trigger the interim analysis. However, in the process of monitoring ongoing enrollment and events in a blinded manner, the independent statistical reviewer determined that events of progressive disease confirmed by central review or death on study that defined the primary endpoint of PFS are occurring at a slower rate than initially expected. This reflects a higher than expected rate of withdrawal for progressive disease not confirmed by central review.

Without a sample size increase, this will result in a substantial loss of power for the original study design. For this reason, we filed an amendment to increase the sample size of the study while leaving the number of prespecified PFS events unchanged. Based on the increase in sample size, we now expect that the interim analysis will be conducted in the first quarter of 2019 following enrollment of 120 patients versus our initial estimate of the second half of this year based on enrollment of 70 patients.

As a reminder, interim analysis results will be categorized by the DMC as belonging to one of four zones based on conditional power: favorable, promising, enrichment, and unfavorable. Following the amendment, the sample size needed to complete the trial will be a total of 170 patients if the interim results lie in the favorable zone and will be a total of 340 patients if in a promising zone. If interim results lie in the enrichment zone, the trial will enroll a total of 220 patients with cutaneous disease. In the unfavorable zone, the sample size will also be a total of 170 patients. However, in that case, the DMC could terminate the trial early for futility.

Moving on, we believe that TRC105 has broad potential and TRACON continues to execute on its tier development strategy to address indications with the range of market sizes from orphan indications to large markets. In addition to the pivotal TAPPAS trial in angiosarcoma, TRC105 continues to advance in Phase 2 studies in two mid-sized market indications. The randomized Phase 2 TRAXAR trial that compares treatment with TRC105 and Inlyta to treatment with single agent Inlyta in patients with clear cell renal cell cancer completed enrollment last September.

We expect to perform the final analysis of PFS upon the occurrence of approximately 80 events as confirmed by the independent central review committee, which should provide at least 80% power to detect an improvement in PFS from 4.8 months with Inlyta as a single agent to 7.7 months with the combination of TRC105 and Inlyta.

PFS will also be assessed according to predefined levels of two soluble biomarkers: osteopontin and TGF beta receptor III, which correlated with response in the Phase 1b portion of the trial. Based on the current rate of events of progression or death that defined the primary endpoint of PFS, we expect to report top line results prior to year-end. Notably the encouraging Phase 1b data, including the 29% response rate and 11.3 month PFS from the combination of TRC105 and Inlyta, were recently accepted for publication in the journal, The Oncologist, and will be the subject of an editorial.

We also continue to enroll the multicenter Phase 2 trial of TRC105 in combination with Nexavar in liver cancer, and we're pleased with the initial safety and response data reported at GI ASCO in January 2018, which showed that the combination of TRC105 and Nexavar was tolerable, and two of the initial eight evaluable patients, or 25%, achieved partial responses. These data are consistent with partial responses by RECIST observed in 5 of 15, or 33% of liver cancer patients treated with the two highest dose levels of TRC105 in combination with Nexavar in a Phase 1/2 trial conducted by the NCI and published in Clinical Cancer Research last year.

As a reminder, the historical, single-agent Nexavar pivotal trial data showed a response rate of 2% to 3% as measured by RECIST. We continue to expect to report mature data from the multicenter Phase 2 trial of TRC105 in combination with Nexavar in liver cancer at GI ASCO in January 2019.

In June, researchers from Leiden University presented preclinical results of treatment with TRC105 combined with PD-1 checkpoint inhibitors at the International Cancer Microenvironment Society Annual Meeting in Lisbon. While treatment with either TRC105 or a PD-1 antibody alone increased tumor volume compared to control to similar degree, combined treatment significantly reduced tumor volume and improved survival resulting in long-term survival in 30% to 60% of animals. Combined treatment increased tumor-specific T-cells indicating stimulation of an immune response, as well as the activity of TRC105 given as a single agent or combined with the PD-1 antibody was diminished upon CD8 positive T cell depletion indicating that TRC105 activity was mediated through an immunologic mechanism.

We are currently dosing TRC105 in combination with Opdivo in a Phase 1 trial of patients with non-small-cell lung cancer and recently amended the protocol to include checkpoint inhibitor-naive as well as checkpoint inhibitor relapse cohorts. We expect to report initial data from this Phase 1 trial later this year.

In December 2017, we out-licensed development and commercialization rights to TRC105 outside of ophthalmology in China, Hong Kong, Macau, and Taiwan to Ambrx. Ambrx has offices in both and San Diego and Shanghai, and its management team has significant expertise in oncology drug development in China. We continue to support Ambrx's efforts to file an IND this year to initiate clinical development of TRC105 in China. Ambrx is expected to initiate studies in liver cancer and contribute Chinese patients to the TRACON Phase 3 TAPPAS trial.

As a reminder, TRACON has retained U.S. commercial rights to TRC105 and expects the Phase 3 TAPPAS trial data to be the basis for initial approval of TRC105 and subsequent commercialization of TRC105 in the United States.

Turning now to DE-122, the ophthalmic formulation of TRC105. In February, Dr. Victor Gonzalez presented encouraging data from the Phase 1/2 PAVE trial at an ophthalmology conference at the Bascom Palmer Eye Institute. Our development partner, Santen, continues to dose wet AMD patients in the three-arm randomized Phase 2 AVANTE study that compares treatment with two different doses of DE-122 combined with Lucentis to treatment with the single-agent Lucentis in patients with wet AMD.

The trial is recruiting patients in the U.S. and the Philippines, and data are expected in mid 2019. We believe that there is a substantial opportunity for agents that target essential angiogenic pathways like endoglin to be developed in combination with VEGF inhibitors for wet AMD as a majority of patients do not experience meaningfully improved vision following treatment with single agent VEGF inhibitors. TRACON retains significant financial rights to DE-122, including $145 million in potential milestones and a high-single-digit to low-teen double-digit royalty on global net sales.

We'll turn now to TRACON's second retained rights product candidate, TRC102, which is a novel, small molecule inhibitor of the DNA base excision repair pathway that is intended to reverse resistance to certain chemotherapeutics. The NCI continues to enroll patients with ovarian, lung, and colorectal cancers into a Phase 2 trial based on the responses in these tumor types reported at ASCO 2017 in the Phase 1 trial.

An additional NCI-sponsored Phase 2 trial of TRC102 and Temodar in patient with glioblastoma has completed the first stage of accrual. In addition, 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 is also enrolling. As well, our collaborators at Case Western are dosing patients in a Phase 1 trial of TRC102 in combination with chemotherapy and radiation therapy in patients with lung cancer.

As part of these studies, we will assess patient tumor samples to determine whether preclinical data showing that glycosylase expression is associated with tumor sensitivity to TRC102 can be validated in the clinic. Multiple data presentations from these trials are expected in 2019.

Moving on to TRC253, our candidate for treating prostate cancer that we are studying in a Phase 1/2 trial. I am pleased to announce that we determined the recommended Phase 2 dose in July, and we are now enrolling patients in the Phase 2 portion of the trial at approximately 20 sites in the U.S. In the Phase 2 trial, we incorporate circulating tumor DNA testing in order to allow for biomarker-directed therapy of prostate cancer patients, who were progressed on treatment with an androgen receptor inhibitor.

As a reminder, we licensed TRC253 from Janssen. And if they exercise the right to reacquire the asset following Phase 2 proof-of-concept data, TRACON will be entitled to receive a $45 million payment and up to $137.5 million in potential milestones and a low single-digit royalty on sales.

The innovative 2016 Janssen transaction also granted TRACON rights to a second compound to which TRACON has an exclusive right. TRC694 is a novel, small molecule potent inhibitor of NF-kappa B inducing kinase, or NIK, that is intended for the treatment of patients with hematologic malignancies, including myeloma. We continue to perform IND-enabling studies with TRC694 and expect to initiate a Phase 1 clinical trial in 2019.

Notably, we recently hired Mark Wiggins as our Chief Business Officer. Mark brings substantial business development and commercialization expertise to TRACON in particular from his experiences at IDEC and Biogen IDEC where he served in senior executive roles. As we have said previously, we firmly believe that TRACON's CRO-independent product development platform saves time and capital compared to CRO-dependent drug development.

The transactions I described earlier with Janssen validate TRACON's development capabilities and the benefit we can provide to potential collaborators. Under Mark's leadership, we have expanded our business development efforts significantly by identifying ex-U. S. companies to our need of a rapid and capital efficient U.S. drug development solution. We believe TRACON can become a preferred clinical development and commercialization partner through a cost and risk sharing partnership structure, which may include U.S. product commercialization rights.

From a financial perspective, our capital resources are expected to be sufficient to fund our currently planned operations into the fourth quarter of 2019, which includes three expected randomized trial readouts: top line data from our Phase 2 TRAXAR trial, the interim analysis from our Phase 3 TAPPAS trial, and top line results with Santen's Phase 2 AVANTE study.

At this time, I will turn the call over to Scott Brown, our Controller, who will provide an update on our financials.

Thank you, Charles, and good afternoon, everyone. TRACON reported collaboration revenue of zero and $3 million for the three and six months ended June 30, 2018, respectively, compared to $0.6 million and $1.3 million for the comparable periods of 2017. The increase in the six-month 2018 period compared to the 2017 period was due to $3 million non-refundable upfront payment received in connection with the Ambrx agreement recorded as revenue in 2018 compared to $1.3 million recognized under the Santen license agreement in 2017.

Research and development expenses were $8.1 million and $17.6 million for the three and six months ended June 30, 2018, respectively, compared to $4.9 million and $10.5 million for their comparable periods of 2017. These increases were primarily attributable to increased manufacturing expenses related to TRC105 in both of the 2018 periods.

General and administrative expenses were $1.6 million and $3.4 million for the three and six months ended June 30, 2018, respectively, compared to $2.1 million and $4 million for the comparable periods of 2017. These decreases were primarily attributable to decreased headcount and stock-based compensation expenses in both of the 2018 periods.

Our net loss was $9.8 million and $18.1 million for three and six months ended June 30, 2018, respectively, compared to $6.6 million and $13.7 million for the comparable periods of 2017.

Turning to the balance sheet, at June 30, 2018, our cash, cash equivalents, and short term investments totaled $53.4 million compared to $62.5 million and $34.5 million at March 31, 2018, and December 31, 2017, respectively. As Charles said, we expect our capital resources to be sufficient to fund our currently planned operations into the fourth quarter of 2019.

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

Thank you, Scott. To summarize, we expect a number of potentially value-creating milestones over the next 12 months. For TRC105, we anticipate three data points from randomized trials: first, top line Phase 2 TRAXAR trial results in renal cell cancer this year; second, the interim analysis to determine the final study size of the pivotal Phase 3 TAPPAS trial in angiosarcoma in the first quarter of 2019; and third, top line Phase 2 AVANTE trial results in wet AMD through our partner Santen in mid 2019. In addition, we expect further non-randomized data from the combination of TRC105 and Nexavar in liver cancer, and the combination of TRC105 and Opdivo in lung cancer. For TRC253, we have now begun Phase 2 testing, and TRC694 remains on track for an IND filing in the first half of 2019.

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 benefit of patients and shareholders.

With that, we're happy to answer your questions.

(Operator Instructions) Our first question will come from the line of Chad Messer from Needham & Company.

This is Gil Blum for Chad Messer. Hi, Charles. Hi, everyone. So just a quick question about the timing update with TAPPAS. So now that we're looking at an interim coming at 1Q of 2019, does that mean the final data will also be delayed?

Yes. For the final data, we were hoping that we have data by the very end of 2019. And currently assuming we go into the zone with the largest sample size, which is the promising zone, we'd be looking at final data in mid 2020, Gil. If we remain in the favorable zone, it would still be on track for the 2019 time frame.

And another question about TRAXAR. So a bit about the shifting landscape of the standard of care with RCC that's moving forward, do you guys think of maybe either partnering or what are you going to do once the final data comes in?

Right. Yes, and I think there's several opportunities in renal cell carcinoma. And there are many trials going on right now with first-line VEGF TKIs being combined with checkpoint inhibitors. And I think there's a very good chance that it will become a standard of care: combination therapy with the TKI plus a checkpoint inhibitor. And if that's the case, I still think that in the second line setting, you'll still see TKIs used, and that's currently the standard of care that patients who fail the first line TKI will still get a second line TKI. So our view is that patients who will fail the first line TKI and the checkpoint inhibitor still would be great candidates for trial that would prove benefit of TRC105 on top of the second TKI that's used in that patient.

I still think that axitinib or Inlyta, the TKI that we're paired with in the Phase 2 study, may still be a dominant second TKI used in many patients. So our choice of using Inlyta as our companion TKI still, I think, makes a lot of sense as the potential plan moving forward.

Long term, there's also the opportunity of combining TRC105 with a TKI plus a checkpoint inhibitor. As we discussed, we're currently proving that TRC105 is tolerable with Opdivo as we speak. We've already shown it's tolerable with Inlyta. So we expect that the triple combination would also be tolerable. And that would be an interesting trial to look at with respect to activity.

(Operator Instructions) Our next question comes from the line of Robert Hazlett from BTIG.

Hi, this is actually Jake Colby on the line for Bert. Thanks for the question. I guess could you provide any additional comments on what may be driving the higher than expected progression in the TAPPAS study? And is there any read-through from this with your additional trials ongoing with TRC105? Thank you.

Sure. Yes, no, to be clear in the TAPPAS trial, what we're seeing is that patients with cancer will develop progressive disease. And with a centrally confirmed review, that has to be confirmed by radiographic criteria. Sometimes patients progress in the absence of radiographically defined progression, and that happens in every randomized trial. And you have to estimate what that rate will be of progression that's not confirmed by central review.

We were a little conservative on our estimates in the TAPPAS trial. And if you look at most trials across the board, 30% and sometimes as many as 50% of progressive disease events will not be confirmed by central review. So by adjusting our sample size with this amendment, we're really adjusting the trial to be more of a standard, if you will, withdrawal rate for an unconfirmed progressive disease, where during the initial design, we were a little bit too conservative in terms of the expectation for events that would not be confirmed by the central reviewer.

Okay, thank you.

Yes, very welcome, Jake. Yes, so, I mean in terms of kind of moving forward, it's just a question of sample size. The nice thing about TAPPAS is we're enrolling so nicely. We are at over 80 patients. We had 15 patients alone in the month of July, which shows you there's continued investigator enthusiasm for that study. And that's, I think, one of the most important take-home messages as well.

(Operator Instructions) And I'm showing no further questions at this time. We have one question from the line of Maury Raycroft from Jefferies.

Hi, this is Vesna on for Maury. I had a question on the Opdivo combo. So it is interesting that you added, as you've said previously, the amendment. So I was wondering are you enrolling checkpoint experienced patients at this point. And can you comment how is the enrollment going? Are you seeing a lot of interest for the patients who had experienced checkpoints in the past? And then you said you will update on the trial soon. Should we expect the press release, high level update? Or will we see this data at a medical meeting?

Hi, Vesna; yes, great questions. So when we initially started the trial, we were enrolling patients at the University of Alabama Birmingham as the initial site, which has done very well through the Phase 1 portion. And recently we added Moffitt Cancer Center in Tampa. And Moffitt was strongly a proponent of enrolling not just PD-1 naive patients but also PD-1 relapse patients. So thanks to their guidance, we have now added that cohort.

So there are two cohorts officially in that study. One is PD-1 naive patients who receive Opdivo and TRC105, and the second is PD-1 in relapse patients who also receive the same combination of TRC105 and Opdivo. In terms of data for that study, we do expect to have a top-line data release on the progress of the trial by end of this year. And then we expect to formally present data from the trial in the first half of 2019.

And then if I can -- just one more question on the 253 and the Janssen collaboration. So that is good you started -- you selected and started the Phase 2 trial. I was wondering have there been any discussions with J&J about them opting in for the drug. Does this start of Phase 2 trigger any milestones if you can remind us? And then in general, if you could just give it additional color on that collaboration.

Sure. Yes, no, it remains a very fruitful collaboration in terms of the back-and-forth communication around the asset. As you mentioned, we now moved formally into Phase 2 with respect to the drug. We expect to fully enroll the Phase 2 study by the end of 2019. At that point, Janssen has an opt-in period, a 90-day opt-in period to reacquire the drug at their discretion. And that right is -- would trigger a $45 million payment to TRACON, and then would also trigger the additional milestones and royalty that is due TRACON.

(Operator Instructions) And I'm showing no questions at this time. I would like to turn the call back to Dr. Charles Theuer for closing remarks.

Great. Thank you very much everyone for your attention. We look forward to updating you again with earnings calls following quarter three. Have a good day.

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.