Palvella Therapeutics Inc (PVLA) 2017 Q2 法說會逐字稿

Greetings, and welcome to the Pieris Pharmaceuticals Second Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Lance Thibault, acting Vice President of Finance for Pieris Pharmaceuticals. Thank you. You may begin.

Okay, good morning, everyone, and thanks for joining us on our second quarter 2017 earnings conference call. We announced financial results yesterday, August 9, 2017, after the market closed for the second quarter ended June 30, 2017. You can access the press release on the Investor Relations -- on our Investor Relations website at www.pieris.com.

And before we begin the following safe harbor comments and before -- excuse me -- before we begin to review our financial results and business highlights, the following safe harbor comments under those provisions -- under the Private Securities Litigation Reform Act of 1995, I'd like to caution that comments made during this conference call by management may contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of the operations of Pieris including statements relating to the timing and progress of our clinical and preclinical trials.

Actual results or events may differ materially from results or events discussed in the forward-looking statements. Factors that might cause such difference including those set forth from time to time in the company's filings with the SEC, including without limitation, the company's Forms 10-K, 10-Q and 8-K.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 10, 2017. Pieris undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that, I'll hand the call over to Stephen Yoder, President and CEO.

Thank you, Lance, and thanks to everyone today for joining us for our 2017 second quarter earnings call. With me on this call is Dr. Lou Matis, Senior Vice President and Chief Development Officer, who will join me in answering questions that you may have on our pipeline and related data as well as our development strategy.

It's also my privilege to introduce to you for the first time our new Chief Financial Officer, Dr. Allan Reine, who some of you may know given his background in the institutional fund [Senten]. Allan brings significant financial experience to his new role, including a detailed knowledge of and extensive relationships with all the critical constituencies of the financial community, not to mention his deep understanding of the therapeutic landscape given his training as a medical doctor.

For purpose of this call, Allan will be in listen-only mode given his very recent appointment at Pieris. But he will be walking you through our financials on our next quarterly update. Allan, welcome to the team.

Thank you, Steve. I was invested in the company since it become public a few years ago and have watched this management team execute an ambitious strategic plan. I'm joining Pieris at a very exciting stage following 2 recent strategic (inaudible) partnerships, the IND announced today for PRS-343 and a robust pipeline of preclinical candidates to further exploit the anticalin platform.

As I become more immersed with the company, I look forward to contributing and sharing a strong invested rationale in Pieris with many of you. I'm honored to have the opportunity to work with such a strong management team and look forward to collaborating with Steve, Lou, Claude and the rest of the Pieris employees in both Boston and Munich.

Thanks, Allan. Before summarizing our progress in the second quarter as well as some more recent highlights, I'd like to remind everyone that at Pieris we're leveraging our proprietary discovery platform to pioneer the development of next-generation therapeutics called anticalin proteins. Which have unique advantages over traditional antibody therapies including truly novel multi-specific formats, which we're deploying particularly in the field of immuno-oncology, as well as the inhalation potential of the drug class, which we're exploiting to address respiratory diseases.

Our core R&D strategy involves addressing validated targets in novel ways using unique features of our proprietary anticalin protein drug class. While our diversified business model involves developing a diversified pipeline comprised of a proprietary, wholly owned product pipeline as well as a portfolio of programs co-developed via strategic partnerships spanning these 2 core immunology related therapeutic areas.

The first half of 2017 was a truly transformative period for the company with the signing of 2 major strategic partnerships that have enabled us to substantially expand our financial runway through key clinical-stage inflection points while accelerating investment into our proprietary pipeline through the nondiluted funding afforded by such partnerships. And bringing us closer to our ultimate goal of becoming a fully integrated commercial-stage biopharmaceutical company marketing transformative therapeutics in the U.S.A.

Turning to our 2017 partnerships that advance this corporate strategy. In January, we entered into a global co-development and co-commercialization partnership in immuno-oncology with Servier, France's largest privately held pharmaceutical company. Then in May, we entered into a global co-development and co-commercializational [alliance] in the area of respiratory diseases with AstraZeneca built around our lead respiratory program PRS-060.

And in between, we entered into an option agreement that provides ASKA Pharmaceutical, a commercial stage Japan based pharmaceuticals company, an exclusive option to develop and commercialize PRS-080 in Japan and certain other Asian territories.

We believe these partnerships are accelerating our ability to become a fully integrated biotechnology company, while also allowing us to systematically partner valuable assets that fall outside our core therapeutic focus area like PRS-080. Our partnerships also allow us to fund our wholly owned programs through major inflection points.

Altogether, the success based anticipated milestones from these partnerships, including those from our partnerships with Roche, Daiichi Sankyo and Sanofi, could total more than $4.5 billion as well as royalties on potential future sales.

I'd like to now summarize the progress made during the second quarter across each of our core therapeutic areas. As well as summarize our collaborations in greater detail. And I'll start with immuno-oncology.

As you know, key therapeutic focus is the area of multi-specific protein therapies for immuno-oncology, particularly tumor targeted T-cell agonists. Our lead and wholly owned program PRS-343 is a bispecific fusion protein made up of 2 parts: a monoclonal antibody against HER2, which is a clinically validated target on tumor cell surfaces; and an anticalin protein directed against the self-surface protein called CD137. also known as 4-1BB, and which is expressed on the surface of tumor specific T-cells within the tumor microenvironment.

We believe that one advantage of this bispecific approach is that we can activate T-cells within the tumor microenvironment and direct their activity to HER-2 positive tumor cells for affective tumor killing without unwanted T-cell activation in healthy tissues that could lead to systemic toxicity seen with conventional antibody approaches.

During the second quarter, the company filed an IND for PRS-343 and engaged in discussions with FDA to finalize the clinical protocol for our multi-ascending dose Phase I trial in HER2-positive solid tumors.

Following FDA's request to modify the dose escalation portion of the protocol, we filed a response to address FDA's request. And we're pleased to report that, following this response, FDA has provided full approval of our IND. Startup activities with initial clinical trial sites have been underway since the IND filing and they continue at a diligent pace and we anticipate to soon dose the first patient.

Our global immuno-oncology partnership with Servier is key to our IO strategy and covers the development of 5 committed bispecific therapeutic programs and may be extended to up to 8 programs. This partnership features our dual check point inhibitor PRS-332, which is a novel bispecific comprised of an anti-PD-1 antibody genetically linked to an anticalin protein directed against an as yet undisclosed check point target synergistic with PD-1 blockade.

PRS-332 continues to advance through preclinical studies and we're planning to nominate a bispecific development candidate in the second half of 2017 together with Servier. Beyond PRS-332, we're pleased to have recently initiated activities for 2 additional bispecific programs within the Servier collaborative pipeline.

And now turning beyond both PRS-343, and PRS-332 in connection with PRS' efforts to develop a broad pipeline of multi-specific anticalin based proteins, during the second quarter, we entered into a license and transfer agreement with Sichuan Kelun Bio-Tech Pharmaceutical, also known as Kelun, where Kelun granted to Pieris a nonexclusive worldwide license to make, develop, manufacture and commercialize bi- and multi-specific fusion proteins that include a monoclonal antibody developed by Kelun specific for an undisclosed target and one or more anticalin proteins.

We believe this type of transaction will be value creating and it parallels other antibody-based IP transactions we have entered into in the past. Such as with Enumeral Biomedical.

Before concluding my update on our IO efforts, I note that we also advanced our collaboration with Roche, which was signed in December of 2015 and where Pieris is developing anticalin proteins specific for different epitopes on an undisclosed immune checkpoint target.

We have amended our collaboration agreement with Roche to permit an expansion of the research term given both the positive progress we've made in this collaboration and the complexities that this program entails. Under that amendment, the initial research term will continue until January 2018, and Roche has the option to extend the term through August of 2018.

Finally, I'd like to discuss our most advanced program, PRS-080, which is a highly potent inhibitor of hepcidin, a key negative regulator of iron metabolism. Hepcidin is up regulated in states of chronic inflammation, such as chronic kidney disease, effectively tracking iron in the body's iron storage cells. And this, in turn, causes what it called functional iron deficiency anemia.

PRS-080, as a reminder, represents a potential first-in-class therapeutic for this disease. Pieris completed a Phase 1b single ascending dose study in anemic dialysis dependent chronic kidney diseases patients and presented these data in June at the 54th European Renal Association conference in Spain.

In this multi-center placebo controlled double-blind study 24 dialysis dependent stage V chronic kidney disease patients with anemia were treated with a single ascending dose of PRS-080 in 3 cohorts at either 2, 4 or 8 milligrams per kilogram body weight. Intravenous administration of PRS-080 was both safe and well tolerated at all doses and resulted in a profound decrease in free hepcidin within 1 hour after infusion followed by robust mobilization of CMR iron with [dose] proportional increases in both the level and the duration of CMR iron concentration in transfer and saturation following treatment.

And during the second quarter, Pieris also filed a separate clinical trial applications with the German and the Czech Republic regulatory authorities to conduct a multidose randomized placebo controlled Phase IIa trial for PRS-080 in functional iron deficient anemia patients. And pending timely regulatory approvals, we expect to enroll patients beginning in the current quarter.

Completion of this trial importantly will trigger our partner in Japan, ASKA Pharmaceutical, to decide whether to exercise the development and commercialization option of PRS-080 in Japan and certain other Asian markets against the payment of an undisclosed option exercise fee. Our strategy for subsequent development of this molecule in other territories will involve out licensing assuming positive Phase IIa data.

So in summary, it was a terrific quarter for Pieris and something you may have seen. Pieris was added to the Russell 2000 and Russell 3000 indices and we believe this addition is but one example of Pieris' successful quarter and exciting progress to date.

And turning lastly to respiratory. I'd like to provide you with an update on our quarterly progress in our partnership, particularly with AstraZeneca. As mentioned, in May of this year, we signed a transformative global strategic partnership with Astra anchored around our (inaudible) program, PRS-060, and which we expect will allow us to leverage Astra's established expertise in complex formulations and inhaler devices for respiratory diseases, as well as their strong global commercial capabilities. The collaboration covers a total of 5 programs including PRS-060.

PRS-060, an anticalin protein that is differentiated from standard of care on several important levels, including its inhaled mode of delivery and its mechanism of action, involving the inhibition of inflammatory effects of 2 key cytokines, IL-4 and IL-13. PRS-060 works by blocking the ability of these cytokines to activate a clinically validated receptor on the surface of respiratory cells called IL-4 receptor alpha.

PRS-060 thus represents a first-in-class inhaled treatment for uncontrolled asthma that is based on IL-4 receptor blockade. And PRS-060 is currently in IND enabling studies and we remain on track to initiate a first in human clinical trial for the fourth quarter of 2017. As trial sponsor, Pieris plans to dose healthy subjects in the fourth quarter of 2017 in a single-ascending dose trial that will be funded by AstraZeneca followed by a multi-ascending dose trial under a clinical trial notification to the therapeutic goods administration in Australia.

The dosing of the first subject would trigger a milestone payment of $12.5 million by AstraZeneca to Pieris which comes in addition to the $45 million in upfront payment Pieris has already received. Following the first proof of concept Phase IIa trial in asthma patients, which will also be funded by Astra, Pieris may then exercise an option to co-develop and separately to co-commercialize this program in the U.S.

Exercising this co-development option would entitle Pieris to a larger royalty up to the high teens or a gross margin share of future sales depending on the level of co-development by Pieris. The AstraZeneca alliance additionally includes these 4, yet undisclosed novel programs, Pieris will be responsible for the initial discovery of novel in-human candidates for these programs after which AstraZeneca will take the lead on continued development.

Pieris has an option to co-develop with up to 2 of these programs at a predefined preclinical stage which would entitle Pieris to a higher level of royalties or a gross margin share of future sales depending on the level of co-development investments. Pieris will also separately have the option to co-commercialize these programs in the U.S.

AstraZeneca will be responsible for the development and worldwide commercialization of any programs for which Pieris does not exercise its option to co-develop and co-commercialize.

So this concludes my prepared remarks, and I would like to hand back over to Lance to guide you through our financials for the second quarter.

Okay. Thank you, Steve. Good morning again everyone. From the top, with revenue, which we recognized $1.8 million for the 3 months ended June 30, 2017. This compares to the $1.1 million in revenue in the 3 months ended June 30, 2016. Year-to-date revenue from June 30, 2017, was $3.2 million, which compares to $2.3 million for the same period last year.

A roughly $900,000 increase in the first half of 2017 over the first half of 2016 is on account of the beginnings of revenue recognition, under our collaboration with Servier, which commenced in January 2017 and started recognizing revenue under our collaboration with AstraZeneca which commenced in May of 2017. These were offset slightly by lower revenues and the amortization of our upfront payments under our collaboration with Roche.

Research and development expenses were $5.4 million and $10.8 million for the 3- and 6-month periods ended June 30, 2017. These compared to $4.5 million and $8.2 million for the 3- and 6-month periods ended June 30, 2016. The company's increases in research and development expenses reflect [that this has] really crossed our pipeline as a program that Steve has indicated in his prior comments.

Specifically for the first half of 2017 as compared to the first half of 2016, expenses in our PRS-300 series of program is up about $400,000, on PRS-060 it's $900,000, and on PRS-080 we've increased approximately $300,000 period-on-period.

Further unallocated costs for us which include some personnel expenses, general ad supplies, license fees and outside services, these have increased as well period-on-period approximately $600,000.

In general and administrative, these expenses were $4.3 million and $8.3 million for the 3- and 6-month periods ended June 30, 2017. These compare to $2.4 million and $4.3 million for the 3- and 6-month periods ended -- corresponding period ended in 2016. The increase in the [2017] period as compared to the corresponding periods in 2016 is largely attributable to a [loss of] $1.8 million in transaction fees connected to the successful close of our license and collaboration agreement with AstraZeneca.

Of a more recurring nature recruiting and personnel costs related -- and personnel related cost are increasing as we continue to build the organization. And we find ourselves increasingly in need of outside professional services including for IP, corporate legal work, auditing, finance, communications and other facets of the business.

Bottom line our net loss was $10.1 million or $0.23 per share for the 3-month period ended June 30, 2017. This compares to a net loss of $5.9 million and $0.14 per share for the 3-months period ended June 30, 2016. And for the first half of 2017, our net loss was $18.1 million or $0.42 per share compared to 10. -- $10 million and $0.25 per share for the 6 month period ended June 30, 2016.

Quickly turning to the balance sheet. Our cash position as of June 30, 2017, totaled $50.3 million and a net increase of nearly $21 million compared to this $29.4 million, we had this as of the end of last year 2016. The increase in our cash reserves is principally attributed to the EUR 30 million of upfront payment that we received from Servier and a $2.8 million option payment received from ASKA.

On the spend side cash and operating expenses for R&D and G&A activities amounted to approximately $15.2 million year-to-date for the first half of the year. To all that, let me add we received $45 million of upfront payments from AstraZeneca last month, July. And with those highlights, I'll turn the call back over to you Steve for any concluding remarks.

Thanks, Lance. We're pleased to have built on in the second quarter on the momentum with which we began this year having forged 2 crucial partnerships in the first quarter with Servier and ASKA as well as now the transformative respiratory disease focused alliance with AstraZeneca in the second quarter now poised to drive significant value creation through partnership in our key focus areas of immuno-oncology and respiratory disease. And the recent acceptance by FDA of our IND filing for PRS-343 will allow additional value creation for our wholly owned program with the expected near-term initiation of patient dosing.

We continue to operate from a position of financial strength, altogether our partnerships have generated approximately $80 million in cash flow to date and could bring us more than $4.5 billion in potential milestone payments, in addition to royalties of future product sales as well as several opportunities for direct commercial sales in the U.S.

Our strong balance sheet enables us to aggressively invest in both our proprietary and partnered programs, while providing significant cash runway to reach several clinical stage value inflection points. Thank you for joining us today and for your continued interest and support. We would now like to open the call to your questions. Melissa?

(Operator Instructions) Our first question comes from the line of Hartaj Singh with Oppenheimer.

Just a couple of very quick questions. The work you're doing on the IND, where you're going to be -- sort of got approval from the FDA on 343, you're going ahead and recruiting patients from solid tumor H2, HER-2 positive patients.

Can you just detail sort of how will you screen for these patients. What's the range of solid tumors in HER2 that you're looking for? And any additional requirements that IRBs might have in terms of this Phase I. And I've just got a quick housekeeping question after that.

Okay. Thanks, Hartaj, for the questions. And I think as it relates to the PRS-343 clinical trial strategy I'm going to hand it over to Lou Matis to answer that question.

Yes, sure. Thank you, Steve. With respect to patient eligibility and the screening for HER2, it obviously depends on the tumor type. So the trial during the dose escalation phase is open to all patients with demonstrated HER2-positive tumors. That includes of course tumors that are well known in the HER2 space such as breast cancer, gastroesophageal cancer and bladder cancer. But addition the whole range of additional HER2-positive tumors that have been discovered, for example, through the MY Pathway trial.

And the screening for of course in those indications where there are designated assays that need to be (inaudible) certified for HER2 positivity at the 3-plus level, such as gastric cancer and breast cancer of course. Those patients have to be HercepTest or [equipment clear] certified positive for HER2. In general, we will allow the sites to use their own standard HER2 assays, but they have to be clearly associated with a 3 plus positivity in the other tumor types as well. So all comers and 3 plus HER2 positivity.

Great. So and then just a quick follow up. You had mentioned that you got the one-off payment in operating expenditures. And then you're increasing as you're hiring more people. I mean you've just got a lot more activity going on which makes complete sense.

Is there any kind of sense of a trajectory going forward or better to wait till sort of happens on board for the third quarter call or going to the next year. But just any thoughts there even if just general color would be helpful, Steve.

Hartaj, and again, as it relates to maybe the cash reach. I think, the flexibility we have now is to make strategic investment decisions based on data. Particularly data that we hope will emerge for PRS-343 across 2018. So obviously, the more we invest into that program, the more that would affect cash reach.

And I think, the good news is that we're going to be data driven and make investments that make sense. So we have plenty of cash to get us through multiple clinical inflection points for multiple programs. And I think what we can do is as data emerge from PRS-343, whether that's next quarter or later in the year or early next year, we can provide more color on that. But right now we're pretty content with the balance sheet and our investment priorities on our pipeline.

Our next question comes from the line of Mike King with JMP Securities.

Steve, I was just wondering if you could talk a bit more about the dose-escalation process for 343. Can you maybe tell us a little bit about the number of patients per cohort or anything about how the doses are intended to be advanced? Apologies if this was asked but my call had dropped briefly before.

Thanks, Mike, for the question. And it was not asked yet. And like the question on 343 from Hartaj, I'm happy to turn this one over to Lou to answer as well.

Sure, Steve. So the trial will begin, the good news, is with an accelerated titration design in the initial dose escalation cohort. With one patient per cohort enrolled at each dose until a patient experiences a grade 2 treatment related adverse event in the first cycle of therapy. That occurs we'll initiate a transition to modify 3 plus 3 design.

At the very highest dose levels, the 4 highest dose levels, we will implement a 3 plus 3 design and regardless even in the absence of having observed any AEs. I have to say we're really very pleased to have approval for the accelerated titration design because it does give us the potential to accelerate the timeline to patients receiving doses that could produce anti-tumor effects.

Okay. And can we talk about -- are you starting a sort of 10ths of milligrams and then going into multiple milligrams and sort of a standard dose escalation process?

Yes, it will be a standard dose escalation. As Steve mentioned during his presentation earlier, the FDA did ask us to modify the dose escalation protocol to the extent that they wanted us to begin at somewhat lower doses because of the potency of our drug. So while we're very gratified by the potency of the drug, we agree with them and so we're going start at somewhat lower doses, but it's going to be standard dose escalation from there.

And it's really -- it's going to be a 3 week DLT, so that's good as well. So once we have a patient dosed there's a given dose level and, after 3 weeks, there's no toxicity we can then move on to the next dose. So that also allows us to accelerate the progress towards the higher and potentially efficacious doses.

Okay, great. And then I was encouraged by Steve's formal comments about the Enumeral relationship. Steve, I think you know, I get my geek on with their platform. I'm just wondering can you talk about when we may see something nominated in the Pieris' pipeline that may have emerged from your collaboration with them?

Sure, thanks, Mike. And I think I mentioned the Enumeral relationship in the context of our now license agreement with Kelun biopharma, where we with Kelun in licensed IP on a novel antibody to further build on novel multi-specifics. But the Enumeral relationship entails us having in licensed IP on their PD-1 antibodies where we genetically link that to different anticalins targeting synergistic checkpoints with PD-1.

And for IP reasons and for strategic reasons under partnership with Servier, we've not yet disclosed what that other checkpoint engaging anticalin is. And we're not yet certain when we are going to disclose publicly when that is.

We remain on track to nominate what we call development candidate by the end of the year. And so that really means we're comfortable with the amino acid sequence of the fusion protein, how it behaves both from a pharmacodynamic prospective and a pharmacokinetic manufacture ability perspective. And the power of our platform is we get to nominate or to interrogate several different permutations of the same building blocks.

So that's the process we're in. And so we want to make sure we have the best possible molecule to move forward with a truly best-in-class approach here. And that's important for us because we didn't want to just develop another PD 1 molecule. So it's progressing. And we're excited about this program. And it is the most advanced program within our partnership with Servier.

(Operator Instructions) Our next question comes from the line of Joe Pantginis with Rodman & Renshaw.

Also wanted to focus on the 343 study, if you don't mind, with the second part being more forward-looking. First, with regard to looking beyond initial tumor responses with the efficacy, what kinds of markers would you be looking at in the study especially with regard to T-Cell activation?

I'll let -- thanks, Joe, for the question and we will let Lou answer that one again.

That's a good question, and obviously this is a major focus of our trial. So we are in this trial going to be looking at biomarkers very thoroughly and aggressively. We have built into the protocol longitudinal biopsies creating in post therapy. In the tumor microenvironment we'll be looking at both immunohistochemistry as well as gene expression analysis, look for evidence of response.

So for example, just as one obvious marker, given the potency of our drug in inducing [CTA] T-Cell responses in tumor microenvironment in our in vivo preclinical studies, we'll be looking at similar potential effective of drug in the tumor microenvironment of patients with HER2-positive tumors.

And we'll also be looking in peripheral blood in serial fashion as well. So this is actually a major work stream right now and we really do believe that the biomarker studies will actually help us in selecting the recommended Phase II dose as well. So it's a major part of our trial. Again both biopsies -- serial biopsies as well as peripheral blood analysis.

That's really helpful. You're going to get a lot of valuable information from that. And I guess the real forward-looking part of my question for the study is -- based on the fact that you're going to get a lot of data from it -- is from a business development standpoint in having multiple tumor types in this as well. Do you feel that this study alone could provide the impetus for significant BD activities or are you sort of in a wait and see mode?

Yes. I think from a BD and a corporate development strategy perspective, PRS-343 to us represents potentially the largest value driving asset in the company. And as part of our strategy of forward integrating based on data and ultimately marketing and selling therapies in the United States, that's our plan.

And if we choose to maybe partner in a way that accelerates that we'll explore that, but in the meantime we're content to keep this to ourselves. Because we have the capital, I think we have the plan, and we have the network of people internally and through a great advisory network to move this forward on our own through proof of concept. And from there we are going to be data-driven.

Thank you. Mr. Yoder, there are no further questions at this time. I'll turn the floor back to you for final comments.

Thanks, Melissa. And again, thanks to all of you for joining us today for your attention and for your continued support of Pieris Pharmaceuticals. We certainly look forward to keeping you updated on our progress. Thanks again for joining the call and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.