PVLA - NASDAQ

Good day, and thank you for standing by. Welcome to the Palvella Therapeutics full-year 2025 financial results conference 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'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Bohan Wei, Vice President of Corporate Development. Please go ahead.

Thank you, operator. Good morning, and thank you for joining the Palvella Therapeutics full-year 2025 financial results and corporate update call. As a reminder, our press release detailing today's announcements can be found in the investor section of our website at www.palvellatx.com. On today's call, you will first hear from Wes Kaupinen, our Founder and Chief Executive Officer, followed by Dr. Jeff Martini, our Chief Scientific Officer, and Matt Korenberg, our Chief Financial Officer. Wes will return for closing remarks before we open the line for Q&A. Before we begin, please note that today's remarks may include forward-looking statements regarding our development programs, regulatory strategy, commercial planning, and financial outlook. These statements are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a full discussion of these risk factors.

Now, I will turn the call over to Wes.

Thanks, Bohan. 2025 was a landmark year for Palvella Therapeutics. One that brings us closer to recognizing our vision of building the leading rare disease biopharmaceutical company focused on developing and commercializing first-in-disease therapies for serious rare skin diseases and vascular malformations. Thanks to the efforts of the Palvella team, our scientific and clinical collaborators, our patient advocacy partners, and the rare disease patients we serve, we achieved several value-creating milestones, including, number one, announcing positive phase II data in cutaneous venous malformations. Data which support the advancement of that program toward a near-term Breakthrough Therapy designation submission to FDA and a pivotal phase III study. Number two, surpassing our target enrollment in our phase III SELVA study in microcystic lymphatic malformations. This based on physician and patient demand, as well as strong execution from our clinical operations team.

Number three, expanding our rare disease pipeline with the addition of two new programs, QTORIN rapamycin for clinically significant angiokeratomas, and QTORIN pitavastatin for porokeratosis. Number four, adding top talent to our senior leadership team, including Dr. David Osborne as our Chief Innovation Officer, and Ashley Kline as our Chief Commercial Officer. Number five, extending our collaboration with the FDA, and specifically FDA's Office of Orphan Products Development, who in 2025 supported our SELVA phase III study with additional non-dilutive funding. Number six, expanding our IP portfolio with two U.S. patents for QTORIN rapamycin, strengthening our multilayered exclusivity strategy. Number seven, capping 2025 by securing FDA's Fast Track designation in clinically significant angiokeratomas. The third Palvella program, which has been granted Fast Track designation.

This momentum, the result of focus and disciplined execution by the Palvella team, has carried into 2026, where earlier this year we announced positive phase III data from our SELVA study in microcystic lymphatic malformations. Results, which we believe position QTORIN rapamycin, if approved, to be a first-line standard-of-care therapy for individuals with microcystic lymphatic malformations. With a significantly strengthened balance sheet as the result of a $230 million financing announced earlier this quarter, Palvella is now well-positioned to pursue a near-term FDA approval of QTORIN rapamycin in microcystic lymphatic malformations, drive a successful standalone U.S. launch, and concurrently advance the rest of our rare disease pipeline. What makes Palvella stand apart from other companies begins with our corporate strategy of pursuing development and commercialization in serious rare diseases with no FDA-approved therapies.

We believe that these diseases are unambiguously high unmet medical need. We intentionally focus on diseases where we are the pioneers in advancing therapies targeted to be first in disease for patients and families suffering from these rare diseases. Our goal is to apply our proprietary QTORIN platform, our internal product development engine for reproducibly developing novel topical product candidates in a focused subset of rare skin diseases and vascular malformations which have clear biology and also the existence of human proof-of-concept data which serves to validate a specific molecular approach.

Evidence of this development strategy is microcystic lymphatic malformations, a well-defined disease caused by PI3K mutation where mTOR hyperactivation is driving the disease progression and in which rapamycin has a large growing foundation of real-world human clinical evidence upon which Palvella can build. We are taking a similar approach in cutaneous venous malformations, angiokeratomas, and disseminated superficial actinic porokeratosis, and we anticipate by year-end the addition of two new diseases to our pipeline, bringing the number of diseases we aim to treat to six. Overall, by taking the approach outlined on this slide, our aim is to reduce the time and capital required to achieve FDA approvals while entering uncontested markets that have more favorable commercial dynamics when compared to more traditional and more competitive markets.

With approximately 600 rare skin diseases, 98% of which do not have a single approved therapy, we see ample opportunity to grow our pipeline and repeat our focused rare disease development model. I want to take you through how our recent execution translates into multiple anticipated high-impact milestones over the next 12+ months. We enter 2026 exceptionally well-positioned across both our lead program and our expanding pipeline. Starting with microcystic lymphatic malformations, we have positive phase III data in hand and are on track for NDA submission in the second half of 2026, with a potential FDA approval targeted for the first half of 2027.

In cutaneous venous malformations, following positive phase II data, we expect a Breakthrough Therapy designation decision in the second quarter of this year and plan to initiate a phase III study in the second half of this year. For clinically significant angiokeratomas, we have received FDA's Fast Track designation and are advancing towards initiation of our phase II study ahead of schedule, with the phase II initiation now expected in the second quarter of this year versus our previous guidance of second half 2026. In DSAP, we have developed our QTORIN pitavastatin formulation, filed IP, and we expect to initiate a phase II study in the second half of 2026.

More broadly, we continue to expand the QTORIN pipeline with a fourth indication for QTORIN rapamycin expected to be announced in the second half of this year and a new QTORIN product candidate, our third, also expected to be announced in the second half of this year. This positions Palvella for a catalyst-rich period, including the potential for our first FDA approval, which we believe could create a streamlined and efficient pathway for indication expansion into other mTOR-driven skin diseases through planned supplemental NDA submissions. Let me now turn to our lead program, QTORIN rapamycin for microcystic lymphatic malformations. We believe microcystic lymphatic malformations represent a significant multibillion-dollar commercial opportunity based on an estimated population of more than 30,000 diagnosed patients in the U.S. according to claims analysis and published literature.

Based on the phase III SELVA results, the results from our phase II study, and the market research we've conducted, we believe QTORIN rapamycin, upon achieving potential FDA approval, is positioned to be first-line and standard-of-care therapy for microcystic lymphatic malformations, directly targeting the underlying disease biology through inhibition of the causative mTOR pathway and doing so in the pathogenic skin tissue of interest. Clinically, we have demonstrated a robust treatment effect across two prospective trials, along with a favorable safety and tolerability profile supporting efficacy and potential for long-term use in this patient population. With positive phase III data now in hand, we are on track for an NDA submission in the second half of 2026 and, if approved, potential FDA approval in the first half of 2027. I'd like to highlight our phase III SELVA data, which we announced last month.

Our team established base and upside cases grounded in what clinical study results could translate to meaningful improvement in patients' lives while supporting an attractive commercial opportunity. SELVA exceeded our predefined upside case across every dimension. On the primary endpoint, the microcystic lymphatic malformation Investigator Global Assessment, we observed a highly statistically significant outcome, well above our upside case. Importantly, 95% of patients completing the efficacy evaluation period improved, and 86% were much improved or very much improved. The blinded key secondary endpoint, the mLM-MCSS, was also highly statistically significant. From a safety perspective, QTORIN rapamycin was well-tolerated in both children and adults, supporting potential for chronic dosing across all ages. Importantly, retention in the study was exceptionally strong, with 98% of week 24 completers electing to roll into the extension period, supporting durability and continued treatment benefit.

SELVA exceeded what we at Palvella had hoped to see, not just on efficacy, but on durability and safety. Ultimately, these results, we believe, translate into meaningful impact for patients of all ages diagnosed with microcystic lymphatic malformations. Turning to our regulatory progress, our planned NDA submission is on track. We recently submitted our pre-NDA meeting request to FDA's Division of Dermatology and Dentistry, with the pre-NDA meeting anticipated in the second quarter of 2026. Notably, we are pursuing a traditional full FDA approval based on clinical endpoints, which differs from an accelerated approval, which relies upon surrogate biomarkers that are likely to reasonably predict clinical outcomes. Providing a strong foundation for our NDA submission is both our phase III SELVA data, which were highly statistically significant and clinically meaningful, as well as the results from our phase II study.

Our interactions with physician key opinion leaders in this disease and our understanding of the progressive nature of the disease suggest that early therapeutic intervention could alter the natural history of the disease. Therefore, it is our intent to pursue a label which includes patients aged three and above. We have previously been granted Breakthrough Therapy, Fast Track, and Orphan Drug designations, and we plan to pursue a 505(b)(2) pathway, which may enable us to leverage existing FDA findings and the established body of evidence for rapamycin as part of a more streamlined development and regulatory strategy. We continue to collaborate closely with the FDA's Office of Orphan Products Development, which in addition to providing non-dilutive funding, intend to participate in our anticipated pre-NDA meeting with the review division in the second quarter of this year.

These elements support a path towards NDA submission in the second half of 2026 and potential for FDA approval in first half of 2027. Turning to the commercial opportunity, we believe QTORIN rapamycin is well-positioned for a highly attractive orphan launch. Microcystic lymphatic malformations represent a serious rare disease with high unmet medical need and currently no FDA-approved therapies available to physicians and patients. There is already a large diagnosed patient population with a meaningful percentage of patients concentrated in specialized vascular anomaly centers. We have also consistently experienced strong enthusiasm from key opinion leaders about the potential for QTORIN rapamycin, many of whom participated in our phase III and phase II studies, and we believe this enthusiasm could contribute to a strong uptake curve following potential FDA approval.

From a pricing and reimbursement perspective, we anticipate orphan pricing consistent with our previous guidance of $100,000-$200,000 per patient per year. All of this is supported by positive phase III data, which indicate a favorable risk-benefit profile, particularly compared to the scarcity of therapeutic options available to these patients today, reinforcing the potential for QTORIN rapamycin to become a first-line standard-of-care therapy for individuals with microcystic lymphatic malformations. We have made significant progress in building the foundation for a potential first half 2027 commercial launch. Starting with leadership, we have assembled a highly experienced commercial team. Last year, Ashley Kline joined Palvella as Chief Commercial Officer, and we recently added Jennifer McDonough to lead market access and patient services.

Ashley is a commercial veteran in the rare disease space, having previously led the launch of OXERVATE, a novel topical therapy for neurotrophic keratitis and a therapy which now generates greater than $1 billion in US sales a few short years after launch. Last week, we welcomed Jennifer McDonough to the Palvella team. Jennifer is widely regarded as a leading executive in rare disease market access and patient services. Her contributions were critical to the success of the launch of VYJUVEK from Krystal Biotech, a first-in-disease topical therapy for dystrophic epidermolysis bullosa, a serious rare genetic skin disease. In parallel, we are building out our medical affairs capabilities with the hiring of medical science liaisons already underway and active participation across the key medical meetings you see listed on the slide here. Importantly, we are also taking a robust approach to patient identification and market development.

We estimate more than 30,000 diagnosed patients in the U.S. and importantly, approximately 1,500 new patients diagnosed each year. We are concentrating our initial efforts on the highest value centers and treating physicians with a specific focus on approximately 400 high volume centers that we estimate represent approximately 50% of the diagnosed population in the U.S. Overall, we've recruited top talent and are making significant investments to ensure we are well-positioned for a successful U.S. launch of QTORIN rapamycin in microcystic lymphatic malformations. Moving now to our QTORIN rapamycin for cutaneous venous malformations program. Let me begin with some comments on the commercial opportunity in this disease.

Venous malformations are the most common type of vascular malformation, and cutaneous venous malformations represent a large and underappreciated market opportunity, with an estimated more than 75,000 diagnosed patients in the U.S. and currently no FDA-approved therapies. We reported positive phase II data in December 2025, with statistically significant results across several clinician and patient-reported outcomes. Specifically, 73% of patients demonstrated improvement on the cVM Investigators' Global Assessment, with 67% rated as much improved or very much improved at week 12. This suggests both a high responder rate and a large magnitude treatment benefit in this initial phase II study. We are now swiftly advancing towards a phase III study with study design alignment expected mid-2026 and trial initiation planned for the second half of the year. In parallel, we are finalizing a Breakthrough Therapy designation application.

This follows a constructive preliminary advice meeting with the FDA earlier this quarter, in which our collaborator, Dr. Denise Adams, a prominent pediatric hematologist-oncologist from Children's Hospital of Philadelphia, described the unmet need in cutaneous venous malformations as well as her experience in the phase II study. In addition to the phase II data, our breakthrough application will include both patient qualitative interviews capturing the meaningfulness of the therapy to their daily lives, and a letter of support from the investigators who participated in the phase II study. We also importantly continue to generate additional data through the ongoing phase II treatment extension period, with plans to present that data set at a medical meeting later this year.

Overall, our QTORIN rapamycin program in cutaneous venous malformations represents a compelling opportunity to expand into a larger second indication for QTORIN rapamycin, and assuming initial pre-approval in microcystic lymphatic malformations, potentially advance through a streamlined supplemental NDA pathway. I will now hand the call over to Jeff, who will talk about our additional pipeline programs. Jeff?

Thank you, Wes. Our clinically significant angiokeratomas program represents our third clinical indication for the QTORIN rapamycin program. Our phase II trial is ahead of schedule, with initiation anticipated in the second quarter. Angiokeratomas are a superficial lymphatic malformation and share overlapping clinical and pathological features with microcystic lymphatic malformations, including similar lesion morphology, superficial vascular involvement, and aberrant lymphatic biology. These lesions are associated with increased mTOR signaling and do not spontaneously regress. This provides a strong mechanistic and clinical rationale for targeting this indication with QTORIN rapamycin. As Wes mentioned earlier in the presentation, and consistent with our strategy of leveraging existing human data, we are able to build on published proof of concept data, including multiple case reports demonstrating preliminary clinical benefit from off-label rapamycin use.

Clinically significant angiokeratomas represents a large underserved indication with more than 50,000 diagnosed patients in the U.S., no FDA-approved therapies, and the potential to expand QTORIN rapamycin into this indication through a supplemental NDA. QTORIN rapamycin is a pipeline in a product. With our lead program in microcystic lymphatic malformations preparing for NDA submission and launch, our cutaneous venous malformations program advancing towards phase III, and our clinically significant angiokeratomas program with a phase II study planned and ahead of schedule. Across these initial three indications, we are already addressing a meaningful patient population in the United States, but there is a significant opportunity for expansion. We are actively evaluating additional mTOR-driven diseases that meet our highly selective criteria and expect to continue to expand our addressable patient population over time.

This strategy enables efficient development by leveraging the same molecule and platform and targeting shared disease-driving biology across multiple indications. We are expanding our pipeline beyond rapamycin with QTORIN pitavastatin in disseminated superficial actinic porokeratosis or DSAP, which represents our second QTORIN program. DSAP is a chronic, progressive, and precancerous skin disease that presents with numerous expanding lesions on sun-exposed areas, causing significant symptoms including burning, itching, and discomfort, and carrying a risk of malignant transformation. Despite this, there are no FDA-approved therapies, and existing treatment approaches are invasive, temporary, and do not address the underlying disease biology. QTORIN pitavastatin is a pathogenesis-directed therapy targeting the mevalonate pathway with the potential to become first-line and standard of care for patients with DSAP.

Our approach is supported by emerging scientific evidence, including our recent publication in Experimental Dermatology, highlighting real-world statin use and treatment gaps, and our presentation at the American Academy of Dermatology demonstrating the burden of disease. Following our public announcement of the program, we are seeing strong inbound patient interest as we prepare for our phase II study, which remains on track for initiation in the second half of 2026. QTORIN pitavastatin for DSAP highlights our disciplined approach to selecting diseases that meet our highly selective criteria, combined with the QTORIN platform's ability to efficiently develop pathogenesis-directed therapies. Before turning the call over to Matt, I'd like to briefly highlight the strength of the QTORIN platform as a new product development engine. We follow a disease-first R&D strategy, spending significant time identifying diseases that meet our highly selective criteria and are well suited for targeted topical therapies.

We have now validated the platform with two positive clinical readouts, including our phase III SELVA trial and our phase II TOIVA results. We are leveraging QTORIN to scale our pipeline, rapidly advancing and testing multiple molecules in a time and capital efficient manner. We also plan to pursue FDA platform technology designation following the anticipated approval of QTORIN rapamycin. As we look ahead, we expect to announce one new QTORIN program and one additional QTORIN rapamycin indication later this year. QTORIN represents a validated and scalable engine to deliver first-in-disease therapies that we believe can make a meaningful difference for patients and create long-term value for shareholders. With that, I'll turn the call over to Matt to review our financial results.

Thanks, Jeff. Turning to the financials, Palvella ended Q4 with $58 million in cash and cash equivalents as of December 31st, 2025. Following our positive phase III SELVA data, we completed an oversubscribed $230 million public offering in February 2026, bringing in $215.8 million in net proceeds. I want to emphasize what this financing means for the company. With pro forma cash of $274 million, this financing fundamentally strengthens our balance sheet and eliminates financing overhang as we enter the most important execution period in Palvella's history. With this cash, and even before considering any potential revenue, we're now fully funded to advance our microcystic lymphatic malformations program through an NDA filing, an FDA approval, and if approved, a U.S. commercial launch.

For QTORIN rapamycin cutaneous venous malformations, our runway allows us to execute a phase III program and subsequently complete an NDA filing. For our QTORIN pipeline, we have the runway to support multiple phase II data readouts from our existing and future pipeline programs. The quality of investor participation in this financing was exceptional, and we believe it reflects the growing institutional conviction in both the SELVA data and our broader pipeline strategy. With this capital base and our innovative operating model that prioritizes capital efficiency, the Palvella team can now focus entirely on execution without the distraction of the near-term financing needs. I'll now turn the call back over to Wes for closing remarks and to open the line for questions. Wes?

Thanks, Matt. 2025 was an exceptional year for Palvella. Now our focus is squarely on execution across our deep pipeline of rare disease programs. We are closer to our first FDA approval than we have ever been, and the entire Palvella team is committed to making that a reality for the patients and families who have been waiting. With that, operator, we will open the line for questions.

As a reminder, if you'd like to ask a question at this time, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Josh Schimmer with Cantor.

Great. Thanks so much for taking the questions. For the QTORIN rapamycin platform, what are the gating steps for each new indication that you choose to pursue? And given the broad number of settings where there is actual data for topical rapamycin, how many different indications do you ultimately expect you might have on the label? Thank you.

Great, Josh. Thank you for being on, and thanks for the question. For the platform, which was your first question, we really start with the disease. We profile diseases that one, have no FDA-approved therapies. Number two, we look for diseases where there's low competitive intensity in the development pipeline. That allows us to be first. That's the goal, to be on a trajectory to having that first approved therapy. We also carefully evaluate from a scientific perspective whether there is clear biology in that particular disease, well-defined biology. We do prefer to go in diseases, as Jeff nicely highlighted earlier, where there is existing human proof of concept data. Sometimes that can be from off-label use, like we've seen with the use of rapamycin and lymphatic malformations.

We think that having some of that data in hand, human proof of concept data, help to validate a particular molecular approach. We then apply the QTORIN platform, of course, the goal being to be on target and in tissue for these localized skin diseases. On your second question, in terms of how many indications we can eventually have for QTORIN rapamycin, there's a long list. There's three publications that I think nicely summarize all the different diseases, skin diseases, where the mTOR pathway is implicated. Jeff can speak to some of those diseases, but there's well over a dozen diseases where scientists, clinicians, researchers, geneticists have implicated a strong role for the mTOR pathway. Jeff?

Yeah, Josh, thanks for the question. You know, just to kind of reiterate what Wes said, you know, we take a really disease-first approach, rely heavily on our medical and scientific advisory board, both for understanding the disease unmet need as well as the biological rationale, and then find experts in the diseases. Because these are rare diseases, we have a lot of good collaboration with experts in these fields, which typically haven't seen much scientific or medical research. We collaborate very closely with the KOLs and then ultimately pick the diseases that have the highest probability of success, biggest unmet need, and also we do have a commercial evaluation as well.

Maybe just to round that out, Josh, the three papers that I referenced, the authors are Swarbrick, Fogel, and Tatiana Lapa, which look at the involvement of the mTOR pathway in skin diseases to maybe quantify your question. In terms of size of population, we think the addressable size of the patient population to be treated with QTORIN rapamycin once you add microLM, cVM, angiokeratomas, and several of the other diseases that we've identified is in the hundreds of thousands.

Thanks very much.

Our next question comes from Ritu Baral with TD Cowen.

Good morning, everyone. Thanks for taking my question. Wes, will the phase II extension data or at least some of the phase II extension data from the cVM study be part of your Breakthrough application for that indication to FDA? Can you give us any more detail as to when that extension data will be presented and sort of like the parameters of that extension data? Then I've got a follow-up on commercial.

Great. Hey, Ritu. Good morning, and thanks for the questions. The phase II extension data is not yet finalized, and we are proceeding with our Breakthrough Therapy designation application. Our Breakthrough Therapy designation application will include the phase II data, where we saw 67% of patients either achieve the ratings of much improved or very much improved. We're also gonna include interviews, patient qualitative interviews, where the patients, in their own words as part of a qualitative interview sub-study that we incorporated, describe their experience in the trial. We think that that's really important to augment the statistically significant data with data that supports clinically meaningful. Finally, our investigators have really rallied here to put together a letter of support for the Breakthrough Therapy designation application.

This is something that our Chief Operating Officer, Kathy Goin, has spearheaded with Denise Adams and several others. That's gonna be a key part of the breakthrough application. That letter will cover not only their view about the preliminary clinical evidence package, but also their view around future study designs, which is gonna be part of our discussion with the FDA after the breakthrough decision.

Understood. Then on the commercial side for mLM, Wes, you mentioned, and this is an Ashley question too, I guess. You mentioned there's the diagnosed pool for mLM. What are your up-to-the-minute estimates for that? And then you mentioned that those patients were under care in a concentrated way at vascular anomaly clinics. Do you have the number of those clinics and what percentage of the diagnosed pool they cover? And then right now, maybe more high level, what are your plans as far as patient support services, coverage support services, for you know, adjunct to the price range that you mentioned? Thanks.

Yeah, thanks, Ritu. Our latest estimates, and this is based on convergence of evidence from a real-world occurrence study that was published by Jack Gallagher, that's available in Orphanet, which projects that there's approximately 80,000 patients in the United States with a cutaneous manifestation of their microcystic lymphatic malformations. We've also done claims work, which suggests a range around 45,000-95,000 diagnosed patients that are within clinical medicine in the U.S. We look at all that evidence. This is a dynamic process at Palvella. You're always evaluating claims data. We estimate, perhaps conservatively, that there's greater than 30,000 diagnosed patients in the United States with microcystic lymphatic malformations that could be addressable, if approved, with QTORIN rapamycin.

When you break down the claims data, we break it down into high volume centers, many of which, Ritu, are these vascular anomaly centers. If you take the 400 highest volume centers, that constitutes about 15,000 patients in the United States. That really is our primary focus. We fortunately have great relationships with many of these vascular anomaly centers as a result of work by our clinical operations teams and the phase II and phase III studies that we've run. In terms of patient services for our U.S. launch, Ashley has a lot of experience in this area, having launched OXERVATE, one of the most successful orphan drug launches of the past decade. We're also thrilled to have recruited Jennifer McDonough.

We've closely followed and rooted for VYJUVEK's success from Krystal Biotech in a really rare and devastating disease there. What we want to do is work with a specialty pharmacy and a patient services hub that have a proven track record in the rare disease space, particularly when you think about microcystic LMs, where you're very likely to see chronic dosing with QTORIN rapamycin, so that we're not only treating the existing clinical signs, but that we're also preventing that disease recurrence, which is a major issue with the disease today.

Great. Thank you.

Our next question comes from Annabel Samimy with Stifel.

Hi. Thanks for taking my question. Great progress. You know, we've been getting questions from investors about FDA unpredictability. This is not an accelerated approval, clearly, and you've noted very specifically that it's not surrogate endpoints, but clinical endpoints. There is still some concern about a one-arm study. How have these interactions been with FDA? Are you still comfortable with that design? I guess looking at cVM, what are you planning as far as phase III design and how might that change with breakthrough designation? Should we have any read through to the mLM receptivity to one-arm trials? It's, I guess, it's a multilayered question, but really it's about FDA unpredictability these days.

Sure. Thanks, Annabel, for the questions. Prior to the commencement of the phase III study, we believe we were aligned and continue to be aligned with the FDA on that single-arm, phase III baseline controlled study where the patient serves as their own control. I think it's important to note here a couple things. Number one, this is a disease where there is documented no spontaneous regression of the disease. Therefore, that can enable a single-arm design to serve as a reliable design for the purposes of an efficacy assessment, particularly, when you employ clinical outcomes like we have, which we think are objective in nature, where the physician is scoring the patient's lesion at the end of treatment and comparing that to a baseline photo.

We shared several photos in our phase III SELVA release, and we think they clearly indicate clinical improvement in lesions that would otherwise progress to a worsened state. Our interactions, we've had interactions with both the review division, the derm division, as well as the Office of Orphan Products Development. Since the phase III SELVA study concluded, we presented them with the data. I would describe those interactions as constructive, and we are proceeding towards a pre-NDA meeting that's been requested at this point in time, and we expect that to occur in phase II. I think that there are certain elements of the FDA at a macro level that we're really encouraged by. I think we've all been following Dr.

Makary advocating for a common sense approach, describing that the new default approach to generating substantial evidence of effectiveness is one trial, not two, and he's consistently been advocating for expediting therapies to patients with rare diseases. FDA came out in Q4 of last year talking about accommodating real-world evidence to help inform regulatory decision making. From Palvella's perspective, we believe the FDA much prefers approved drugs to off-label or compounded drugs. We think all of those sort of macro trends certainly work in our favor. From a cVM perspective, it's gonna be a two-step process to land on a study design. Step one is gonna be determining whether or not we are Breakthrough designated.

That application is gonna go in imminently with the various elements that I mentioned earlier. Whether or not we're granted Breakthrough, we're gonna meet with the FDA on the other side of that decision. I think our KOLs will be strongly advocating for flexibility for the phase III study design. There's a range of potential outcomes here. In our interactions with folks like Denise Adams at CHOP, I think they would much prefer all patients having the opportunity to go on drug, given that it's well accepted that sirolimus does have activity in vascular malformations, and specifically venous malformations. There could be issues around clinical equipoise or ethics as well that we have to work through collaboratively with the FDA. That said, there is also the potential for a placebo-controlled design.

Our strategy is to first determine whether or not we're breakthrough designated, and then on the other side of that, align with the FDA on a study design that works for patients, physicians, FDA, and for Palvella as well.

Okay, great. Thank you.

Our next question comes from Ryan Ries with Mizuho.

Hi, this is Ryan on for today. I was just wondering if you guys could talk a little bit about the plans for the commercial launch of QTORIN rapamycin and mLMs beyond some of the key new hires, like any organizational changes, upgrades, or timelines on sales force or expanding KOLs. Any plans for upcoming medical meetings. Any kind of you're sort of prepping. Thank you.

Yeah. Thanks, Ryan, for those questions. I'm a firm believer in trying to recruit the best talent in the world to Palvella. Ultimately, I think that's gonna help dictate our success for patients and shareholders. I think we've really assembled incredible talent between Ashley Kline as Chief Commercial Officer, Jennifer McDonough, and our build-out of our medical affairs team. Ryan, in terms of your questions of changes or upgrades, I would characterize where we are as additions and investments that we're making. We are building out a medical science liaison team. We expect that to be somewhere between five and 10 MSLs. They will be very active with these Top 400 targets that I mentioned earlier.

They will also have a major presence at medical meetings. We expect to hire, and it was noted in our corporate deck, a head of sales in the near term. We're gonna bring that hire on a bit early to start to really think through how to shape an attractive uptake curve for QTORIN rapamycin, similar to what we saw with companies like the ones I've been involved with, such as Insmed, Ashley with OXERVATE and Jen McDonough with Krystal Biotech. That's gonna be really key. We've put forward a provisional range of 20-40 sales reps.

I think with the capital raise having been completed, and we're very grateful to the investors who participated for their support, we're more likely to go to the upper end of that 20-40 range versus the lower end of that range. Key in all this will be quality, Ryan. One of the hiring processes that we've implemented here is that the senior executive team is very involved in the hiring at all levels. We wanna make sure we bring in the right people that are high performers. We're a performance-driven culture here, but also ones who are authentically patient-oriented and really feel a strong desire to serve patients with rare diseases.

Great. Thanks, Wes.

Our next question comes from Sam Slutsky with LifeSci Capital.

Hey, good morning. Thanks for taking the questions. So obviously, great to see the angiokeratoma phase II initiation moves up to Q2. Could you just remind us on the key endpoints that you'll be looking at here and the magnitude of effect that would be deemed clinically relevant? Just as you prepare for commercial launch and pipeline expansion, any additional granularity that you're able to give on cash burn expectations over this next year? Thanks.

Hey, Sam. Thanks a lot for both questions. I'll pass it over to Jeff to discuss the endpoints that we're looking at in the phase II angiokeratoma study. That's gonna be similar to what we did in mLM and cVM, and that there's gonna be no pre-specified statistical hierarchy, no primary endpoint. We think that's a thoughtful approach to take in rare diseases, where there's no FDA-approved therapies and really where you're trying to determine which endpoints are sensitive to detecting a treatment effect before putting together that statistical hierarchy in phase III. Jeff will comment on that, and then we'll pass it over to Matt Korenberg to address the second part of your question. Jeff?

Yeah. Thanks for the question, Sam. We're gonna follow what we're calling the Palvella playbook, and it's really repeating the overall strategy that we've used for these other rare diseases that have never had a clinical trial done with them before. As Wes mentioned, there is no statistical hierarchy. The purpose of the study is to understand what are the endpoints that are sensitive to change. We started out by talking with patients as well as clinicians to identify what are the key signs. We'll look at individual signs as well as global endpoints to look at global changes. We'll look at both dynamic and static scales. We'll also look at both clinician and patient's perspective.

Importantly, like all of our trials, it's really important to capture the voice of the patient, so we'll be conducting qualitative interviews both at baseline and end of treatment. Ultimately, we'll package all that data, and that will inform future plans.

Yeah. Sam, on the, cash- Yep. On the cash burn, I appreciate the question. It's as I said in my prepared comments, the cash that we have today is sufficient to get us through basically advancing all of our programs over the next several years. What that translates to for 2026 is somewhere around $80 million of cash burn. That's the number for 2026, just around $80 million.

Thanks, Sam.

Our next question comes from Whitney Ijem with Canaccord Genuity.

Hey, guys. Thanks for taking the question. Just kind of to the FDA flexibility and macro tailwinds, Wes, I think you said there. Just curious if you've had a chance to speak with the agency on the plausible mechanism pathway. I know that was something you talked about back in December. Yeah, just curious if you've had those conversations and just as we think about kind of all of the indications where there is sort of clinical validation for topical rapamycin, just if that might be a potential path forward to shorten the timeline to some of those. Thanks.

Thanks, Whitney, for those questions. On the plausible mechanism pathway, at this juncture, we have not had formal interactions with FDA as to whether one or more of our programs qualify for the plausible mechanism pathway. Looking across our pipeline, we do have several molecules and several diseases that we believe represent closer to a validated mechanism than one that is plausible in nature. We're carefully monitoring how the FDA is implementing the new plausible mechanism pathway program. It is our intention to better understand whether one or more of our programs other than microLMs could qualify for the plausible mechanism pathway. On microLMs, we don't think that's a pathway at this point in time that we need to march towards an NDA submission and FDA approval.

Plausible mechanism could apply to cVM, potentially angiokeratomas, as well as porokeratosis.

Great. Thanks.

Our next question comes from Ryan Deschner with Raymond James.

Thanks for the question. Were there specific drivers in the written feedback from FDA that drove the acceleration in the angiokeratomas clinical initiation timeline? Also, what are your expectations for how far along in the clinical development of your new programs you can get with the current cash runway at this point? Thanks.

Great. Thanks, Ryan, for both questions. I'll take the first question, and then Matt can speak to the key milestones that we intend to achieve with the cash on hand. FDA granted us, Ryan, Fast Track designation in angiokeratomas at the conclusion of last year. We look at that as a major milestone for the company. It's our third Fast Track designated program. We placed in front of the FDA a phase II design on angiokeratomas of about 10 or 20 patients. That design is intended to really be a signal finding study. The FDA understands that we're evaluating a number of different endpoints in this disease, which currently has no FDA-approved therapies.

I think what enables us to move quickly there, and it's core to the business model that we articulated earlier, is we do have an open IND at the FDA around QTORIN 3.9% rapamycin anhydrous gel. They're very familiar with the tox package, all the safety data that we presented over the years. We're leveraging our existing manufacturing process, so our ability to jumpstart new indications on QTORIN rapamycin while preserving that same formulation, IND, manufacturing process is, we think, one of the advantages and what will allow us to do serial and sNDA submissions over time once we have that first approved indication, which we expect to be microcystic lymphatic malformation. Matt, do you wanna tackle the second part of the question?

Yeah. Thanks, Wes. Ryan, the existing cash, as I said, even without considering any revenue, fuels a whole number of catalysts for us over the 2026 and 2027 and into 2028 period. On the lead program mLM, we can get all the way through a potential approval and launch. On cVMs, we think we can get through a filing. For DSAP and angiokeratoma, the two programs launching phase II trials this year, we can easily get through data on those two trials. For the two new indications that we've talked about announcing this year, we believe we have sufficient cash to get through data readouts in those indications as well.

Importantly, my prepared comments were caveated by lack of any revenue adjustment for that cash runway. I think if we consider potential cash generation through revenue and launch, there's a potential that we can get to cash flow breakeven depending on how aggressively revenue ramps and depending on how aggressively we build out the pipeline. We feel like we have all the cash we need for the foreseeable future to really just focus on execution and generating data and eventually commercial products across the pipeline.

All right. Thank you very much.

Yeah, thanks for the question. We think the average patient will be 1 ppd, and we expect this to be dosed in a manner that will be chronic therapy. I think that's something that we've gathered from our KOLs, including folks like Dr. Mike Kelly from the Cleveland Clinic. The way we're modeling that, and Matt can comment further, is looking at that in the pricing range of $100,000-$200,000 per patient per year. Averaging that out across patients, some of whom will consume more than 1 ppd, some patients who probably will consume less than 1 ppd. Matt can comment on any further specificity that he'd like to add.

Yeah. Thanks, Wes. I think it's important when we have recently started talking about a peak sales opportunity of multi-billion dollar TAM and $1 billion or more as peak sales at mLM, which is taking pretty conservative assumptions across the board, including for patient numbers, penetration, and then to your specific question on any patient compliance assumptions as you move out in years for patients on drugs. We see any kind of compliance variations from a standard 1 ppd as being more than offset by the new incident population of more than 1,500 new patients coming in per year.

Yeah. Thanks for that question. We've had extensive conversations with our physician collaborators around that question. Many of our phase II and phase III investigators have utilized compounded off-label therapies. I think you heard that, Jenny, likely from Dr. Mike Kelly on the SELVA phase III data release. Very consistently what we hear is that physicians much prefer an FDA-approved therapy that has proven safety, quality, and efficacy, and done so in prospective studies under an FDA IND to any therapy which has not gone through that rigorous and stringent FDA-approved process. That's very consistent feedback, and I think, as we look at FDA activity around compounders, certainly the FDA is ramping up their enforcement of compounded medications in the presence of drugs that are FDA-approved, most notably from the GLP-1.

That's been consistent feedback that we have received from folks like Mike Kelly, Jim Treat at CHOP, and others. Most importantly, just to reiterate our SELVA phase III data, we saw 95% of patients who completed the efficacy evaluation period improve while on drug, and 86% of those were much or very much improved. We think that if we're FDA approved, we think that will result in a strong uptake from patients and physicians, and we're looking forward to that day of having QTORIN rapamycin be made available to those folks.

Our next question comes from Kaveri Pohlman with Clear Street.

Oh, yes. Good morning. Thanks for the updates, and thanks for taking my questions. I would like to follow up on maybe if you can provide more details on treatment compliance, what it would look like typically, and were there any patients in the phase III or prior phase II trial who needed to pause the treatment due to adverse events or any other factors? And overall also for mLM, out of 30,000 patients, can you share, like, what proportion you know consider truly, like, moderate to severe and therefore more appropriate for the treatment? I have a follow-up.

Yeah. Thanks for those questions, Kaveri. I'll start with the last one. We think that any patient who is within clinical medicine, and our data indicates that there's greater than 30,000 patients that are currently within clinical medicine that are diagnosed with microcystic LMs. We think any patient with that profile is a good candidate for QTORIN rapamycin. I think part of that goes to the underlying biology of the disease. This is a proliferative and progressive disease, so if the disease is left untreated, the patient will worsen. What we know clinically is that's likely to result in leaking or lymphorrhea, bleeding, other impact on quality of life and of course risk of infection, cellulitis and other infections, some of which can even be life-threatening.

We think the best approach, even for those patients who may be more moderate in nature, is to treat the lesion and treat it in a manner that hopefully alleviates the clinical signs but also prevents the progression of the disease. From a treatment compliance perspective, you know, our goal will be to work with, and Ritu asked the question earlier, our specialty pharmacy and our patient services hub to encourage patients to be compliant. We think that compliance with QTORIN rapamycin is set up in a manner for patients to be highly compliant with the drug. What do I mean by that? It is once daily dosing. We've also selected excipients in the formulation that are designed to be non-irritating. We do not have any traditional penetration enhancers.

For that reason, we would expect to see high compliance relative to other therapies which may require more frequent daily dosing and which may have more significant safety or tolerability effects. Jeff?

Yeah. Kaveri, thanks for the question on adverse events. You know, we've completed two clinical trials. The first was the phase II trial, which was 12 weeks. In that study, no patients withdrew due to adverse events. In the phase III trial, which was 24 weeks in duration, we had 50 patients enrolled. We did have six patients who discontinued treatment. Five of those six were deemed unrelated to study drug. One of the patients was related as possibly related to study drug. This is a patient who had a history of lymphorrhea and withdrew for lymphorrhea.

Oh, yes. Sorry. I just wanted to know if any patient had to pause the treatment in between and they restarted the treatment during that period?

No, we did not have that situation.

Got it. That's helpful. Maybe there was a recent publication suggesting that rapamycin's two years of continuous use followed by more like a customized intermittent use can provide long-term benefit to majority of patients. Is that your expectation for QTORIN rapamycin as well? Do you think having an official label and approval would increase awareness, and clear guidance could change these estimates around duration of treatment? Thank you.

Thanks for the question. It's a really nice scientific publication that came out just showing that, you know, long-term use of rapamycin can have a really nice clinical benefit. What we've observed in our clinical trial is that over 24 weeks with continued treatment you continue to have clinical benefit, and that we observed 98% of patients roll over to the treatment extension. So they were, at least in our perspective, perceiving a positive risk-benefit profile. We don't have additional data beyond that point, but we'll continue to monitor those patients in the treatment extension period.

Our next question comes from Catherine Novack with JonesTrading.

Hi. Thanks for taking my question. Just curious of, you know, what's still up for discussion at the pre-NDA meeting. Do you think you'll get clarity on the 3+ age range at this time, or would this be something that would take place down the line during labeling discussions? Just remind us of the enrollment dynamics that led to exclusion of the three to five age patients from the ITT in phase III. Thanks.

Great. Thanks, Catherine. On the pre-NDA meeting, essentially what you're doing is you're putting forth what you anticipate being your package to support substantial evidence of effectiveness, as well as what will constitute your safety package as well. I'm not sure those are up for discussion. I think the FDA has known for a long time about our drug development program, the fact that we ran a phase II study. Recall that they granted Breakthrough Therapy designation on that phase II study, so that's demonstration of preliminary clinical evidence. With a very similar design in phase III, albeit with a much larger sample size, we demonstrated highly statistically significant results on our primary, key secondary, and all secondary endpoints. It's a matter of presenting that data to the FDA.

To your question regarding age range, that typically does occur later on in the NDA discussions. We felt like it was important on this call to share that based on our feedback from investigators, that there is a desire for Palvella to advocate that younger patients might have this therapy available to them, of course, pending FDA review and approval. Jeff, do you wanna speak to why the three to five year-old cohort was not a part of the primary endpoint?

Yep. Thanks. Catherine, what we did in phase II is we had patients six and up in that trial where we had 100% of patients respond. For phase III, our intention was to repeat that successful study. We originally enrolled patients age six and up. We had a lot of interest from investigators to increase the age to three to five. We ran that by the FDA. They agreed, and they allowed us to expand while that trial was ongoing. Essentially because we haven't studied the efficacy in the three to five year-old population, we kept the primary analysis of the primary endpoint the same, age six and up, and then just did post-hoc analysis on the patient in the three to five year-old category.

Got it. That's very helpful. Thanks.

Thanks, Catherine.

Our next question comes from Albert Lowe with Craig-Hallum.

Hi. I was wondering, what are the steps for platform technology designation after the initial approval? When can you potentially receive designation, and how would this change the Palvella playbook?

Yeah. Thanks for that question, Albert. The goal is to secure approval of QTORIN rapamycin first. That's gonna be the first product from the platform, we believe, to achieve that FDA approval. As noted on this call, we've had a constructive and collaborative relationship with multiple parts of the FDA, including the review division and the Office of Orphan Products. Our strategy for achieving the platform technology designation would be to indicate our interest in that designation to the review division of the FDA, but also involving other parts of the FDA, if relevant, before submitting a more formal application around that. How does that change the Palvella playbook? I think that's an important question.

The platform technology designation, while relatively new, in many ways, functions similar to other expedited programs in the sense that, it's designed as a result of the FDA's review of a, CMC package and an understanding of a technology platform to then create more expedited and streamlined pathways for future, platform products. We see a lot of value in this, particularly given some of the similarities between QTORIN pitavastatin and QTORIN rapamycin. Dr. Osborne, David Osborne, and Jeff will be announcing a third QTORIN platform product later this year.

Again, further to one of my initial slides that was presented today, we are consistently pursuing and advocating for ways to get drugs to patients sooner and do so on reduced time and reduced capital, and we think the platform technology designation would help us achieve that.

Great. That's helpful. Thank you.

Thanks, Albert.

Our next question comes from Dev Prasad with Lucid Capital Markets.

Hi. Thank you for taking my question, and congrats on the update. I have a couple of questions. One is, can you talk about identification and recruitment of 10-20 angiokeratoma patient for phase II? Are you leveraging the same clinical site network as SELVA and TOIVA, or does this require a distinct referral approach? The second is the QTORIN pitavastatin. It's the first directed therapy for DSAP for this pathway. Just can you remind the most significant translational data or preclinical evidence that support this mechanism and what gives you confidence in topical drug penetration for these lesions? Thank you.

Great. Thanks, Dev. I'll take your first question on the angiokeratoma phase II study, and then Jeff will take your second question around evidence of mevalonate pathway inhibitors in porokeratosis. Actually, there's a great paper that Jeff was involved with that we recently published on that, so he'll be able to go through the highlights of that paper. In terms of the sites for angiokeratomas, you're exactly right. We are going to leverage some of the same sites that we've worked with closely in microcystic lymphatic malformations and cutaneous venous malformations. We have great relationships with these groups. We're also gonna leverage commercial sites that often have large volumes of patients with angiokeratomas. I'd say we've been pleasantly surprised.

One of our feasibility efforts that we make on our all of our clinical trials is understanding just how many patients a particular academic site or a commercial site have with this condition. I'd say consistently, we've heard from our clinical operations team that there are more angiokeratoma patients than there are microcystic LM and maybe even as much as cutaneous venous malformation. A nice blend of both academic sites and commercial sites, as well as a nice blend of sites who have been involved in mLM, cVM but also some new sites that will leverage for angiokeratomas as well as additional studies from our QTORIN platform. Jeff?

Yeah, thanks for the question, Dev. With DSAP, the genetics here are very well characterized, and a lot of this work comes out of the lab of Dr. Keith Choate at Yale University, who's a close collaborator and also a member of our MSAB. Genetically, they're monogenic loss-of-function mutations in any of the five genes involved in the mevalonate pathway. We know that this is the right pathway to involve a therapy. The idea mechanistically is if you can inhibit this pathway from being activated, you can have a clinical response because these intermediate metabolites can cause toxicity within the cells. This was first studied out of Keith Choate's lab. He did a really nice clinical study with topical lovastatin who showed clinical response.

Since that time, there's been a number of studies, about 24 studies that we recently published on during a review showing the potential proof of concept data with inhibiting this pathway in porokeratosis. Importantly, what we've uncovered in our formulation work, really led by David Osborne, was that many of these statins are chemically labile, so they break down very, very quickly, which really translates to the inconsistent yield which we've heard during our market research. What we've done with QTORIN pitavastatin is optimize that for delivery, so we get a very stable formulation and consistent delivery at therapeutic concentrations with low systemic absorption.

Great. Thank you.

Our next question comes from Jeet Mukherjee with BTIG.

Great. Thanks for taking the question. You shared some details about the phase II study for angiokeratomas in terms of number of patients and efficacy measures. I was hoping you could shed some light on the phase II study for DSAP as well. When can we expect data from both these phase II programs? Thank you.

Great, Jeet. Thanks for being on. Thanks for the questions. Jeff can speak to the phase II study design in DSAP. At this point in time, we have not given specific guidance on trial readout timelines. We are really enthusiastic about the fact that the angiokeratoma study one is moving ahead of schedule with the first patient expected to be dosed this quarter, and also just the level of demand that we're seeing for the study. We look forward to providing guidance on those trial timeline readouts here in the near term for both angiokeratomas and porokeratosis as we get a little bit further along towards initiation and start to move up the enrollment curve. Jeff?

Yeah, thanks for the question. The trial design for DSAP is not finalized yet, so we're still working through that. At a very high level, our approach is very similar. There's no spontaneous regression in this disease, and we know that inhibiting the mevalonate pathway is on target. What we've developed with QTORIN pitavastatin is an on target in tissue approach. We're looking at both individual signs of the disease and global changes in disease. We're working with both patients and KOLs to identify what are the right signs to measure and what we think we can have a clinical benefit on. We'll also, like all of our programs, incorporate baseline and exit interviews to help capture the voice of the patient.

That concludes today's question-and-answer session. I'd like to turn the call back to Wes Kaupinen for closing remarks.

Thank you, operator. In closing, thank you to everyone who firmly believes in Palvella's mission to serve, our vision to lead, and our strategy of being first in disease. We remain relentlessly focused on execution and have an unwavering commitment to delivering on this mission, vision, and strategy. We deeply appreciate your continued support. With that, I'd like to conclude today's call. Thank you, everyone.