TRACON Pharmaceuticals, Inc. (NASDAQ:TCON) Q4 2023 Earnings Call Transcript
TRACON Pharmaceuticals, Inc. (NASDAQ:TCON) Q4 2023 Earnings Call Transcript March 5, 2024
TRACON Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $0.01, expectations were $-0.03. TCON isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day ladies and gentlemen and welcome to the TRACON Pharmaceuticals Fourth Quarter and Year-End 2023 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, financing opportunities, our development plan and strategies, potential cost savings and other benefits deliverable through our product development platform or PDP, ability to enter into additional license agreements and expectations regarding envafolimab treatments continuing to generate a double-digit objective response rate. These statements are subject to risks and 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, 2023 and subsequent reports on Forms 10-Q.
You are cautioned not to place undue reliance on these forward-looking statements unless required by applicable law. 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, please begin.
Charles Theuer: Good afternoon and thank you for joining TRACON's fourth quarter and year-end 2023 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 the financial results for the 3 and 12 months ended December 31, 2023. Finally, we will conclude by taking your questions. I'll begin with an update on our continued progress with the ongoing Phase II ENVASARC pivotal trial. In December, we reported updated interim safety and efficacy data from 46 patients in cohort C of single-agent enva treatment. The objective response rate in the initial 46 patients treated with single-agent enva was 15% by investigator review and 8.7% by blinded independent central review or 4 responses.
Enva monotherapy was generally well tolerated without a single drug-related serious adverse event. Importantly, median duration response by central review is greater than 6 months. We are on track to complete accrual of the ENVASARC pivotal trial later this quarter and expect to report updated response data shortly thereafter and prior to the end of this quarter. As a reminder, in order to statistically exceed the 4% objective response rate of Votrient, the only FDA-approved treatment for patients with refractory UPS or MFS, the primary endpoint in ENVASARC must show objective responses in 9 out of 80 patients or an 11.25% objective response rate confirmed by central review. Median duration response of greater than 6 months is a key secondary endpoint.
Our goal in ENVASARC is to demonstrate that enva has potential to be both safer and more efficacious than Votrient, a drug with a black-box warning for fatal liver toxicity. Based on data from trials of other checkpoint inhibitors in refractory UPS or MFS, we are targeting a 15% response rate for single-agent enva. Furthermore, we plan to approach the FDA to discuss the BLA filing strategy as soon as we determine 9 responses. As a reminder, we have received Fast Track designation for enva in the sarcoma subtypes of UPS and MFS that have progressed on 1 or 2 prior lines of therapy and received orphan drug designation in soft tissue sarcoma based on activity observed in ENVASARC. These salutations provide important advantages that might expedite regulatory review of enva.
ENVASARC is designed to provide safety and efficacy data in the refractory sarcoma subtypes of UPS and MFS. We also have a strategy to pursue the approval of enva in frontline sarcoma. Doxorubicin is the most common approved therapy used for the treatment of newly diagnosed sarcoma patients. We therefore plan to initiate a trial of enva and doxorubicin in the frontline setting of the common sarcoma subtypes, including UPS and MFS, following the completion of enrollment in the pivotal ENVASARC trial and prior to the expected BLA submission, subject to positive results from ENVASARC. The goal of that trial will be to determine the subtypes of sarcoma that best respond to the combination of enva and doxorubicin. Assuming positive results in the ENVASARC pivotal trial, we expect the FDA will require a randomized trial to demonstrate a survival benefit.
We expect this potential Phase III post-approval trial will compare single-agent doxorubicin to doxorubicin with enva with progression-free survival as the endpoint. This trial would be expected to enroll patients with UPS and MFS as well as other sarcoma subtypes expected to respond to therapy with enva and doxorubicin. We expect to discuss the design of a frontline trial with the FDA at the time of our expected pre-BLA meeting to review the expected submission of data from ENVASARC for potential accelerated approval of enva in refractory sarcoma. It is important to understand the sales potential in sarcoma with enva at parity pricing is not solely the forecasted $200 million in peak annual revenues anticipated following approval 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 BLAs. We will now turn to our DNA damage repair inhibitor, TRC102, a program that is financially supported through a cooperative research and development agreement with the National Cancer Institute. The NCI is sponsoring an ongoing randomized Phase II trial assessing TRC102 in Stage III non-squamous, non-small cell lung cancer in combination with chemo radiation. The 2-arm 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 maintenance treatment.
The primary endpoint of the trial is progression-free survival and the trial is designed to detect an improvement in progression-free survival at 1 year from 56% to 75%. 12 sites are now open for enrollment in the U.S. and the final results are expected in 2025. I will now shift from our pipeline update to discuss our product development platform, or PDP, of CRO independent research. We executed a license of our PDP for an upfront payment of $3 million in November of last year to a biotech company that recognized the value of internalizing its clinical operations to reap the benefits of CRO independent clinical trial implementation that we enjoy at TRACON. The license of the PDP is expected to allow them to run clinical trials as we do at TRACON for an estimated cost of approximately $100,000 per patient.
As a typical CRO charges $300,000 or more per patient, the potential savings from licensing our PDP on a 100-patient trial could be up to approximately $20 million for our partner in addition to the expected advantages of increased speed of trial execution and pace of enrollment that we enjoy at TRACON by running trials using our in-house team. As we have noted in the past, we expect to further supplement our cash position through opportunities for non-dilutive capital enabled through our CRO independent PDP that we believe positions us as one of the most efficient clinical development organizations. We expect to continue to leverage our platform in 2 ways that provide for potential non-dilutive capital to TRACON. First, we plan to continue to evaluate drug candidates where TRACON performs clinical trials at a lower fixed cost compared to a CRO but still at a premium to our cost using a pay-for-performance model.
This is an aligned structure we used in the past, for example, with Johnson & Johnson. Second, we plan to continue to execute non-transferable licenses to our PDP, whereby we are paid to share our proprietary capabilities and know-how to enable another company 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, we believe such an investment can result in substantial time and cost savings for our partner. We believe that over time, our PDP has earned strong credibility as a compelling solution for companies who wish to become CRO-independent and reap the rewards of conducting trials faster at higher quality and at lower cost compared to trials typically contracted to CROs. At this time, Scott will provide an update on our financials.
Scott Brown: Thank you, Charles and good afternoon, everyone. Revenue was $3 million and $12 million for the 3 and 12 months ended December 31, 2023, compared to zero for the comparable periods of 2022. The increase in revenue for the 3-month period is related to the PDP license for $3 million and the increase in the 12-month period is due to the prespecified $9 million termination fee for the TJ4309 license in conjunction with the previously announced arbitration outcome with I-Mab. TRACON's research and development expenses were $1.5 million and $12.3 million for the 3 and 12 months ended December 31, 2023, compared to $3.9 million and $13.9 million for the comparable period of 2022. The decrease was due to enrollment only in cohort C of ENVASARC and the corresponding termination of Cohort D of the ENVASARC pivotal trial.
General and administrative expenses were $1.1 million and $6.7 million for the 3 and 12 months ended December 31, 2023, compared to $2 million and $14 million for the comparable periods of 2022. The decrease was due to lower legal expenses. Our net income was $0.4 million for the 3 months ended December 31, 2023 and our net loss was $3.6 million for the 12 months ended December 31, 2023, compared to net losses of $7 million and $29.1 million for the comparable periods of 2022. We recorded other income of $13 million in the 12 months ended December 31, 2023, due to the arbitration award being collected in the third quarter. Turning to the balance sheet. At December 31, 2023, our cash, cash equivalents and restricted cash totaled $8.6 million compared to $17.5 million at December 31, 2022.
With that, I will turn the call back over to Charles.
Charles Theuer: Thank you, Scott. As you have heard, our corporate strategy is proceeding as planned. Allow me to recap 2 key expected events. First, later this quarter, we expect to report updated response data from the ENVASARC pivotal trial. Second, we expect to continue to leverage our product development platform to generate non-dilutive capital through either an additional license or through fees captured by replacing a CRO and executing clinical trials for partners at a lower cost compared to a CRO but still at a premium to our cost using a pay-for-performance model. Thank you for your time and attention and we are now available to answer your questions.
Operator: [Operator Instructions] Our first question will come from the line of Soumit Roy with Jones Research.
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