TRACON Pharmaceuticals Inc (TCON) 2022 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals First Quarter 2022 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 activities, future expenses and cash runway and our development plans and strategies. 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, 2021 and subsequent quarterly reports 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?

Good afternoon, and thank you for joining TRACON's First Quarter 2022 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, 2022. Finally, we will conclude by taking your questions.

I'll start with an update on our continued progress with the ENVASARC pivotal trial. Recall that in December 2021, the independent data monitoring committee recommended doubling the ENVA dose to 600 milligrams after noting that ENVA dosed at 300 milligrams was well tolerated and demonstrated a significantly higher objective response rate in lower-weight patients.

This recommendation was incorporated into an amended protocol that was submitted to the FDA in January, approved by the FDA in February and then approved by internal review boards or ethics committees at each of the 30 ENVASARC sites, including 29 sites in the U.S. and 1 site in the United Kingdom.

We believe the short time frame between amendment submission in January and amendment approval by April. At each of the 30 clinical sites is another demonstration of the value of TRACON's CRO-independent product development platform that permits highly efficient interactions between TRACON and the sites that conduct our trials. We also noted in April that more than 10 patients had initiated treatment at the 600-milligram ENVA dose.

ENVASARC enrollment continues to be brisk. And as a result, we expect to report on 3 key interim data monitoring committee assessments this year. First, we expect to report 2 safety assessments in mid-2022, at 3 weeks and 12 weeks following enrollment of the 20th patient. In the second half of this year, we expect to report on the interim efficacy assessment, 3 months following enrollment of the 36th patient to allow for an assessment of the preliminary response rate.

At that time, the Data Monitoring Committee will apply a formal futility rule that requires at least 1 response in 18 patients enrolled into each of the 2 cohorts at the 600-milligram ENVA dose. As a reminder, the ENVASARC trial includes 1 cohort, who received single-agent ENVA and a second cohort who received ENVA in combination with Yervoy. The primary endpoint in each cohort 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 by central review, or an 11.25% objective response rate defines the level of response that satisfies the primary objective of the study, which is to statistically exceed the 4% objective response rate of Votrient, the only approved treatment for patients with refractory UPS and MFS.

Notably, Votrient is a drug with a black box warning for fatal liver toxicity. We believe ENVA has the potential to transform the care of refractory sarcoma patients through the demonstration of superior efficacy and safety compared to Votrient. Based on data from trials of other checkpoint inhibitors in refractory UPS and MFS, we are targeting a 15% response rate for single-agent ENVA and up to a 30% response rate for ENVA given with Yervoy.

Furthermore, we plan to approach the FDA to discuss a BLA filing strategy as soon as we determine nonresponses in either cohort. Our second clinical stage immuno-oncology asset is YH001, a potential best-in-class CTLA-4 antibody licensed from Eucure Biopharma in October last year. As a reminder, we received a broad license for YH001 to develop and commercialize in North America in sarcoma and multiple other indications, including microsatellite stable colorectal cancer, renal cell carcinoma and KRAS-positive lung cancer.

Note with respect to our license, we can substitute any one of those indications for bladder cancer, endometrial cancer or melanoma at our election. In these non-sarcoma indications, YH001 could be combined with existing standard of care agents included marketed PD-1 antibodies. Our initial development plan for YH001 is to initiate a clinical trial in sarcoma in combination with ENVA in the second half of this year.

Importantly, we can leverage data from 2 completed Phase I trials of YH001 performed by our partner, Eucure to inform our dosing strategy. These 2 trials determine the recommended Phase II dose of YH001 as a single agent and in combination with the PD-1 antibody, toripalimab. We intend to initiate a Phase I/II clinical trial studying a triplet that includes YH001, ENVA and doxorubicin chemotherapy as doxorubicin is the current frontline standard of care treatment for sarcoma.

Following the Phase I portion of the trial to assess the tolerability of the combination of ENVA and YH001 doublet as a -- as well as the triple therapy that includes doxorubicin, we will assess the response rate of common and rare sarcoma cell types to combination treatment with the intent of demonstrating superior response rates compared to historical data using standard of care agents.

For example, in leiomyosarcoma, we plan to compare the response rate of triple therapy to the historical 15% response rate of single agent doxorubicin. In the case of a rare sarcoma subtype like chondrosarcoma where chemotherapy is not effective, we plan to study the doublet of YH001 and ENVA to assess the response rate compared to historical response rates of less than 5% with standard of care treatments.

One of the purposes of this Phase I/II trial is to determine the subtypes of sarcoma that respond best to the combination of ENVA and YH001. Following the potential accelerated approval of ENVA through the ENVASARC trial, the FDA will require a randomized trial to demonstrate a survival benefit.

We expect this Phase III post-approval trial will compare single-agent doxorubicin through the triple combination of doxorubicin with ENVA and YH001 with PFS as the endpoint. This trial would be expected to enroll patients with UPS and MFS as well as other sarcoma subtypes shown to be responsive to triple therapy based on data from the Phase I/II trial that I described earlier.

The ability for TRACON to commercialize 2 in-licensed immuno-oncology therapies together in sarcoma will be of great strategic benefit. It is important to understand the sales potential in sarcoma with ENVA at parity pricing is not just the forecast of $200 million in annual ENVA revenues from the initial indications in refractory UPS and MFS.

Our clinical development strategy is designed to create the opportunity for ENVA to broadly benefit patients with sarcoma in the frontline, adjuvant and neoadjuvant settings by seeking supplemental indications. Moreover, we believe TRACON's total sarcoma driven sales revenue should be further enhanced by marketing YH001 and ENVA together as part of the same treatment combination in sarcoma.

While development in sarcoma straightforward due to the lack of any approved immunotherapies, we also see a path forward for YH001 in other indications where there is clear evidence of activity with dual checkpoint inhibition. For example, the combination of OPDIVO and Yervoy is approved for the first-line treatment of intermediate and high-risk patients with advanced renal cell carcinoma. However, our discussions with key opinion leaders indicate that most patients receive frontline treatment with a PD-1 antibody and a VEGF inhibitor rather than with Yervoy.

Therefore, we believe the unmet medical need in advanced renal cell carcinoma patients is in the PD-1 refractory setting. Data presented at ASCO indicated that PD-1 refractory patients can be re-sensitized to immunotherapy, and we expect to evaluate YH001 in this line of treatment. This strategy of second-line dual checkpoint inhibition may be relevant for many tumor types where PD-1-directed treatment is given in combination with chemotherapy or a VEGF inhibitor, but without Yervoy in the frontline setting.

In addition to our 2 checkpoint inhibitors, we are pleased the National Cancer Institute continues to fund development our DNA with damage repair inhibitor, TRC102. In February, the NCI initiated a randomized Phase II trial assessing TRC102 in stage III non-squamous non-small cell lung cancer in combination with chemoradiation. The [tumor] trial will enroll 78 patients to assess the benefit of adding TRC102 to current standard of care treatment of pemetrexed, cisplatin and radiation therapy, followed by consolidated durvalumab treatment.

The primary endpoint of the trial is PFS and the trial is designed to detect an improvement in PFS at 1 year from 56% to 75%. Enrollment is expected to begin this year and results are expected in 2024. Our fourth clinical-stage asset is the CD73 antibody, TJ4309, that TRACON is evaluating in a Phase I study as a single agent and in combination with the checkpoint inhibitor, Tecentriq.

We are working to complete data analysis of the trial, which has enrolled the last patient. As a reminder, I-Mab has indicated their desire to exercise their option to terminate the TJ4309 license following completion of the Phase I trial, for a payment to TRACON of $9 million, which is expected later this year.

Next, I will provide a legal update on the 2 disputes which are in arbitration with our corporate partner, I-Mab. As a reminder, in February of this year, arguments for alleged breaches of both of our license agreements with I-Mab were heard before an International Chamber of Congress, arbitration tribunal under New York law. As we have noted in the past, in March 2020, I-Mab issued a press release announcing a strategic partnership with KG Bio whereby KG Bio received what the press release described as a right of first negotiation for exclusive rights to commercialize TJ4309 in multiple Asian, African and Middle Eastern countries for up to $340 million in potential payments to I-Mab.

We believe that based on the KG Bio license, TRACON was entitled to receive a payment at that time under the TJ4309 agreement, although I-Mab has disputed that this payment is due. The other dispute with I-Mab with regards our bispecific antibody agreement with them, the disputes in this agreement include issues related to I-Mab's 2 license and collaboration agreements with ABL Bio in July 2018 that preceded our agreement with I-Mab in November 2018.

As of today, the TJ4309 agreement and bispecific antibody agreement disputes remain under post-hearing consideration by the tribunal, and we've been guiding to expect their binding decision later this year. Pending results of the arbitration, we continue to meet our obligations under the terms of both agreements. We will promptly provide an update when the tribunal panel announce their findings.

Given the challenging capital markets, the expectation to secure nondilutive capital from our corporate partner is important and may be further supplemented by opportunities for nondilutive capital enabled through our CRO independent product development platform that we believe makes us one of the most efficient clinical development organizations.

We expect to continue to leverage our platform in 2 ways that provide for potential nondilutive capital to TRACON. First, we are evaluating drug candidates, whereby TRACON performs clinical trials at a premium to our cost and TRACON then earns a share in the revenue, including sublicensing fees and our royalties from commercialization.

This is an aligned structure we used in the past, for example, with Johnson & Johnson. Second, we are exploring a franchise model, whereby we are paid to share our proprietary capabilities and know-how to enable other companies to independently internalize clinical operations and use these new capabilities to avoid contracting with CROs to execute clinical trials.

As has been the experience at TRACON, such an investment would be expected to result in substantial time and cost savings for our partner. We believe that over time, our product development platform has earned strong credibility as a compelling solution for companies who wish to become CRO independent and therefore, reap the rewards of conducting trials faster, at higher quality and at lower costs than those trials typically contracted to CROs. 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 $3 million for the first quarter of 2022 compared to $2.3 million for the comparable period of 2021. The increase was primarily related to additional enrollment in the pivotal ENVASARC trial.

General and administrative expenses were $6.5 million for the first quarter of 2022 compared to $2.7 million for the comparable period of 2021. The increase was primarily related to legal expenses in connection with the arbitration with I-Mab and we expect G&A expenses to decrease significantly for the remainder of the year as the arbitration hearing is now complete. Our net loss was $9.5 million for the first quarter of 2022 compared to $5.1 million for the comparable period of 2021.

Turning to the balance sheet. At March 31, 2022, our cash, cash equivalents and investments totaled $16.6 million compared to $24.1 million at December 31, 2021. We expect our current capital resources to be sufficient to fund our planned operations in 2023.

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

Thank you, Scott. As you have heard, our business strategy is proceeding as planned. Allow me to recap the 5 key events we expect this year. First, we expect to report 3 interim assessments at the 600-milligram dose of ENVA in ENVASARC this year, including an interim efficacy assessment in the second half of this year.

Second, we are on track to initiate a Phase I/II trial of our potential best-in-class CTLA-4 antibody, YH001, in combination with ENVA in the second half of this year to begin first-line development of the combination of our 2 checkpoint inhibitors in sarcoma.

Third, we expect to further leverage our unique product development platform to provide TRACON nondilutive capital in exchange for enabling companies tired of being beholden to CROs to benefit from our capabilities and realize for themselves, the substantial time and cost savings, we enjoy at TRACON.

Fourth, we expect to complete the TJ4309 Phase I trial this year, providing I-Mab the opportunity to exercise their stated desire to terminate the agreement for a payment to TRACON of $9 million.

Fifth, we expect to report the arbitration panel's binding decision, including potential damage awards regarding our significant legal disputes with I-Mab. As Scott indicated, our current cash runway extends into 2023 and passed each of the 5 upcoming key milestones, including expected nondilutive capital from an existing partnership.

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

(Operator Instructions) Our first question comes from the line of Maury Raycroft with Jefferies.

I was just going to start off with the ENVASARC study and with the interim analysis later this year for efficacy. I think you mentioned that's going to include about 36 patients. Just wanted to see if that's correct. And then I'm wondering if the data is going to be pooled or if you're going to break it out by the mono versus combo?

Maury, thanks for your call, and we're looking forward to seeing you at your conference in June in New York in just a month away. With respect to ENVASARC, we will do, if you will, an identical analysis to what we did last year at the lower dose. So at the 600-milligram dose we're using currently in the trial after the 36 patients enrolled, which would mean 18 patients in each cohort, meaning 18 patients who received single-agent ENVA and 18 patients received ENVA and Yervoy. Once those 18 patients in each cohort has gone 3 months and had 2 scans, then we will assess the preliminary objective response rate and present that to the Data Monitoring Committee, knowing there's a futility rule whereby we need 1 response within each of those 18 patients in each cohort in order to continue enrolling that specific cohort.

So depending on the review by the Data Monitoring Committee, we will then reveal results to the Street pending their guidance, if you will. So I can't promise exactly what we'll be revealed in terms of aggregate or individual response rates other than that we will reveal that the decisions by the DMC with respect to futility and any further announcements by the DMC with respect to modifications or any potential change in the clinical trial.

Our expectation will be that the DMC would continue the trial as planned. I would point out, even at the lower dose, we saw significant activity, including activity to satisfy the futility analysis. So we feel the futility analysis will be also fulfilled at the 600-milligram dose. And as I mentioned, I think earlier, we expect to see the activity that we saw in lighter-weight patients generalized to patients independent of weight, which I think would be an exciting prospect for patients.

Got it. That's helpful clarification. And then also wanted to just check on enrollment. We noticed recently that you -- that your target sites hit about 30 on ct.gov. And just wondering if you're planning on going beyond 30? Or do you think 30 is sufficient? And if you can put any more finer points on enrollment expectations at this point in the time line?

Sure, Maury. Yes. I appreciate that. So there continues to be a lot of excitement for sites wanting to join the trial. So I think initially, we planned about 25 sites, but it's hard to turn away an experienced sarcoma site that wants to be part of the study. So that's why we increased the number now up to 30, 29 in the U.S. and then 1 in the United Kingdom as well.

And I think that will be probably the total for the entire study going forward. Although, again, if a site really comes to us and wants to be part of the study, it would be hard to turn them down. But assume it will be 30 sites going forward. In terms of accrual, we expect to accrue the study between now and end of 2023. I think we're being fairly conservative in our accrual estimates. But -- and if we exceed that, that would be fantastic. I am encouraged by the fact that even during processing the amendment, as I disclosed, we enrolled more than 10 patients just in the first quarter alone. So there's, again, a lot of excitement around the trial, and we do expect continued robust accrual.

Got it. Okay. That's helpful. And last quick question for me for the $9 million termination fee and the completion of the Phase I, I guess, is that going to be more of a third quarter update or a fourth quarter update when you complete the Phase 1? And then when do you get the $9 million?

Yes. Currently, our expectation is, as we disclosed in the [QA] that we'll complete the study by the end of this quarter. And so thereafter, we would expect the -- our partner to exercise our stated intention to terminate the license and then pays to $9 million. So hard to say exactly when that is, Maury, but I do expect that will be in the second half of this year.

Our next question comes from the line of Ed White with H.C. Wainwright.

I have 3 questions. The first 1 is just on the timing of the interim looks from the Data Safety Monitoring Board -- the -- is the safety -- are you going to have 2 safety reviews prior to the efficacy data being released? Or how should we be thinking of that?

Yes, I appreciate the question, Ed. Yes, we expect really the timing of -- or the progression of the interim review is similar to what we saw last year, just now will be at the higher dose. So we'll see the first review is after the 20th patient has been on study for 3 weeks. And then this another stage review will be after the 20th patient has been on study for 12 weeks. So those are 2 reviews that will happen in sequence you expect mid this year.

And then once the 36th patient has been on trial for 3 months and have 2 scans, that will permit the interim efficacy assessment, which we expect towards the end of the second half of this year. So that's the sequence of 3 that, in a sense, will parallel, if you will, to the sequence of 3 that we had last year at the lower dose.

Okay. The second question I have is on your announcement on the product development platform. I'm just curious if you've had any interest yet. And is there any timing that we could think of seeing a contract signed?

Sure. Yes, I mean, I guess, I would say, in general, so when people look at TRACON, especially other companies and they look at our expenses, that we can run a pivotal trial like ENVASARC for about $20 million. I mean they want to be able to do that themselves. And so we've used our platform in many ways. So we've used it as a means of gaining commercial rights, for instance, envafolimab, we say we'll take on the clinical trial burden, run the trials at our cost even though that cost is very low, secure U.S. commercial rights with the intent of commercializing the drug and then share profits with our partner, but not paying upfront or milestones.

That's been our standard business, if you will, operation. But -- as I noted in the past, we have done the revenue share model, whereby, for instance, with Johnson & Johnson, we will take on an asset, but we'll ask the partner to pay for the trial and pay cost plus. Now we know even if a partner pays cost plus, it's going to be cheaper than if they pay a CRO. And then we want to be aligned with our partner. We don't want to just act like a CRO and not be aligned to do the trial quickly.

So we also want a piece of the revenue, whether it be a piece of the sublicensing fees or the royalty so that we are aligned to do the trial quickly at low cost and at high-quality knowing we'll still save our partner money versus then work with the CRO and more importantly, we'll save them time versus them working with the CRO. So that's the revenue share model. And I will say there's significant interest in working with TRACON along those lines. I'd say especially in these days, where a lot of companies are capital-constrained and whereas 2, 3 years ago, the amount I cared about throwing a bunch of money to the CRO. Now they're saying, "You know what, we need to be very judicious. And if they want to be judicious, working with TRACON makes perfect sense."

So there is a lot of interest around the revenue share model that I mentioned, which would be beneficial to TRACON because it would allow us to collect nondilutive capital. The third model is something that's more recently come to the front because a lot of companies say it's great that you would do the trials for us, and we understand your need to be a revenue sharing partner. But -- what we'd really like is the keys to the kingdom. We'd like you to teach us to do what you do.

And so that's where we've come up with this idea of the franchise model. It teaches someone to do what TRACON does. Teaches them how to do trials much faster at 1/3 of the cost with probably better quality than the CRO and teaches that magic, if you will, teaches the special sauce.

So that's a more recent idea that we've been approached with respect to thinking about. Yes, I think with that idea, we'd really want to work with a very trustworthy partner because we would be really teaching them our special sauce. But that is something that is of interest to certain partners. So in terms of when to execute a deal, our stated corporate objective, Ed, would be to do at least 1 deal this year around a model that would allow nondilutive capital coming to TRACON.

Okay. And then perhaps the last question is for Scott. The R&D expense sequentially was down ever so slightly, but it was down as you're expanding your trials, I'm just wondering, was there anything onetime in nature in the fourth quarter that perhaps wasn't seen in the first quarter or something in the first quarter that was pushed out to the second quarter. And how we should be thinking of the quarters going forward?

Yes. No, thanks for the question. So going forward, the quarter should be similar to Q1, about $3 million in R&D expense. Q1 was down a little bit because of that amendment, we weren't enrolling too many patients in January, but then we enrolled quite a few in February and March. But that was really the -- why it was down just a little bit from Q4. But going forward, I would expect about [$3 million] a quarter.

Your next question comes from the line of Joel Beatty with Baird.

The first 1 is on the 2 safety assessments that are coming up for ENVASARC. What will we learn from those? Are those just kind of go, no-go decisions? Or is more detail than full provided? And how would the result of those safety assessments to be communicated with the Street?

Joel, thanks for your question. Yes, the safety assessments are really just to see if there's any significant safety signal that we're seeing with envafolimab or envafolimab combined with Yervoy that we didn't expect. I would point out that we had the similar safety assessments at the lower dose of envafolimab, both as a single agent and combined with Yervoy and there was no issue raised whatsoever, and we released that general finding as a top line press release to the Street, and we would intend to do the same thing this year.

We -- I would also point out that the increased dose of envafolimab we're using at 600 milligrams is still a dose that's well within the maximum tolerated dose parameters of the drug in the sense that in Phase I testing, this drug was dosed as high as the equivalent dose of 2,400 milligrams every 3 weeks. So 4x higher than the dose we're using in ENVASARC.

So I would say that we feel it's very unlikely we'll uncover a safety signal we haven't seen. Remember, ENVA's been dosed to over 700 patients as a single agent and in combination with other drugs, but this is a formal way to assess safety, you have the DMC review it and make sure there's nothing untoward that we haven't seen or expected that could potentially impact the patients in the trial.

Got it. That makes sense. And then another question. Thinking back to the 70 patients that were enrolled last year, is there any potential to share data on those to help further understand the impact that increasing their dose here it could have?

The 70 patients that are enrolled at the lower dose, Joel, I don't expect we'll release data independent of the final data for the trial. But it's important everyone to understand how valuable those patients are with respect to informing on the clinical pharmacology of envafolimab. And I mentioned that because the FDA has put a great deal of emphasis lately on clinical pharmacology and this Optimus project to make sure you're going to file for approval at the right dose.

And those patients dosed at 300, combined with the now 160 patients, we expect to be dosed at 600, is going to give us a broad, if you will, exposure -- a broad base of patients that have various exposures of envafolimab that I think will be incredibly useful to really, if you will, prove to the FDA that we're using the right dose which is the 600-milligram dose that we expect to file for approval.

So those 70 patients and the PK data from those patients and correlating that PK with the responses we've seen in those patients will be incredibly valuable to support our expected application for approval of 600 milligrams.

Great. And then 1 last question. For the franchise model that you've been discussing, can you help with maybe quantifying the value to potential partners such as the magnitude of the cost savings and any other potential benefit?

Joel, I really appreciate you asking that question, and maybe I'll put it in perspective this way. So let's say you're running a 30-patient Phase I study. Now we do studies at about $100,000 a patient. So for us to do a simple 30-patient Phase I study cost us $3 million. If you were to go to a CRO in Oncology in this day and age, and I have seen numbers of about $300,000 per patient. So in other words, if you run a Phase I study with the CRO, it will cost you probably around $9 million.

So you can understand that if you were to work with TRACON's model, you would say potentially around $6 million just for a Phase I trial. If you're running a simple -- 2 simple Phase I trials, using our model potentially could save a company $12 million in just, say, 2 years running 2 simple Phase I studies.

And if you do a Phase II, Phase III, it goes up from there. As I mentioned, we're doing ENVASARC for about $20 million to $25 million. I mean as you well know, pivotal trials typically cost up to 5x as much. So you start thinking about how much money a company would save if they've used our model, that's kind of the metrics of what we feel a franchise model would be worth to TRACON for us to teach that to another company.

Your next question comes from the line of Nick Abbott with Wells Fargo.

First one, Charles, how much do you think you spent cumulatively on the I-Mab litigation?

I think overall -- Scott, maybe you can better answer that question.

Yes. And Nick, it's our normal G&A spend is about [$2 million] a quarter. That's kind of what I'd say it's historically been. So then last year, we spent about $17.5 million and so -- $17.5 million. The difference between that and 8%, the majority of that, I would say, would be the I-Mab arbitration. And then this year as well as [$6.5 million] and normal would be about $2 million . So that's over $10 million just last year and this year and then there were some costs in 2020 as well. But that kind of gives you an idea.

Terrific. And then a couple of people asked about franchise model, Charles. How do you think -- what is the revenue generation from that look like? Is it a onetime fee? Is it a trial fee? How do you think about revenue?

No. Great question, Nick. I appreciate you asking that. So what we think is that there would be a significant upfront payment to TRACON for us to teach the partner or if you will, give them the keys to the kingdom. But it's also a system that we continue to upgrade on an annual basis. So our thought would be to be an upfront fee and then it'd be annual, if you will, maintenance fees to TRACON, say, over a 5-year period of time, because I think it will take that period of time for someone to feel really comfortable that they don't need to continue to kind of reference us and have us met to them in terms of small parts of the system that you may not get the first time.

Remember, it took us 10 years to fully internalize. We've been doing this for 10 years, I should say, and I'd say it took us 3 years to really fully internalize and feel comfortable doing the system ourselves. So that's how we think about upfront payment and then annual, if you will, maintenance payments, say, for 5 years as we continue to be a resource for the company that we teach to use the system.

And maybe just a follow-up on that. Is that -- do you think that once you sign a franchisee, is there a plus option where you help them with headcount in order to pass the sort of teaching phase?

Yes, I think that's a great point. I mean, we would really -- I mean, we always pride us on being a great partner. So with a franchisee, we would really teach them exactly what we're doing, help them understand exactly what personnel they need in each specific role in the company to be able to mimic what we do. Knowing that if you have the right people, you don't need a ton of people. Remember, TRACON, our total number of employees right now is 20. And we're able to run multinational trials with that team just because the system is so good and the people are so good.

So we would have to help them not only get the systems, but have the right people -- sort of the right people in the right spots on the bus at that company to run the systems well. But it doesn't take a lot of people if they're well trained and very capable which is the case of TRACON, for example.

And there's no risk that you lose your people?

Yes. I think we'd make sure we sign the contract indication of (inaudible).

And then last 1 for me, though I like the plan for YH001 and it would be great if ENVASARC could be -- sorry, envafolimab could be its buddy. What do you think the probability is that you can expand their envafolimab license beyond just sarcoma?

Yes. No, it's a great question. It's definitely something we would love to do. Clearly, it's something we need to get concurrence from each of our partners, both Alphamab and 3D Medicines. So can't state that we're able to do that right now. And -- but I can state that it's something we clearly wish we can do in the near future, knowing that I think to your point, if we had our own dual checkpoint inhibitor franchise with ENVA and YH001 that could be broadly powerful and benefit patients across multiple indications, not just sarcoma.

Your next question comes from the line of Bert Hazlett with BTIG.

Just kind of a follow-up to the last 1 in terms of potential triple combinations. Just with regard to YH001 ENVA. Just so we can kind of frame it. Again, the Phase I, Phase II combination with doxy is really in frontline in multiple sarcoma subtypes, that is to generate data in the combination to ultimately move into a Phase III trial in the first line in that setting.

Bert, thanks for your question. Yes, exactly right. It's exactly what we're planning to do. I mean we've seen, for instance, in lung cancer that dual checkpoint inhibitors can be combined with frontline chemotherapy quite effectively. And with respect to sarcoma, doxorubicin is the standard frontline therapy used in the majority of sarcoma patients. So our goal would be to do in sarcoma, if you will, what other companies have done, say, in frontline lung cancer, which is combine 2 checkpoint inhibitors with chemotherapy in this case, doxorubicin, so it would be that triple therapy you referenced.

Okay. So then the discussion about RCC relative to kind of the answer you just gave to the prior question. Is -- examining an ENVA YH001 combination in PD-1 refractory RCC patients. That's really maybe down the road and if things can be adjusted or -- I just want to make sure I understand kind of the optionality there.

No, I appreciate it, Bert. So yes, with respect to renal cell carcinoma, we have rights to develop YH001. We do not have rights to develop ENVA in that indication. So if we're unable to expand our license to secure rights to develop ENVA, for example, in renal cell carcinoma, fortunately, we could still develop YH001, which is our plan. But in that case, we develop it with a PD-1 inhibitor, presumably 1 that's already approved in renal cell as the combination.

Okay. Great. And as you can provide additional combinations, is that -- are there other indications behind that at this point or things are still under construction there?

I mean the other indications where we have rights for YH001, for instance, includes microsatellite stable cancer, particularly colorectal cancer, that's another indication, we think, is something we potentially could explore. But I would say after sarcoma, right now, top of our list would be renal cell carcinoma.

(Operator Instructions) Our next question comes from the line of Soumit Roy with Jones Research.

Congratulations on all the progress. If I may ask this question, maybe I'm a little confused. The prior -- in December when you are dosing at 300 milligram, I thought some of those patients were eligible to transition into this higher 600-milligram trial. Is that what is happening? Or you have to enroll such new patients?

Soumit, yes, to be clear. So the way the trial works is we are enrolling 80 new patients in each of the 2 cohorts who will start at 600 milligrams. So 80 patients will start at 600 milligrams as single-agent ENVA and 80 patients will start at ENVA 600 with Yervoy. And those are the 2 cohorts that are the primary cohorts evaluated for the primary objective of response rate, where we have to see 9 of 80 responses in either cohort to reach the primary endpoint.

So that's the, if you will, the data set that's evaluated for potential approval of those 280 patient cohorts. But the 70 patients already enrolled at 300, there are patients ongoing at 300 milligrams, and those patients individually can dose escalate to 600 to see if that will also benefit the individual patient and that will also be very useful data as supportive data. But to be clear, the population evaluated for the primary endpoint is this 80 new patients enrolled into each of what we call Cohort C of single-agent ENVA at 600 and Cohort D of ENVA at 600 plus Yervoy. That's the key population that's evaluated for the primary endpoint.

I see.

So in other words, Soumit, So another word, Soumit, just to clarify, we expect the total number of patients enrolled in the trial now will be 230. 70 patients already enrolled at the lower dose of ENVA and then 160 patients of which more than 10 are already enrolled, as I speak, that will be enrolled in the 2 cohorts at the higher dose. Please, your question?

That really helps. Can you give us any idea how many of those 70 patients you see are dose escalating into 600 milligrams?

Multiple patients. I can't give you an exact number, but multiple patients that were on at 300 where they're, as we've disclosed, there was really minimal safety issue at 300, have dose escalated to 600, both the single agent and also with Yervoy.

Okay. And is there any possibility you would present that data separately, cohort A, B? Or it would all be packaged into 1 data set for approval -- for registration?

Yes. Our thought is that probably will be packaged in 1 data set that, that 70 patient data will be highly supportive data because it will actually be so valuable to us given this real emphasis by the FDA on clinical pharmacology and the Optimus project. That data is going to be hugely valuable, and that will be part of the filing package, if you will. So to be clear, the endpoint will be determined at the higher dose -- the patients start at the higher dose of ENVA. But that 70 patients worth of data will be supportive data and be integrated, for instance, into the population PK analysis and the exposure response assessment analysis that's a key part of any BLA filing in this day and age.

There are no further questions at this time. I will now turn the call over back to Dr. Charles Theuer for closing remarks.

I'd just like to thank everyone for the careful listening to the script and to the dialogue, the questions. I appreciate your time, and wish everyone a great day. Thank you.

This concludes today's conference call. Thank you again for participating. You may now disconnect.