TRACON Pharmaceuticals, Inc. (NASDAQ:TCON) Q2 2022 Earnings Conference Call August 10, 2022 4:30 PM ET
Company Participants
Charles Theuer – President and Chief Executive Officer
Scott Brown – Chief Financial Officer
Conference Call Participants
Maury Raycroft – Jefferies
Ed White – H.C. Wainwright
Soumit Roy – Jones Research
Nick Abbott – Wells Fargo
Joel Beatty – Baird
Operator
Good day, ladies and gentlemen, and welcome to TRACON Pharmaceuticals Second Quarter 2022 Earnings Conference Call. At this time, all callers are in a listen-only mode. After the speakers’ prepared remarks, we will conduct a question-and-answer session and instructions will be given at that time.
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, our development plans and strategy and the timing of results of our arbitration with I-Mab. These statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2021, and subsequent quarterly reports on Form 10-Q. You are cautioned to not place undue reliance on these forward-looking statements, and unless required by applicable law we disclaim any obligation to update such statements.
I will now turn the call over to Dr. Charles Theuer, President and CEO of TRACON Pharmaceuticals. Dr. Theuer?
Charles Theuer
Thank you for joining TRACON’s second quarter 2022 financial results business update call. I will begin on with an update on our pipeline and then review our recent activities. Following that Scott Brown, our Chief Financial Officer will review our financial results for the three and six months ended June 30 2022. Finally, we will conclude by taking your questions.
I’ll start with an update on our continued progress with the ENVASARC pivotal trial. We have now enrolled more than 36 patients in ENVASARC, which is open for enrollment at 29 sites in the U.S. and one site in the U.K. Accrual has been robust and is ahead of our estimates that project full accrual of 160 patient’s dose at the 600 milligram dose to be completed by end of 2023.
This morning, we announced that the IDMC reviewed three weeks of safety data from more than 20 patients and recommended the trial continuous plan at the 600 milligram ENVA dose. We expect two additional IDMC reviews this year. The second safety assessment that occurs 12 weeks after enrollment of the 20th patient is expected in October. And the interim efficacy assessment that occurs three months following enrollment of the 36 patients is expected in the fourth quarter.
During the interim efficacy assessment, the Committee will apply a futility rule that requires at least one response in 18 patients in each of the two cohorts at the 600 milligram ENVA dose. Note an identical futility threshold was achieved at the interim analysis performed last year in 36 patients who received the 300 milligram and the dose.
Recall at that time, a significantly higher response rate was observed in lighter weight patients, which prompted the IDMC to recommend increasing the ENVA dose to 600 milligrams.
As a reminder, the ENVASARC trial includes one cohort you receive single agent ENVA and a second cohort who received ENVA in combination with Yervoy. The primary endpoint in each cohort is objective response rate by resist, as confirmed by blinded independent central review with duration of response, being a key secondary endpoint.
In each cohort, the demonstration of 9 out of 80 objective responses by central review or an 11.25% objective response rate defines level of response that satisfies the primary objective of the study, which is to statistically exceed the 4% objective response rate of Votrient, the only approved treatment for patients with refractory UPS and MFS.
Notably Votrient is a drug with a black box warning for fatal liver toxicity. We believe ENVA has the potential to transform the care of refractory sarcoma patients through the demonstration of superior efficacy and safety compared to Votrient. Based on data from trials of other checkpoint inhibitors in refractory UPS and MFS, we are targeting a 15% response rate for single agent ENVA and up to a 30% response rate for ENVA given with Yervoy.
Furthermore, we plan to approach the FDA to discuss a BLA filing strategy as soon as we determine nine responses in either cohort. Finally, based on activity already observed in ENVASARC, we have applied fast track designation with the FDA and expect a response from the agency later this year.
Our second checkpoint inhibitor YH001is a potential best-in-class CTLA-4 antibody we licensed from Eucure Biopharma in October last year. Earlier this month, we submitted an IND application to the FDA for the initiation of a Phase 1/2 clinical trial of YH001 in combination with ENVA and doxorubicin for the treatment of sarcoma patients, including patients who have not received prior therapy.
As a reminder, we received a broad license to develop and commercialize YH001 in North American in sarcoma, and multiple other indications, including microsatellite stable colorectal cancer, renal cell carcinoma, and KRAS-positive lung cancer.
Now, with respect to our license, we can substitute any one of those indications for bladder cancer, endometrial cancer or melanoma at our election. In these non-sarcoma indications, YH001 could be combined with existing standard of care agents included marketed PD1 antibodies.
Our initial YH001 trial leverages data from two Phase 1 trials conducted by a partner Eucure. These two trials demonstrated the recommended Phase 2 dose of YH001 as a single agent, and in combination with the PD-1 antibody, toripalimab. Our sponsored Phase 1/2 clinical trial will evaluate a triplet that includes YH001, ENVA and doxorubicin chemotherapy, as doxorubicin is the current frontline standard-of-care treatment for sarcoma.
Following the Phase 1 portion of the trial to assess the tolerability of the combination of the ENVA and YH001 doublet, as well as the triple therapy that includes doxorubicin. We will assess the response rate in common and rare sarcoma subtypes to combination treatment with the intent of demonstrating superior response rates compared to historical data using standard-of-care agents.
In leiomyosarcoma, and liposarcoma, we plan to compare the response rate of triple therapy to the historical 10% to 15% response rate of single agent doxorubicin. In the case of rare sarcoma subtypes leiomyosarcoma, and alveolar soft part sarcoma, where chemotherapy is not highly effective, we intend to study the doublet of YH001 and ENVA to assess the response rate compared to the historical response rates with chemotherapy, or single agent checkpoint inhibition.
One of the purposes of this Phase 1/2 trial is to determine the subtypes of sarcoma that best respond to the combination of ENVA YH001 and doxorubicin. Following the potential accelerated approval of ENVA, assuming positive trial results in the pivotal ENVASARC trial, the FDA require a randomized trial to demonstrate a survival benefit. We expect its Phase 3 post approval trial will compare single agent doxorubicin to the triplet combination of doxorubicin with ENVA and YH001 with PFS at the endpoint. This trial would be expected to rural patients with UPS and MFS as well as other sarcoma subtypes shown to respond to triple therapy, based on data from the Phase 1/2 trial that I described earlier.
The ability for TRACON to commercialize to in licensed immune oncology therapies together in sarcoma is a great strategic benefit. It is important to understand the sales potential and sarcoma with ENVA at pricing is now solely the forecasts of $200 million in annual ENVA revenues expected in the initial indications of refractor UPS and MFS as well as the $100 million in annual revenue in rare sarcoma subtypes where the activity checkpoint inhibition has been demonstrated.
Our clinical development strategy is designed to create the opportunity for ENVA to broadly benefit patients with sarcoma in the frontline, adjuvant and neoadjuvant settings by seeking supplemental indications. Moreover, we believe TRACONS total sarcoma driven sales revenue would be significantly enhanced by marketing YH001 and ENVA together as part of a treatment combination in sarcoma.
In addition to our two checkpoint inhibitors, we are pleased that the National Cancer Institute continues to fund development of our DNA damage repair inhibitor TRC102. The National Cancer Institute has initiated a randomized Phase 2 trial assessing TRC102 in stage three, non-squamous, non-small cell lung cancer in combination with chemo radiation. The two 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 fall by consolidative durvalumab treatment.
The primary endpoint of the trial’s PFS and the trials designed to detect an improvement in PFS at one-year from 56% to 75%. Results are expected in 2024. Our fourth clinical stage asset is a CD73 antibody TJ4309 that TRACON is evaluating in a Phase 1 study as a single agent and in combination with the checkpoint inhibitor tri-centric.
We’re working to complete data analysis of the trial which has enrolled the last patient. As a reminder, I-Mab has indicated their desire to exercise their option to terminate the TJ4309 license following completion of the Phase 1 trial for a payment to TRACON of $9 million.
While we expected the study would be completed by the end of the second quarter, we are awaiting results of the final clinical sample testing that we now expect will be completed this quarter. This then triggers I-Mabs option to require TJ 409 for $9 million.
Next, I will provide an update on our legal disputes with I-Mab. As a reminder, I-Mab commenced arbitration in June 2020. After TRACON invoke contractual dispute resolution provisions, asserting that I-Mab had breached its contractual obligations concerning both of our agreements entered into in November 2018. We filed counterclaims in the arbitration seeking to recover over $200 million in damages from I-Mab based on the alleged breaches. Under the applicable rules of the arbitration, the prevailing party may also be awarded attorney’s fees at the tribunals discretion.
In February of this year, arguments for alleged breaches of both of our agreements with I-Mab were heard before an International Chamber of Commerce arbitration tribunal under New York law, and the final post hearing briefs were submitted to the tribunal in late May. On June 2, the International Court of Arbitration of the ICC notified us to expect a final decision by September 30, although the Tribunal may ask the ICC for a further extension if warranted. The claims under the arbitration are complex.
Accordingly, we cannot predict the outcome of the arbitration, and we are unable to estimate the amount of recovery of damages if any that may be awarded by the tribunal. Pending results of the arbitration, we continue to meet our obligations under the terms of both agreements. We will promptly provide an update when the tribunal panel announced their findings.
Given the challenge in capital markets, the expectation to secure non-dilutive capital from our corporate partners is important. In the meantime, we recently secured capital through another source. In June our largest shareholder, OCLI purchase $4 million in common stock and pre funded warrants at market price without the issuance of common warrants. Capital from this transaction extends our cash runway into the first half of 2023.
Our runway would be further extended by the $9 million payment expected later this year from I-Mab related to their stated intent to require TJ4309 following completion of the Phase 1 trial and will be further extended to any arbitration award.
As we have noted in the past, we expect to further supplement our cancellation through opportunities for non-dilutive capital enabled through our CRO independent product development platform that we believe positions us as one of the most efficient clinical development organizations. We expect to continue to leverage our platform in two ways that provide for potential non-dilutive capital to TRACON.
First, we’re evaluating drug candidates were by TRACON performs clinical trials at a lower cost than a CRO, but still at a premium to our costs using a pay for performance model that TRACON further benefits by earning a share of the revenue, including sub licensing fees and royalties from commercialization. This is an aligned structure we use in the past, for example, with Johnson & Johnson.
Second, we’re exploring a franchise model whereby we’re 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 contract thing with CROs to execute clinical trials. As has been the experience of TRACON such an investment would be expected to result in substantial time and cost savings for our partner. We believe that overtime, our product development platform 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 lower costs 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. TRACON’s research and development expenses were $2.9 million and $5.9 million for the three and six months ended June 30 2022, respectively, compared to $3.1 million and $5.4 million for the comparable periods of 2021.
The increase in the six month period was primarily related to additional enrollment in the pivotal ENVASARC trial. General and Administrative expenses were $3.3 million and $9.8 million for the three and six months ended June 30 2022 respectively, compared to $6.1 million and $8.8 million for the comparable period of 2021. The decrease in the three month period was due to the lawsuit filed in Delaware Court of Chancery by I-Mab in 2021. And the increase in the six month period was primarily related to legal expenses in connection with the arbitration hearing with I-Mab in February of this year.
We expect G&A expenses to decrease significantly for the remainder of the year as the arbitration hearing is now complete. Our net loss was $6.2 million and $15.7 million for the three and six months ended June 30, 2022 respectively, compared to $8.9 million and $14 million for the comparable periods of 2021.
Turning to the balance sheet, at June 30 2022 our cash and cash equivalents totaled $13.6 million, compared to $24.1 million at December 31 2021. We expect our current capital resources to be sufficient to fund our planned operations into 2023.
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 with five key events we expect this year. First, we expect to report the IDMC interim efficacy assessment for the two ENVASARC cohorts at the 600 milligram dose of ENVA.
Second, we expect to dose the first patient in the Phase 1/2 trial of our potential best-in-class CTLA4 antibody YH001 in combination with ENVA and doxorubicin as a potential first line treatment for sarcoma. Third, we expect to further leverage our unique product development platform to provide TRACON non-dilutive capital, in exchange for enabling companies tired of being beholden to CROs to potentially benefit from our capabilities and realize for themselves the substantial time and cost savings we enjoy at TRACON.
Fourth, we expect to complete the TJ4309 Phase 1 trial preventing I-Mab the opportunity to exercise their stated desire to terminate the agreement for a payment to TRACON of $9 million. Fifth, we expect to report the arbitration panel’s binding decision, including potential damage awards regarding our significant legal disputes with I-Mab.
As Scott indicated our current cash run rate extends into the first half of 2023 and past each of the five key upcoming milestones, including expected non-dilutive capital from an existing partnership.
Thank you for your time and attention and we are now available to answer your questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Maury Raycroft with Jefferies. Your line is now open.
Maury Raycroft
Hi, Charles. Thanks for taking my questions and congrats on the progress. First question I was going to ask is just for checking the box on this 70 original patients in ENVASARC at the lower dose. Can you say what proportion of those patients have been titrated up to 600 mg dose? And to clarify, would those data be disclosed along with the final analysis for ENVASARC?
Charles Theuer
Hi Maury, thanks for the questions. As you pointed out, we treated 70 patients with an initial dose of 20 milligrams with envafolimab and then once the amendment to dose at 600 milligrams was approved at each individual site. Those patients that were on study at that time, were able to dose escalate to 600 milligram. I can’t give you exact numbers, Maury, but many patients have those escalate from 300 to 600 milligrams. And so really, they’re going to be in terms of the final data, if you will, the primary endpoint to be clear as being assessed with respect to the 600 milligram dosing patients being the patients who started the trial, 600 milligram will be 80 patients that received ENVA at 600 80 that received ENVA plus Yervoy with ENVA at 600. And that’s the primary data set for the primary outcome.
But there will be additional data in 70 patients those 300 milligrams initially and a subset of those that those escalated 600. Those are the three datasets and all those will be part of you will the filing for the expected approval of the drug with the 70 patients, including those that those escalated, 600 being a supportive dataset. But I can’t give you exact numbers in terms of the categories within the 70 that the dose escalated to 600.
Maury Raycroft
Got it. Okay, I understand. And that’s helpful. And I also want to ask a question about the Phase 1/2 with ENVA YH001, and doxorubicin. Do you plan on reporting data after the Phase 1 portion is completed? And can you remind me if you see potential for an accelerated approval path based on the Phase 2?
Charles Theuer
Great questions Maury. With respect to the trial, we will, we do expect to provide data following completion of the Phase 1. This is not a registrational trial. It’s different with respect to the design and the ENVASARC trial, which is a pivotal study. So we will plan to report data at the conclusion of the Phase 1 portion. And then also, each of the four Phase 2 courts may enroll kind of a different paces, if you will, there are two common sarcoma subtypes and two rarer ones. So we’ll report the Phase 2 data, kind of as it comes out first per cohort.
You ask an interesting question. I mean, we are dealing with respect to the Phase 2 portion of the study with some very underserved subtypes of sarcoma. We’re not planning this Phase 1/2 trials a pivotal study to be clear, but if there’s very promising data, there’s a possibility to bring up discussions with the agency to meet what our incredible unmet needs within these patient populations, but at the outset, this is not planned as a pivotal study. But that said, data will dictate our approach to interact with the agency around very promising data if that were to be the case.
Maury Raycroft
Got it. That makes sense in for advancing into the frontline and Phase 3, can you talk about some of the gating factors that you’re going to be looking for in Phase 1/2 prior to starting that Phase 3?
Charles Theuer
Sure. No appreciate the question Maury. So each of the four Phase 2 cohorts leiomyosarcoma, [indiscernible] leiomyosarcoma, chondrosarcoma and alveolar soft part sarcoma each have a separate if you will endpoint, meaning a targeted objective response rate that we’re looking to hit that would be clearly superior to the objective response rate seen with single agent chemotherapy with doxorubicin. So if all four hit that targeted response rate, which is our goal, then we unroll all four of those subtypes, in addition to UPS and MFS in that potential Phase 3 trial.
Maury Raycroft
Got it. And last question, and then I’ll have back in the queue. Just wondering if you have insight into Eucure data updates for YH001 that could happen this year or next year, and well, one or two of those updates be relevant to TRACON that we should be looking for?
Charles Theuer
Yes, yes, I think the most recent update Eucure did present data at ASCO with the combination study of YH001 toripalimab. I thought it was very encouraging data both from a safety perspective, but also from an efficacy perspective where there were several responses across multiple solid tumor types. We could see some additional data from the single agent trial that is also a Phase 1 study. Remember there were two Phase 1 studies they did. The combo with toripalimab and then the single agent study. So we might see an update on the single agent data. I think with respect to further updates on the combination trial, I think the ASCO poster actually was fairly complete with respect to the patients that have been enrolled so we were pleased to see that updated report and encouraged by both the safety and efficacy that was reported at ASCO this year.
Maury Raycroft
Got it. Okay. Thanks for taking my questions.
Charles Theuer
Thank you, Maury.
Operator
Thank you. Our next question comes from the line of Ed White with H.C. Wainwright. Your line is open.
Ed White
Good afternoon. Thanks for taking my questions. So, Charles, just want to change gears here a little bit. And ask you a little bit about your CRO independent clinical development program and capabilities there. Are you? How does it work with the franchise model? Has there been any company that’s been interested so far? And how long would a process take to get that technology are and no how over to a separate company?
Charles Theuer
Hi, thanks for the question. We have generally explored the franchise model in the following manner that, there are companies that right now have a significant pipeline. And if they have a significant pipeline, in our view, they’re paying an exorbitant amount of their operational expenses to fund those trials, running them through a CRO using the fee for service plus guaranteed monthly payment model that, frankly, is not the best use of capital. We feel those companies were to adopt our franchise model, they could run their trials at half the cost, or even potentially lower of what they’re paying a CRO.
So you can appreciate that the ideal company for this type of model is one that has a pipeline of say more than one product in one trial. But for that company, learning our systems would be transformative in terms of the capital, they would say the time they would save. And frankly, we also think the quality would be better.
Now in terms of identifying that company we have identified, let’s say a handful of companies, just a couple, I think is kind of how we look at it, we just want to initially focus on one company, because it is a major undertaking for both us and the company, it’s going to be something it’s something for us to take on adopt over 10 years. But with respect to that company, we do feel that if they intensely invested in this program, in within six months, they will be running their own trials, it could be Phase 1, it could be Phase 2, it could be Phase 3, they will be saving incredible amounts of capital, and they’d be engaged in a process much like TRACON where we feel they could save a year per phase of development.
So year on each Phase 1, Phase 2, and Phase 3 trials such that if an overall program goes to market, they potentially could save three years on the process of developing their drug. So that should give you I think, general idea of how we’re thinking about it, why it appeals to certain companies, and why it takes a special company that we want to, if you will teach this franchise model initially. And once that company learns it, then we would kind of move on to another company. But our goal is to really transform the industry help more people read the advantage we have by being CRO independent.
Ed White
And from a training standpoint, do you think you’d be more likely to do a franchise model? First, or your pay for performance model? Is would that be something that would be an easier sell?
Charles Theuer
I think that’s a great point, Ed. I mean, I think the nice thing about the pay for performance model is that we’ve done that, for instance, with Johnson & Johnson. We’ve executed around that, that that model, and it’s a lot easier for the company that collaborates with the to pay for performance because, they don’t have to do learn our systems, right? They’re saying, please work with us. We’ll give you the molecule; you take it through the trial. And then it’s still our partners molecule, they still have commercial rights; we share in the revenue from that commercialization. But from our partners point of view, it’s not much more work than if they hired a CRO the advantages. It’s cheaper for them. It’s faster for them, and we also feel the quality of our work is better.
But it doesn’t require a big investment of their time to learn systems. De novo, which the franchise model does. So to your point Ed, I think continue to execute around the pay for performance model, which is something that we’ve done on more than one occasion would make the most sense in terms of what would get done in the sooner timeframe.
Ed White
Okay, thanks, Charles. And one last question, if I may, just on the 4309 what is the definitive last thing that needs to be done in order for I-Mab to terminate the license and pay the $9 million?
Charles Theuer
Yes, it really is completing the Phase 1 study. It’s really analyzing some clinical samples, which we expect to be able to complete this quarter, and then I-Mab would trigger the often.
Ed White
Okay, so Charles, thanks for taking my questions.
Charles Theuer
Thank you Ed. Much appreciated.
Operator
Thank you. Our next question comes from Soumit Roy with Jones Research. Your line is now open.
Soumit Roy
Hi, everyone, and congratulations on all the progress. If I may ask one question on the ENVASARC trial. So year-end when you are going to present interim data from the 36 patients? What do you expect the duration on drug would be? Are we going to be in a similar situation as last year where most of the patient won’t be around 24 weeks where we mostly see the responses happen. So any color on that would be appreciated.
Charles Theuer
Now appreciate the question, Soumit. It is a bit like last year in the sense that, with respect to this year at the 600 milligram dose, we were dosing patients, by first quarter. So there’s a potential for patients to be on drugs as long as they 11 months if you were to say to go to the very end of the year. In terms of the minimum time on study is three months. So yes, I’d say anywhere between, say three and say 10 months or so, would be the maximum time a patient would be on therapy.
So as is the case last year, we’re going to report and do the analysis. It’s a planar response rate knowing to your point, not every patient responds on the first or second CT scan. We know that for a fact, especially with combination checkpoint inhibition that many patients won’t respond to, to your point until, say 24 weeks or thereafter. So our goal is to clearly see activity in both cohorts, we need to see at least one response per the futility analysis. And it would be nice to see a double digit response rate even at this early analysis, knowing that response would likely would grow. And it could grow significantly, based on what you pointed out that many responses in sarcoma, psychotherapy take more than just three weeks, three months to develop.
Soumit Roy
So would you say like, at least half the patients will have six months on drug or less than that?
Charles Theuer
Well, we announced the 36 patient was enrolled as of July. So, those patients and we did see, I’d say a nice amount of a cruel, in the last three months. So yes, I think a lot of patients will have three months on therapy. There’ll be a segment will have six months, and then that rare segment will have say nine months, potentially.
But yes, I would say a lot of patients will have, if you will just two scans. Maybe the third scan will get done before we actually had the DMC meeting, but it’s going to be in that kind of ballpark, Soumit if you will.
Soumit Roy
Okay, no, that’s really helpful. Thank you for that. And one last question on the — the when you’re starting the frontline trial in sarcoma. I was under the impression that it would not be UPS, MFS and it would focus more on well differentiated or leiomyosarcoma so that it doesn’t compete with your current second line or refractory.
Charles Theuer
No, you’re exactly right, Soumit. No, no, you’re exactly right. So the Phase 1/2 trial to be clear, those are enrolling patients with sarcoma that does not include MFS and UPS. So to your point, we will not cannibalize enrollment into the ENVASARC trial. What will, what is expected to happen is that once the Phase 1/2 trial is done, and ENVASARC is done when we start that Phase 3 study, which will be the post approval commitment study, that that would then enroll UPS and MFS because ENVASARC will be fully enrolled, and also include other subtypes, including the subtypes that would enroll in the Phase 1/2 trial where we see activity of that triple therapy.
Soumit Roy
Got it? Any you are not having any enrollment proprietary [ph] on the TPS score, or would you get only greater than 5%?
Charles Theuer
Yes, so for sarcoma in the Phase 1/2 study we’re rolling by histology. We will do postdoc analyses looking at biomarkers including PD-L1 expression, including for example, what’s called a sarcoma immune class. We’ll do postdoc analyses looking at biomarkers including PD-L1 expression, including, for example, what’s called a sarcoma immune classification, to see if there’s a possibility of selecting patients based on a biomarker. That would be a post hoc analysis based on the Phase 1/2 trial but if that is highly informed that is highly informative, it’s possible that the Phase 2 trial could also include biomarker, enriched enrollment. So all those are to be determined based on the results of the Phase 1/2 trial.
Soumit Roy
Thank you so much for taking the questions. And congratulations again on all the progress.
Charles Theuer
Thank you Soumit. Appreciate it.
Operator
Thank you. [Operator Instructions] Our next question comes from Nick Abbott with Wells Fargo. Your line is now open.
Nick Abbott
Good afternoon. Thanks for taking the questions and congrats Charles and team. Charles, can you elaborate on off-track application? Is that ENVA Plus, — ENVA Plus YH001. What does that cover?
Charles Theuer
Sure, no, appreciate the question, Nick. Yes, the Fast Track application is for envafolimab based on activity we’ve seen as a single agent. So our expectation is to gain Fast Track status for envafolimab that would then facilitate the expected ENVASARC pivotal trial filing or the filing based on the ENVASARCpivotal trial data. And we do expect to receive that designation later this year.
Nick Abbott
Is that presumably that the activities the outside of cohort CMD. This is from the Phase 1 thing we’ve got orphan drug based on brain clinical activity. So in general, I’m not saying it implies that you haven’t seen activities or the combination, but what about the combination of it?
Charles Theuer
No, good question. So with respect to fast track, it’s really more pertinent I’d say today is more pertinent single agent activity, just because you can definitively say that’s your drug. So, to your point, we saw a single agent activity in sarcoma in Phase 1 in the alveolar soft part sarcoma which was really important in terms of securing orphan drug designation. And then we saw single agent activity at 300 milligrams in the ENVASARC trial, again, with that activity significantly more evident in the lighter weight patients.
So based on the single agent activity we seen in Phase 1, and also in ENVASARC even at the lower dose, we feel there’s clear evidence of single agent activity that we feel will be sufficient to secure Fast Track designation.
Nick Abbott
Okay. And then how does that play with your prior comments on seeking breakthrough therapy designation?
Charles Theuer
And okay, great, great question. So, breakthrough therapy designation is a higher hurdle. And so we will await the results of the interim analysis end of the year as the basis we’re considering a breakthrough application, just because that is clearly a higher hurdle. And we don’t have enough data at this point, until we do the interim analysis end of the year to consider an opportunity like that.
Nick Abbott
And then, before, obviously, the opportunity to grow the total amount of license. Where are you on that? And as you think about this franchise model, is there an opportunity to do some horse trading [indiscernible] envafolimab in return for a franchise?
Charles Theuer
It’s very perceptive question. I would say just in general, we remain incredibly interested in expanding the field of use for envafolimab, and we would definitely entertain, offering our expertise in terms of running clinical trials in order to do that. So still high priority for our company is to expand the field to use for envafolimab.
Nick Abbott
Okay. And then you kind of mentioned right at the very end, the franchise or already non-dilutive capital. You said so many existing partnership and I think you did outline I guess the [indiscernible] earlier, but with some this entails, do you feel confident that you might be able to land either a franchise with or security is one development opportunity?
Charles Theuer
It’s definitely one of our goals for the year. I think, Nick, to the to the earlier question, I think it’s probably much more likely that we’d engage in the pay for performance model that includes the revenue share, just because that’s a that’s an easier idea to understand for a potential partner is something we’ve executed multiple times before. But that is an important corporate goal for us this year.
Nick Abbott
Okay, thanks. And then just spend some time describing the YH001 drawback, but can you just outline again the steps in order you need to get through in order to get to verifying patients. And, what, when we might see data from that stepwise approach?
Charles Theuer
Yes, sure, sure Nick. Yes, so the study is a Phase 1/2 trial, and we expect to initiate dosing this year in the Phase 1 portion. And I don’t think the Phase 1 portion will take that long because we have the advantage that our partners have already completed two Phase 1 trials, but we want to just make sure that those advisors when we select is not only tolerable with within envafolimab, but also with doxorubicin. But once we establish that dose of why just want to tolerable with ENVA at 600 and standard dose doxorubicin. The Phase 2 portion will dose frontline patients, including frontline patients with leiomyosarcoma, and differentiated liposarcoma, which are two of the major classifications of sarcoma.
So that I think is exciting. Those patients right now are getting doxorubicin chemotherapy or maybe a couple of chemotherapeutics together with doxorubicin. We will be giving them the opportunity to get dual checkpoint inhibition with Docs as frontline therapy. And I think that’s going to be really exciting. And people are investigators are excited because that prospect as are we as a company.
Nick Abbott
So you think that that’s a realistic objective for next year is to get into phase 2.
Charles Theuer
Yes. Yes, exactly. Right Nick.
Nick Abbott
And then it’s last one for me. I think when you did the YH001 license, you talked about perhaps starting a solid tumor trial later this year, and I think we know — was high up on the list, is that that’s still a goal for this year?
Charles Theuer
That’s still a goal for the program. I don’t think we’ll start that this year, Nick. But that is a goal for the program. That would be a goal for 2023 is to begin an investigation of a non-sarcoma indication once we get the sarcoma study up in running.
Nick Abbott
Okay, perfect. That’s all.
Charles Theuer
Appreciate the questions, Nick. Thank you.
Operator
Thank you. Our next question is a follow up from Maury Raycroft with Jefferies. Your line is now open.
Maury Raycroft
Hi thanks for doing the follow up question. I just wanted to ask one about the 200 million in damages related to 4309 arbitration. I’m guessing you can’t say too much about your specific case. But are there good proxies or 0analogs as it relates to your case that support number one that the claim for 200 million in damages? And then number two, I guess how much was rewarded in those other proxy cases?
Charles Theuer
Hi Maury, appreciate the question. I would, I can’t say a ton about arbitration because it is a competence from proceeding. And yes, I think that’s the other problem with thinking about proxies. A lot of times arbitration is confidential, as opposed to say, a lawsuit in a public court. I would just point out that the arbitration damages that we seek relates not just to TJ4309, but also to the to the vices of antibody agreement, which, as you recall, as agreement whereby TRACON was to be provided five basic antibodies over the course of or we were able to take five basic antibodies over the course of five years and had the option to acquire rights to any or all of those by basics that is worldwide outside of Korea and China.
And we felt that was a very valuable agreement to us. And that’s reflected in some part, as well as the TJ4309 breach in the award that we talked about. Yes, the only thing I could just point out is, Bispecific Antibody pipeline access, again, we feel is very valuable. And I think if you were to, to evaluate deals done by, by pharma companies to get that type of access, those are those are deals that are valuable as indicated in the public announcements.
So that’s maybe a proxy to think about, but I can’t go into details regarding the arbitration itself.
Maury Raycroft
Got it. Understood. That makes sense. Okay. Thank you. Thanks again.
Charles Theuer
Thank you, Maury. Appreciate it.
Operator
Thank you. Our next question comes from the line of Joel Beatty with Baird. Your line is open.
Joel Beatty
Hi, Greg, thanks for taking the questions. The first one is on envafolimab. Can you discuss the confidence now in the 600 milligram dose level? And is it pretty much based on what was learned before starting this new cohort? Or are there additional learnings you had from this cohort or from the patients that were escalated from 300 to 600 in the previous cohort that called, added the captain.
Charles Theuer
Sure, Joel I appreciate the question. So we escalated from 306 milligrams from 300 to 600 milligrams at the advice of the IDMC, when they noted that there was clearly significant at higher activity and lighter weight patients, and because it’s a flat dose. If we double the dose, we gave every patient the optimal chance to respond irrespective of their body weight. And I think what we’ve what we’ve learned going to 600 so far is that the drug has been very safe. And I think that was reflected in today’s announcement when the DMC evaluated more than 20 patients worth of data at the higher dose.
And I would point out that that’s not surprising. We know from Phase 1 testing that this drug was dosed at even fourfold higher doses than 600 and was shown to be to be tolerable. So it’s nice to confirm that the 600 milligram dose is safe. And, and that, again, it’s not an unexpected announcement.
In terms of activity, we knew in Phase 1 that patients that responded to sarcoma in Phase 1 had the equivalent of the 600 milligram dose. So that was useful data. To understand why that’s a logical choice to increase to once we saw the increased activity and the lighter weight patients. In terms of 300 milligrams to 600 milligram dose escalation, I’d point out that that happened based on the decision already to go to 600. So we will have data on those patients. As I mentioned, they’ll be part of the supplemental data to support the expected BLA, but those data actually didn’t inform our decision to go to 600 because that decision was made before the dose escalation happened in those individual patients. And the dose escalation was really based on the clear activity, we saw that dose level in Phase 1, the fact that it was expected to be safe. The fact that the 600 milligram doses is higher even than the dose approved in China that showed a very robust response rate in MSI high cancer. And so those are all factors that then made the 600 milligram dose logical to move to in ENVASARC.
Joel Beatty
Yes, that makes sense. And then it’s a question on expenses and how to think about them over the next couple of quarters. As you know, it seems like clinical trial activity could be increasing while the legal dispute may be winding down.
Scott Brown
Yes, thanks Joel, this is Scott. So on the G&A side, we do expect expenses to continue to come down. Our normal baseline is around 2 million a quarter. So that’s what we would expect, in the low $2 million range for the second half of this year, and even in the first part of next year, assuming no additional legal expenses related to the arbitration. And then on the R&D side, we’d expect similar to the first half of the year in around 3 million quarter with, probably small increases due to additional enrollment and the YH001 trial getting up and running. But nothing too much above, kind of a low to mid $3 million a quarter.
Joel Beatty
Right. Thank you.
Scott Brown
Yes, thank you Joel.
Operator
Thank you. And I’m currently showing no further questions at this time. I’d like to turn the call back over to Dr. Theuer for closing remarks.
Charles Theuer
Well, I just wanted to thank the listeners and thank you especially to the analysts for your questions. We look forward to updating you later this quarter. Have a good day.
Operator
Thank you for participating. You may now disconnect.
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