Palvella Therapeutics Inc (PVLA) 2017 Q3 法說會逐字稿

Greetings, and welcome to the Pieris Pharmaceuticals Third Quarter 2017 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Allan Reine. Please go ahead, sir.

Thanks, Kevin. Good morning, everyone, and thank you for joining us for our third quarter 2017 earnings conference call. On the call today, we have Steve Yoder, our President and CEO; and Lou Matis, SVP and Chief Development Officer, who will be available for Q&A.

We announced financial results yesterday, November 8, 2017 after the market closed for the third quarter ended September 30, 2017. You can access the press release on the Investor Relations page of our website at www.pieris.com.

Before we begin to review financial results and business highlights, in compliance with the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, I'd like to caution that comments made during this call by management may contain forward-looking statements that involve risks and uncertainties regarding the operations and future results 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 differences include those set forth from time to time in the company's filings with the SEC, including without limitation, the company's Form 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, November 9, 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 will hand the call over to Stephen.

Thank you, Allan, and thanks to everyone today for joining us for our 2017 third quarter earnings call. At Pieris Pharmaceuticals, we continue to advance our proprietary class with next-generation therapeutics called anticalin proteins, which have unique advantages over traditional antibody therapies, including truly novel multi-specifics 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 locally in the lung. We have broad intellectual property and protein engineering know-how, providing us both the freedom to operate and a high barrier to entry.

Our core R&D strategy involves addressing known targets in new ways due to these unique features of our drug class, allowing us to take relatively lower target risk in the first-in-class monoclonal antibody approaches. Further, our diversified business model, which involves advancing a mixed proprietary and codeveloped portfolio of drug candidates in multiple immunology-related therapeutic areas, is another effective mechanism for managing scientific and balance sheet risk.

The third quarter of this year marks a very exciting milestone for the company within our fully proprietary pipeline as dosing commenced for PRS-343, our lead immuno-oncology asset. PRS-343 is, to our knowledge, the first immuno-oncology bispecific costimulatory T-cell agonist to enter clinical development, which is a real testament to not only our protein engineering expertise, but also our scientific leadership in a very complex area of biology.

This combined protein engineering and biology expertise allowed us to advance PRS-343 from the idea stage to the clinic in just over 3 years, which we believe is proving to be a repeatable paradigm at Pieris. To this end, we are developing an emerging pipeline of early-stage immuno-oncology bi and multi-specifics that we believe can repeat the paradigm that PRS-343 represents.

2017 has been our most active year on the partnering front. The company signed 3 deals in the first half of the year, receiving approximately $80 million in upfront licensing fees and has now amassed a total partnership deal potential of USD 4.5 billion in milestone payments as well as royalties on future sales, not to mention several opportunities for direct commercialization in the United States.

In January, we entered into a global codevelopment and cocommercialization partnership with Servier in immuno-oncology. In May, we entered into a global codevelopment and cocommercialization deal with AstraZeneca in the area of respiratory diseases, which is built around our lead inhaled anticalin protein, PRS-060.

In between these 2 anchor alliances, we signed an option agreement with ASKA Pharmaceutical to commercialize PRS-080, our anemia program, in Japan and other Asian territories as we continue to explore thoughtful ways to monetize this asset as it becomes noncore and is undergoing the final clinical trial that we anticipate sponsoring before a fuller divestiture of that asset.

I will now go into more detail on PRS-343, the focus on our anchor partnerships in both immuno-oncology and respiratory disease, followed by a discussion on our noncore anemia program, PRS-080.

Looking first to immuno-oncology. This is a key therapeutic focus for us, particularly multi-specific protein therapies in the tumor targeted T-cell agonist space. Our lead and wholly owned program, PRS-343, is a bispecific fusion protein made up of 2 parts. First, it's an anticalin protein directed against the cell surface protein called CD137, also known as 4-1BB, which is expressed on the surface of tumor-specific T-cells within the micro environment; and second is a monoclonal antibody against HER2. 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 HER2-positive tumor cells for effective tumor killing without having the unwanted T-cell activation in healthy tissues that could lead to systemic toxicity seen previously with conventional 4-1BB-targeted antibodies.

Targeted tumors. We'll focus on those that are HER2-positive and where conventional HER2 interventions have failed to demonstrate or no longer demonstrate efficacy. Beyond its potential as a monotherapy, our drug candidate, we believe, will be synergistic with other immuno-oncology drugs, mainly checkpoint inhibitors, and combinations will focus particularly in that area.

At the end of September, we announced that the first patient was dosed in our Phase I multi-ascending dose trial of PRS-343 in HER2-positive solid tumors. As a reminder, initial cohorts are composed of a single patient evaluated over a 21-day period for dose-limiting toxicities. We hope to provide initial safety and efficacy data next year from the trial and to initiate expansion cohorts evaluating PRS-343 in HER2 cancers with unmet needs such as metastatic gastric and bladder cancer patients.

Beyond PRS-343, our global immuno-oncology partnership with Servier is a key to our IO strategy and covers the development of 5 committed bispecific therapeutic programs, yet may be expanded to up to 8 programs in total. This partnership features our dual checkpoint inhibitor, PRS-332, which is a novel bispecific protein comprised of an anti-PD-1 antibody genetically linked to an anticalin protein directed against an as-yet-undisclosed checkpoint target which we believe is synergistic with PD-1 blockade.

Beyond PRS-332, we are continuing preclinical evaluation of 2 additional bispecific programs within the Servier collaboration. We expect to provide more details regarding these programs next year at one or more medical conferences.

Looking beyond our immuno-oncology efforts, I would like to now provide you with an update on our lead respiratory program, PRS-060. As indicated earlier, in May of this year, we signed a transformative global strategic partnership with AstraZeneca anchored around this program. This partnership allows us to leverage Astra's established expertise in complex inhalation formulations and devices for respiratory diseases as well as their global commercialization capabilities as a leader in this space. The collaboration covers up to 5 programs, including PRS-060, with codevelopment and separate cocommercialization opportunities for both PRS-060 and multiple additional programs within this alliance. PRS-060 itself is an anticalin that blocks IL-4 receptor alpha, thereby inhibiting the activity of 2 key cytokines, both IL-4 and IL-13. This is similar to Regeneron's and Sanofi's drug, dupilumab, which is also an IL-4 receptor alpha inhibitor, but is dosed systemically via subcutaneous injection, unlike PRS-060, which is targeting the disease locally via direct inhalation into the lung. Phase III results for dupilumab were released in September of this year and demonstrated, again, a robust effect in moderate to severe asthma patients with elevated levels of eosinophils. We believe these data validate the goal of blocking IL-4 and IL-13 via the IL-4 receptor alpha in the pathogenesis of overactive airway disease and is an example of our strategy of addressing known targets in new ways, namely deriving benefits of a localized therapy on a target highly validated in the clinic with a systemic therapy. As far as future milestones are concerned, we remain on track to initiate a first-in-human clinical trial for PRS-060 before year-end. As trial sponsor, we plan to dose healthy subjects in a clinical trial which will be funded by AstraZeneca.

The dosing of the first subject would trigger a milestone payment of USD 12.5 million by AstraZeneca, which comes in addition to the $45 million upfront payment Pieris already received. Following the successful completion of Phase I, Pieris would hand the program over to AstraZeneca, who would be responsible for executing a Phase IIa trial in collaboration with Pieris.

And looking farther ahead, following the first proof-of-concept Phase IIa trial in asthma patients, again, to be funded and sponsored by AstraZeneca, Pieris may exercise an option to codevelop and, separately, to cocommercialize this program in the United States. Exercising this codevelopment option will entitle Pieris to a larger royalty, up to the high teens, or a gross margin share of future sales, depending on the level of codevelopment investment by Pieris. We look forward to providing an update on PRS-060 and other programs within this alliance at a future date.

Finally, I'd like to discuss PRS-080, which is a highly potent inhibitor of hepcidin, a key negative regulator of iron metabolism. And as a reminder, hepcidin is upregulated in states of chronic inflammation such as chronic kidney disease, effectively trapping iron in the body's iron storage cells. And this in turn causes what is called functional iron deficient, or FID, anemia. PRS-080 represents a potential first-in-class therapeutic for this disease.

During the fourth quarter, Pieris initiated enrollment of a randomized placebo-controlled Phase IIa trial for PRS-080 in FID anemia. This Phase IIa trial will enroll 2 cohorts of FID anemic patients at 4 milligrams per kilogram and 8 milligrams per kilogram by body weight. Patients who meet enrollment criteria will receive 5 weekly infusions of therapy, with one objective of the trial being to assess whether PRS-080 can elevate hemoglobin levels after 4 weeks of exposure to therapy.

Completion of this trial will trigger our partner in Japan, ASKA Pharmaceutical, to exercise its option to codevelop and cocommercialize PRS-080 in Japan and certain other Asian markets, subject to the payment of an undisclosed option fee. Our strategy for this molecule in other territories will involve out-licensing, assuming positive Phase IIa data, as we focus our resources on developing our IO and respiratory pipelines as an increasingly immunology-focused organization.

This concludes my prepared remarks. And I would now like to hand back over to Allan to guide you through our financial results for the third quarter of 2017.

Thank you, Steve, and good morning, again, everyone. We recognized revenue of $3.9 million for the 3 months ended September 30, 2017 as compared with $0.8 million in revenue in the 3 months ended September 30, 2016. For the 9 months ended September 30, 2017, we recognized revenue of $7.1 million as compared to $3.1 million in revenue for the 9 months ended September 30, 2016. This increase in revenue for the 3 and 9 months is due to revenue recognized with regard to our collaboration agreements with both Servier and AstraZeneca signed in the first half of 2017.

Research and development expenses were $6.3 million and $17 million for the 3- and 9-month periods ended September 30, 2017, respectively. Research and development expenses in the corresponding 2016 periods were $4.6 million and $12.8 million, respectively. This increase in research and development expenses reflect advancement across our pipeline of programs as well as preparation and advancement of clinical activities.

General and administrative expenses were $2.9 million and $11.2 million for the 3- and 9-month periods ending September 30, 2017. General and administrative expenses in the corresponding 2016 period were $2.3 million and $6.7 million, respectively. The increase in the 2017 periods as compared to the corresponding periods in 2016 is largely attributable to $1.8 million in transaction fees for the successful close of our license and collaboration agreement with AstraZeneca.

Recruiting and personnel-related costs are increasing as we continue to build the organization and require increased outside professional services, including for intellectual property, corporate legal work, auditing, finance, communications and in other facets of the business. The net loss for the third quarter of 2017 was $7.1 million or $0.16 per share for the quarter ended September 30, 2016 (sic) [2017], compared to a net loss of $6.2 million or $0.14 per share for the quarter ended September 30, 2016. The net loss for the 9 months ended September 30, 2017 was $25.1 million or $0.58 per share compared to a net loss of $16.2 million or $0.39 per share for the corresponding 2016 period.

Now turning to the balance sheet. Total cash and cash equivalents as of the third quarter ended September 30, 2017 totaled $89.9 million as compared to $29.4 million as of December 31, 2016. This increase in cash was driven primarily by the upfront payments received from Servier and AstraZeneca and the option payment received from ASKA, offset principally by $29 million of operating cash expenditures during the year.

With that, I will turn the call back over to Steve.

Thanks, Allan. In summary, during the third quarter, the company continued its transition to a more advanced clinical entity and we expect to have 3 products in various stages of clinical development by year-end. In addition, we continue to progress multiple earlier-stage programs from both our proprietary pipeline and our numerous collaborations. We look forward to providing additional details on these programs next year as they advance closer to the clinic.

Thank you for joining us on the call today. We would now like to open the call for your questions.

(Operator Instructions) Our first question today is coming from Hartaj Singh from Oppenheimer & Co.

A couple of questions. One is, Steve, just wanted to ask you on PRS-343, the design on clinicaltrials.gov, just looking it over and I know you gave some color on it on the call already. But when you're looking for the MTD, I guess, you're dosing at 3-week dosing, and then you might switch to a 2-week or a 4-week. I guess, just walk us through the steps of how many patients you'll need to get to that comfort level, with a 3-week MTD, is that -- if you don't get there, then how do you switch over to a 2-week versus 4-week. And then finally, how do you -- the additional 30 patients that you're expanding to, is that the expansion cohort on the various tumor types you're looking at across the various cancers? And I just got a quick follow-up question after that.

Hartaj, thanks for those 2 questions. I'm sure we'll then come back to you for the follow-up question. I think for both of those questions, as it varies on the clinical trial strategy, I'm going to turn it over to Lou, Lou Matis, who's going to -- who'll try to answer your questions.

Thank you, Steve, and good question, Hartaj. With immuno-stimulatory, immuno therapeutics in cancer, identifying a preferred Phase II dose, a recommended Phase II dose, actually really involves a significant amount of biology -- and we have ongoing in our -- dose-ascending phase of the trial, a really robust biomarker analysis, which will involve longitudinal tumor biopsies. And the key to what we'll learn from those biopsies is the amount of immune activation that we see in the tumor microenvironment by dose. We actually are working very actively with, and we're pleased to announce our third site that has just come online, as part of the dose escalation phase, MD Anderson. They have a very robust immunology program or immunology biomarker program, that will accompany the dosing of the patients. And that kind of information will be really key in terms of identifying the recommended dose for Phase II studies. And so the trial, as you know, is going according to plan. We dosed our first patient, as announced in September, and now things are proceeding along the lines that we have initially described. And we'll be announcing the activation of a fourth major U.S. cancer center participating in the dose escalation phase within the next weeks. But once again, in terms of identifying the dose and the dosing interval, that will be driven to a very significant extent by the biological marker, by the immune activation data that we generate as we treat the patients in a dose escalation manner. So (inaudible) differences.

Got it, Lou. That's actually very interesting. Just, Lou, one follow up to that. Is that -- is there a possibility that in the next 1 to 2 years, we could see, for example, an abstract or a poster presentation detailing the study design? I mean, it seems like you're doing a lot of interesting work. Is that something that could become part of a future, just, presentation? Or it's sort of to be determined?

Yes. Actually, we've guided last time during the previous quarter's call, we think there's a potential to actually have interesting data in terms of immunologic activity of the drug in the second half of 2018, and that certainly is a possibility. And if so, we'll clearly be reporting that at a major conference.

Great. Fantastic. And then, just a quick follow-up on PRS-080. Steve, I know you're going to partner that out, that's not a core asset. But if you were to partner it out, I mean, what sort of, just roughly speaking, what are the sort deal metrics, assuming it happens, that we could think about? I mean, I know that AZ and Servier were really, really amazing deals. I don't know whether this could be something analogous to that, maybe less than that, I mean. Or maybe just set expectations as to if it was to happen, what should we be sort of thinking about?

Sure. Thanks, Hartaj. So as far as PRS-080 is concerned, as you mentioned, this is a noncore asset and we do want to be clear that our ambition is to complete the Phase IIa trial. And then in addition to, if data are positive, expecting ASKA to hopefully exercise their option in Japan, to then look to partners who are capable of moving this forward to the next stage of development and commercialization, particularly in the U.S. It's really hard to crystal-ball gaze as far as deal terms are concerned. The management team, part of the management team, who have done a lot of deals in their current life and former lives. There's so many factors that influence that from -- if the program is perceived as particularly hot, if there's a competitive process, I think knowing how Pieris has partnered this year, you can rest assured that if the data are there, we will run a as competitive a process as possible and we will seek to extract maximum value for our shareholders out of what is becoming an increasingly noncore asset. But beyond that, I think I would be reluctant to comment on anything specifically at this time.

(Operator Instructions) Our next question today is coming from Mike King from JMP Securities.

I had 1 or 2 for Steve and Lou, and 1 for Allan. So on 060, a couple of questions on that. First is when you talk about -- I know the first trials will be in healthy volunteers. But will there be any biomarker data that we can get at least some sense of activity from the study, blood markers or cytokines or other things that might be suggestive of activity in larger studies?

Thanks, Mike. Great question. I think at this time, we're not prepared to provide further public guidance or information on the full details of the PRS-060 trials beyond what we disclosed publicly. But I can remind you and everyone that one of the reasons we're so excited about this program and this pathway is that it is biomarker rich. And if you simply look at the path that dupilumab took to go from early clinical to now completion of what is probably a registration trial in asthma, there is an excellent blueprint for things that we expect to be able to pursue in collaboration with AstraZeneca. And having an early handle on PK/PD is something that, of course, would be of high value, and so we look forward to providing more details on that probably in the course of 2018. But as this is a codeveloped asset with Astra, we certainly want to align on a more comprehensive communication strategy before providing more details.

Okay. So is the agreement, as it's drawn right now, Steve, is it the responsibility of AZ to disclose the results of the Phase I? Is it -- because you're running it, it's up to you, or is it a joint decision?

It's effectively a joint decision. I mean, this is a true partnership, where we are the sponsor, they are funding, which is nice, but we are driving this Phase I trial as the sponsor. And we would be of course -- we would be foolish not to consider their high level of expertise in maximizing the value for this first trial. So it will be a joint decision, of course, out of respect for the collaboration. But I think there's a great deal of enthusiasm for both companies to socialize the data at the appropriate time. So stay tuned. But beyond that, I mean, we also have preclinical data that we generated which, of course, helped to motivate the parties to collaborate in the manner that they did. And I think you can think about 2018 as a time to also get a deeper insight on preclinical data at medical conferences for that, although no promises at this stage, that's something that we're discussing right now. So expect more data in 2018, hopefully, to be disclosed whether preclinically and/or clinically, I think, the first point, of course, would be preclinical data.

Okay. Great. And then just beyond asthma, are you guys contemplating any other immune-related disorders as a potential development pathway for 060? I'm thinking particularly things like atopic derm or some of these orphan disorders as well?

And you're speaking, Mike, again specifically for PRS-060 or for other programs?

Yes. Well, specifically, 060, but if you want to elaborate on other programs, that's fine too, I just think mechanistically, 060 was the focus for my question.

Yes. Again, as a reminder, the alliance with AstraZeneca is, of course, anchored by PRS-060 and there are 4 additional new programs that we will start in partnership with AstraZeneca. Each of the programs has a -- an activity that will be directed at a local intervention in the lung for respiratory disease. It includes, but is not limited to asthma, so there are different pathologies that you can imagine would benefit from a local intervention as opposed to a systemic intervention, with PRS-060, representing a repeatable paradigm here. As far as PRS-060 development goes, there are potential other interesting application outside respiratory disease for that drug. And we continue to explore how best to extract value in that area, including atopic dermatitis. And that's something that at this present time, we're not providing further details on, but it's -- based on the data we're seeing, atopic dermatitis is certainly an interesting area for an IL-4 receptor alpha engagement.

Okay. Great, that's helpful. And then just for Allan, real quick. Allan, just as far as revenue recognition off of the upfronts, just hoping to maybe get some clarity on how we should be thinking on -- about that as a -- on a quarter-to-quarter basis?

Yes. I mean, you can kind of take the run rate that we're going at and use that to -- kind of for your numbers going forward. We kind of don't break it out for you as to kind of what accounting units we're using to go through our revenue recognition, but obviously, from a cash flow basis, you kind of know when the cash comes in the door and we'll update -- we always update our cash balance from a revenue recognition standpoint. Again, it's -- we're not going to go into that level of detail of how our financial models work with our various partnerships.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

I just want to end by saying thanks, again, to everyone for your attention today and for your continued support of Pieris Pharmaceuticals. We certainly look forward to keeping you updated on our progress, and I want to thank you again for joining the call, and wish you a great rest of the day. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.