TCON stock is moving in pre-market trading on December 20, 2019, after the company announced a deal with a Chinese firm.

TRACON Pharmaceuticals (NASDAQ:TCON), a clinical stage biopharmaceutical company focused on the development and commercialization of novel targeted therapeutics for cancer, announced today that it has signed a collaborative partnership agreement with 3D Medicines (Beijing) Co., Ltd., a China-based biopharmaceutical company focused on cancer precision medical treatment, and Jiangsu Alphamab Biopharmaceuticals Co., Ltd., a wholly-owned subsidiary of Alphamab Oncology (HKEX: 9966) and a China-based clinical stage biopharmaceutical company primarily engaging in research and development, manufacturing and commercialization of biologics of oncology, for the development of envafolimab, also known as KN035, a PD-L1 single-domain antibody administered by subcutaneous injection, for development in soft tissue sarcoma in North America.

TRACON and 3D Medicines and Jiangsu Alphamab entered into a product development collaboration whereby TRACON will be responsible for the clinical development and commercialization of envafolimab in soft tissue sarcoma in North America, with the majority of the development activities expected to occur in the U.S. TRACON will bear the costs of clinical trials and 3D Medicines and Jiangsu Alphamab will supply envafolimab at pre-negotiated prices.

TRACON will be responsible for commercializing envafolimab for sarcoma in North America, except in certain circumstances involving the approval of envafolimab for other indications in North America, in which case TRACON has the option to co-market envafolimab for sarcoma in North America.

If TRACON has responsibility for commercialization under the Collaboration Agreement, it will owe 3D Medicines and Jiangsu Alphamab escalating double digit royalties on net sales of envafolimab for sarcoma in North America ranging from the teens to mid-double digits, which amounts shall be split between 3D Medicines and Jiangsu Alphamab as negotiated. If 3D Medicines and Jiangsu Alphamab have responsibility for commercialization under the Collaboration Agreement, TRACON will be entitled to (a) escalating double digit royalties on net sales of envafolimab for sarcoma in North America ranging from the teens to mid-double digits if TRACON has chosen to not co-market envafolimab in sarcoma or (b) a 50% royalty on net sales of envafolimab for sarcoma in North America if TRACON has chosen to co-market envafolimab in sarcoma.

At the American Society of Clinical Oncology 2019 meeting, data were presented from the SARC 028 clinical study demonstrating that the PD-1 inhibitor Keytruda® (pembrolizumab) achieved a 23% response rate in 40 patients with UPS, irrespective of PD-L1 expression in the tumor specimen. Additional data published subsequently indicate that Keytruda achieved more than a 50% objective response rate in cutaneous angiosarcoma. In a separate study, the PD-L1 inhibitor Tecentriq® (atezolizumab) achieved a more than 40% objective response rate in alveolar soft part sarcoma.

“Given the activity of other PD-1 and PD-L1 inhibitors in sarcoma, we believe a registration enabling study of envafolimab in the sarcoma subtype of UPS will be meaningful to patients and providers, and is strategically aligned with TRACON’s mission to rapidly develop and commercialize drugs targeting unmet need indications in the U.S.,” said Charles Theuer, M.D., Ph.D., President and CEO of TRACON. “We expect to discuss our plan of initiating a pivotal trial of envafolimab in UPS with the U.S. FDA in early 2020. Our ultimate goal is to enable a biomarker directed approach for treatment with envafolimab in patients with multiple types of soft tissue sarcoma.”

UPS accounts for 10% of new cases of soft tissue sarcoma in the United States and TRACON estimates that it represents a potential market of $200M without considering a price premium to the reference PD-1 inhibitors Opdivo® (nivolumb) and Keytruda® (pembrolizumab). Approval in soft tissue sarcoma subtypes other than UPS could increase the market opportunity significantly.

“We believe that collaboration with TRACON will give cancer patients an option for a subcutaneous injection in the United States. In earlier clinical trials, the safety and efficacy profiles of envafolimab are comparable to other PD-1/PD-L1 antibodies in the market,” said John Gong, CEO of 3D Medicines.

Dr. Ting Xu, Chairman and CEO of Alphamab Oncology, added, “The collaboration is an important part of envafolimab’s global development strategy. As the most advanced single domain antibody in IO with the advantage of a subcutaneous dosage, we are confident it will bring a valuable option for cancer patients.”

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