Lance Thibault - Acting CFO, Treasurer and Secretary Stephen Yoder - CEO, President and Director Allan Reine - CFO Louis Matis - SVP and Chief Development Officer.

Michael King - JMP Securities LLC Hartaj Singh - Oppenheimer.

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

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

And before we begin the following Safe Harbor comments and before -- excuse me and before begin to review our financial results and business highlights the following Safe Harbor comments under those provisions -- under the Private Securities Litigation Reform Act of 1995, I'd like to caution that comments made during this conference call by management may contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of the operations of Pieris including statements related 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, August 10, 2017. Pieris undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

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

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

It's also my privilege to introduce you for the first time our new Chief Financial Officer Dr. Allan Reine, but some of you in no background in the intstitional. Allan brings significant financial experience to this new role including a detailed knowledge and extensive relationships with all the critical constituencies of the financial community.

Not to mention his deep understanding of therapeutic landscape given his training as a medical doctor. For purpose of this call, Alan will be in listen only mode given this very recent appointment at Pieris. But he will be financials on the next quarterly update. Allan, welcome to the team..

Thank you, Steve. I was invested in the company since it become public a few years ago and I watch this management team execute an ambitious strategic plan.

I'm joining Pieris at a very exciting stage following 2 recent strategic partnerships, the IND announced today for PRS-343 and a robust pipeline of preclinical candidates to further exploit the anti killer platform.

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

Thanks, Alan. Before summarizing our progress in the second quarter as well as some more recent highlights, I'd like to remind everyone that at Pieris we're leveraging our proprietary discovery platform, the pioneers of development of next-generation therapeutics called anti taken proteins.

Which have unique advantages over traditional antibody therapies including truly novel multi-specific formats, which were deployed particularly in the field of immuno-oncology as well as the inhalation potential of the drug class, which were exploding to address respiratory disease.

Our core RND strategy involves addressing validated targets in novel ways using unique features of our proprietary anti and protein drug class.

While our diversified business model involves developing a diversified pipeline comprised of a proprietary, wholly owned product pipeline as well as a portfolio of programs codeveloped via strategic partnerships spanning these 2 core immunology related therapeutic areas.

The first half of 2017, was a truly transformative period for the company with the signing of 2 major strategic partnerships that has enabled us substantially expand our financial run way through key clinical stage point while accelerating investment into our proprietary pipeline through the non-Diluted funding afforded by such partnerships and bringing us closer to our ultimate goal of becoming a fully integrated commercial stage biopharmaceutical company marketing transformative therapeutics in the USA.

Turning to our 2017, partnerships that advances corporate strategy. In January, we entered into a global co-development and co-commercialization partnership in a immuno-oncology [indiscernible] France's largest privately held pharmaceutical company.

Then in May, we entered into a global co-development and commercialization line in the area of respiratory diseases with AstraZeneca built around our lead respiratory PRS-060.

And in between, we entered into an option agreement that provides Astra pharmaceuticals a commercial stage depend pharmaceuticals company an exclusive option to develop and commercialize TRSLA in Japan and certain other Asian territories.

We believe these partnerships are accelerating our ability to become the fully integrated biotechnology company, while also allowing us to systematically partner valuable assets that's all outside our core therapeutic focus area like PRSLA. Our partnerships also allow to fund our wholly owned programs for major inflection points.

Altogether, the success based anticipated milestones from these partnerships including those from our partnerships with Roche, Daiichi Sankyo and Sanofi that totaled more than $4.5 billion as well as royalties on potential future sales. I'd like to now summarize the progress made during the second quarter across each of our core therapeutic areas.

As well as summarize our collaborations in greater detail. And I'll start with immuno-oncology. As you know, key therapeutic focus is the area of multi-specific protein therapies for immuno-oncology particularly tumor targeted T-cells. Our lead and wholly owned program PRS-343 is a bi-specific fusion protein made up of two parts.

Monoclonal antibody [indiscernible] which is a clinically validated target on tumor cell surfaces and anti-calin protein directed against the self-surface protein called call CD-137 also known as 41BB and which is expressed on the surface tumor specific T-cells within the tumor micro environment.

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

During the second quarter, the company filed an IND for PRS-343 and engaged in discussion with FDA to finalize the clinical protocol for our multi-ascendon Phase I trial in HER2-positive tumors. Following FDA's request to modify to those escalation portion of the protocol, we filed a response to address FDA's request.

And we're pleased to report that following this response, FDA has provided full approval of our IND, -- startup activities with initial clinical trial sites have the underway in the IND filing and they continued at a diligent pace and we anticipate as soon those the first patients.

Our global immuno-oncology partnership with Serbia is key to our I/O strategy and covers the development of 5 committed bi-specific therapeutic programs and may be extended to up to 8 programs.

This partnership features are renewed check point inhibitor PRS-332 which is a novel bi-specific comprised of an anti-PD-1 antibody genetically linked to an anti- protein directed against and as yet undisclosed check point target synergistic with PD-1 blockhead.

PRS-332 continues to advance through preclinical studies and we're planned to denominate a bi-specific development candidate in the second half of 2017 together with Siviat. Beyond PRS-332, we're pleased to have recently initiated activities for 2 additional bi-specific programs within the Saviat collaborative pipeline.

And now turning beyond both PRS-343, and PR 332 in connection with PRSs efforts to develop a broad pipeline of multi-specific anti-calin based proteins during the second quarter, we entered into a license and transfer agreement with [indiscernible] biotech pharmaceutical off often known as KLIN, where KLIN granted to Pieris a nonexclusive worldwide license to make development, manufacture and commercialize by an multi-specific fusion proteins that include a mono-clin antibody developed by KLIN specific for an undisclosed target and one or more anti-Kilen proteins.

We believe this type of transaction will be value creating and it parallel other antibody-based IP transactions we have entered into the past such as with a Numero Biomedical [ph].

Before concluding my update on our I/O efforts, I note that the also advance our collaboration with Roche, which was signed in December of 2015 and Pieris is developing anti- proteins specific for different isotopes on an undisclosed immune check point target.

We have amended our collaboration agreement with Roche to permit an expansion of the research term given both the positive progress which we made in this collaboration and the complexities of this program in tails.

Under that amendment, the initial research term will continue until January 2018, and Roche has the option to extend the terms through August of 2018. Finally, I'd like to discuss our most advanced program PRS-080, which is a highly focused inhibitor of [indiscernible] a key negative regulator of iron metabolism.

[Indiscernible] is up regulated in state of chronic information such as chronic disease effectively tracking in the bodies iron storage cells and this in turn causes what it caused functional iron deficiency anemia. PRS-080 is a reminder represent potential first in class therapeutic for this disease.

Pieris completed a Phase I be single sending those study in a minic dialysis depending chronic diseases patients that presented these data in June at the 54th European Association conference in Spain.

In this multi-center foreseeable controls double-blind study 24 dialysis dependent stage V chronic disease patients with anemia were treated with the single ascending dose of PRS-080 in 3 cohort that either 2, 4 or 8 milligrams per kilogram body weight.

Each anemia administration of PRS-080 was both safe and well tolerated at all doses and resulted in a profound decrease in within 1 hour after infusion followed by a robust mobilization at CMR with those proportional increases in both the level and the duration of CRM iron concentration in transfer and saturation following treatment.

And during the second quarter, Pieris also filed a separate clinical trial applications with the German and the Czech Republic revelatory authorities to conduct a multidose to randomize foreseeable controlled Phase II-A trial for PRS-080 in functional iron deficient anemia patients.

Depending timely regulatory approvals we expect to enroll patients beginning in the current quarter.

Completion of this trial importantly will trigger our partners in Japan as a pharmaceutical to decide whether to exercise the development in commercialization option PRS-080 in Japan and certain other Asian markets against the payment of the undisclosed auction exercise fee.

Our strategy for subsequent development of this small and other territories will involve out licensing assuming positive Phase II data. So in summary, it was a terrific quarter for Pieris and something you may have seen.

Pieris was added to the Russell 2000 and Russell 3000 NOCs and we believe this addition is but one example of Pieris is successful for an exciting progress to date. And turning lastly to respiratory. I'd like to provide you with an update on our quarterly progress in our partnership particularly with AstraZeneca.

As mentioned, in May this year, we signed a transformative global strategic partnership with AstraZeneca program PRS-060 and which we expect will allow us to leverage Astris establish expertise in complex formulations and inhaler devices for respiratory diseases. As well as their strong global commercial capabilities.

The collaboration covered a total of 5 programs including PRS-060. PRS-060 for any protein that is differentiated from standard care on several important levels including its inhaled mode of delivery and its mechanism of action involving the innovation of inflammatory effects of two key IL-4 and IL-13.

Here is the 60 works by blocking the ability of these to activate its clinically validated receptor on surface of respiratory cells called IL-4 receptor alpha. PRS-060 thus represents a first in class in health treatment for uncontrolled estimate that is based on IL-4 receptive block A.

And here is currently an IND enabling studies and we remain on track to initiate a first human clinical trial for the fourth quarter of 2017.

As trials sponsor, Pieris plans to dose healthy subjects in the fourth quarter of 2017 in a single ascending dose trials that will we funded by AstraZeneca followed by a multi ascending dose trial under a clinical trial notification to the therapeutic goods administration in Australia.

The dose in the first subject will trigger a milestone payment of $12.5 million by AstraZeneca to Pieris which comes in addition to the $45 million in up front payment Pieris has already received.

Following the first proof of concept Phase IIA trial in Astra patients which will also be funded by Astra, Pieris will then exercise an option to codevelop and separately to commercialize this program in U.S.

Exercising this co-development option, would entitle Pieris to a larger royalty up to the high teens or a gross margin share of future sales depending on the level of co-development by Pieris.

The AstraZeneca lines additionally includes the score get undisclosed novel programs, Pieris will be responsible for the initial discovery of novel and human candidates for these programs after which AstraZeneca will take the lead on continued development.

Pieris has an option to codevelopment upto 2 of these programs that have predefined preclinical stage which was entitled Pieris to a higher level of royalties or a gross margin share of future sales depending on the level of co-development investments. Pieris will also separately have the option to commercialize these programs in the U.S.

AstraZeneca was responsible for the development in worldwide commercialization of any programs for which Pieris is not exercised its options to codevelop and commercialize. So this concludes my prepared remarks, and I would like to hand back over to Lance to guide you through our financials for the second quarter..

Okay. Thank you, Steve. Good morning, again everyone. From the stock. With revenue which we recognized $1.8 million for the 3 months ended June 30, 2017. As this compares to the $1.1 million in revenue in the 3 months ended June 30, 2016.

Year-to-date revenues from June 30, 2017, was $3.2 million, which compares to $2.3 million for the same period last year.

The roughly $900,000 increase in the first half of 2017 over the first half of 2016 is on a calendar beginnings of revenue recognition, under our collaboration with Servia which commenced in January 2017 and started recognizing revenue under our collaboration with AstraZeneca which commenced in May of 2017.

These were in offset slightly by lower revenues and the amortization of our upfront payments under our collaboration with Roche. Research and development expenses were $5.4 million and $10.8 million for the 3 and 6 months period ended June 30, 2017. These compared to $4.5 million and $8.2 million for the 3 and 6 months period ended June 30, '16.

The company's increases has been research and development expenses reflect that is really crossed our pipeline as a program that Steve has indicated in his prior comments.

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

Further on allocated cost for us which includes some personnel expenses, general and supplies, license fees and outside these are the increase as well period-on-period approximately $600,000. In general and administrative, these expenses were $4.3 million and $8.3 million for the 3 and 6 months ended June 30, 2017.

These compared to $2.4 million and $4.3 million for the 3 and 6 months period ended -- corresponded period ended in 2016.

The increase in the 27 period that's compares to the corresponding periods in 2016 is largely attributable to allow $1.8 million in transaction fees, connected to the successful close of our license and collaboration agreement with AstraZeneca.

While more recurring nature recruiting and personnel costs related -- and personal related cost are pretty significant as we continue to build the organization. And we find ourselves increasingly in need of outside professional services including for IT, corporate legal work, auditing, finance, communication and other factors of the business.

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

-- $10 million and $0.25 per share or 6 the month ended June 30, 2016. Quickly turning to the balance sheet. Our cash position as of June 30, 2017, was $50.3 million and a net increase of nearly $21 million compared to this $29.4 million, we had this as the end of last year 2016.

The increase in our cash reserves is principally attributed to the EUR 30 million upfront payment we received from Servia and a $2.8 million option payment received from Astech. On the sense side cash and operating expenses for RND and G&A activities demolished to approximately $15.2 million year-to-date for the first half of the year.

To all that, let me add we received $45 million above from payments from AstraZeneca last month July. And with those highlights, I'll turn the call back over to you Steve for any closing remarks..

Thanks, Lance. We're pleased we have built on in the second quarter on the momentum with which we began this year having 2 crucial partnerships in the first quarter with Servi and ASKA as well as now the transformative respiratory disease focused aligns with AstraZeneca in the second quarter.

Now poise to drive significant value creation through partnership and our key focus areas of immuno-oncology and respiratory disease. And the recent acceptance by FDA of our IND filing for PRS-343 will allow additional value creation for our wholly-owned program. With the expected near-term initiation of patient dosing.

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

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

Melissa?.

[Operator Instructions]. Our first question comes from the line of Hartaj Singh with Oppenheimer..

Just a couple of very quick questions. The work you're doing on the IND, where you're going to be caught approval from the FDA on 343, you're going ahead and including patients from solid tumor H2, I hear 2 positive patients. Can you just detail sort of how would you screen for these patients.

What's the range of solid tumors and HER2 that you're looking for. And any additional requirements that IRB's might have in terms of this Phase I. And I just got a quick housekeeping question after that..

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

Yes, sure. Thank you, Steve. With respect to the patient eligibility and the screening for HER2 it obviously depends on the tumor type. So the trial during the dose escalation phase is open to all patients with demonstrated HER2-positive tumors.

That concludes of course tumors that are well known in HER2 space such as breast cancer, gastro [indiscernible] cancer and bladder cancer. But addition the whole range of additional HER2-positive tumors that have been discovered from example trial.

And the screening for of course in those indications where there are designated for certified for HER2 positivity at a 3 plus level, such as gastric cancer and breast cancer of course. Those patients have to be equipment clear certified positive for HER2.

In general, we will allow the site to use their own standard HER2 assets but they have to be a clearly associated with HER3 plus positivity in other tumor types as well. So all comers and 3 plus certain positivity..

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

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

And it relates to maybe cash reach. I think, the flexibility we have now is to make strategic investment decisions based on data. Particularly data that we will emerged from PRS-343 across 2018. So obviously, the more we invest into that program, the more that would affect cash reach.

And I think, the good news is that we're going to be data driven and make investments that make sense. So we have plenty of cash to get us through multiple clinical inflection point for multiple programs.

And I think what we can do is as data emerge from PRS-343 whether that's next quarter or later in the year or early next year we can provide more color on that. But right now we're pretty content with the balance sheet and our investment priorities on our pipeline..

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

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

Thanks, Mike for the question. It was not asked yet. And likely a question on 343 from Hartaj, I'll happy to turn this over Lou to answer as well..

Sure, Steve. So the trial will begin within accelerated alteration design in the initial dose escalation cohort. With 1 patient for cohort enrolled at each dose until patient's experience is great through treatment related adverse in the first cycle of therapy. That occurs that will initiate a transaction to modify 3 plus 3 design.

At the very highest force levels before highest levels, we're implementing 3 plus 3 design and regard with the even in the absence of having observed AEs.

I have to say we're really very pleased to have approval for the accelerated design because it does give us the potential to accelerate the timeline to patients receiving dose this producing more effects..

Okay.

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

Yes, it will be a standard dose escalation as Steve mentioned during his presentation earlier, the FDA did ask to modify the dose escalation protocol to the extent that they wanted us to begin somewhat lower doses because of the prudent see over drugs. So we're very gratified by the urgency of the drug.

We summer but it's going to be standard dose escalation from there and it's going to be 3 week deal so that's there as well. So once we have a patient dose to be given those levels and after 3 weeks, there's no toxicity we can then move on to the next dose.

So that also allows us to accelerate the progress towards the higher and potentially efficacious doses..

Okay, great. And then I was encouraged by Steve's formal comments about the numeral relationship, Steve, I think I get my geek on with the platform.

I'm just wondering can you talk about when we may see nominated in Pieris pipeline that may have emerged from your collaboration with them?.

Sure, thanks, Mike.

And I think I mentioned in the numeral relationship in the context of our now license agreement with Keelan biopharma, where we with Keelan in license IP on a novel antibody to further build on novel multi-specific but the numeral relationship entails us having in license IP on their PD-1 antibodies where we genetically link to different any keelans targeting synergistic checkpoints with PD-1 and for IP reasons and for strategic reasons on your partnership with Servia.

We've not yet disclosed what that other check point engaging any Keelan is. And we're not yet certain when we're going to disclose publicly when that is. We remain on track to nominate we call development candidate by the end of the year.

So that really means we're comfortable with the neuro acid sequence of the fusion protein how it behaves both from the pharmacodynamic prospective and a pharmacokinetic on manufacture ability perspective. And the power of our platform is we get to nominate or interrogates them in addition to the same building blocks. So that's the process we're in.

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

[Operator Instructions]. Our next question comes from the line of [indiscernible] with Robin..

Also wanted to focus on 343 study if you don't mind, with the second part being more forward-looking. First, with regard to looking beyond initial tumor responses with the efficacy.

What kind of markers would you be looking at in the study especially with regard to T-Cell activation?.

I like thanks you for the question and we we'll answer that again..

That's a good question and obviously that's a major focus of our trial. So we are in this trial going to be looking to biomarkers very early and aggressively.

We have built into the protocol longitudinal biopsies creating imposed therapy in the tumor micro environment it will be looking at both in the histochemistry as well as gene expression analysis look evidence so for example just as one obvious marker, given the prudence of our drug and inducing CTA T-Cell responses in tumor micro environment in preclinical studies we'll be looking at similar potential effective of drug in the tumor micro environment of patients with HER2-positive tumors.

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

That's really helpful. And I guess the real forward-looking part of my question for the study is based on the fact that you're going to get a lot of data from it. Is from a business development standpoint and having multiple tumor types in this as well.

Do you feel that this study alone could provide the significant BB activities or you sort of on wait and see mode?.

Yes. I think from a BD and Corporate Development strategy perspective, PRS-343 to us represents potentially the largest value driving asset in the company.

And as part of our strategy, a forward integrating based on data and ultimately marketing and selling therapies in the United States, that's our plan and if we choose to maybe partner in a way that accelerates that we'll explore that but in the meantime we'll content to keep this to ourselves.

Because we have the capital and we have the plan, and we have the network of people internally and to a great advisory network to move this forward on our own foolproof of concept. And from that we are going to be data-driven..

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

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

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