TRACON(TCON) - 2021 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information, including financial statements, management's discussion and analysis, market risk disclosures, and internal controls Financial Statements This section presents TRACON Pharmaceuticals' unaudited condensed consolidated financial statements for Q1 2021, highlighting a net loss increase and asset decrease Condensed Consolidated Financial Statements This section provides the condensed consolidated balance sheet, statements of operations, and cash flows for the specified periods Condensed Consolidated Balance Sheet (in thousands) | | March 31, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $26,408 | $32,131 | | Total current assets | $31,217 | $36,914 | | Total assets | $31,654 | $37,438 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $10,280 | $10,543 | | Total liabilities | $11,297 | $12,366 | | Total stockholders' equity | $20,357 | $25,072 | | Accumulated deficit | $(184,173) | $(179,109) | Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $2,284 | $1,998 | | General and administrative | $2,671 | $1,886 | | Loss from operations | $(4,955) | $(3,884) | | Net loss | $(5,064) | $(4,021) | | Net loss per share, basic and diluted | $(0.33) | $(0.78) | Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,859) | $(5,292) | | Net cash used in investing activities | $(4) | $0 | | Net cash (used in) provided by financing activities | $(860) | $3,014 | | Change in cash and cash equivalents | $(5,723) | $(2,278) | Notes to Condensed Consolidated Financial Statements These notes provide critical context to the financial statements, detailing collaborations, legal disputes, and debt obligations - The company has an accumulated deficit of $184.2 million as of March 31, 2021, and expects to incur future net losses. Management believes current cash of $30.4 million is sufficient to fund operations for over a year[24] - The company has a collaboration with 3D Medicines and Alphamab for envafolimab, where TRACON is responsible for development and commercialization in sarcoma in North America. Royalties are payable to partners if TRACON commercializes, or receivable by TRACON if partners commercialize[68][69][72] - TRACON is in a dispute with I-Mab over the TJ004309 and Bispecific agreements. I-Mab attempted to terminate the TJ004309 agreement, which TRACON is contesting. The dispute is before an ICC arbitration panel with a hearing set for February 2022[80][90] - Janssen declined its option to reacquire rights to TRC253. TRACON retains worldwide rights and is obligated to pay Janssen up to $45.0 million in milestones plus low single-digit royalties on net sales[92] Long-Term Debt (in thousands) | | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Long-term debt | $3,500 | $4,200 | | Less current portion | $(2,800) | $(2,800) | | Long-term debt, net of current portion | $698 | $1,391 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business strategy, financial performance, and liquidity, highlighting increased net loss and sufficient cash for operations Overview and Pipeline This section outlines TRACON's biopharmaceutical focus, lead product candidates, and clinical development strategy, including the ENVASARC trial - The ENVASARC Phase 2 pivotal trial for envafolimab is expected to produce interim data in 2021, final data in 2022, and a potential BLA submission for accelerated approval in 2023[99][100] - The company is in a dispute with I-Mab over the TJ004309 agreement, with I-Mab attempting to terminate it. TRACON is contesting this, and the matter is in arbitration[107] Key Development Pipeline and Expected Data | Product Candidate | Indication | Phase | Data Expected | | :--- | :--- | :--- | :--- | | Envafolimab | Soft Tissue Sarcoma (UPS and MFS) | Pivotal Phase 2 | Interim 2021, Final 2022 | | TRC102 | Solid tumors and Lymphomas | Phase 1/2 | 2021 | | TJ004309 | Solid Tumors | Phase 1 | 2021 | Results of Operations This section details the company's operating expenses, showing increases in R&D and G&A for the three months ended March 31, 2021 Comparison of Operating Expenses (in thousands) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development expenses | $2,284 | $1,998 | $286 | | General and administrative expenses | $2,671 | $1,886 | $785 | - The increase in R&D expenses was primarily due to the enrollment of the ENVASARC trial[147] - The increase in G&A expenses was primarily due to legal and corporate related expenses[148] Liquidity and Capital Resources This section details the company's cash position, capital resources, and financing facilities, indicating sufficient liquidity into H2 2022 - The company believes its cash, cash equivalents, and short-term investments are sufficient to fund operations into the second half of 2022[150][165] - The company has an ATM facility with JonesTrading with up to $50.0 million available for sale as of March 31, 2021[153] - The company has a purchase agreement with Aspire Capital, with $9.6 million in net proceeds raised to date and additional capacity available[152] - The total outstanding balance owed under the SVB loan was $3.5 million as of March 31, 2021[158] Quantitative and Qualitative Disclosures About Market Risk This section indicates that quantitative and qualitative disclosures about market risk are not applicable to the company - Not applicable[168] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[170] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[171] PART II OTHER INFORMATION This section covers other essential information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Legal Proceedings The company reports it is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[174] Risk Factors This section outlines significant risks to the company's business, including financial needs, product dependency, and operational challenges - The company has a history of operating losses, with an accumulated deficit of $184.2 million at March 31, 2021, and will require substantial additional financing[178][180] - The business is heavily dependent on the success of its lead candidate, envafolimab, and clinical development is a lengthy, expensive process with an uncertain outcome[176][194] - The COVID-19 pandemic could continue to adversely impact business operations, including clinical trials, supply chain, and business development activities[301][303] - The company is dependent on corporate partners like 3D Medicines, Alphamab, and I-Mab. Disputes with I-Mab and reliance on partners for manufacturing and development create significant risks[233][236] - The company's ability to use its net operating loss (NOL) carryforwards of approximately $152.5 million (federal) and $117.7 million (California) may be limited due to ownership changes[300] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds for the period - None[332] Defaults Upon Senior Securities The company reports no defaults upon senior securities for the period - None[333] Mine Safety Disclosures This section on mine safety disclosures is not applicable to the company - Not applicable[334] Other Information The company reports no other material information for the period - None[335] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, agreements, and officer certifications - The report includes a list of filed exhibits, such as corporate governance documents, securities purchase agreements, and certifications by the Principal Executive Officer and Principal Financial Officer[336]