TRACON Pharmaceuticals Inc (TCON) 2021 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals' First Quarter 2021 Earnings Conference Call. (Operator Instructions)

During today's call, we will be making certain forward-looking statements, including statements regarding expected time in the 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 the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2020, and subsequent quarterly report on Form 10-Q. 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?

Thank you for joining TRACON's First Quarter 2021 Financial Results and Business Update Call. I will begin with an update on our pipeline and then review our recent activities. Following that, Scott Brown, our Chief Financial Officer, will review our financial results for the 3 months ended March 31, 2021. Finally, we will conclude by taking your questions.

Our development efforts continue to focus on the pivotal ENVASARC trial. ENVASARC is designed to allow potential approval of envafolimab in the sarcoma subtypes of undifferentiated pleomorphic sarcoma, or UPS, and myxofibrosarcoma, or MFS. As a reminder, envafolimab is a potential best-in-class PD-L1 checkpoint inhibitor and making for additional clinical benefit by virtue of its convenient and rapidly delivered subcutaneous route of administration.

We continue to make progress on the ENVASARC pivotal trial, where we have initiated 22 sites and expect to achieve our goal of initiating 25 sites by the end of this quarter. Accrual remains on track, such that we expect multiple envafolimab milestones this year. First, we have enrolled more than 20 patients, which has triggered the initial Data Monitoring Committee review of safety data from each cohort. We expect the DMC recommendation later this quarter. A further DMC safety review is expected next quarter.

Second, we resubmitted our orphan drug application to the FDA in response to request for preclinical or clinical evidence of activity for envafolimab in sarcoma. We expect correspondence from the FDA this quarter based on the amended application.

Third, we expect the availability of interim ENVASARC efficacy data in the second half of this year. The DMC-mandated interim efficacy analyses are scheduled at least 3 months after the enrollment of the 36th and 92nd patient to allow for determination of the preliminary objective response rate. For the futility rules of the study, there must be at least 1 response among the initial 18 patients and 3 responses among the initial 46 patients enrolled into each cohort to continue enrollment of that cohort. We expect to present interim efficacy data following the initial DMC review later this year at a scientific conference or in a top line data release.

Fourth, we expect interim efficacy data will be the basis for submitting a request to the FDA for Breakthrough Therapy designation or for Fast Track designation as either designation permits a rolling BLA submission that will facilitate the timely review of a BLA. Looking forward, we anticipate reporting final response data in 2022 and assuming positive data, submitting a BLA for accelerated approval that if approved could allow for product launch in the U.S. in 2023.

We reviewed the design of the ENVASARC trial at a poster in the Trials in Progress program of the AACR virtual meeting in April, and we'll also present a poster reviewing the trial design at ASCO in June. As a reminder, the ENVASARC trial includes 2 cohorts of 80 patients each. One cohort receives single agent envafolimab. And a second cohort receives envafolimab in combination with Yervoy, a second checkpoint inhibitor targeting the CTLA-4 receptor that is marketed by BMS. The trial enrolls patients with UPS and MFS who have progressed on 1 or 2 lines of prior treatment and have not received prior checkpoint inhibitor therapy.

The primary endpoint in both cohorts is objective response rate by RECIST, as confirmed by blinded independent central review, with duration of response being a key secondary endpoint. In each cohort, the demonstration of 9 out of 80 objective responses or an 11.25% objective response rate confirmed by independent radiographic review defines the level of response that satisfies the primary objective of the study, which is to statistically exclude the known 4% response rate of Votrient, the only approved therapy for refractory UPS and MFS patients.

We are studying the sarcoma subtypes in UPS and MFS because they are responsive to checkpoint inhibition based on data presented at ASCO 2019 and '20. At ASCO 2020, investigators from the Alliance for Clinical Trials in Oncology reported an impressive 29% confirmed objective response rate in patients with highly refractory UPS who received Opdivo in combination with Yervoy. These data built upon data presented at ASCO 2019, showing that single-agent Keytruda demonstrate a 23% response rate in highly refractory UPS and MFS patients.

From a financial perspective, we estimate that the costs of conducting the pivotal trial using TRACON's CRO independent product development platform, including paying for Yervoy, will be less than $20 million that will be spent over the next 8 to 10 quarters. In parallel, our corporate partners, 3D Medicines and Alphamab Oncology, submitted envafolimab data from the completed pivotal trial in MSI-high cancer in China as part of a new drug application that was accepted for priority review by the NMPA earlier this year. We believe envafolimab could be approved in China later this year.

Returning to TRACON's development in sarcoma in the U.S., our market assessment concluded that envafolimab, if FDA approved for refractory UPS and MFS, could generate peak annual revenue of approximately $200 million in the U.S., assuming parity pricing to Keytruda or Opdivo. The adoption rate is forecasted to be relatively rapid using envafolimab's target product profile, a 15% response rate as a single agent and a 30% response rate when combined with Yervoy, which would compare favorably to the 4% objective response rate of the one approved treatment for refractory UPS and MFS patients.

Envafolimab's sales revenue could increase further through label expansion or compendia listing into other refractory sarcoma subtypes that have been shown to be responsive to checkpoint inhibition such as angiosarcoma, alveolar soft part sarcoma and dedifferentiated liposarcoma, which our market assessment study indicated could generate an additional $100 million in peak annual revenue in the U.S. for a total of $300 million when combined with UPS and MFS.

We believe dual checkpoint inhibition with the combination of envafolimab and Yervoy should also be advanced into first-line treatment. Notably, the response rate for dual checkpoint inhibition with Opdivo and Yervoy in refractory sarcoma subtypes other than UPS and MFS was 16%. Given the response rate of first-line chemotherapy in sarcoma is only 17%, we expect to dose envafolimab with doxorubicin in a Phase I trial later this year to assess safety of the combination and then move quickly into a potential pivotal trial. The trial could include a combination of doxorubicin, envafolimab and a CTLA-4 inhibitor. That CTLA-4 inhibitor could be Yervoy or another proprietary CTLA-4 inhibitor, as one of our business development priorities is licensing another immuno-oncology asset.

We are also discussing a clinical trial of envafolimab with an approved c-KIT inhibitor in gastrointestinal stromal tumor, or GIST. We believe thorough label expansion in sarcoma, including in the first-line setting in GIST as well as for neoadjuvant treatment prior to surgical resection and for adjuvant treatment following surgical resection could substantially increase sales revenues to over $1 billion in sarcoma.

While envafolimab is our most advanced product candidate, we continue to progress 2 other clinical stage assets. We expect TRC102 to continue to advance to NCI sponsorship in lung cancer in combination with chemotherapy and radiation therapy. Data presented at ASCO showed that TRC102 in combination with chemoradiation resulted in a 100% response rate in 15 patients with advanced localized non-squamous non-small cell lung cancer, including in 3 patients who had a complete response to treatment. These data compare favorably to prior trials of chemoradiation therapy in these patients.

Imfinzi, a PD-L1 checkpoint inhibitor is now approved for patients with unresectable localized non-small cell lung cancer, whose disease has not progressed following chemoradiation. And we believe a randomized trial of TRC102 with chemoradiation and Imfinzi in these patients is warranted.

Based on NCI data reported in cancer cell in December 2020 and Phase II data in refractory glioblastoma patients treated with TRC102 and Temodar, inhibiting base excision repair with TRC102 is able to induce synthetic lethality in MGMT-methylated patients. Based on these data, we expect further development by the NCI in glioblastoma, including a trial in the first-line setting of Temodar, radiation therapy and TRC102. Notably, in October 2020, TRC102 was granted Orphan Drug designation by the FDA in malignant glioma that includes glioblastoma.

Our third clinical stage asset is the CD73 antibody, TJ004309, that is being evaluated in an ongoing Phase I dose-escalation study as a single agent and in combination with a checkpoint inhibitor, Tecentriq. Data from the ongoing Phase I trial were accepted for poster presentation at the 2021 ASCO virtual meeting in June.

We're developing TJ004309 in collaboration with I-Mab Biopharma through one of our 2 strategic agreements with them whereby we are responsible for the regulatory and clinical development of TJ004309 in the U.S. and Europe. Per the license agreement with them, we are entitled to receive escalating portions of nonroyalty and royalty payments if I-Mab elects to license TJ004309 to a third party in any region outside of China, Macau or Taiwan. Following the completion of Phase I, I-Mab has the option to terminate the agreement for a payment of $9 million.

From a business development perspective, I would like to note that we continue to evaluate additional clinical stage assets to potentially add to our pipeline this year in order to leverage our CRO independent product development platform that includes U.S. commercialization expertise. We believe our product development platform will continue to allow us to establish key new partnerships that will drive significant long-term shareholder value. At this time, Scott will provide an update on our financials.

Thank you, Charles, and good afternoon, everyone. TRACON's research and development expenses were $2.3 million for the first quarter of 2021 compared to $2 million for the comparable period of 2020. The increase was related to enrollment in the pivotal ENVASARC trial in 2021. General and administrative expenses were $2.7 million for the first quarter of 2021 compared to $1.9 million for the comparable period of 2020. Our net loss was $5.1 million for the first quarter of 2021 compared to $4 million for the comparable period of 2020.

Turning to the balance sheet. At March 31, 2021, our cash, cash equivalents and investments totaled $30.4 million compared to $36.1 million at December 31, 2020. We expect our current capital resources to be sufficient to fund our planned operations into the second half of 2022. With that, I'll turn the call back over to Charles.

Thank you, Scott. To recap, we continue to execute our clinical development plan around our lead product candidate, envafolimab, and have made substantial progress in the ENVASARC pivotal trial. We have now initiated 22 of the 25 ENVASARC sites and have enrolled more than 20 patients, which triggers the initial DMC safety review. We expect safety updates this quarter and in the third quarter, Orphan Drug designation this quarter and an interim efficacy assessment in the second half of this year. One of our key goals is to request Breakthrough designation or Fast Track designation by year-end based on interim ENVASARC efficacy data.

We believe the ENVASARC trial provides a potential fast-to-market opportunity to provide envafolimab to sarcoma patients in significant need of a new therapy as expeditiously as possible. Addressing this high unmet clinical need is clearly important to investigators and they remain excited about envafolimab's convenient and rapidly delivered subcutaneous route of administration as evidenced by the robust ENVASARC accrual seen to date despite the COVID pandemic. We credit this robust accrual in part to our CRO independent developmental capabilities.

Importantly, we believe our capital will be sufficient to fund the company past the expected ENVASARC final efficacy data, which could demonstrate the potential for envafolimab to rapidly transform the standard of care for refractory sarcoma patients. We look forward to providing further updates in the coming months 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.

Thank you for your time and attention. And we are now available to answer your questions.

(Operator Instructions) Your first question is from the line of Maury Raycroft from Jefferies.

Congrats on the progress. First question, I just wanted to check on the enrollment. It sounds like you've got greater than 20 patients in the study. Just wondering if you can comment on if your enrollment rate has been better than expected or in line with expectations. And then anything else you're seeing about the patient characteristics, are those in line with expectations? And how did they compare with the patients from the historical studies that we're benchmarking?

Maury, I appreciate the questions. So with respect to accrual, we're on track with respect to our goal, which is to fully enroll the patients in an 18-month period of time, meaning full enrollment by mid-next year. So we're very pleased with that. And I should mention we're on track despite the fact we haven't even opened up all the sites yet. So that's where we consider the enrollment robust at this point.

Yes, I think also, importantly, you bring up a great point about the fact that this trial enrolls patients who have failed 1 or 2 prior therapies, so third-line setting or second-line setting. And that actually compares quite favorably to prior studies of checkpoint inhibitors in refractory UPS and MFS patients where the majority of those patients were in the third and fourth-line setting and in some cases, had as many as 6 prior therapies. So we tried to create a more, if you will, homogeneous population of refractory UPS and MFS patients to carefully define the response rate of both envafolimab as a single agent and also in combination with Yervoy.

Got it. That's helpful, Charles. And then another question I had is based on the DMC reviews. So for the DMC review at this quarter, next quarter and 4Q, I'm wondering if you get access to the overall response data and if you do, if it's better than expected, is there any chance that you would provide an early update on what you're seeing in either one of the cohorts?

Thanks for the question, Maury. Yes, the DMC safety reviews were really be exclusively focused with respect to the one expected this quarter and third quarter on safety. And the expectation you should have is that the DMC would review the safety data, and if everything looks as we expect it will look, the communication to the Street would be that the trial will continue as planned, with just a general statement from me around the safety of both the envafolimab as a single agent and also in combination with ipilimumab.

In that regard, Maury, I would say with respect to envafolimab single-agent data, we feel quite confident of the known safety profile given it's been dosed to over 700 patients. This is the first time though that envafolimab is being dosed with ipilimumab. So I think from our perspective, the most important part of both the DMC safety evaluation this quarter and the subsequent one in quarter 3 will be to define that envafolimab combined with ipilimumab is also well tolerated. And then by end of the year though, you should expect an update with respect to interim efficacy data that we will report either at a top line release or at a scientific meeting.

Got it. Okay. And so with -- maybe last question is just for the 3Q -- the DMC review for next quarter. I just wanted to make sure that I got it right. So that's going to be 3 of 46 patients in each cohort. If you're seeing responses there and the study continues, that means that the futility wasn't triggered. Is that the right way to think about it?

Maury, so let me go through it carefully just to make sure I'm crystal clear. So this cohort will be the initial safety review. There's 1 more safety review next quarter. And then following the 2 initial safety reviews, there will be 2 futility analyses, as you pointed out, and those are done after 18 patients are enrolled in each cohort. And in each cohort after 18 patients are enrolled, we need to see 1 response.

But to be clear, that's only 3 months after the 18th patient is enrolled, because we want to give patients time to get CT scans, so we can define the preliminary response rate. So that's why we expect that will be second half, and we'll report those data as an interim efficacy assessment in second half of this year, is the expectation.

As you also pointed, there's a second futility analysis. That's when 46 patients are enrolled in each cohort, but also that 46th patient has to be on therapy for -- excuse me, has to have scans for at least 3 months, so we can again define the preliminary objective response rate. So based on that, there'll be second interim analysis for futility. And we haven't guided on the exact timing of that. It could be this year, but again, because it has that 3-month delay in assessments after enrollment of the 46th patient, it also could be quarter 1 of 2022.

Got it. That's really helpful. And that helps clarify how this is going to work out. So the futility analyses are independent of the DMC review. It's going to be done at different times.

Well, to be clear, Maury, so the DMC will make the decision on futility analyses and we provide the general guidelines that we need 1 response out of at least 18 patients in each cohort and 3 responses out of 46 patients in each cohort. But it is a DMC decision. And the reason we leeway to the DMC more is because it is preliminary data. We're only giving them 3 months of response data on the last patient in that cohort. So it could be the DMC sees data, says, wow, there are 3 patients that have partial responses, but we haven't confirmed them yet. So they're not confirmed responses, but we think we should wait a little longer and give these patients more time to fully respond, as an example. So it is a DMC decision. Those are the general rules. But the DMC has full leeway to consider the totality of the data, including what the ongoing patients are actually doing on trial.

Your next question is from Jason McCarthy from Maxim Group.

It's [Dave] on the line for Jason. So we noticed some activity with envafolimab in China yesterday actually with respect to chronic hepatitis B. And it seems like the drug was well-tolerated in patients over there. So I just wanted to see if you had any comments on that.

Appreciate the question, [Dave]. Yes, it was an interesting press release from a partner, Ascletis, in China that is studying envafolimab in a trial of hepatitis B patients. And as I think people will know, hepatitis B infection is a significant problem in China. In the U.S., it's becoming less of a problem given routine childhood vaccination.

But what was meaningful to us in that press release was the fact that envafolimab was given to patients with active hepatitis B infection. So they have significant underlying liver disease. And envafolimab was very well-tolerated in those patients. Now notably in ENVASARC, we don't have patients with underlying liver disease, it's a specific exclusion. But it just gives you an idea of how well-tolerated envafolimab is that you can dose it very effectively to patients, even with known viral hepatitis.

Of note, there was also sign of activity in those patients in the sense that viral loads decreased in response to envafolimab therapy. So it really helps to reaffirm for us that envafolimab is a very safe therapy, even in patients with underlying liver disease, which should bode well for ENVASARC, as some patients do have liver metastasis, as you might expect when they come into our trial.

Your next question is from Soumit Roy from JonesTrading.

Congratulations on all the progress. A question around expansion beyond sarcoma. As -- how you're thinking of expanding in the GIST or other indication of if you're getting more inbounds from collaborators or investigators and given that one of the company has started planning to do a MEK inhibitor combination. So how -- what kind of traction you're getting? And second is looks like BMS is presenting a subQ nivo formulation, some preliminary data at ASCO. How are you viewing this? As a competition? Or any color would be appreciated.

Yes. No. Appreciate the comments, Soumit. I'll first take on the question around sarcoma expansion. And that is with respect to, I think, 3 indications. First, with respect to combining with doxorubicin in frontline therapy. So we are planning before end of this year to dose envafolimab in combination with doxorubicin therapy. And likely that trial will also include doxorubicin, envafolimab and a CTLA-4 inhibitor. As we mentioned briefly, that could be ipilimumab or potentially another CTLA-4 inhibitor.

That combination also could be very relevant in the neoadjuvant and adjuvant therapy space within sarcoma. As an example, most patients with sarcoma present with a extremity lesion and it's resected surgically. If those lesions are large, like 5 to 10 centimeters, typically they get neoadjuvant chemotherapy to try to shrink them down before the resection, and then they get adjuvant therapy after the resection. That's another trial where we've seen significant interest about developing enva/ipi, enva/dox or enva/ipi and dox as an example, knowing the ipi could be substituted for another CTLA-4 inhibitor as preoperative therapy.

It's something we've seen extreme interest. And again, I think it plays to the fact that those patients currently get a significant chemotherapy regimen. It's called AIM chemotherapy, Adriamycin, ifosfamide and Mesna, that's quite myelosuppressive. So if we could dial down the chemotherapy or replace it with immunotherapy, I think investigators would see that as a major advance. So expect those 2 trials to run forward this year. And that is frontline dox in metastatic disease combining with enva or enva and a CTLA-4 and also the same combination of neoadjuvant therapy followed by adjuvant treatment with continued enva dosing.

In GIST, to your point, there's interesting data that GIST with combining principle of the MEK inhibitor was announced within the past day or so. I think that's an interesting combination and I think combining a c-KIT inhibitor with envafolimab makes a lot of sense, and it could be multiple tyrosine kinase inhibitors with envafolimab. The current data with envafolimab is it is very well tolerated. I mean that was confirmed with respect to the dosing in hepatitis B patients, and it's been confirmed with respect to the 700 patients dosing that we've had through both our studies and our partner studies that indicate envafolimab seems to be safer than some checkpoint inhibitors with respect to pneumonitis and colitis. And clearly, there's no risk of an infusion reaction, which makes it safer than any intravenously administered therapy.

Now you mentioned with respect to BMS and subQ dosing. I think it's important that what makes enva different is that I don't think any full-length antibody can mimic what envafolimab does as a single-domain antibody. And we know that the companies are dosing, for example, with full-length antibodies combining with an adjuvant like, for instance, hyaluronidase. That's more the standard, I think, most well-proven subcutaneous dosing mechanism to try to let antibodies go from IV to subQ. But let's think about what that means versus how you give them the full amount.

If you're giving an antibody, for instance, with hyaluronidase, you're giving a large volume, 10 to 20ccs, and you're giving it over minutes. With envafolimab, literally, you're giving an injection of about 1.5cc in 30 seconds. That -- there's nothing easier than that, and that's why this is so easily dosed in the clinic. And that's why potentially home dosing is a real option with envafolimab in a way that could not ever be attained with a full-length antibody that will -- that requires an adjuvant.

Your next question is from Bert Hazlett from BTIG.

Just a quick follow-up with regard to the last one. Charles, could you give a sense of the gating items for move into first-line sarcoma or GIST or additional efforts? Is it really dependent upon looking at the futility analysis? Or what are the gating items there?

Great question, Bert. Yes. I think with respect to moving into frontline, we're actively planning a frontline trial. Initially, that was started as a Phase I tolerability study, but -- and it will be gated in the sense that we want to see activity clearly at envafolimab single agent and also, the combination with Yervoy in the ENVASARC trial.

I think we expect to see that evidence of activity by second half, clearly. And our plans are to basically start the frontline trial by end of the year. So it's typical kind of TRACON time line. We'll move aggressively. The sites that are already in ENVASARC will be sites that do the frontline trial. I cannot underestimate the enthusiasm of the investigators to move this drug forward as evidenced by the neoadjuvant study, which we were kind of thinking about on the back burner that right now there's incredible enthusiasm for that study as well.

So expect that to start second half. If we saw futility as an example in one cohort, we'd probably advance the other cohort. That said, our expectation, again, based on really good data for checkpoint inhibition in these indications in refractory UPS and MFS make it clear that checkpoints are quite active in this disease. So based on what we expect to see, do expect us to be in frontline trials before end of the year, and we're excited to see that move forward.

Okay. And the other question I had is with regard to the CTLA-4 combination molecule. You mentioned a couple of times with regard to in-licensing and potential for that. Always difficult to predict, but you've had some notable success. Care to put a little meat on that bone? Are you moving in the direction of Yervoy or another molecule?

No, I appreciate the question, Bert. I mean I think we feel it would be a very attractive and a strategically aligned business development opportunity for us to license our own CTLA-4. We're very active in terms of looking for new molecules to plug into our CRO independent engine, and I think as evidenced by the ENVASARC trial and again, how quickly we moved that forward into a pivotal, or I should say move -- and before that, how quickly moved that forward from Phase I data in the U.S. into pivotal study less than a year after a license, speaks volumes about how we move.

So for us to own both legs, if you will, the dual inhibitor checkpoint franchise -- dual checkpoint inhibitor franchise would be very attractive. We're also interested in other immuno-oncology targets that might build upon envafolimab. And then beyond that, we're interested in assets that might just stand alone with respect to their ability to proceed in unmet need populations in the U.S. But to your point, I think from a strategic point of view, we think owning both ends of a dual checkpoint inhibitor franchise would be quite an attractive proposition for TRACON.

(Operator Instructions) Your next question is from Nick Abbott from Wells Fargo.

First question, Charles, is in the prepared remarks for the application, Orphan Drug resubmission, it says, request from FDA on preclinical or clinical evidence of activity for enva. So what data did you actually submit for Orphan Drug?

Nick, appreciate the question. Yes, so when we initially submitted the Orphan Drug designation application, we kind of submitted it with respect to the prevalence of sarcoma, which made it clear that this is an orphan drug, and yet they indicated they wanted more data. They wanted evidence either preclinically or clinically that this drug, envafolimab, is active in sarcoma. We will fully disclose, I think, what we submitted with respect to that updated application at the time we receive FDA correspondence, Nick, and I just ask you to be patient until that time, at which we will be fully forthcoming.

Okay. Fair enough. And then just following on Bert's question, how feasible is it you can get a CTLA-4 and get an IND approved ahead of that study start?

Yes. That's a great question, Nick. So with respect to our current ENVASARC trial, to be crystal clear, we will continue that as designed, meaning we'll continue that trial moving forward envafolimab plus ipilimumab. We are quite aggressive on the business development front, and our track record has been that we execute deals. We did 4 deals between 2016 and '19. We did not consummate a deal last year, and I think COVID had an impact on that, but we did make a lot of contacts that allow us to feel confident for the business development opportunities this year. And ideally, these circumstances would permit us to begin a first-line trial with envafolimab and another immune-oncology asset in combination with doxorubicin, to your point.

I am showing no further questions at this time. I would now like to turn the conference back to Dr. Theuer.

Great. Well, thank you, everyone, for the questions and your attention, and we look forward to talking with you again next quarter. Let's stay safe and have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.