Edited Transcript of TCON earnings conference call or presentation 13-May-20 8:30pm GMT

SAN DIEGO May 26, 2020 (Thomson StreetEvents) — Edited Transcript of TRACON Pharmaceuticals Inc earnings conference call or presentation Wednesday, May 13, 2020 at 8:30:00pm GMT

* Charles P. Theuer

TRACON Pharmaceuticals, Inc. – CEO, President & Director

* Scott B. Brown

TRACON Pharmaceuticals, Inc. – CAO & Head of Finance

H.C. Wainwright & Co, LLC, Research Division – MD of Equity Research & Senior Healthcare Analyst

Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst

* Nicholas M. Abbott

Good day, ladies and gentlemen, and welcome to the TRACON Pharmaceuticals’ First Quarter 2020 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 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, 2019, 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?

Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [2]

Good afternoon and thank you for joining TRACON’s First Quarter 2020 Financial Results and Business Update Conference Call. I will begin with an update on our pipeline and recent activities. Following that, our Chief Accounting Officer, Scott Brown, will review our financial results for the 3 months ended March 31, 2020. Finally, we will conclude by taking your questions.

Our primary focus is on our recently in-licensed PD-L1 product candidate, envafolimab, a late-stage, potential best-in-class checkpoint inhibitor by virtue of its subcutaneous route of administration. We expect to begin enrollment in a pivotal study in sarcoma in the second half of this year. While envafolimab is our lead product candidate, we also anticipate significant milestones related to our 3 other clinical stage assets in the near term.

Let’s begin with a review of our recent meeting with the U.S. FDA last week, where we reviewed and discussed our plans for the pivotal Phase II ENVASARC trial of envafolimab for the treatment of sarcoma. As a result of our May 8 Type B meeting with the U.S. FDA, we expect to initiate the ENVASARC pivotal trial in the sarcoma subtypes of undifferentiated pleomorphic sarcoma, or UPS, and the closely related subtype of myxofibrosarcoma, or MFS. This trial will include 1 cohort of approximately 80 patients who will receive single-agent envafolimab and a second cohort of approximately 80 patients who will receive envafolimab in combination with Yervoy, a second checkpoint inhibitor targeting the CTLA-4 receptor that is marketed by BMS.

The trial will enroll patients with UPS and MFS who have progressed on a single line of treatment and who have not received prior checkpoint inhibitor therapy. The primary endpoint in each of the cohorts will be objective response rate by RECIST by blinded independent central review, with duration of response being a key secondary endpoint. Each cohort will target a 15% response rate. And the trial is designed to detect a response rate that statistically excludes the known 4% response rate of Votrient, the only approved treatment for refractory sarcoma that includes UPS and MFS. Yes, you heard me correctly, and it is disappointing to report that the only approved treatment for refractory UPS and MFS has a 4% objective response rate. This is a clear statement as to the high unmet need. We believe targeting a 15% response rate in UPS and MFS is reasonable, as Keytruda’s Phase II trial in UPS demonstrated a 23% response rate.

Furthermore, checkpoint inhibition with the combination of Opdivo and Yervoy more than doubled the Opdivo response rate in unselected sarcomas. Dual checkpoint inhibition may, therefore, result in a higher response rate as well as deeper and more durable responses than single-agent envafolimab treatment. Success in both cohorts could allow approval of envafolimab as a single agent in combination with Yervoy — pardon me, success in both cohorts could allow approval of envafolimab as a single agent and in combination with Yervoy, which would allow physicians to determine which patients are best served by single-agent or combination therapy. The dual arm design also provides for risk mitigation should combination treatment be required for robust responses. Notably, BMS executed a similar dual-cohort clinical strategy for Opdivo in MSI-high tumors that resulted in Opdivo’s approval as both a single agent and in combination with Yervoy based on objective response rate in MSI-high cancers.

Not surprisingly, key opinion leaders and investigators are very enthusiastic about initiating the ENVASARC trial based on addressing an unmet need and the convenience of subcutaneous dosing. We expect to open the study at approximately 20 sites in the U.S. Also of note is that the expected total cost of the ENVASARC trial using our CRO-independent product development platform, including paying for the Yervoy, is approximately $15 million that will be spent over the next 2 to 3 years.

We recently filed envafolimab for orphan drug designation in sarcoma. And now that the FDA meeting has been completed, we expect to file an IND that will cross-reference the existing open IND for envafolimab maintained by our partner, 3D Medicines, and initiate dosing in the ENVASARC trial in the second half of this year. Our partner, 3D Medicines, is conducting clinical trials in the U.S. and China. And in the near future, we expect them to file envafolimab for approval in China. We also look forward to our partner’s clinical data presentation at ASCO. The ASCO presentation is abstract 3021 and is entitled “Envafolimab in Advanced Tumors With Mismatch-Repair Deficiency” and will be part of the immunotherapy developmental therapeutics session. The abstract contents are expected to be released by ASCO later today, and we expect to highlight the abstract contents in a press release tomorrow morning.

Our expected time line for the ENVASARC trial continues to include an interim response assessment in 2021, a final response assessment in 2022 and, assuming positive data, submitting a BLA for accelerated approval that, if approved, would allow for a product launch in the U.S. in 2023. Additionally, positive data from the initial trial in refractory UPS and MFS could lead to an additional new clinical trial and testing in other sarcoma patient populations. This could be accomplished by initiating a randomized trial of envafolimab as a single agent or combined with Yervoy or another approved cancer therapy for multiple soft tissue sarcoma subtypes. This trial could also include biomarker-directed enrollment based on biomarker analyses that will be conducted as part of the initial ENVASARC trial in refractory UPS and MFS.

We estimate a checkpoint inhibitor market for UPS and MFS could generate annual revenue of nearly $200 million in the U.S., assuming parity pricing to Keytruda or Opdivo. Of course, revenue could increase when treatment is expanded into other sarcoma subtypes.

We’ll turn now to TRC102, our second clinical stage asset, which is a novel small molecule inhibitor of the DNA base excision repair pathway that is intended to reverse resistance to certain chemotherapeutics. The NCI is supporting 4 Phase I or Phase II trials that are focused on patients with mesothelioma or non-small cell lung cancer. In addition, our academic collaborators continue to evaluate biomarkers in tumor specimens from glioblastoma patients treated in a completed Phase II trial and in tumor specimens from patients in ongoing TRC102 trials, with the goal of identifying a protein or gene expression profile that correlates with clinical response.

Data from multiple TRC102 clinical trials will be presented at ASCO. Dr. Biswas of Case Comprehensive Cancer Center will present Phase I data of TRC102 in combination with chemoradiation for locally advanced nonsquamous non-small cell lung cancer. Dr. Koczywas of City of Hope Medical Center will present Phase I data for TRC102 in combination with cisplatin and pemetrexed in patients with advanced solid tumors and Phase II data for TRC102 in combination with pemetrexed in patients with mesothelioma refractory to pemetrexed and platinum therapy. We hope these clinical trial data provide the impetus for the NCI to enroll a new trial of an enriched population of patients who may be most likely to respond to treatment.

We’ll now move on to TRC253, our third clinical stage asset. We recently announced that we retained global rights for the development and commercialization of TRC253, following Janssen’s decision not to exercise its option. While the product candidate was not highly active in prostate cancer patients with acquired resistance to Xtandi, TRC253 is as active as Xtandi in prostate cancer cell lines and patient-derived xenograft models. Given these preclinical data indicating TRC253 may be as active as Xtandi in an earlier line setting, we expect the product candidate can be developed and commercialized successfully in countries where prostate cancer patients generally do not have — generally do not yet have access to Xtandi. We have, therefore, initiated an out-licensing process to identify a corporate partner to develop and commercialize TRC253. Notably, we have established 3 corporate partnerships in China over the past 3 years and have developed significant relations with Chinese pharmaceutical and biotechnology companies that we hope to leverage to quickly identify a partner.

Our fourth clinical-stage asset is the CD73 antibody, TJ4309, also known as TJD5, that is in a Phase I dose escalation study as a single agent and in combination with Tecentriq, a marketed checkpoint inhibitor being supplied by Roche. We are developing TJ4309 in collaboration with I-Mab Biopharma through our first agreement with them, and we anticipate completing dose escalation and presenting top line data from this Phase I trial in the second half of 2020. In this collaboration, TRACON is responsible for the regulatory and clinical development of TJ4309 in the U.S. and Europe, and TRACON is entitled to receive escalating portions of nonroyalty and royalty payments if I-Mab elects to out-license TJ4309 to a third party in any region outside of China, Macau or Taiwan.

In March 2020, I-Mab issued a press release announcing a strategic partnership with Kalbe Genexine Biologics, or KG Bio, whereby KG Bio received what their 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 transaction, TRACON may be entitled to receive a payment under the TJ4309 agreement, although I-Mab has disputed that any payment is due. On April 8, we issued a notice of dispute regarding the TJ4309 agreement we signed with I-Mab in November 2018. As of today, that dispute has not yet been resolved. We will continue to fulfill our obligations under the TJ4309 agreements.

As you know, our second agreement with I-Mab is a multiproduct collaboration to develop up to 5 of I-Mab’s bispecific antibodies in North America. Pursuant to the bispecific agreement, TRACON and I-Mab may mutually select, through a joint steering committee, up to 5 of I-Mab’s bispecific antibody product candidates within a 5-year period for development and commercialization in North America. TRACON shares the North American rights of any selected bispecific antibodies with I-Mab for each collaborative program, and TRACON has opt-in rights to in-license the bispecific antibodies from I-Mab in certain territories.

In March 2020, we learned that I-Mab entered into 2 license and collaboration agreements with ABL Bio in July 2018. On April 8, we issued a notice of dispute regarding possible breach of the bispecific agreement we signed with I-Mab in November 2018. As of today, this dispute has not been resolved, and we cannot provide a time line as to when or if we will file an IND for a bispecific antibody under the bispecific agreement.

Our capital resources are expected to be sufficient to fund our currently planned operations into the first quarter of 2021. Furthermore, we amended our agreement with Aspire Capital, under which they are committed to purchase up to $15 million of our common stock at our request from time to time during a 30-month period at prices based on the market price at the time of each sale. The amendment reset the base price for calculating shares sold at or above the market price, which may facilitate fully utilizing the equity line if we elect to do so. If fully utilized, we estimate this facility would extend our cash runway into late 3 quarter 2021. Importantly, our financial runway could further be extended through use of our ATM or shelf registration statement or through nondilutive capital from the license of rights to TRC253 or success-based milestones through our TJ4309 partnership with I-Mab.

At this time, Scott will provide an update on our financials.

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Scott B. Brown, TRACON Pharmaceuticals, Inc. – CAO & Head of Finance [3]

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Thank you, Charles, and good afternoon, everyone. Research and development expenses were $2 million for the first quarter of 2020 compared to $5.2 million for the comparable period of 2019. The decrease was primarily attributable to lower manufacturing and clinical trial expenses related to the termination of the TRC105 program in April of last year, along with lower manufacturing expenses for TRC253. General and administrative expenses were $1.9 million for the first quarter of 2020 and 2019. Our net loss was $4 million for the first quarter of 2020 compared to $7.2 million for the comparable period of 2019.

Turning to the balance sheet. At March 31, 2020, our cash and cash equivalents totaled $14.1 million compared to $16.4 million at December 31, 2019. As Charles said, we expect our current capital resources to be sufficient to fund our planned operations into the first quarter of 2021, which could be further extended through use of the equity line with Aspire Capital.

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

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [4]

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Thank you, Scott. To recap, we are pleased the FDA agreed with the ENVASARC pivotal trial design and endpoints as we believe it to be a fast-to-market opportunity to provide envafolimab to sarcoma patients in need of a new therapy as expeditiously as possible. This is also important to investigators who are very enthusiastic about initiating the ENVASARC trial. Envafolimab solves for our quest to license an exciting late-stage asset and repositions the company to forward integrate and potentially build our commercial capabilities, which we eventually intend to leverage across multiple products over time.

We expect to deliver multiple potential value-creating envafolimab milestones in the next few months, including filing the envafolimab IND, receiving orphan drug designation and, importantly, dosing the ENVASARC pivotal trial in sarcoma. We also expect our partners, 3D Medicines and Alphamab Oncology, to file envafolimab for approval in China in MSI-high cancer and present envafolimab clinical trial data in MSI-high cancer at ASCO, including abstract contents that we expect to highlight in a press release tomorrow.

We look forward to providing further updates in the coming months and remain confident that we have the right strategy in place to deliver on our development and business plans for the benefit of patients and shareholders.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) I show our first question comes from Maury Raycroft from Jefferies.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [2]

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First one is just on enva. I was wondering, if enva does not hit your expected 15% overall response rate in the combo with Yervoy, and it produces results that are close to — the double agent produces results that are close to the SARC 028 study with pembro, in the mid-20% range in 6 months’ durability, I guess would that be sufficient for approval? Or do you think there’s risk you might have to run another study with Yervoy alone? I guess what’s the best reference out there for the combo arm?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [3]

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Yes. It’s a great point, Maury. So the reason for the combo arm really is the current Alliance trial, which show that Opdivo single-agent activity in all sarcoma, to be clear, not just UPS, was only 5%. But the combination of Opdivo and Yervoy in all sarcoma was 16%, which is fairly remarkable. So if we were to have a trial, whereby the doublet of envafolimab and Yervoy achieved a 20% to 30% response rate, just think what that would mean to patients who currently have a standard of care with a 4% response rate. That would clearly meet the endpoint of the trial, and we would suspect that would be sufficient for approval. The reason I say that is, Yervoy as a single agent has been studied in sarcoma. In fact, there are 3 separate published studies for Yervoy as a single agent. And in each case, it was highly ineffective, meaning almost no response rate whatsoever. So I think the whole community in sarcoma is pretty confident that Yervoy, as a single agent, is much — is ineffective in sarcoma and, for instance, much less active than single-agent PD-1 or PD-L1s.

So in response to your question, we hope that we see the response rates that would allow approval as a single agent based on, say, 15% response rate and also the combination of Yervoy and envafolimab based on potentially a 30% response rate. That gives the physicians the most options in treating their patients. But if we see that the combination is really what’s needed for significant activity, we would be very pleased. That would mean a huge advance in the standard of care for patients with refractory UPS and MFS. It would set up the stage for additional studies of that combination, other subtypes, even potentially in the first-line setting because remember, Maury, in first-line sarcoma, doxorubicin’s response rate is about 17%. So that’s why if we can see its response rate with that combination, in the 20% to 30%, maybe 40% range, that literally would be a revolutionary treatment for sarcoma patients.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [4]

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Got it. Yes. That’s helpful. And then so for the pembro data from SARC 028, it’s — that’s probably an outlier. Is that kind of what you’re thinking in that respect then?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [5]

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Yes. So it’s interesting, yes. There are other studies of single-agent PD, PD-L1s in UPS. The highest response rate clearly was the pembro data in SARC 028. So I’m not sure it’s an outlier, but I do think that the real response rate could be closer for this class of agents in the 15% to 20% range, Maury. And I think we’ll see more data forthcoming, for instance, from the Alliance trial that will have updated data potentially even at ASCO this year. So in the range, I’d say, of 10% to 20%, I think that’s what you potentially could expect with PD-1, PD-L1 therapies as single agents in UPS. And then in the range potentially of double that you’d expect for the combination with Yervoy, again, based on the Alliance data. Whereas by nivo, it would be double the response rate of single-agent nivo across all sarcoma subtypes.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [6]

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Yes. Okay. That’s helpful. And then I wanted to ask on the I-Mab relationship, just if you can comment on those dialogue. And if agreements are breached, are there breakup fees involved that I-Mab would owe to TRACON? And if you can just provide any more perspective on the relationship, I think that would be helpful.

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [7]

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Yes. No, I appreciate the question, Maury. Again, there are 2 dispute notices ongoing at this time. And given that consideration, we won’t provide further commentary beyond what I disclosed in the earnings call, what’s disclosed in our current 10-Q and what’s disclosed in the current press release. I would reiterate, though, that we remain diligent with respect to running the TJ4309 trial, and we have enjoyed working with I-Mab on that trial. And we’ll continue to work and move that trial forward expeditiously.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division – Equity Analyst [8]

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Got it. Okay. And then last question, also related to I-Mab. Just with the study that they announced that they started in China, I was wondering if those are going to be similar patient types like you’re pursuing. And if you can just comment on expectations for whether the data that you report later this year, whether that would be at a medical conference or in a press release and maybe anything additional on how much data we should expect from that?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [9]

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Right. Yes. No, we’re encouraged to see I-Mab begin their own study of TJ4309 in China that would complement our current investigations. With respect to data release, I think either is possible, Maury. I think at this point, I would lean more toward a top line data release with respect to completing the dose escalation, which we’re well on track to do by end of this year.

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Operator [10]

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Our next question comes from Ed White from H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division – MD of Equity Research & Senior Healthcare Analyst [11]

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So just a couple of things. On the 253 in China, you had mentioned any discussions there. Is — do you have any thoughts on if we can see a deal being inked this year? Or — and are things being slowed down really because of the pandemic as far as getting a deal done in China?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [12]

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Yes. Great question. I think with respect to our TRC253, the great advantage we have is that we have spent so much time in China over the past 2 years as a result of our current partnerships with I-Mab, with 3D Medicines and with Alphamab Oncology. So while we’ve engaged with partners, we’ve also met, I’d say, on the course of 15 to 20 additional pharma companies or biotech companies in China that we can turn to with potential interest in TRC253. So once that relation is established, I think we can leverage that. And it’s hard to promise anything on deal timing, but we are engaging in a process to engage many companies in China around interest in TRC253. And that is a priority in terms of business development this year. And we do feel it’s something that because of our existing relationships, we can manage through the COVID-19 situation.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division – MD of Equity Research & Senior Healthcare Analyst [13]

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Okay. Great. And then just a financial question. As far as Aspire goes, you had $14.2 million out of the $15 million left in the agreement at the end of the first quarter. Has anything been done in the — between the end of the first quarter and now as far as shares being sold?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [14]

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Sure. No. The $14.2 million remains to be exercised at our option. And between the end of the quarter and now, we have not yet exercised any additional share puts to Aspire.

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Operator [15]

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Our next question comes from Jim Molloy from Alliance Global Partners.

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James Francis Molloy, Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [16]

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I had a question following up on Ed’s on the pandemic issues and your thoughts on any potential impacts in the U.S. Now a number of companies have had to delay trials. And how does the — any intentional delays, should they occur, impact your cash runway?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [17]

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Yes. Great question, Jim. So I think, with respect to the current trial, the TJ4309 Phase I trial, we haven’t seen an impact of the COVID-19 on that trial. And that’s mainly because we opened it at 4 sites. And when you have a 3 plus 3 design and you have 4 sites, you end up having actually sites fighting over the slots to enroll patients. So we were smart to do that. I mean, MD Anderson, for example, was one of the sites, and they did hold enrollment. But because we had 3 other sites open, that didn’t — we didn’t see an impact in enrollment in that trial.

With respect to ENVASARC, I’d point out the following. We have been doing calls with up to 20 sites that we expect to enroll in — or to participate in this trial. And to almost a site, I would say, the sites say it is business as usual in terms of patients coming in. Yes, they get screened at the clinic door for a temperature. And if they have a temperature, they would go to the ER for an evaluation. But patients get screened at the door. They come in. They do their clinic visits as they would before the COVID-19. We had a lot of concern about this, as your question might have implied. But we’ve been very happy that oncology patients, especially those with refractory sarcoma, need treatments, and they’ve been able to receive treatment throughout the epidemic, even in areas where the epidemic has been most fulminant. Patients have remained on clinical trials. There have been more telemedicine visits. But when patients need to come in for treatment, they come in for treatment. So overall, we haven’t seen a huge impact at the sites that will enroll patients in the study, and we do not expect COVID-19 will affect the time line of the trial.

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James Francis Molloy, Alliance Global Partners, Research Division – MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [18]

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Obviously, cancer is certainly not taking a vacation during this as well. I had a question on part of the injection. I remember one thing when we spoke about before was sort of the ease of injection and how that could be a differentiating factor. Obviously, if you get a better objective response, that’s really all you need. It doesn’t matter how you have to inject it. But how would that play in if it’s more equivocal data in that you’d have a much simpler method of delivering product?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [19]

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Yes. No, good question, Jim. So our goal is to show that this drug has a similar efficacy and safety profile of the PD-L1 class of therapeutics. And the differentiating feature, as you said, is the subcutaneous administration. And to be clear, this is subcutaneous administration without an adjuvant. So this is not like taking an antibody and having to mix it with a Halozyme-enhanced technology where you inject, say, a 10 to 15 cc bolus subcutaneously. This is a simple 2 cc or less injection that is given in the arm, in the thigh, abdomen, lower back. It’s very different in that sense. And so we feel this is a major advance. You don’t have to come into an infusion center and sit in a chair to get this therapy. You literally could receive this therapy as part of an outpatient visit at your clinical oncologists. Literally, you come in, you see your oncologists, much like you or I go in to see our general practitioner and we get a flu shot. That could be the simple paradigm for use of envafolimab in the clinic. Beyond that, there’s also the potential to then do home dosing. Patients dose Lovenox at home. They obviously dose insulin at home. Again, for this trial, to be clear, our plan is to have this drug dosed by a health care professional. But longer term, this does have the potential to be administered by self-administration, again, given that it’s fairly straightforward, 2 ccs or less injection, subcutaneous in easily accessible anatomic regions.

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Operator [20]

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Our next question comes from Jim Birchenough from Wells Fargo.

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Nicholas M. Abbott, Wells Fargo Securities, LLC, Research Division – Director & Associate Analyst [21]

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It’s Nick on for Jim this afternoon. First off, Charles, congratulations on the envafolimab agreement, quite a feather in your cap to get that trial designed. On that, did you go to the FDA with a suggestion for the combination arm? Or is that something that was an agreement during the discussion process?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [22]

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Nick, I appreciate the question. I mean, the reason we were so pleased with the meeting with the FDA, Nick, is we proposed the exact trial design that they agreed to. We felt that, that combination arm, as I mentioned briefly in some prior comments, really could revolutionize the care of patients, not just UPS and MFS, through the data we expect to produce for this trial but potentially even in larger and other sarcoma subtypes. So that was, I think, the real joy to us. And I think the great part of the interaction with the FDA, the FDA was very collaborative with respect to understanding our goal here to really meet this unmet need, understanding that the combination therapy could potentially be the best way to increase the response rate in refractory UPS and MFS and offered very helpful comments, but agreed with the scheme, the endpoints, the eligible patient population, all the key items that are needed to implement this trial.

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Nicholas M. Abbott, Wells Fargo Securities, LLC, Research Division – Director & Associate Analyst [23]

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Okay. And then is there any off-label uses of PD-1 or other checkpoint inhibitors in the intended — patients in your study?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [24]

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Yes. No, it’s a great question, Nick. Yes, it’s very, I’d say, dependent on the investigators. So there are clearly investigators that are using, for instance, Keytruda in UPS and refractory disease. I would say those that do use it restrict it to patients that have PD-L1 expression. There are many very experienced academic investigators that have not yet moved to that level and, I would say, the many community practice physicians that also don’t use that as a standard of therapy in UPS, even if it’s PD-L1 positive. But clearly, certain academic centers do use Keytruda off-label in UPS. It’s hard to estimate what the overall use is across the entire spectrum of patients, Nick. But I think it would be, overall, the great minority of physicians are using Keytruda off-label in UPS at this time.

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Nicholas M. Abbott, Wells Fargo Securities, LLC, Research Division – Director & Associate Analyst [25]

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Okay. And then also on — so last one on envafolimab release then. The — I mean, I had a quick look on ClinicalTrials.gov, and there are some PD-1 combination trials ongoing in some major U.S. centers. Will you be competing for patients at those centers? Or will you be targeting centers where there are no active trials ongoing?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [26]

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Yes. We’re actually targeting, Nick, all of the top centers in the U.S., we expect to participate in this trial. If you consider the sites we use for the TAPPAS trial, we had 27 U.S. sites for that study, it’s really going to be the majority of those or the similar sites that will be used for the ENVASARC trial. And yes, there may be other studies going on. But to our knowledge, those centers are not doing a trial where they’re using a checkpoint inhibitor in the refractory UPS/MFS setting that would compete with this trial. And I think that’s an important point. I would say one more time, the enthusiasm of the community of investigators for this trial is very intense and a pleasant thing to encounter. So no, we don’t feel there will be competitive issues at any of these sites. And to be clear, if there was a competitive issue, some of these sites couldn’t open the trial. So in other words, the top centers, if there’s a study for the exact same population as a study that’s already open, they won’t enroll your study. And we have not encountered that issue at all with respect to the 20 or 21 sites we expect to enroll this — to participate in this study. And again, they are the crème de la crème, I would say, of cancer centers in this country.

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Nicholas M. Abbott, Wells Fargo Securities, LLC, Research Division – Director & Associate Analyst [27]

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That’s great. Charles, just to add to that. So presumably, if they had a trial in an earlier-stage patient population, once they’ve been exposed to either a PD-1 inhibitor or to ipilimumab, they would be — become ineligible for your trial?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [28]

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That’s true. If those centers are seeing a first-line patient that’s on a checkpoint inhibitor trial, to your point, they would not be eligible for this trial. I would say this, Nick, that the majority of patients we expect to enroll in the refractory setting at these major centers, many of them will have received their first-line therapy elsewhere. So they’ll get doxorubicin therapy, say, in a community oncology setting because that’s kind of what everyone gets. Once they feel that, that’s the time frame where they come to the more specialized clinical care — or sorry, comprehensive cancer center and would be a great person to enroll in our trial.

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Operator [29]

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(Operator Instructions) Our next question comes from Bert Hazlett from BTIG.

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Robert Cummins Hazlett, BTIG, LLC, Research Division – MD & Biotechnology Equity Research Analyst [30]

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Just one additional follow-up on I-Mab and 4309, Charles. Just to be clear, you are conducting that Phase I study in the United States, and you will be generating that data. That’s the way this relationship is — continues to evolve right now.

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [31]

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That’s exactly right, Bert. Yes, we’re fully responsible for the regulatory and clinical development of TJ4309 in the United States.

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Robert Cummins Hazlett, BTIG, LLC, Research Division – MD & Biotechnology Equity Research Analyst [32]

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Okay. Look forward to additional progress. I know you’re sensitive to this. But can you say what the next steps are in the dispute resolution process?

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [33]

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Yes. I really can’t comment further on that, Bert. Yes. I mean, our focus really right now is — yes. No, I appreciate the comment. Our focus right now is the pivotal study for envafolimab. I mean, that’s — that kind of, to sum up our thoughts, is the driver of value for TRACON. And to come out of that FDA meeting with the concurrence and the agreement from the agency around that trial was, as Nick noted, it was a great feather on our cap, and it sets the stage now for several events over the next quarter that should be culminating in the actual enrollment of the pivotal study.

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Operator [34]

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I show no further questions in the queue at this time. I would like to turn the call back over to Dr. Charles Theuer, President and CEO, for closing remarks.

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Charles P. Theuer, TRACON Pharmaceuticals, Inc. – CEO, President & Director [35]

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Well, we thank you for your time and attention today, and we look forward to speaking with you again next quarter.

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Operator [36]

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Ladies and gentlemen, thank you for participating in today’s conference call. This concludes the program. You may now disconnect.

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