Greetings, and welcome to the Pieris Pharmaceuticals Inc First Quarter 2019 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Allan Reine, Chief Financial Officer for Pieris Pharmaceuticals. Thank you. You may begin..

Thanks. Good morning, everyone. And thank you for joining us for first quarter 2019 conference call and corporate update. On the call today, we have Steve Yoder, our President and CEO; and Lou Matis, SVP and Chief Development Officer, who will be available for Q&A.

You can access the press release released this morning on the Investor Relations page of our website at www.pieris.com.

Before we begin, I'd like to caution that comments made during this conference call may contain forward-looking statements involving risks and uncertainties regarding the operations and future results of operations of Pieris, including statements related to the timing and progress of our clinical trials and preclinical programs.

Our partnerships and our financial position and actual results or events may differ materially from those expressed or implied by such forward-looking statements. Factors that might cause such differences are described in our filings with the SEC, including our annual, quarterly and current reports.

The information being presented is only accurate as of today. And Pieris undertakes no obligation to update any statement to reflect future events or circumstances. With that, I will turn the call over to Steve..

Thank you, Allan. And thank you to everyone for joining us today for our 2019 first quarter earnings call. I will begin the call by giving a brief introduction to Pieris before discussing our pipeline progress and our plans for the remainder of the year.

At Pieris we are leveraging our proprietary Anticalin platform technology to develop protein therapeutics.

Anticalin proteins are engineered human lipocalins, which are proteins that are naturally abundant in the body and serves to bind and transport various molecules, because lipocalins and by extension, Anticalin proteins are smaller, and typically more stable and engineerable that antibodies.

They offer unique advantages to other treatment options, such as inhaled delivery to treat respiratory disorders locally or creating more complex by specific formats to drive the desired biology as we are doing in immune-oncology. I'll now turn to a brief overview of our respiratory strategy.

And Anticalin's capacity for inhaled delivery informs are growing respiratory franchise. We are developing multiple inhaled drug candidates for respiratory disease in collaboration with AstraZeneca, as part of a five program respiratory alliance showcased by our lead program PRS-060 and four other programs.

Within this alliance we have retained co-development and co-commercialization options for PRS-060 and two other programs. PRS-060 is an inhalable IL-4 receptor alpha antagonist and development for the treatment of asthma and is our lead respiratory asset.

We look forward to presenting first demand data at the 2019 American Thoracic Society International Conference later this month. In that trial, a single ascending dose Phase 1 study, PRS-060, was demonstrated to be safe and well tolerated in healthy volunteers in nebulized doses ranging from 0.25 milligrams to 400 milligrams.

This was the first Anticalin protein to be administered to human subjects via inhalation. And we believe that the single ascending dose Phase 1 data help to de-risk this Anticalin protein from a safety perspective.

Further, as our lead program, PRS-060, serves as proof-of-concept for the inhalable administration potential of our platform, in addition to PRS-060 being a promising commercial opportunity itself.

Looking beyond, this first in human trial, we plan to present data from the ongoing placebo controlled multiple ascending dose Phase 1 study of PRS-060 in patients with mild controlled asthma with pre-screen elevated levels of fractional exhaled nitric oxide or FeNO and elevated levels meaning PPBs greater than 35.

We present to -- we look forward to presenting this at an upcoming medical meeting alongside our partner, AstraZeneca, with FeNO being a validated marker of lung inflammation. As a reminder, the objective of the study is to ascertain a meaningful pharmacodynamic and pharmacokinetic or PKPD profile for the drug candidate.

More specifically, we are evaluating the safety tolerability in PK profile of this drug candidate along with its capacity to reduce FeNO in mild asthmatic patients dosed with PRS-060 versus placebo.

The ability of PRS-060 to reduce FeNO could reflect effective IL-4 receptor alpha target engagement locally in the lung, demonstrating PRS-060s therapeutic potential and better in forming a Phase 2 dosing regimen.

As a reminder, our R&D strategy is focused on addressing clinically validated targets in new ways to develop differentiated drugs with relatively lower biology risk that a first-in-class therapy. And we believe PRS-060 is a great example of this strategy.

In this respect, PRS-060 engages the same target IO for receptor alpha as the approved drug Dupixent or Dupilumab. Dupixent, which is an injectable molecule antibody, was approved earlier this week by the EMA for severe asthma in patients with either high [indiscernible] or high FeNO.

And this is the first time to our knowledge that FeNO has been the basis of an approval for an asthma biologic, which reinforces our conviction that the FeNO reducing potential of PRS-060 in our ongoing Phase 1 multiple ascending dose study could create a significant inflection point for this program.

And looking forward, assuming successful completion of the ongoing multiple ascending dose study, AstraZeneca will sponsor the Phase 2a study details of which will be made available in due course. Once this Phase 2 study is complete, Pieris may exercise its options to co-develop and separately to co-commercialize PRS-060 in the United States.

Additionally, we continue to advance two discovery stage programs we initiated last year as part of our respiratory collaboration with AstraZeneca, under which AstraZeneca may initiate up to two additional programs.

And we also continue to advance the two proprietary discovery stage programs we initiated last year and we plan to initiate additional proprietary respiratory programs later this year. I'd now like to turn to our immuno-oncology pipeline.

As a reminder, our lead oncology asset PRS-343 is a fully proprietary for 4-1BB/HER2 bispecific designed to preferentially activate tumor-specific T-cells in the tumor microenvironment.

We continue to enroll patients in our PRS-343 Phase 1 dose escalation trial for HER2-positive solid tumors with the objective of ascertaining the appropriate exposure levels of the drug candidate as measured by a desired PD response. We intend to report comprehensive data from the PRS-343 Phase 1 monotherapy dose escalation study later this year.

And we also continue to enroll patients in our Phase 1 dose escalation trial in combination with atezolizumab, an approved PD-L1 inhibitor, under a drug supply agreement for Roche, and we intend to report data from that study later this year as well.

Beyond PRS-343, we plan to file an IND application later this year for PRS-344, which is a PDL1/4-1BB antibody Anticalin bispecific molecule, and is a lead program in our five program immuno-oncology collaboration with Servier.

We also recently presented preclinical data for PRS-342, a GPC3/4-1BB bispecific drug candidate at a poster session at the 2019 American Association for Cancer Research ACR Annual Meeting. Additionally, our Seattle Genetics immuno-oncology collaboration continues to advance according to plan.

And finally, I'll provide a brief update on PRS-080, which is a half life optimized hepcidin antagonist for anemia. We intend to report results from the Phase 2a multiple ascending dose study for this program at the 24th European Hematology Association Congress or EHA on June 16, 2018.

We are also be sharing the data set with ASKA Pharmaceutical who have an often right to develop and commercialize PRS-080 in Japan and other Asian territories. This concludes my prepared remarks. And I would now like to hand back over to Allan to guide you through our financial results for the first quarter of 2019..

Thank you, Steve, and good morning again, everyone.

For revenue, we recognized $8.5 million for the quarter ended March 31, 2019 as compared to $4.2 million revenue in the quarter ended March 31, 2018, reflecting higher amounts of revenue recognized from upfront and milestone payments along with billing for development services from our partners, research and development expenses were $14.3 million for the quarter ended March 31, 2019, as compared to $7.9 million for the quarter ended March 31 2018.

This increase in R&D expenses reflects increased clinical, drug supply, manufacturing and salary and benefit costs associated with the advancement of our clinical and preclinical programs. General and administrative expenses were $4.9 million for the quarter ended March 31 as compared to $4.4 million for the quarter ended March 31, 2018.

This increase in G&A expenses is attributable to both higher personnel costs and professional service fees such as audit and tax. The net loss for the quarter was $10.3 million or $0.20 per share compared to a net loss of $8.7 million or $0.17 cents per share for the quarter a year earlier.

Now turning to the balance sheet, total cash, cash equivalents and investments as of the quarter ended March 31, 2019, total $110.8 million as compared to cash of $128.1 million as of December 31, 2018. This reflects increased operating expenses as well as annual bonus payments, which are made in the first quarter.

Our quarter ending cash balance was also impacted by higher prepayments for the quarter of $1.8 million and the timing of payments from our strategic partners, which is reflected in $4.4 million increase in accounts receivable on our balance sheet. With that, I will turn the call back over to Steve..

Thanks, Allan. And just in conclusion. I'd like to say, we look forward to sharing the data from the single ascending dose study of PRS-060 in the coming weeks at ATS, and the data from the ongoing multiple ascending dose study of that program at its upcoming medical meeting.

We also look forward to sharing data from the monotherapy and atezolizumab combination studies of PRS-343 later this year in addition to the filing of the IND for PRS-344. Thank you for joining us on the call today. And we now would like to open the call for your questions..

Thank you. [Operator Instructions] Our first question comes from the line of Umer Raffat with Evercore ISI. Please proceed with your question..

This is Paul [ph] on for Umer. I have some quick question on the PRS-060 program.

First, on the single ascending dose, what -- in terms of the systematic exposure, what dose in the single ascending dose is comparable to dupi? And how should we think about that? And also on the lung residence time of the PRS-060, how should we think about that? And what informed you to have the BID dosing in multiple ascending doses? And also on the formulation bridging Phase 1, you mentioned on the ClinicalTrials.gov, you're going to use the monodose inhaler for the dry powder inhaler.

Should we assume that this is going to be the device you use in Phase 2 and beyond? And could you remind us what are the -- some of the approved drugs using this device and your confidence level with this? Thanks..

Thanks Paul. We're scribbling furiously there to catch all those questions. So we'll start with the first one what is about the dosing, the dosing regimen and information from the dosage of the statics data you're mentioning from the single ascending dose trial and what to infer around long residence time. And Allan is happy to take that question..

Yes. So what's public so far though is our -- is the abstract from ATS, honestly, the poster you'll see in a couple of weeks. So when we look at systemic exposure, we're not trying to get to dupi like systemic exposure. Now, when we see the full data set, can we get there with high enough doses of our drugs? The answer is we can.

As you see in the abstract, we can show pretty robust statics inhibition, a very high dose that lasts significantly long time there you think you would get consistent systemic knockdown of that drug. But again, to remind you, this is, we believe asthma is a local disease. And this is a local therapy to address that, again, local inflammation.

So that's our target here. We're not saying that systemic exposure is necessary to drive efficacy with our drug. Now we can get some systemic exposure depending on where we dose, and we'll look at what the efficacy looks like both in the Phase 1b from the multi-ascending dose study and mild asthmatics and looking at the FeNo reduction.

And we can compare that to the systemic exposure that we end up seeing with those different dose levels. And then again in the Phase 2a will be able to test that in the moderate to severe population as well. In terms of long residence time, there's going to be some more information at ATS. I'm not going to disclose anything more on that today.

And why BID [ph], I think it's a present time, as you say, we think BID [ph] is a reasonable dose level of efficacy. It doesn't rule out that one day that we're going to look at ones a day, and determine if that is also an effective way to dose this drug. But we know that the idea or believe the idea gives us the coverage need.

And there's always potential to go to ones a day from that. When we think about the bridging study, we're using the InnoSpire nebulizer, which was the same as the Phase 1a study. And as you said, monodose dose inhaler.

We've said previously, our attention is that our Phase 2a study will use the dry powder formulation and AstraZeneca is developing that, and after taking the lead on the DPI formulation, and all the bridging work. So we're not getting additional details on that at this time.

However, it's a small study to bridge the DPI formulation, and it continued to progress according to plan. So I'm not going to comment any more on device or anything like that that's for AstraZeneca or [indiscernible] once the approved drugs are that have been used in that.

With that, next question, or sorry Lou, do you want to add?.

I just like to add another point that we're very pleased with the fact that we were able to show stature condition because it's really demonstration that the drug remains stable. And also shows the ability of the drug even [indiscernible] to continue to inhibit its target. And it's a direct demonstration of IL-4 inhibition as well.

So it's a very nice proof of concept in those studies..

Thank you. Our next question comes from line of Chris Shibutani with Cowen and Company. Please proceed with your question..

Hi, this is Pam Barendt and for Chris. Good morning. How does your respiratory strategy differ between your proprietary program and the program you started to discuss a little more at least making us aware of them the discovery stage programs? Thank you. And then I have a follow-up..

one is we like the strategy in the near-term of addressing validated targets locally, targets that are validated clinically, maybe more systemically to go after them locally; and number two, not being constrained to asthma. Asthma comes with large and longer development times in some other respiratory diseases.

And so it's a mix, its part of our portfolio balancing. And I hope that gives you a flavor of how we're striking that balance between what we're working on with Astra and then what we're working on our own.

And look forward to in the future, probably not this year, of disclosing some of those targets once we feel more comfortable from a competitive intelligence and an IP perspective..

Thanks so much. And my follow-up question was on the IL program. So you mentioned the IND that you're hoping to send that. So you mentioned in the IND that you're hoping to submit this year with Servier.

Can you provide any insight into your philosophy in this collaboration with regard to potential indications whether there would be any overlap with 343? Or if you'd be looking in a completely different direction, so there wouldn't be any competition there or necessarily read through? Thanks a lot..

Sure Pam. So I'm going to let Louis to take and answer on this question. Thanks..

Yes. So with this drug which is a PD-L1/4-1BB bispecific molecule, we're not disclosing indications. One thing that we can't say is that with PDL1 as the anchor in the tumor microenvironment is the molecule that's expressed both on tumor cells as well as on cells within the tumor microenvironment, both myeloid and lymphoid as well.

The range of different tumor types that one can address with a PDL1 tumor microenvironment binding for BB activating bispecific is really quite large. And so it does give us a larger landscape of tumors to address.

And I think that, we are -- in our discussions and strategizing with our partners in this, ultimately will make a decision about what the tumor to go in first, but we're not mentioning that now..

Thank you..

As far as the combination, it's very attracted to us because it's a combination of a checkpoint inhibitor and a immune per stimulator and one molecule.

And there's abundant evidence from certainly raft to preclinical literature that PD1 pathway inhibition combined with 4-1BB activation is quite synergistic, not only in generating in anti-tumor immune response, but in generating anti-tumor activity as well..

Our next question comes from lines of Biren Amin with Jefferies. Please proceed with your question..

Just on the asthma Phase 1b trial. Are you measuring anti-drug antibodies? And how should we think about immunogenicity with this drug? Thanks..

Hi, Biren, this is Steve here again. So yes, there is an easy maybe a simple answer to this. Yes we are measuring for us and we are not at liberty to talk about any data from the ongoing trial. As a reminder, it is obviously confidential information under the AstraZeneca Alliance.

We look forward to presenting a really a comprehensive data set at an upcoming medical meeting, once the trial is complete. Thanks..

And then, I guess on the other respiratory collaboration with -- when would we start to learn about additional targets that you've interested in. And I think you also have some in-house proprietary programs as well.

So when we learn more about those targets as well?.

Hey Biren, this is Allan here. So as far as AstraZeneca is concerned, that's the disclosure of those targets is really dependent on AstraZeneca. So we're not free to disclose what they're developing. So you'd have to stay tuned for either -- their pipeline disclosures, their potential presentations and medical meetings and things like that.

As we've talked about, we've already started two additional programs on top of PRS-060. We have another two programs that'll initiate likely this year, which will round out the total five from that program. As far as proprietary pipeline, I think it's the same thing.

As Steve said earlier, for IP reasons and competitive reasons, we don't want to disclose everything for our target text. But we're very, I guess, excited about our discovery efforts within the respiratory area.

And as we get, further along with data and get some preclinical data in-house that we feel good about presenting, I think, we'll at some point and file IP, and I think we'll get more comfortable that relating to the street what those targets are..

And then, I guess just from a proprietary respiratory pipeline standpoint, Allan.

Is a company looking at large indications like asthma or their orphan indications that they could -- that you could pursue with those targets?.

Yes, it's everything is on the table. When we think about respiratory diseases, there are many diseases out there. Asthma is just one of them. There's a lot of block -- obviously, blockbuster drugs within the asthma paradigm. And when we look at T2 asthma, there's a lot of low hanging fruit on targets that you can go after for asthmatic disease.

But as you said, there's plenty of other indications out there, both orphan and larger indications that we can think about within respiratory. As Steve said earlier, we've built up a really broad, impressive network of respiratory KALs [ph] in a really impressive Scientific Advisory Board.

In addition, we've really bought up our scientific expertise in-house when we think about translational work with in respiratory diseases. So we're really looking at the full gamut of anything respiratory..

Thank you. Our next question comes from line of Matt Phipps with William Blair. Please proceed with your question..

I guess that PRS-343, so continuing to enroll patients there. I believe kind of one of the last updates you were at the approved trastuzumab dosage level.

I was wondering, are you dosing above that? Or is this really more backfilling previous dose levels with kind of the IL response of tumor types? And then additionally, are you seeing or what you can say at this point, but since you're using this same full on BB Anticalin and some of your other projects, I mean, are you getting confidence from 343 that this Anticalin is definitely active in the tumor micro-environment?.

Thanks, Matt. Again, I'm going to let Lou to take a stab..

Yes, as we said, we're not going to comment on data. We look forward to presenting really a complete data set for both the monotherapy as well as a combination study by the end of the year. We are continuing into dose escalation to determine the best exposure for the drug. Again that is liberty to say whether we've seen for the 4 BB activation.

What we can say which is actually we think we were very pleased to see that in a plenary session at the AACR, American Association for Cancer Research meeting a little over a month ago. Roche, who has a very similarly designed bispecific tumor targeted Anticalin BB molecule.

Their tumor target was FAP, fibroblast activation protein, which is found in elevated levels in the storm of different tumors. And they presented a single patient from a plenary session, one patient from their trial who had achieved a partial -- a clear partial response.

So that was basically their validation of the fact that a tumor targeted 4-1BB bispecific can work both with respect to activating the tumor micro-environment and eliciting a objective-response of the tumor itself. Next public data that those, that's public presentation. So we are looking forward to presenting our data later this year as well..

And Matt, just to add to that, you'd asked around them doses, these are the indicated Herceptin levels, and they are different. So we are exploring exposure levels of our drugs to that would probably be higher than what you would dose with trastuzumab, given that are bispecific target kinetics at stake.

So I would say that there are two ways to do that. You could do absolute dosages, dose amounts, as well as frequency. And so those are things that we're looking at as we continue to escalate. But of course, we also have the flexibility, as you mentioned to backfill and our protocols has a lot of flexibility to go out to at least 10 patients per arm.

And so we are also exploring that and are guided by a totality of data from drug like properties and PD of patients in any of those given arms on the way through escalation..

Thank you. [Operator Instructions] Our next question comes from line of Joe Pantginis with H.C. Wainwright. Please proceed with your question..

Wanted to focus my question on the co-development option for 060.

First from a logistical standpoint, can you just remind us how long you have to make the decision on your front? And then number two, even if it's just a broad stroke, financial answer with regard to maybe the net effect of your co-development, participation meaning, obviously your expenses would increase with the co-development, but there was also be offset from milestones for AstraZeneca.

So maybe what the general net effect might be for your participation if you were to co-develop? Thanks..

Hi, Joe. So I'll take the first cut it out if anybody wants to add to feel free. So there are two questions there. It's maybe the mechanics of being able to look at the data share, share the data, and decide whether to opt-in. And then the second part is the return on investment as a function of our co-investment if we choose to go down that path.

So on the first point, we -- these are all confidential terms under the contract unless otherwise disclose. So the precise timing of the opt-in decision, which, again, is after the Phase 2a data are available from the forthcoming Phase 2a trial. We haven't disclosed a specific time period.

However, what we have disclosed is that it was important for Pieris to be able to disclose the essence of those data to be able to get credit for them, if they are positive, in order to inform the potential for the drug going forward in order to then access the necessary capital to go forward in co-development if we choose to do so.

So there will be an opportunity for the street to be able to understand what those data are to understand our basis for moving forward if we want to move forward in co-development at that time.

Number two, as for the leverage on return on investment as a function of sitting back and just enjoying milestone and royalty income versus co-developing going forward with AstraZeneca, we again haven't disclosed specific details on the milestones or the royalties or the full impact, if we were to go at the full threshold of co-development.

However, what we can say is that beyond just sitting back and enjoying milestone in royalty income with no investment, we can invest in multiple peers and depending on the level of investment that we would take, we can in some certain, in some instances, increase the milestones and the royalties into the high-teens.

And that royalty stream would continue as long as sales continue. And at the highest threshold, we can convert the royalty to a gross profit split on the basis of global sales, again for so long as sales continue.

And we structured the deal that in our beliefs allows us to with each dollar invested in the program allows for a more leverage return on investment. And so if the data were in fact positive, looking again at FEV1 lung function improvements.

Today, as I said here today, I think we would really like to be able to invest as much as we can in that program, because we believe that's a significant de-risking point for the program. And number two, the way the mechanics are of the contract that would be the best return for Pieris shareholders long-term..

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Yoder for any final comments. Thank you..

I just want to thank everyone again today for your attention and for your continued support. We look forward to keeping you updated on our progress and the disclosure of data for PRS-060 in about two weeks. Thank you again for joining the call and have a great day..

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