TRACON Pharmaceuticals Inc. (NASDAQ:TCON) Q1 2019 Earnings Conference Call May 14, 2019 4:30 PM ET
Charles Theuer - President & CEO
Scott Brown - Director, Controller
Conference Call Participants
Maury Raycroft - Jefferies
Jake Colby - BTIG
Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals First Quarter 2019 Earnings Conference Call. At this time, all callers are in a listen-only mode. After the speaker's prepared remarks, we will conduct a question-and-answer session and instructions will be given at that time.
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 the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2018 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 conference call over to Dr. Charles Theuer, President and CEO of TRACON Pharmaceuticals. Dr. Theuer, may begin.
Good afternoon, and thank you for joining TRACON's first quarter 2019 financial results and business update conference call. I will begin with an update on our pipeline and recent activities. Following that, our Vice President of Finance, Scott Brown; will review our financial results for the three months ended March 31, 2019. Finally, we will conclude by taking your questions.
Last month, we announced the termination of the TRC105 program in oncology due to futility at the interim analysis of the Phase 3 TAPPAS trial. While these results were disappointing, it's important to note that TRACON continues to develop a robust pipeline consisting of four clinical stage assets. As well, we have access to a pipeline of multiple preclinical by specific antibodies. Further, we have developed a sustainable product development platform that we expect will continue to allow us to form new partnerships that will drive significant long-term shareholder value. Let's begin with a brief update on our first clinical stage asset, DE-122, the ophthalmic formulation of carotuximab. We remain optimistic about development of this drug in wet AMD where the main biologic basis for loss of vision is neovascularization. Angiogenesis inhibitors have revolutionized patient care in this disease, and angiogenesis inhibition maybe much more relevant than in oncology.
Our licensee Santen is at an advanced stage of enrollment in the three arm randomized Phase 2 AVANTE study that compares treatment with two different doses of the DE-122 combined with Lucentis to treatment with single-agent Lucentis. The trial is accruing patients at ten sites in the U.S., and data are still expected in the first half of 2020. We believe there is a substantial opportunity for agents that target essential angiogenetic pathways like endoglin to be developed in combination with VEGF inhibitors for wet AMD as the majority of patients do not experience meaningfully improved vision following treatment with single-agent VEGF inhibitors. TRACON retained significant financial rights with DE-122 including $145 million in remaining developmental, regulatory and commercialization success-based milestones and the high-single-digits to low-teen royalty on global net sales.
We'll turn now to TRC102, our second clinical stage asset that is a novel small molecule inhibitor of the DNA base excision repair pathway, that is intended to reverse resistance to certain chemotherapeutics. In April, The National Cancer Institute reported top line data from the Phase 2 trial of TRC102 and Temodar in patients with relapsed, metastatic colorectal cancer at the AACR annual meeting. The combination of TRC102 and Temodar was tolerable but the overall response rate of 6% did not meet the primary efficacy endpoint. This response rate is similar to that seen in trials of TRC102 with other chemotherapeutics. Therefore, we believe that biomarker validation to identify patients most likely to respond to TRC102 treatment is important to the success of the program.
Preclinical data indicates that glycosylase expression is associated with tumor sensitivity to TRC102. Therefore, we expect to assess glycosylase expression in tumor samples from the TRC102 and Temodar trial, as well as in tumor samples from patients in three other ongoing Phase 1/2 trials of TRC102 with other chemotherapeutics or radiation therapy.
Moving on to TRC253; our third clinical stage asset that we are studying in a Phase 1/2 trial in patients with prostate cancer. The Phase 1 data will be published in the ASCO proceedings, and we continue to enroll patients in the Phase 2 portion of the trial at 18 sites in the U.S. In the Phase 2 portion of the trial, we are incorporating circulating tumor DNA testing to allow for biomarker directed therapy for prostate cancer patients who have progressed on androgen receptor inhibitor treatment. We continue to expect top line Phase 2 data from this study in the second half of 2020. We licensed TRC253 from Janssen, and if they exercise their right to reacquire the assets following Phase 2 proof-of-concept data, TRACON is entitled to receive $45 million upfront payment upto $137 million in potential milestones and a low-single-digit royalty on sales. If Janssen does not opt in, TRACON can advance TRC253 independently.
Last quarter, we announced clearance of the IND for TJ4309, making it our fourth clinical stage assets. This is the initial antibody we are developing in collaboration with I-Mab Biopharma through our first agreement with them. We expect to initiate dosing of TJ4309 mid-year, both as a single agent and in combination with tri-centric [ph], a PD-L1 antibody commercialized by Roche. We anticipate completing enrollment and presenting top line data from this Phase 1 trial in 2020. As you will recall, TRACON is responsible for the regulatory and clinical development of TJ4309 in the U.S. and in Europe, and will receive escalating portions of non-royalty and royalty payments I-Mab may receive if they elect to outlicense TJ4309 to a third-party.
The second agreement with I-Mab is a multi-product collaboration to develop upto five of I-Mab's bispecific antibodies in North America. TRACON will lead clinical development in the U.S. and Europe, bearing the cost of early-phase clinical trials with TRACON and I-Mab sharing the costs for more advanced developmental stages and commercialization. In this agreement TRACON also has optional rights to in-license each of the bispecific antibodies from I-Mab prior to conclusion of the pivotal study which would expand our rights to include all territories outside of Greater China. These opt-in payments escalate depending on the phase of development. For example, an opt-in payment of $10 million is due TRACON exercises it's option prior to IND-enabling studies.
We believe that bispecific antibodies are one of the most exciting areas of cancer research and you are accessed to a multi-product pipeline of these compelling assets through our collaboration with I-Mab as a critical differentiator for TRACON. We expect to file an IND for the first one or two bispecific antibodies in 2020, and look forward to collaborating with I-Mab on this project. As evidenced by our collaborations with I-Mab, we believe TRACON can become a preferred clinical development and commercialization solution in the U.S. for select companies through a cost, risk and profit share model. We possess the ability to conduct clinical trials using our product development platform without the need for contracting a clinical CRO.
We believe this capability substantially decreases the costs of clinical development and also enhances quality and shortens timelines. We are eager to continue to leverage our capabilities using a model of drug development that creates strong alignment with potential partners who understand and appreciate the value of sharing the risk, the cost and the profits. We have additional capacity to develop clinical-stage assets at this time and we continue our efforts to identify ex-U.S. companies with first-in-class or potentially best-in-class clinical-stage assets who would benefit from accessing the TRACON product development platform which we believe offers a rapid and capital-efficient U.S. drug development solution.
From a financial perspective, our capital resources are expected to be sufficient to fund our currently planned operations into the third quarter of 2020 through multiple potential value creating milestones including the top line results from Santen's Phase 2 AVANTE study, the Phase 2 data from TRC253, the Phase 1 data from TJ4309, and finally, IND for the initial bispecific antibody.
At this time, Scott will provide an update on our financials.
Thank you, Charles and good afternoon, everyone. TRACON reported no collaboration revenue for the first quarter of 2019, and $3 million for the comparable period of 2018. The decrease was due to $3 million upfront payments received in connection with the Ambrx agreement that was recorded as revenue in 2018 compared to no corresponding revenue in 2019.
Research and development expenses were $5.2 million for the first quarter of 2019 compared to $9.4 million for the comparable period of 2018. The decrease was primarily attributable to decreased manufacturing expenses related to TRC-105. General and administrative expenses were $1.9 million for the first quarter of 2019 compared to $1.8 million for the comparable period of 2018. Our net loss was $7.2 million for the first quarter of 2019 compared to $8.4 million for the comparable period of 2018. Looking ahead with the termination of the TRC-105 program, we currently expect research and development expenses to further decrease throughout 2019 and into 2020.
Turning to the balance sheet at March 31, 2019; our cash, cash equivalents and short-term investments totaled $32.1 million compared to $39.1 million at December 31, 2018. As Charles said, we expect our capital resources to be sufficient to fund our currently planned operations into the third quarter of 2020.
With that I'll turn the call back over to Charles.
Thank you, Scott. To summarize, while we were disappointed in the outcome of the TAPPAS study, we have built a broad pipeline and look forward to multiple value-creating milestones that are expected in 2020.
The top line Phase 2 AVANTE trial results in wet AMB to our licensee Santen in the first half of 2020, and then in the second half of 2020 two additional clinical events. The phase 1 data from TJ4309 and top line Phase 2 results from TRC253. Success-based milestones could result directly or in response to these clinical events. In addition, in 2020 we expect to follow and IND for one or two bispecific antibodies. We also continue efforts to identify ex-U.S. companies with first-in-class or potentially best-in-class clinical stage assets would benefit from accessing the TRACON product development platform through a new corporate collaboration as their U.S. clinical development and commercialization solution. We look forward to providing further updates regarding our upcoming key milestone throughout 2019 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.
I thank you for your time and attention. And we are available to answer your questions.
[Operator Instructions] And our first question is coming from the line of Maury Raycroft with Jefferies. Your line is now open.
My first question is just on 253, so we didn't see anything in the ASCO titles. I'm just wondering if it's possible that we missed it or this could be at ASCO or potentially some other meeting this summer?
Hi Maury, thanks for your question. Yes, TRC253 was submitted for ASCO presentation, it was not selected for formal presentation Maury but the abstract will be published in the proceedings. And then to your point, that would set us up for a public presentation at a later date at a separate conference. That later date and separate conference hasn't been determined at this time.
Okay, thank you. And as far as the number of patients that we should expect and the follow-up; can you comment on that? And also how the drug works with the mutation status and resistance in prostate cancer, if you could provide any more details and if we should expect anything related to that?
Yes, with respect to the abstract that will be published in the proceedings that is the Phase 1 data which will be detailed safety and PK data. There will be some limited evidence of efficacy in that abstract, if any, Maury. The majority of the FC data will be in the Phase 2 portion of the trial which is enrolling as we speak, and those data will be presented in top line form towards the end of 2020.
Got it, okay. And then for TJD5, just wondering if you had any thoughts in general on data that were reported at ACR [ph] for HUA or CD73, particularly any perspective on the AstraZeneca data that showed some activity in prostate cancer? If any of the new understanding that's come out over the last couple of quarters and if that could influence the types of patients that you want to enroll into your site?
Great question, Maury. Yes, I think what we're looking at in terms of kind of learning about the best way to dose CD73 antibody and also, really, really the best combinations to think about moving forward will be informed by data for instance presented by MedImmune AZ to your point, and also a data that we expect to be presented by BMS as they've also finished Phase 1 testing. To your point, MedImmune AZ is probably engaged in one the most broad programs with respect to CD73 in terms of combining with not just PD-1 checkpoint inhibitor therapy but also with chemotherapeutics, as well as kinase inhibitors. So, we are clearly assessing the data as it becomes available, we're also assessing our own internal I-Mab's internal proprietary preclinical data to really make the most informed choice about what combinations to study, and also, potentially which populations to enroll which could include possible biomarker-based enrichment strategies.
So right now we don't have a public comment other just say we continue to remain very excited about the target but do feel I think is, as you're implying it is critical to the success of any CD73 antibody will be picking the right companion therapy, and also picking the right population to study.
And just last question on DE-122. So if Phase 2 data look good and it decides the -- then that would further at $10 million milestone. Do you know or do you have an idea if Santen will make a decision in the first half of ;20? That as well or will we see the data first? Then we have to wait for Santen to make the decision on whether to opt-in?
A great question. I wish I could give you a better and more clear answer on that. Really, the entire decision about when to present the data, when to start the next trial, and what the form of that trial would be which really is what that $10 million developmental stage payment will be predicated on; it's really all in Santen's court. So we can't give you really too much more clarity. There are other than that they advertise the data as I mentioned the first half of 2020 which I think will be an exciting data point for both companies.
Got it. Thank you very much.
And our next question is coming from the line of Robert Hassan with BTIG. Your line is now open.
Hi, guys, this is actually Jake Colbey on the line for Robert. Thanks for the questions. I guess I just want to follow-up on the line of questioning earlier. I was wondering if you could just talk a little bit more about maybe kind of your internal rationales for selecting to centric as the combo partner for 4309. And then, on the study design, the potential patient-population; should we think about -- both, potentially in checkpoint experience and checkpoint naive being enrolled. Just any comments you can add there thank you.
Sure. Thanks, again, I appreciates the question.Yes, I think to your point with respect to the Phase 1 trial we wanted to study the C-75 by both as a single agent and then also in combination with either PD-1 or PDL-1 inhibitor. We're eager to work with Roche, I think they've clearly demonstrated that they're interested in combining their established therapy with promising new therapies and that was important in terms of working with them. I think with respect to thinking about the overall trials and how we think about enrolling this trial, it will be a standard Phase 1 study. So even though we don't require patients to fail at immune-checkpoint inhibitor, I think in this thin age it's safe to assume that the majority of Phase 1 patients will be -- will have experience or been treated with an immune checkpoint inhibitor, although that's not a formal requirement. Clearly, if we can see activity in that population they will be substantial and exciting to us.
Our next question is coming from the line of Jim Virtuna [ph] with Wells Fargo. Your line is now open.
[Indiscernible]. Charles, of the 253, is there a provision for an early breakout at that Phase 2 trial?
So, it's a Phase 1/2 high neck, thanks for the question. It's the phase 1/2 open-label study so as the data is required, we have full access to the data; so we will have a great idea of how the trials going in expect to activity of in patients specific mutations where we expect the drug to be very active. And also in patients that need not have the exact mutation that we expect to be the basis for activity but there maybe some unexpected finding of activity. So there are two cohorts in the Phase 2 study, one with specific mutations where we expect the activity based on the mechanism of action of the drug, and then other basis for resistance where it could be a serendipitous finding that we see additional activity. In terms of reporting those data, we will likely wait until the completion of the Phase 2 study.
So the timing is really [indiscernible] by the curation of response?
So timing would be driven by the rate of enrollments, and then also to your point, I think the two efficacy endpoints that are important to one is, is the PSA response rate. And then I think also the second would be the duration of progression-free survival, radiographic progression-free survival which typical endpoint is 3 or 6 months. So those I think are two important endpoints in terms of looking in the activity of the drug.
And in terms of the CD73 [ph], is there anything unique about the approach here that differentiates from AstraZeneca products?
So this is a unique antibody to CD73 that binds the unique epitope in comparison to the two products that you mentioned. And on that basis and some of the pharmaceutical properties of the drug seemed preclincally and in TOX studies, there are theoretical advantages. Those advantages we haven't disclosed publicly but there is the clear potential that this is a best-in-class therapy and we are excited to develop the drug.
And then, just the last one for me is; you mentioned the possibility of doing additional deals. I mean, how much capacity is there for the company -- how many more programs can you undertake?
So with TRC105 going down with us taking that program down, that was being studied at almost 30 sites in the U.S. and at 7 European countries, so it's a substantial investment in terms of time and people [ph] at our company. With that no longer an effort, we have substantial capacities, so we're looking for at least three clinical stage assets at this time, they could be individual assets from two separate companies or they could be a broad collaboration around a pipeline which would mimic in a sense the I-Mab deal although the clear distinction is, we really would like to have clinical stage assets in the company at this time. So we have significant capacity to do that and we are aggressively looking for those types of assets as we speak.
So do you have sort of an internal timeline then before you think about having to take cost reduction exercise?
Yes, our goal is to consummate another deal before end of this year, around two or three clinical stage assets. We appreciate the questions.
I'll bump into you at ASCO.
Yes, I'll look forward to it Nick. Thanks so much.
[Operator Instructions] And at this time, I am showing no further questions. I would like to turn the conference call back over to Dr. Charles for closing remarks.
Great. Well, thanks for your attention and for your questions. We look forward to touching base with you again next quarter. Have a good day.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. And you may all disconnect. Everyone, have a great day.