Palvella Therapeutics, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Paul Vela's full year 2024 financials and corporate update call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Bohan Wei, Vice President of Corporate Development. Please go ahead.

Thanks, Operator. Good morning. My name is Bohan Wei, and I'm the Vice President of Corporate Development for Pavela Therapeutics. I joined Pavela in December of last year after ten years at Centerview Partners and Cowen. and I'm excited to help bring cuturin rapamycin to market and continue to build our rare disease pipeline. I'm pleased to kick off Palvela's first earnings call and would like to first extend our thanks to everyone for joining today's call. On today's call, we are joined by several members of the Palvela's senior executive team, including Wes Koppenen, our founder and chief executive officer, Dr. Jeff Martini, our chief scientific officer, and Matt Kornberg, Palvela's chief financial officer. As a reminder, the press release issued earlier today can be found under the Investors page of the Palvella website at www.palvellatx.com. I would like to remind you that we will be making certain forward-looking statements today. These may include statements regarding, among other things, the timing and expectations of research and development plans, regulatory plans, our plans to present or report additional data, and our financial resources and cash runway. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve risks and uncertainties that may cause the actual results to differ materially from those contained in the forward-looking statements. These and other risk factors can be found in our most recent periodic report filed with the SEC. Now I would like to turn the call over to Wes.

Thanks, Bohan. Good morning, and thank you all for joining Paul Vela's first earnings call as a publicly traded company. I'd like to begin this morning's call by sharing Palvela's mission, strategy, and vision, which together are the foundation upon which we are building an enduring rare disease biopharmaceutical company that we believe will become the leader in developing and commercializing novel therapies for serious rare genetic skin diseases. Palvela in Finnish means to serve, and our mission is to relentlessly serve patients suffering from serious rare diseases with no FDA-approved therapies. We are accomplishing this mission through the development and commercialization of novel therapies, which we believe will have a transformational impact on patients' lives. Our strategy at Paul Vela is to be first, first with an approved therapy in a serious rare disease that previously lacked a single approved treatment. We believe tremendous value can and will be created by identifying a rare disease with no treatments and changing that treatment paradigm from zero to one. We firmly believe this strategy can create outsized concurrent value for both patients and also for our shareholders. Our vision at Palvella is to build the leader in this area of rare genetic skin diseases. It is estimated that there's 597 rare skin diseases many of those genetically based, and unfortunately, only 2% of these diseases have an FDA approved therapy. Therefore, we believe rare skin diseases are an unambiguously high unmet need and also low competitive intensity corridor of the orphan universe. Dynamics which are ideally suited for the Paul Vela team to build an enduring leader in the space. With strong support from both new and existing investors, including our lead investors, BBF partners, and Fraser Life Sciences, we closed a $78.9 million pipe financing while debuting as a public company in December, 2024. What sets Palvella apart begins with our strategy. We want to be first, first in disease by identifying serious rare genetic skin diseases that currently do not have a single FDA approved therapy and delivering transformational impact for patients. by developing and commercializing that first approved therapy. I'm honored to lead a team that has deep experience in rare disease drug development, including my own experience in InnsMed, helping to bring therapies to patients with rare lung diseases that previously had no FDA approved treatments. Since founding, we've executed our business model with great capital efficiency. Our aim has been to mitigate risk and do so with small quantums of capital. That's our commitment to our shareholders in the years to come, continue to be highly capital efficient in our development and commercialization efforts. We now have both a compelling late-stage pipeline and a platform for reproducibly producing novel topical product candidates, which is called Qtorin. The highlight of our late-stage pipeline is our lead product candidate, Qtorin 3.9%. rapamycin anhydrous gel, which we refer to as cuturin rapamycin. We're advancing cuturin rapamycin for microcystic lymphatic malformations, where we've been granted FDA's breakthrough therapy designation, and also for cutaneous venous malformations. Both are serious, rare, and chronically debilitating genetic diseases for which there are no FDA approved therapies, and importantly, both diseases are driven by the mammalian target of rapamycin or mTOR pathway. If approved, we believe, based on market research, that ketorin rapamycin has the potential to be first-line therapy and standard of care for patients with microcystic lymphatic malformations and cutaneous venous malformations. We'll now move to our lead product candidate, ketorin 3.9%, rapamycin anhydrous gel. The mTOR pathway has been shown through scientific work by academics and geneticists to be a key driver for many genetic skin diseases. Over 200 published papers exist describing the clinical and commercial potential of inhibiting the mTOR pathway across a multitude of skin diseases. While this broad potential exists, what has been elusive for the scientific and clinical communities is a commercially viable, FDA-approved topical formulation. Attempts to properly develop topical mTOR inhibitors such as rapamycin and topical PI3K inhibitors for the treatment of microcystic lymphatic malformations and venous malformations have been unsuccessful. Relegating the field to off-label oral rapamycin, which comes with unwanted immunosuppression, a host of off-target toxicities that are unacceptable, especially for pediatric populations, and limited efficacy for skin diseases due to rapamycin's poor skin biodistribution, or the field is relegated to unproven and unapproved compounded formulations, which are typically formulated at low rapamycin concentrations between 0.1 and 1%. Those formulations lack the reliable quality, efficacy, and most of all, safety characteristics that patients and physicians deserve. We believe we have overcome the challenges of unlocking rapamycin's potential in rare genetic skin diseases with our breakthrough innovation, cuturin rapamycin. Cuturin rapamycin is the result of more than a two-year innovation process in which we evaluated more than 80 prototypes with leading experts in topical formulation science from the US and Europe. Several of our key innovations on cuturin rapamycin are listed on this slide. First, we discovered a co-solvent system that allows for synergistic solubility of rapamycin, a highly insoluble molecule, enabling a 3.9% rapamycin concentration. Keturin rapamycin's 3.9% drug concentration, we believe, could number one, lead to a fast onset of therapeutic activity for patients with chronically debilitating skin diseases, and number two, result in more predictable efficacy and a more dramatic therapeutic impact on their diseases. Second, we have been able to demonstrate preclinically that ketorin rapamycin delivers rapamycin into the dermis, the lower layer of the skin, and the site of disease origin for many of the diseases that we target. The rapamycin levels that we've shown preclinically exceed the IC90 for mTOR inhibition, indicating the potential for therapeutic activity at the site of disease pathology. Third, we developed a formulation that has no traditional penetration enhancers, which we believe lends itself to having a patient-friendly, tolerable profile. Furthermore, multiple clinical studies have shown that ketorin rapamycin results in limited systemic absorption, which we believe indicates retention of rapamycin in the skin without absorption levels that trigger unwanted immunosuppression and toxicities. We're now pleased to have six issued or pending patents in the United States with claims until at least 2038. It's a very exciting next four quarters at Palvela, highlighted by what we expect to be our top line phase three data in microcystic lymphatic malformations. We now have 13 clinical sites open and recruiting patients in our phase three SELVA study. And we're pleased to confirm the study is on track to read out top line results in Q1, 2026. Furthermore, later this year in Q4 of 2025, we also expect to announce top line results from our phase two study of cuturin rapamycin and cutaneous venous malformations. Furthermore, as highlighted earlier, we truly believe cuturin rapamycin is a pipeline and a product with clinical and commercial potential that extends well beyond microcystic lymphatic malformations and cutaneous venous malformations. We expect to unveil our third target indication for cuturin rapamycin later this year, and we also anticipate unveiling our next cuturin program in the second half of this year. We'll now move to our lead indication, microcystic lymphatic malformations. Microcystic lymphatic malformations are a serious, rare, chronically debilitating, and lifelong genetic disease. We estimate that the disease impacts more than 30,000 diagnosed patients in the United States. The genetics, disease biology, target skin tissue, and natural history of microcystic lymphatic malformations have all been well characterized. Genetically, they're caused by PI3K mutations. Biologically, the PI3K mutation results in hyperactivation of the mTOR pathway, which ultimately produces malformed vessels that protrude through the skin. The target skin tissue is the dermis, which is the site of disease origin in microcystic lymphatic malformations. From a natural history perspective, the disease is present at birth, has no spontaneous progression, and is proliferative and progressive. The major clinical burden to these patients is referred to as lymphorrhea, which is the leaking or discharge of internal lymphatic fluid onto the skin or into the soft tissues. The result of lymphorrhea is that these patients are at persistent risk of serious infections, including acute cellulitis, which can cause repeated hospitalizations. In addition, bleeding can also cause significant disease morbidity for these patients. Moving to the current treatment paradigm, first, there's no FDA-approved therapies. Attempts to treat the disease, therefore, have typically been through highly invasive approaches such as surgery, sclerotherapy, which involves repeated injections of chemotherapeutic agents such as bleomycin, and laser therapy. These invasive approaches are destructive to the patient's skin and are characterized by a lack of durable efficacy due to the known high disease recurrence rates, which stem from the genetic basis of the disease. More recently, since the discovery of the genetic basis of lymphatic malformations around 2015, which recognize the central role of the mTOR pathway in microcystic LMs, there's been use of off-label oral and topical mTOR inhibitors, an incremental move towards targeted molecular inhibitors, albeit with major limitations. Moving to our Phase III study of ketorin rapamycin for microcystic lymphatic malformations. I'm pleased to share, thanks to the dedicated efforts of our Phase III investigators, and the research coordinators at clinical trial sites, our passionate patient advocacy collaborators, the highly committed Palldella Clinical Operations team, and most of all, the patients living with microcystic lymphatic malformations who have enrolled in this landmark study, that the phase three study is on track to read out top line data on 40 patients in Q1 of 2026. In terms of study leadership, the principal investigator is Dr. Joyce Ting from Stanford. Dr. Ting is a true champion for patients with serious rare genetic skin diseases. In addition to microcystic lymphatic malformations, she has worked tirelessly to advance therapies for patients with other rare diseases such as epidermolysis bullosa and erythropoietic protoporphyria, or EPP. We've had the pleasure of working closely with Dr. Ting for many years. and we're honored to have her leading this study. Stanford is joined by an additional 12 sites listed on this slide, all of whom are active and all of whom are recruiting patients. From a study design perspective, we designed our phase three study after extensive interactions with our key opinion leaders, such as Dr. Jim Treat, pediatric dermatologist at Children's Hospital of Philadelphia, and Dr. Mike Kelly, a pediatric hematologist oncologist at Cleveland Clinic. as well as collaborative interactions with the FDA's Division of Dermatology and Dentistry, including our Type B meeting after the agency granted breakthrough therapy designation to ketorin rapamycin. Overall, the design of the Phase III study mimics our Phase II study. The Phase III is a single-arm, baseline-controlled study with a clinician-reported dynamic change scale as the primary endpoint and a sample size of 40 patients. We believe a baseline control design is an appropriate and a reliable trial design in microcystic lymphatic malformations since the natural history of microcystic LMs is well documented to have no spontaneous regression of their disease. The primary endpoint for the phase three study is the microcystic lymphatic malformation investigator global assessment, a seven point change scale, which has many similarities with the clinician global of impression change instrument that was used in our phase two study. We expect top line data from this study in the first quarter of 2026. Our phase three Silva trial microcystic LMS builds upon our compelling phase two data, the results of which led to FDA's granting of breakthrough therapy designation. The study design was a phase two open label baseline controlled study over 12 weeks with a sample size of 12 patients. Importantly, The results from that study showed clinically and statistically significant improvements on pre-specified global and individual endpoints, some of which we'll review here. Beginning with the clinician global impression of change, this is a single item question that the physician completes in clinic where they're comparing the patient's lesion severity at the end of the treatment period to baseline. As you can see from the data under the clinician global impression of change at week 12, Futurin rapamycin's average effect size on this scale, which goes from negative three, very much worse, to plus three, very much improved, was 2.42. All 12 patients in the study on this scale were either a plus two or a plus three, so either much improved or very much improved. Importantly, a similar result was seen on the patient's global impression of change, where at week four, week eight, and week 12, statistically significant results were achieved, with the average patient at just above a two or much improved. We also evaluated individual signs of microcystic lymphatic malformations in the phase two study. The results are listed on the right side of the slide and were also statistically significant. We've included here some of the photography results from the trial which illustrate the patient's lesions at baseline and then the patient's lesions at the end of treatment after 12 weeks of ketorin rapamycin. As seen on the slides, when compared to baseline at week 12, patients improved in terms of the height of the lesion on the skin and the presence of bleeding, while also demonstrating a reduction in the presence of microcysts or the vesicles on the skin at week 12. So overall, exciting phase 2 results that strongly encourage the advancement of cuturin rapamycin into a pivotal phase 3 study. We were excited at press release earlier this year that our Phase II data has been published in the Journal of Vascular Anomalies, or JOVA, which is the official journal of the International Society for the Study of Vascular Anomalies. The Phase II publication highlighted the remarkable visual improvement observed in the Phase II study as a result of cuturin rapamycin treatment, as well as noting a robust clinical response that was statistically significant across a variety of clinician and patient endpoints. In our phase two study, we also prospectively implemented patient qualitative interviews aimed at capturing the voice of the patient. This is an emerging technique used in many rare disease studies to capture clinical meaningfulness of a potential treatment effect. This involved conducting qualitative interviews of patients before they initiated treatment and also at the end of the study after 12 weeks of treatment. The JOVA publication highlights that these patient interviews confirm the positive results from the Phase II study. Preparations are underway for an NDA submission in 2026, following a successful Phase III study result. From a regulatory strategy perspective, we intend to leverage the 505 pathway for our NDA submission. which can represent a streamlined drug review process, enabling us to incorporate existing data on rapamycin into our NDA submission while avoiding unnecessary duplication of certain studies that have already been performed on the drug. In addition to 505 , we intend to leverage the large growing real-world evidence base indicating rapamycin's therapeutic activity in lymphatic malformations, which should augment the clinical data from our prospective phase three and phase two studies. And our NDA submission will be supported by the designations you see listed here. Breakthrough therapy, fast track, and orphan drug designations. As a function of breakthrough therapy and fast track designations, we should be in a position to execute a rolling NDA submission and we will also be eligible for an expedited six month priority NDA review. In addition to the financial support from the institutional investors from our pipe financing last December, we're pleased to have the FDA financially supporting the Phase III Selva study through a non-dilutive FDA orphan product grant of up to $2.6 million. As background, the FDA Orphan Product Grant Program is administered by FDA's Office of Orphan Products Development Annually, they award non-dilutive grants typically to programs that are in serious rare diseases with either no approved therapies or inadequate therapies where there's been a high level of scientific and technical merit demonstrated to a particular therapeutic approach. Last year, there were 51 applicants for the FDA Orphan Drug Grant Program and only seven recipients. We were one of the seven recipients and notably, we're the only phase three study that the FDA is supporting. On the slide here is an article from Hyman, Phelps, and McNamara, a leading FDA law firm that contextualizes the grant program while noting that these grants likely represent a meaningful degree of alignment with the FDA review division on a particular program and trial. Pavela's commercial planning is well underway for microcystic lymphatic malformations based on multiple methodologies, including primary prospective research published in the Orphanet Journal of Rare Diseases, as well as a claims analysis we recently conducted in partnership with Trinity Life Sciences, we estimate that there are more than 30,000 diagnosed patients in the United States afflicted with microcystic lymphatic malformations. For 2025, we have additional claims analysis work ongoing, which will help elucidate, number one, the estimated annual incidence of microcystic lymphatic malformations, or commercially speaking, the number of new patients annually coming into the addressable pool of patients that could be treated with ketorin rapamycin. And number two, the concentration of microcystic lymphatic malformation patients in established centers of excellence, sometimes referred to as vascular anomaly centers. We look forward to sharing the results of this ongoing work later this year. Continuing with the theme of market research, we're encouraged by the results from the market research we conducted in 2024 with 52 high volume treaters of microcystic lymphatic malformations. We presented those physicians with the product profile of a topical 3.9% rapamycin gel. 98% of physicians surveyed indicated they'd incorporate such a product into their clinical practice. 98% would consider a topical 3.9 rapamycin gel as first line therapy, and 96% saw advantages to a targeted topical rapamycin intervention when compared to orally administered mTOR PI3K inhibitors. Overall, this research confirmed ketorin rapamycin's potential to be first line standard of care therapy for microcystic lymphatic malformations. Our plan, if successful in our phase three trial, is to commercialize ketoran rapamycin on a standalone basis in the U.S. We believe there are favorable commercial dynamics that will allow Palvella to execute a successful U.S. launch in line with other rare disease companies who have launched first and only approved therapies in serious rare diseases. At launch, we plan to focus our efforts on the established centers of excellence, referred to as vascular anomaly centers, which today diagnose and treat microcystic lymphatic malformations and other vascular malformations. Specifically, over the last 15 years, there's been approximately 150 of these vascular anomaly centers that have been formed, and they're usually associated with pediatric hospitals. We believe these vascular anomaly centers are a logical point of focus for our sales, marketing, and medical affairs efforts after FDA approval, since a meaningful percentage of patients with microcystic lymphatic malformations are diagnosed and treated at these centers. Furthermore, patients with cutaneous venous malformations are also oftentimes diagnosed and treated at these vascular anomaly centers. So overall, we see strong synergy from a commercialization perspective as we think about adding cutaneous venous malformations as our second indication for cuturin rapamycin. With that, it's my pleasure to turn it over to Dr. Jeff Martini, our Chief Scientific Officer, to provide an overview of our second indication for cuturin reformation, cutaneous venous malformations. Jeff?