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Tracon Pharmaceuticals, Inc. (TCON)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 delivered a headline net income of $10.76M ($0.29 EPS) driven by $13.0M of other income from the I-Mab arbitration collection; operating loss before other items was $1.59M as OpEx fell sharply on lower R&D and a $2.0M arbitration-fee refund .
  • ENVASARC single‑agent envafolimab cleared the second/final interim futility bar; BICR ORR was 8.7% (confirmed) in the first 46 pts and investigator‑assessed ORR was 13%; DMC recommended the study continue as planned .
  • Milestones were reiterated/updated: complete accrual in Q4’23, provide an ORR update before year‑end, and final ENVASARC data mid‑2024; management also expects to license its PDP and generate non‑dilutive capital in 2023 (accelerated from prior “by end of 2024”) .
  • Estimates context: S&P Global consensus for TCON was unavailable via our feed (missing CIQ mapping), so no beat/miss determination versus Street is possible at this time.

What Went Well and What Went Wrong

  • What Went Well

    • ENVASARC surpassed the futility hurdle at the second/final interim; DMC advised continuing as planned. BICR ORR 8.7% (confirmed) and investigator ORR 13% in the first 46 patients; median DOR by BICR >6 months .
    • Significant non‑dilutive inflow: $22M arbitration award collected in July; recognized $13.0M other income in Q3; net income $10.8M in the quarter .
    • OpEx discipline: R&D ($2.33M) and G&A ($1.26M) declined YoY on cohort focus and lower legal spend; $2.0M arbitration success‑fee refund further reduced OpEx .
    • Quote: “We are on track to complete enrollment of 80 patients… this year… We expect to report updated response rate data before the end of the year” — CEO Charles Theuer .

  • What Went Wrong

    • No operating revenue in Q3 (collaboration revenue $0), leaving results dependent on one‑time items; operating loss before other items was $1.59M .
    • Balance sheet tight: cash, cash equivalents and restricted cash $7.8M at 9/30/23; runway “into 2024,” with dependence on executing PDP licensing for additional non‑dilutive capital .
    • ENVASARC still must reach the 11.25% BICR ORR primary endpoint (9/80 responses); management acknowledged forward plans (e.g., frontline study) depend on achieving that double‑digit BICR ORR in the pivotal trial .

Financial Results

MetricQ3 2022Q2 2023Q3 2023
Collaboration Revenue ($USD Millions)$0.00 $9.00 $0.00
R&D Expense ($USD Millions)$4.10 $3.49 $2.33
G&A Expense ($USD Millions)$2.28 $1.92 $1.26
Arbitration Success Fees (OpEx line; $USD Millions)$0.00 $4.38 $(2.00)
Total Operating Expenses ($USD Millions)$6.38 $9.78 $1.59
Total Other Income (Expense) ($USD Millions)$(0.06) $(5.51) $12.35
Net Income (Loss) ($USD Millions)$(6.44) $(6.29) $10.76
EPS, Basic & Diluted ($)$(0.30) $(0.20) $0.29

Balance Sheet Highlights

  • Cash, cash equivalents and restricted cash: $1.87M at 6/30/23 (cash & equiv $1.74M; restricted cash $0.14M) and $7.84M at 9/30/23 (cash & equiv $7.76M; restricted cash $0.07M) .

KPIs and Clinical Metrics

KPIValueSource
ENVASARC BICR ORR (first 46 pts)8.7% (all confirmed responses) Press release, call
ENVASARC Investigator ORR (first 46 pts)13.0% Press release, call
Median DOR by BICR>6 months Press release, call
Additional patients enrolled post‑DMC>20 Press release, call
Primary endpoint threshold11.25% BICR ORR (9/80 responses) Press release, call

Note: Margin analyses are not meaningful given $0 revenue in Q3 2023 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ENVASARC accrual completion2023Complete accrual in Q4 2023 Complete accrual in Q4 2023 Maintained
ENVASARC interim efficacy review2023Second/final interim expected later Q3’23; futility threshold already achieved by responses to date Interim achieved; BICR 8.7%/investigator 13%; proceed as planned Achieved/Updated
Updated ORR data2023Not specifiedReport updated response rate before year‑end 2023 New/Specified
Final ENVASARC dataMid‑2024Mid‑2024 Mid‑2024 Maintained
PDP licensing / non‑dilutive capital2023–2024Generate non‑dilutive capital by end of 2024 License PDP and generate non‑dilutive capital in 2023 Accelerated (pulled in)
Cash runway2023–2024Pro forma cash funds into Q1 2024 Runway into 2024; PDP licensing expected to extend further Maintained/clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2023)Current Period (Q3 2023)Trend
ENVASARC efficacy and futilityQ1: second/final interim planned; accrual ahead of plan . Q2: double‑digit ORR in on‑study scans; futility threshold expected to be exceeded .Interim cleared; BICR 8.7%, inv 13%; DMC: continue .Positive validation
Regulatory/approval pathQ1: position for potential commercial launch in 2025 if successful .Plan to discuss BLA strategy once 9 responses reached; fast track and orphan status reiterated .Advancing planning
PDP licensing/non‑dilutive capitalQ1: equity facility with LPC; arbitration award expected . Q2: collected $22M award; target non‑dilutive capital by 2024 .Expect to license PDP and receive revenue in 2023 .Accelerating
Cash runway/liquidityQ1: into early 2024 with arbitration proceeds . Q2: pro forma into Q1 2024 .Into 2024; PDP license expected to extend .Stable, contingent on BD
Legal/arbitrationQ1: ~$23M award announced . Q2: $22M collected; $4.4M in trust pending fees .Received $2.0M fee refund, ~$0.3M write‑off; matter closed .Resolved
Frontline strategyQ1: focus on pivotal ENVASARC .Outline of post‑ENVASARC path including frontline ENVA + doxorubicin and potential post‑approval Phase 3 .More explicit roadmap

Management Commentary

  • “We are on track to complete enrollment of 80 patients… this year… We expect to report updated response rate data before the end of the year, with final data anticipated mid‑2024.” — Charles Theuer, CEO .
  • “The objective response rate… was 13% by investigator review and 8.7% by blinded independent central review… The DMC recommended the study continue as planned.” .
  • “We plan to approach the FDA to discuss a BLA filing strategy as soon as we determine 9 responses.” .
  • “Our expectation is to license the platform to one or more companies and to receive revenue in the same time frame [this year]… non‑dilutive capital…” .
  • “We recorded other income of $13 million… due to the arbitration award… Net income was $10.8 million” — Scott Brown, CFO .

Q&A Highlights

  • BICR vs investigator ORR: Management noted that within the 46‑patient DMC set, some investigator responses could still become BICR‑confirmed, but emphasized the >20 additional patients enrolled post‑DMC as the key to reaching a low double‑digit BICR ORR at the next update .
  • Dependence of future development on ENVASARC: Advancement to frontline combinations is predicated on achieving the double‑digit BICR ORR primary endpoint in ENVASARC .
  • PDP licensing economics/timing: Expectation to sign license(s) and recognize associated revenue in 2023, delivering non‑dilutive capital .
  • Cash runway: Into 2024; PDP proceeds expected to extend runway further into 2024 .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q3 2023 revenue and EPS (metrics: Primary EPS Consensus Mean, Revenue Consensus Mean), but the feed returned no data due to a missing CIQ mapping for TCON. As a result, we cannot assess beats/misses versus Street for this quarter using S&P Global.
  • Given the lack of available consensus, no estimate‑based adjustments are proposed at this time.

Key Takeaways for Investors

  • ENVASARC cleared a key de‑risking event (final interim futility) with BICR‑confirmed responses and acceptable tolerability; the next ORR update before year‑end is the near‑term stock catalyst .
  • Q3 profitability was driven by non‑recurring other income; operating profile remains loss‑making absent collaboration/product revenue, underscoring reliance on milestone events and BD execution .
  • OpEx compression and the $2.0M legal fee refund support cash conservation, but the balance sheet remains tight; runway into 2024 likely needs PDP licensing or additional financing to bridge to mid‑2024 readout .
  • Management outlined a regulatory path toward a BLA upon reaching 9 BICR‑confirmed responses and a potential frontline strategy (ENVA + doxorubicin), which, if successful, would broaden the commercial opportunity beyond refractory UPS/MFS .
  • PDP licensing pulled forward to 2023 from prior “by 2024” could provide meaningful non‑dilutive funding and serves as an incremental catalyst if executed on time .
  • With no Street consensus available via our feed, share reaction is likely to hinge on trial updates (BICR ORR trajectory toward ≥11.25%) and tangible BD progress rather than earnings metrics this quarter.

Additional Detail

  • Q3 Press Release and Financials (Form 8‑K, Item 2.02; Exhibit 99.1): revenue $0, R&D $2.33M, G&A $1.26M, arbitration success fees $(2.00)M, other income $12.35M, net income $10.76M, EPS $0.29; cash and equivalents $7.76M at 9/30/23 .
  • Q2 Press Release (Form 8‑K, Item 2.02; Exhibit 99.1): collaboration revenue $9.0M (TJ4309 termination), R&D $3.49M, G&A $1.92M, arbitration success fees $4.38M, net loss $(6.29)M, EPS $(0.20); cash & equivalents $1.74M at 6/30/23; pro forma cash $8.86M after July collection .
  • Q1 Press Release (Form 8‑K, Item 2.02; Exhibit 99.1): R&D $4.97M, G&A $2.34M, net loss $(8.50)M; expected collection of ~$23M arbitration award; accrual ahead of projections; second/final interim in Q3 2023 .

All citations: .