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Edited Transcript of TCON earnings conference call or presentation 28-Feb-19 9:30pm GMT

Q4 2018 TRACON Pharmaceuticals Inc Earnings Call

SAN DIEGO Mar 1, 2019 (Thomson StreetEvents) -- Edited Transcript of TRACON Pharmaceuticals Inc earnings conference call or presentation Thursday, February 28, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Charles Theuer

TRACON Pharmaceuticals - President and CEO

* Scott Brown

TRACON Pharmaceuticals - Director, Controller

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Conference Call Participants

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* Maury Raycroft

Jefferies - Analyst

* Jake Colby

BTIG - Analyst

* Nick Abbott

Wells Fargo - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals Fourth Quarter and Year-End 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 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?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [2]

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Good afternoon and thank you for joining TRACON's fourth quarter and full year 2018 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 and year-ended December 31, 2018. Finally, we will conclude by taking your questions.

Let's begin with a 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, France, Austria, and Poland. The trial continues to enroll well and has now enrolled the 120th patient required to trigger preparations for the interim analysis. We expect the DMC to meet and provide the final sample size of the trial in April. The sample size needed to complete the trial will be a total of 190 patients if the interim results lie in the favorable zone and will be a total of 340 patients if in the promising zone.

If the 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 190 patients. In that scenario, the DMC could elect to terminate the trial early for futility.

We also continue to enroll the multi-center Phase 2 trial of TRC105 in combination with Nexavar in liver cancer and reported updated data Gastrointestinal Cancers Symposia of ASCO. Three of 15 evaluable patients or 20% had confirmed partial responses by RECIST. Since that time, one additional patient has developed a partial response, such that four of seventeen evaluable patients or 24% have demonstrated partial responses by RECIST to-date. For comparison, in separate Phase 3 trials, the confirmed partial response rate by RECIST in liver cancer patients treated with single agent Nexavar was 2% and 3%.

In December, we reported that our Phase 2 TRAXAR trial of TRC105 and Inlyta in patients with advanced or metastatic kidney cancer did not meet the primary endpoint of improving progression free survival when compared to single agent Inlyta. We are working with investigators to appropriately conclude this study in a manner consistent with the best interest of each patient and expect to present data from this trial at a scientific conference later this year.

In June, investigators from Leiden University presented preclinical data showing synergistic activity of the combination of TRC105 and checkpoint inhibitor therapy in tumor models. These researchers will present updated preclinical data at the American Association for Cancer Research or AACR Annual Meeting at Philadelphia in March.

Based on this work, we are currently dosing TRC105 in combination with Opdivo in a Phase 1 trial patients with non-small cell lung cancer. In December, we reported that the combination of TRC105 and Opdivo was well-tolerated without the development of dose-limiting toxicity in six patients who were treated as part of dose escalation.

One of these six patients whose archival tumors did not express PD-L1 and who had not received prior checkpoint inhibitor treatment developed a partial response and remains on study for more than 12 months. Two of the other five patients, one of whom progressed following prior Opdivo treatment, remain on trial with stable disease.

Patients are currently enrolling into two parallel 12-patient expansion cohorts, one includes patients who have progressed following prior checkpoint inhibitor treatment and one includes patients who have not yet received prior checkpoint inhibitor treatment. And we expect to report top-line data from these cohorts in late 2019.

In February, we reacquired rights to develop TRC105 in Greater China from Ambrx. You will recall that in December 2017, we licensed commercial rights for TRC105 to Ambrx for terms that included a $3 million upfront payment. Following discussions with Ambrx regarding their progress towards initiating a Phase 1 clinical trial of TRC105 in China, Ambrx notified us that they had elected to terminate the license agreement, resulting in all rights to TRC105 in Greater China reverting to us.

We now expect to engage a new corporate partner with substantial clinical development capabilities to lead TRC105 development in China, including an emphasis in liver cancer. In parallel, our business development efforts now include identifying one or more partners for TRC105 in Europe and Japan.

As a reminder, TRACON retains U.S. commercial rights to TRC105 and expects that if positive, the Phase 3 TAPPAS trial data could be the basis for the initial approval of TRC105 and its subsequent commercialization in the U.S.

Turning now to DE-122, the ophthalmic formulation of TRC105. Our developmental 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 single-agent Lucentis in patients with wet AMD.

The trial was accruing patients at 10 sites in the U.S. and data are now expected in the first half of 2020, following an amendment to increase the sample size of the trial to 76 patients which will provide greater power to see a potential treatment effect.

We believe 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 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 potential developmental, regulatory and commercialization milestones and the high-single-digits or low-teen royalty on global net sales.

We will 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.

In November 2018, we reported top-line data from the Phase 2 trial of TRC102 and Temodar in patients with recurrent glioblastoma at the Society for Neuro-Oncology Annual Meeting. The combination of TRC102 and Temodar was tolerable, but did not meet the primary efficacy endpoint of demonstrating objective responses in the initial 19 enrolled patients.

However, two patients or 10% demonstrated evidence of clinical benefit and met the secondary endpoint of progression free survival beyond six months. Both patients who demonstrated progression free survival for more than 11 months and expressed glycosylase, a biomarker associated with TRC102 activity in preclinical models.

In our other trial of TRC102 in Temodar is being conducted by the National Cancer Institute. We will present data from an expanded cohort of patients with colorectal cancer at the AACR Annual Meeting in April.

In addition, there are three other ongoing trials of TRC102 being performed by the California Cancer Consortia for Case Western University. The California Cancer Consortia continues to enroll 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. And Case Western continues dosing lung cancer patients in a Phase 1 trial of TRC102 in combination with chemotherapy and radiation therapy.

As part of these studies, patient tumor samples are being assessed to determine whether preclinical data showing glycosylase expression is associated with tumor sensitivity of TRC102 can be validated in the clinic. We believe biomarker validation will represent a significant advancement for the program by identifying patients most likely to respond to TRC102 treatments.

Moving on to TRC253, our candidate for treating prostate cancer that we are studying in a Phase 1/2 trial. We expect to present the Phase 1 data at a scientific conference in the first half of 2019 and are now enrolling patients in the Phase 2 portion of the trial at approximately 20 sites in the U.S. In the Phase 2 portion of the trial, we incorporate circulating tumor DNA testing to allow for biomarker directed therapy of prostate cancer patients who have progressed following androgen receptor inhibitor treatments.

As reported in 2018, we expect top-line Phase 2 data from this study in 2020. We licensed TRC253 from Janssen and if they exercise their right to reacquire the asset following Phase 2 proof-of-concept data, TRACON is entitled to receive a $45 million upfront payment up to $137.5 million in potential milestones and a low-single-digit royalty on sales. If Janssen does not opt in, TRACON can advance TRC253 independently.

The 2016 Janssen transaction also granted TRACON rights TRC694, a novel small molecule potent inhibitor of NF-kappa-B-inducing kinase that is intended for the treatment of patients with hematologic malignancies, including myeloma. Following completion of preclinical development of TRC694, we determined the compound did not warrant further development and have returned all rights to Janssen.

We continue to maintain a strong working relationship with Janssen and look forward to potentially discussing additional product development opportunities with them in the future.

On the business development front, in November, we executed two significant partnerships with I-Mab Biopharma, a Chinese-based clinical stage biopharmaceutical company focused on the development of innovative biologics in immuno-oncology and autoimmune diseases. The first strategic collaboration provides TRACON with the right develop I-Mab's proprietary CD73 antibody TJ4309, a novel asset with best-in-class potential.

TRACON and I-Mab entered into a cost-sharing product development collaboration whereby TRACON will be responsible for the regulatory and clinical development of TJ4309 and can receive escalating portions of non-royalty and royalty payments I-Mab may receive if they outlicense TC4309 to a third-party.

Notably, TRACON submitted an IND for TJ4309 in December which was within four weeks of executing the license agreement with I-Mab. In January, the FDA cleared the IND and we expect to begin dosing TJ4309 in a Phase 1 trial of cancer patients in the first half of 2019.

A second agreement allows TRACON to develop up to five of I-Mab's proprietary bispecific antibodies in North America with TRACON leading clinical development and bearing the cost of early phased clinical trials and TRACON and I-Mab sharing the cost for more advanced development stages and commercialization.

TRACON also has opt-in rights to in-license each of the bispecific antibodies from I-Mab in certain territories for payments that escalate depending on the phase of developments. As evidenced by the recent deals with I-Mab, we believe TRACON can become a preferred clinical development and commercialization solution in the U.S. for select companies to a cost, risk and profit share model.

Our product development platform has 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 best-in-class clinical-stage assets who will 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 late into the first quarter of 2020, which includes two expected randomized trial readouts.

The interim analysis from our Phase 3 TAPPAS trial and top-line results from Santen's Phase 2 AVANTE study, as well as expanded cohort data from the trial of TRC105 and Opdivo in lung cancer, Phase 1 data from TRC 253, and Phase 1 data from TJ4309.

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

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Scott Brown, TRACON Pharmaceuticals - Director, Controller [3]

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Thank you, Charles, and good afternoon, everyone. TRACON reported no collaboration revenue for the fourth quarter and $3 million for the year ended December 31, 2018, compared to 0 and $8.8 million respectively for the comparable periods of 2017. The decrease in the full year 2018 period compared to the 2017 period was due to the $3 million upfront payment received in connection with the Ambrx agreement that was recorded as revenue in 2018, compared to the $7 million milestone payment received in connection with the Santen agreement in 2017.

Research and development expenses were $5.9 million for the fourth quarter and $30.5 million for the year ended December 31, 2018, compared to $4.6 million and $19.4 million respectively for the 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 $1.8 million for the fourth quarter and $7.3 million for the year ended December 31, 2018, compared to $1.7 million and $7.6 million respectively for the comparable periods of 2017.

Our net loss was $7.8 million for the fourth quarter and $35 million for the year ended December 31, 2018 compared to $6.6 million and $19.1 million respectively for the comparable periods of 2017. For 2019, we expect annual research and development expenses to be lower than 2018 due to decreased manufacturing expenses for TRC105.

Turning to the balance sheet, at December 31, 2018, our cash, cash equivalents and short-term investments totaled $39.1 million, compared to $34.5 million at December 31, 2017. As Charles said, we expect our capital resources to be sufficient to fund our currently planned operations late into the first quarter of 2020.

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

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [4]

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Thank you, Scott. To summarize, we expect a number of potentially value-creating milestones over the next 12 months. For TRC105, we anticipate two data points from randomized trials. First, the interim analysis to determine the final study size of the pivotal Phase 2 TAPPAS trial in angiosarcoma in April of this year. Second, top-line Phase 2 AVANTE trial results in wet AMD through our partner Santen in the first half of 2020.

In addition, later this year, we expect a presentation of data from the combination of TRC105 and Opdivo in lung cancer based on data for TRC253 in patients with prostate cancer and to begin dosing in a Phase 1 trial TJ4309. We also continue our efforts to identify ex-U.S. companies with first-in-class or best-in-class clinical stage assets who had benefited from accessing the TRACON's product development platform.

We look forward to providing further updates regarding our upcoming key milestones 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 the time and attention and we are available to answer your questions.

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Questions and Answers

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Editor [1]

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Operator: (Operator Instructions) Our first question comes from the line of Maury Raycroft of Jefferies. Your line is now open.

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Maury Raycroft, Jefferies - Analyst [2]

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First question is just on the TAPPAS trial. So, looking forward to that update, I am wondering if you can provide any perspective into the patient demographics that you enrolled. Given that it's an open-label study and also any thoughts on the safety signals and discontinuation rate, if you can comment on that?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [3]

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We have not interrogated the database to be able to give you definitive answers to those questions, Maury. I think we will be able to provide more clarity in a conference call following the interim analysis through the DMC.

I mean, you are correct, the study is open-label from the perspective that the investigators know which arm each patient is on, but to be clear, we have no insight whatsoever with respect to these final and primary endpoint efficacy analysis which is progression free survival by independent radiographic review.

So, we haven't -- at this time, without DMC concurrence presented any data from the trial publicly. We will discuss with the DMC what to present with respect to the interim analysis and that could include for instance demographic information with respect to the key outcome of that analysis, so it will be the final sample size of the trial.

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Maury Raycroft, Jefferies - Analyst [4]

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Okay. Okay, and as far as the proportion of -- can you comment on the breakdown of patients from U.S. versus ex-U.S.? And maybe even like cutaneous population that you enrolled?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [5]

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Sure. The majority of patients are still from the U.S. Although the EU sites are accruing very nicely and I think that reflects just the fact we were able to open U.S. sites more quickly than in the European case.

With respect to the proportion of cutaneous and non-cutaneous, while we haven't done a rigorous analysis, we would expect those are roughly to be in equal proportions.

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Maury Raycroft, Jefferies - Analyst [6]

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Got it. Okay. And as far as the number of patients required to complete the trial, so I think you went from 170 to 190. Was that just a minor uptick or any other comments on that?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [7]

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So, in the favorable or unfavorable results, 190 patients which was the new number established following the amendments to increase the sample size based on the increased dropout rate and that has not changed. And then in the promising zone, it's 340 patients; and then in the cutaneous zone, it's 220 patients.

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Maury Raycroft, Jefferies - Analyst [8]

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Got it. Okay. Good. And for 253, I'm wondering if you can provide any more specifics on what we should expect with that update on the first half of the year, will that come in a press release or do you anticipate it coming out at a meeting and then from a (inaudible)?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [9]

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Yes, no, appreciate that Maury. So, yes, the TRC253 trial completed the Phase 1 portion last year as we had announced. And our goal would be to see that presented publicly at a significant meeting for example, ASCO in the June timeframe and our goal would be to present the full Phase 1 dose escalation data including all the cohorts enrolled in a Phase 1 portion.

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Maury Raycroft, Jefferies - Analyst [10]

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Great. Okay. And then for the combo 105 plus Opdivo study, you've got the one PR, I am wondering if that patient is -- if that response is deepening at all and with the other patients if they are staying on study, if you can comment on that.

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [11]

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Good question. I don't have the details to give you exact percentage reductions on those patients other than to say that the PR patient was a confirmed PR that remains on study with a significant reduction in tumor mass. The stable disease patients also have had reductions in tumor mass but did not qualify as partial responses, but I can't give you those exact numbers right off the top of my head.

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Operator [12]

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Thank you. Our next question comes from the line of Robert Hazlett of BTIG. Your line is now open.

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Jake Colby, BTIG - Analyst [13]

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Hi, guys, this is Jake Colby on the line for Bert. Thanks for the question and the update. If I could just start on the CD73 program and I was wondering if you could talk about potential enrichment strategies you may be looking at heading into the Phase 1 trial and will they be included in that study?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [14]

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So, I appreciate your question. I do believe that CD73 enrichment is going to be a critical part of having a successful therapeutic and in Phase 1 that will be a focus and enrichment could take one of several forms. That could, for example, include CTC analysis to look at CD73 expression on CTCs, that's one example. It could also look at other members of the pathway, for instance [HT2A] receptor expression as well.

With respect to archival tumor tissues, it's been clear from previous work that CD73 expression is associated with poor survival in certain tumor types. It also may predict response to therapies, that will be another source of a potential enrichment strategy namely looking at archival tissue with respect to CD73 expression on the archival tumor tissue.

The final consideration would be soluble CD73 as a marker in plasma surrogate, if you will, in CD73 expression on the actual tumor. That will be another assessment that will be interrogated as part of the study. And there may be further analyses, we haven't committed to them, but for instance, gene expression profile is another thing to consider as another potential enrichment strategy to sort potentially responsive patients and correlate RNA expression with response.

So, I completely agree that designing a study that interrogates for possible PD markers that I think could be used in next studies as potential enrichment markers is a key emphasis of the CD73 program.

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Jake Colby, BTIG - Analyst [15]

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Okay. Great. Thanks for the very comprehensive answer, Charles. And then, based on business development in terms of bringing new assets potentially into the clinical development funnel, are you looking at oncology-specific assets or more broadly? And just kind of what do you think about capacity for 2019 now that we are kind of into that year?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [16]

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I appreciate the question. So, the I-Mab deal was we think a fantastic deal because it did what we really had been wanting to for several years which is marry a discovery engine to our developmental platform. And we look forward to moving us forward on an annual basis with I-Mab in the first one, the CD73 antibody, will start the process which as I mentioned should dose very soon this first half of the year.

That said, we feel the platform is very generalizable to the development of any product that will be marketed to a physician-specialty audience. And to be clear, when we engage in core development, we also are engaging in ideally co-commercialization where we will market the product in the U.S. co-commercialize with our partner and even give our partner the opportunity to co-promote with us, which allows them to become a commercial entity in the U.S. which could be very valuable to them.

Clearly, our expertise to this date has been with oncology programs, but to be clear, the platform is definitely generalizable and we will evaluate products that are non-oncology as long as they are marketed to a physician-specialty audience.

With respect to capacity, we are actively looking for a clinical-stage asset. With the I-Mab deal, we feel like we have access to a fantastic pipeline for many years and that satisfies to do all the preclinical need in terms of having a discovery capabilities through I-Mab married to our developmental engine so we clearly would like to acquire a clinical-stage asset where we can co-develop with a partner, co-commercialize with them and if they are an ex-U.S. partner, provide them the opportunity to co-promote with us.

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Jake Colby, BTIG - Analyst [17]

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Great. Thank you. And I guess, just lastly, I wanted to confirm what I thought I heard and that was top-line data from the AVANTE study within the current cash guidance.

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [18]

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Yes, we expect there will be just at the edge of the cash guidance, correct.

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Operator [19]

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Thank you. (Operator Instructions) Our next question comes from the line of Jim Birchenough of Wells Fargo. Your line is now open.

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Nick Abbott, Wells Fargo - Analyst [20]

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Charles, it's Nick on for Jim this afternoon. Just a couple of questions on TAPPAS. I think you said in the past that enrollment has been going very well in this trial. So, assuming the enrollments continues at the current rate, how many patients do you think you will have enrolled by the time we get through to the DMC decision in April?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [21]

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Yes, thanks for your question. So, we've enrolled now past 120 and we continue to enroll as the DMC will review the data. And so, yes, at the current rate of enrollment, I think we announced in December, we are at about a 110. So we will continue to enroll roughly at that pace and continue that to -- continue with the DMC decision, which I mentioned we expect in April.

So, I think you will see roughly a maximize, say of a 140 patients in the -- [with] the first cohort which is statistically separate from the second cohort, which enrolls following the DMC decision.

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Nick Abbott, Wells Fargo - Analyst [22]

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Thank you. And then, I know you are looking for potential partners in Europe and Japan. Can you elaborate on how far those discussions are going and presumably the trigger is going to be this DMC decision. Are discussions far enough along that once you have a DMC decision, you think you can secure a partner quickly and presumably TAPPAS is sufficient for registration in Japan?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [23]

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Yes, great questions, Nick. You've kind of answered your own question. But we do feel that discussions with respect to licensing TRC105 outside of the U.S. will proceed at a reasonable clip, if you will, after the TAPPAS data.

If it's in the promising zone, which we think is a likely outcome, I think there will be several interested parties given the fact that it's a trial that through the EMA and the FDA is a single trial that should be sufficient for approval based on the primary endpoint of PFS.

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Nick Abbott, Wells Fargo - Analyst [24]

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And in terms of Japan, the trial will suffice for Japan?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [25]

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Yes, sorry, great point. We have not discussed with Japan regulators. So, that's definitely an open question. I would say, based on similar products in orphan indications, we would definitely expect to have to do some clinical work in Japan with respect to showing PK in Japanese patients, hopefully will be very similar to PK in non-Japanese patients.

If we are able to show that and we are able to show a clear treatment effect in the TAPPAS trial, I think our goal would be to approach regulators with that as a sufficient trial for approval with the additional need for the PK study. But that's -- that would be my punitive plan, but to be clear, we have not discussed that with Japanese regulators at this time.

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Nick Abbott, Wells Fargo - Analyst [26]

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Okay. Thanks, Charles. And then a couple on the lung study, I heard you mentioned the PR patient is now out over 12 months. Did you mention the durability of stable disease for those two other patients?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [27]

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I did not mention that and I don't have those numbers off the top of my head, Nick. I could say there -- just based on the fact that I think we initially reported data back in December and the first assessments are about three months on study. So I think you could assume those patients have been on study at least four months.

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Nick Abbott, Wells Fargo - Analyst [28]

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Okay. And then, in terms of biomarker analyses, has there been an analysis of MDSCs or other biomarkers might be relevant in lung cancer?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [29]

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Yes, no, I appreciate the question. So, we are doing a very detailed analysis of the archival tumor specimens in that study and we are just starting to analyze the initial six patients in the dose escalation cohorts to see if we can make a correlation between them and the responses in the patients.

Now, again with six patients, I would say, we can't make a clear correlation at this point, Nick. But that is being done as we speak and our goal is, once we have the cohorts and the expansion course completed, we'll have enough of a sample size potentially to make some correlations. But that is an active part of the protocol mainly immunofluorescence of the archival tumor specimens assessing the T-cell components, the MDSC components and how they kind of intermingle with the tumor versus whether they are completely excluded from the tumor and to see if that might be a correlation with response.

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Operator [30]

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

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Unidentified Participant [31]

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Hi, this is Jennifer. I am calling on behalf of Chad Messer from Needham. So, my first question is, I understand that there might be some R&D uptick and also milestone received for the $145 million. Can you give us -- can you maybe provide some color on the R&D spending looking forward until 2019? And also for the -- how it relates to the $145 million milestone?

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Scott Brown, TRACON Pharmaceuticals - Director, Controller [32]

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Hi, Jennifer, this is Scott. Yes, so, we actually expect R&D expenses to decrease in 2019, compared to 2018. We would expect them to come closer to the 2017 level than the 2018 level, mainly due to manufacturing expenses that we do not expect to incur in 2019.

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Unidentified Participant [33]

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Okay.

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [34]

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And Jennifer, this is Charles. I think on the $45 million milestone with respect to -- I think that you are referring to the Janssen opt-in that when we complete the TRC253 Phase 2 study and present the data to them, they then have 90 days to opt in and reacquire the asset at their discretion. And that would be the initial payment as part of that opt in.

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Unidentified Participant [35]

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I see. And can you just kind of like, provide us some color about the TRC102? And what kind of, like goals and probably like some of the data that might we may see in April or?

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [36]

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Sure.

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Unidentified Participant [37]

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Yes.

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [38]

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Yes, I mean I think TRC102, we've studied that through NCI with multiple chemotherapeutics and in most of those trials, we've seen about 10% of patients have a response including in tumor types where Temodar as a single agent is not considered an active agent. And I think to make it a therapy that has high value to us, we need to be able to predict which patients will respond to the therapy.

And I mentioned it in the [Snow] data that there were two patients that had prolonged progressive -- excuse me, prolonged progression free survival with GBM that had been previously treated with Temodar and radiation therapy that then on retreatment with Temodar and 102 did fairly well in terms of recurrent GBM is a difficult disease to treat. They both expressed this biomarker called, glycosylase which is the first enzyme that actually initiates the base excision repair pathway.

So, in terms of continuing to move forward with the program in general, where we are hoping to see from the NCI in April is continued activity of TRC102 and Temodar in expanded cohort patients. But then also the long-term goal of the program is to be able to correlate response with glycosylase expression and then that would potentially enable a true companion diagnostic to be considered as part of the potential advancement of TRC102 into a more advanced trials.

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Operator [39]

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Thank you. (Operator Instructions) And I am showing no further questions at this time. I would now like to turn the call over to Dr. Charles Theuer for closing remarks.

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Charles Theuer, TRACON Pharmaceuticals - President and CEO [40]

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Well, thank you very much for your attention today. We look forward to catching up with you at our next quarterly conference call. Have a great day.

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Operator [41]

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