Greetings, and welcome to Pieris Pharmaceuticals' Q1 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 turn the conference over to your host, Tom Bures, Vice President, Finance.

You go ahead..

Thank you. Good morning, everyone, and thank you for joining us for our year-end 2020 conference call and corporate update.

On the call today, we have Steve Yoder, our President and CEO, who will provide a corporate overview and outlook on our pipeline; Hitto Kaufmann, our Chief Scientific Officer; and Shane Olwill, our SVP and Head of Translational Science, 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 relating 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 statements to reflect future events or circumstances. I'll now turn the call over to Steve..

Thank you, Tom and thank you to everyone for joining us today for our 2021 first quarter earnings call. The last few months have been very productive and marked by significant accomplishments, as we advanced our proprietary and partner pipeline and leveraged existing and new alliances to materially bolster our balance sheet.

Putting the past few weeks into perspective, we have generated $46 million in cash flow through milestone achievement, equity investments by partners AstraZeneca and Seagen and the addition of a new partner, while also securing drug supply for a key combination study for our most advanced IO asset.

We can and will continue to use partnerships and the power of non-dilutive funding mechanisms to reach significant corporate inflection points.

Pieris is the proprietor of a class of next generation therapeutic polypeptides called Anticalins and we are focusing the development of Anticalins in two areas; one, inhaled delivery for respiratory disease and two, bispecifics in immuno-oncology.

I will first share some exciting updates for my respiratory pipeline, and I'm pleased to begin by announcing that patient dosing with PRS-060 has begun in the first part of a global Phase IIa study.

PRS-060 is an IL-4 receptor alpha antagonist we are developing for moderate to severe asthma in collaboration with AstraZeneca and it's our lead respiratory program.

The first part of this two part study is evaluating the safety and pharmacokinetics of the dry powder formulation of 060 in moderate asthmatics controlled on standard of care asthma therapy over four weeks.

The second part of the study will then evaluate the efficacy, safety and pharmacokinetics of PRS-060 in moderate uncontrolled asthmatics over four weeks. The primary endpoint of the study will be FEV1 improvement compared to placebo.

Last quarter, we announced the achievement of a $13 million milestone payment in connection with the initiation of this clinical study, alongside a $10 million equity investment from AstraZeneca in connection with a restructuring of certain financial terms for PRS-060 in a manner that does not impact the overall value split of the asset between Pieris and AstraZeneca.

We are pleased with AstraZeneca's commitment to this program and to this collaboration more broadly, which also includes four discovery stage programs that are currently under active collaboration.

In addition to our partnered respiratory programs, we are also developing a number of proprietary programs and look forward to sharing additional details, including IND plans for one of these respiratory programs later this year.

Looking beyond our respiratory franchise, I would now like to discuss the progress we have made in our immuno-oncology pipeline. Our immuno-oncology pipeline is coming concentrated around our expertise in 4-1BB based bispecifics.

We remain enthusiastic about 4-1BB as a target, which is an immune cell co-stimulatory receptor that is over-expressed on activated T cells and natural killer cells in particular, and whose activation drives improved metabolic fitness of the cells.

We have designed our 4-1BB based bispecifics with the objective of agonizing 4-1BB locally to leverage its benefits, while overcoming systemic and off target side effects that have plagued systemically active 4-1BB agonists. We were the first company to bring a 4-1BB based bispecific into the clinic, which is now progressing into Phase II.

And we have a number of 4-1BB based bispecific programs following that lead. Cinrebafusp Alfa, also known as PRS-343, or CINRA is our lead 4-1BB clinical program. CINRA is a 4-1BB HER2 bispecific that we have tested in two Phase I studies.

Last month, we presented a clinical data update from the Phase I monotherapy study of CINRA at AACR, disclosing additional clinical benefit at the highest dose, including an additional confirmed, durable partial response, three additional patients with stable diseases best response and overall durable benefit.

CINRA has shown a clear dose response and a 4-1BB driven mode of action and clinical benefit was observed in patients with cold tumors, as well as those with HER2 low expressing tumors. CINRA has shown an acceptable safety profile at all doses tested with no dose limiting toxicities.

These findings provide the rationale for advancing this asset into a Phase II trial in HER2 expressing gastric cancer, a tumor type that continues to derive benefit from immuno-modulatory therapies, as recently demonstrated by the KEYNOTE 811 clinical study outcome, which led to the approval of Pembrolizumab when added to the first line standard of care Trastuzumab and chemotherapy.

The dose dependent activity we are seeing with CINRA supports our recommended Phase II dose which consists of a two cycle loading dose at 80 milligrams per kilogram on a Q2 weekly regimen, followed by an 8 mg/kilogram Q2 weekly regimen in subsequent cycles. As a reminder, the Phase II study will be a two arm study.

The first arm will evaluate CINRA in HER2 high gastric cancer in combination with Ramucirumab and Paclitaxel, with Lily supplying Ramucirumab at no cost to Pieris as part of a trial collaboration agreement.

We expect to begin enrolling this 20 patients study arm later this summer, focusing on the US and South Korea where gastric cancer has a high prevalence.

We are setting a high bar for go-no-go in our planned interim analysis of this study to ensure that we remain competitive with the evolving treatment landscape and we'll be looking at a composite of efficacy measures including durability and safety, in addition to objective response rate or ORR.

We are setting our target at a minimum of 50% at this interim analysis, which is higher than the 28% ORR benchmark established by Ramucirumab and Paclitaxel and takes into consideration, potential emerging standard of care.

And it's a bar we believe we can achieve given the activity we have observed with CINRA to date and the complimentary mode of action in this combination.

We believe that setting stringent criteria for advancement of our proprietary assets will help to ensure prudent and judicious use of our corporate resources and that achieving these criteria can translate into meaningful value for patients and shareholders.

The second arm of the study will enroll 20 patients with HER2 low gastric cancer and we'll evaluate CINRA in combination with tucatinib, which will be supplied by our partner Seagen at no cost to Pieris.

In addition to the data we generated collaboratively with Seagen that showed synergy between tucatinib and CINRA in enhancing a 4-1BB mediated immune cell activation, the data we're we presented at this year's AACR conference also support that CINRA is active in the HER2 low tumor setting, as we observed clinical benefit in multiple HER2 low patients receiving CINRA as a monotherapy coupled with the pharmacodynamic data that demonstrate 4-1BB agonism in these HER2 two locations.

We believe it is encouraging that when paired with tucatinib, CINRA may show clinical benefit in a setting where many other HER2 targeting drugs have shown only minimal activity. HER2 low gastric cancer, therefore presents a high unmet medical need and is a sizable market opportunity.

And as in the HER2 high arm of this study, we are setting a high bar for success for the HER2 low arm looking at the same composite of efficacy measures including durability and safety in addition to ORR.

Here, we believe that achieving at least a 40% ORR would be a significant improvement over the 28% ORR demonstrated by standard of care Ramucirumab and Paclitaxel, in light of the marginal activity of other agents tested in this setting.

We are excited to study this novel combination regimen was Seagen who made a $13 million strategic equity investment in Pieris in collaboration and in connection with the amendment of our existing immuno-oncology collaboration agreement last quarter.

As we are making the necessary preparations for the start of the Phase II study of CINRA, we are also working hard alongside our partners Servier in anticipation of advancing PRS-344, which is a 4-1BB/PD-L1 bispecific into Phase I later this year.

Last month, we also presented preclinical data for 344 at AACR, demonstrating superiority to the combination of PD-L1 and 4-1BB targeting molecules. As a reminder, we hold exclusive commercialization rights for PRS-344 in the United States, and will receive royalties on ex-US sales by Servier for this program.

Servier is also responsible for further development of PRS-352 in undisclosed immuno-oncology bispecific that is also part of our collaboration.

Finally, we also recently entered into a licensing collaboration agreement granting Boston Pharmaceuticals exclusive worldwide rights to PRS-342, a pre-clinical 4-1BB/GPC3 immuno-oncology bispecific under the terms of that agreement, Pieris received an upfront payment of $10 million and is further entitled to receive up to around $350 million in milestone payments, tiered royalties up to low double digits on sales of the treatment, if successfully approved and commercialized, and a share of certain subsequent sublicensing revenue.

Pieris will collaborate with Boston Pharmaceuticals to advance the program towards an IND submission.

Boston Pharmaceuticals has a strong leadership team and proven track record of developing a broad range of assets including oncology and we look forward to the advancement of this novel next generation bispecific, which follows in the localized 4-1BB agonism mode of action of CINRA.

So in conclusion, with our focused investments in Cinrebafusp Alfa and our partnerships with Servier, Seagen, and Boston Pharmaceuticals, we have placed our immuno-oncology bispecifics pipeline on solid footing.

And we look forward to the progression of multiple assets into the clinical stage beyond CINRA driven by material ongoing investments by these partners. This concludes my prepared remarks and I would now like to hand the call back over to Tom to guide you through our first quarter 2021 financial results. Over to you Tom..

Thanks, Steve and good morning again everyone. Cash and cash equivalents totaled 66.8 million for the quarter ended March 31, 2021 compared to our cash and cash equivalents balance of 70.4 million for the quarter ended December 31, 2020. The increase was due to the $13 million received from Seagen in March 2021 offset by our operating cash needs.

The quarter ending cash balance excludes both $23 million received from AstraZeneca in April and $10 million to be received from Boston Pharmaceuticals. On a pro forma basis, quarter end cash and cash equivalents would have been approximately $100 million, which ensures that we are well positioned to execute on our strategic plans into 2023.

R&D expenses were 16.6 million for the quarter ended March 31, 2021 compared to 12.8 million for the quarter ended March 31, 2020.

The increase reflects higher spending on preclinical activities for our proprietary respiratory pipeline and manufacturing costs for immuno-oncology programs while maintaining flat spending on other non project related R&D costs.

G&A expenses were $4.1 million for the quarter ended March 31, 2021 compared to 4.4 million for the quarter ended March 31, 2020. This decrease reflects more one-time costs incurred in 2020 related to the move to our new R&D facility in Hallbergmoos, Germany, partially offset by higher consulting expenses in the current quarter.

Net loss was 4.2 million or $0.07 loss per share for the quarter ended March 31, 2021 compared to a net loss of 3.6 million or a $0.07 loss per share for the quarter ended March 31, 2020. With that, I'll turn the call back over to you, Steve..

Thanks, Tom. And as I trust you all would agree, these last few months have been a productive time at Pieris, particularly with respect to our leveraging of new and existing partnerships, and we look forward to building on our momentum.

Thanks to our business development activities, we have added $46 million to our balance sheet through a mix of non-dilutive funding and focused strategic equity stakes from two existing partners. We remain committed to this business model.

We look forward to keeping you updated on our progress, as we drive towards achieving key inflection points throughout the year. I want to thank you for joining us on the call today and we would now like to open the call to your questions. Thank you..

Thank you. [Operator Instructions] Our first question today is from Umer Raffat of Evercore. Please proceed with your question..

Hi, guys, thanks for taking my question. I have a few today, if I may. One, for the asthma trial, would you have an internal readout of the part one.

I know ClinTrials says there'll be unblinded review, so I'm just trying to understand can we talk to you about part one, perhaps even if it's not a press release? And also, would you be able to announce that you're now formally progressing to part two and that dose level three was included? Would that be a formal announcement? Should we expect that or not? And perhaps also, if you could spell out for us what is that bar that you have to clear to include that third dose and to move to Phase III.

And finally, just quickly, if you could remind us the choice of site selection, I noticed its Australia and the Ukraine site and trying to understand if we should expect US sites to be up as well, when you get to part two. Thank you..

Hi, Umer. Thanks for the questions all focused on a 60 clinical study design and that's great. I can try to take all those one at a time. So yeah, as you noted, Umer, there's two parts to this study.

There's the part one efficacy phase, which is up to three safety phase, sorry, which is up to three doses, and then there is the part two efficacy phase, which would look at FEV1 as the primary endpoint.

We have not disclosed specific communication planning for the progression from part one into part two but as I had mentioned before, it's my personal desire, and assuming AstraZeneca is fine with that, I assume that they will be, is that we intend to be able to announce when we have or that we have progressed from part one into part two, which I would anticipate pending enrollment as planned that that would be sometime later this year.

So that's something that we hope to be able to talk about, even though I would not expect a formal press release around any data disclosures, but then we could talk about that for sure.

As far as the doses that would be used in the part one as a progression of part two, there is a certain amount of staging that is allowed such that if one were to clear the first two doses, one could then move into the efficacy phase, rather than wait for all three.

So that's some nuances in design that we still will consider but we don't necessarily have to clear all three doses before moving into the efficacy phase at the lower doses. And then as far as the sites, as you noted, we are currently leveraging efficiency and regulatory interactions and site readiness.

We've been very, very accustomed to working in Australia with Phase I and Phase Ib with PRS-060, so we're focused there and also in the Ukraine. And we're looking at multiple additional geographies and several other sites. It's a global study.

We haven't disclosed a specific strategy in the US yet, but certainly interactions with the FDA are certainly contemplated before too long..

Thank you very much..

The next question is from Matt Phipps of William Blair. Please proceed with your question..

Good morning. Thanks for taking my questions and congrats on the business development activity in the quarter.

I guess, given where you guys have gotten with CINRA and the data generated through this first 4-1BB bispecific and now it's becoming a pretty competitive space, just looking for a bigger picture on how you can leverage that info into the rest of your pipeline.

And then specifically for kind of the PD-L1 group of these bispecifics, which had a couple other companies start to get some disclosures around their programs, wondering what you might have taken from that that can help with the development of 344 in combination with others, which you've learned from CINRA..

Sure, Matt. Thanks so much. There's a lot of things we could talk through there. I mean, firstly, what did the data from CINRA speak to the opportunity with CINRA itself in the gastric cancer space in particular, and we can talk about that.

Then you also mentioned the broader of learnings of CINRA throughout the rest of our pipeline and then specifically looking at the PD-L1 4-1BB bispecific approach where there are a number of other programs that have recently moved into clinical stage and some of them already reported some initial data.

So I can just frame that at a high level and then I'd like for Shane to go through that in a little bit more detail.

And when we first think about the CINRA for CINRA's sake, looking at the opportunity in HER2 expressing tumors, let's not forget that we have what I think is pretty compelling, impressive single agent activity, coupled with a very good safety and tolerability profile.

And then I don't [ph] want to get lost on people because 4-1BB agonism can be a very sharp knife. And we've seen that coupled with a dose response and I think a great set of PD correlates that will help us to - that have helped us to zero in on what we think is a very thoughtful RP2D.

And when we consider the single agent activity, the relevance of immunotherapies in gastric cancer and the ability to play in both the HER2 high space and the HER2 low space, the latter being far less dynamic than the HER2 positive space, we really like those nuances of bringing a 4-1BB bispecific into this field.

And if you think about the biology at stake, this is the only - to our knowledge, the only HER2 engage in agent that leverages the adaptive immune space. It also brings innate immunity to it with NK cells. But compared to bispecifics, compared to novel payloads, compared with macrophage biology, this is different.

And if we think about what 4-1BB does, which is driving improved metabolic fitness of T cells, and immune cells in general, this is something we think could lead to meaningful, differentiated opportunity.

And there will be some learnings from this into how we think about positioning the 4-1BB PD-L1 based bispecific as well as I think helping Boston Pharmaceuticals on the positioning of the GPC3/4-1BB bispecific.

So Shane can maybe go a little bit deeper on some of the nuances in HER2 high or HER2 low, including the bars that we announced today on ORR as well as why we feel really enthusiastic about our specific 4-1BB PD-L1 bispecific which we've really put a lot of thought into designing for potentially best in class opportunities there.

So I'm going to hand it over to Shane to go a little bit deeper..

Thanks, Steve and thanks, Matt, for the question. So maybe just going back to your question in terms of what do we see in 4-1BB that excites us and how can we leverage what we see with CINRA to really help position those other programs we're bringing through.

So with regard to what we see with CINRA, the power of 4-1BB is very evident in our clinical trial. As you know, it was a translation heavy trial where we mandated paired [ph] biopsies that allowed us to take a look into the tumor microenvironment and see what was happening and we see really nice dose dependent increase in CD8 T cells.

As Steve said, this is, to our mind, the only HER2 targeted agent that has shown to be driving expansion of T cells in the tumor microenvironment. We also have developed a very useful biomarker in soluble 4-1BB which can be tracked in the blood of patients and that demonstrates target engagement and our 4-1BB mechanism of action.

And what's very important is those PD correlates are also correlating with clinical benefit. So we're seeing patients that have that expansion of CD8 T cells and expansion of 4-1BB gaining clinical benefit from our agent. As Steve said, the monotherapy activity is, to our mind, very compelling.

What's also compelling is that we're driving that 4-1BB organism in a HER2 low setting as well and that has really allowed us to go for this two armed gastric cancer study. So in terms of the first arm there, we will combine with Ramucirumab and Paclitaxel.

We've set an ORR of 50% or greater and we believe that's achievable based on that very unique mechanism of action, which will complement the debulking of the chemotherapy and the vascular normalization that will come with Ramucirumab.

In terms of what else have we learned from this study? Well, we've learned that we can combine with tucatinib in a meaningful way with a preclinical data set showing that we can drive strong 4-1BB agonism off of fairly low HER2 receptor density.

And when we look forward into the other studies, we're certainly bringing all of that biomarker data with us, we know what to expect from a tumor microenvironment perspective.

We know that we can drive the NK population, we can drive cytotoxic T cells and therefore, it has allowed us with regard to PRS-344 to set up a very, very nice biomarker strategy there as well.

In terms of how are they - how are we feeling about what others are doing? Well, certainly, we failed 4-1BB is very relevant and the data coming out from competitor trials is also confirming that. So, we will use all of the data that we've generated, all the knowledge we have of 4-1BB to have a have a smart design there.

But in terms of in terms of PD-L/ 4-1BB in particular, we certainly developed a molecule which we believe has a compelling activity profile based on what we shared at AACR this year and we look forward to taking that into the clinic later this year.

As Steve said, we've also got the Boston Pharmaceuticals collaboration where we will bring the 4-1BB GPC3 molecule forwards, all of the biomarker assays we've set up for CINRA are certainly relevant there. And we will collaborate very closely with Boston Pharma to ensure that that clinical trial design takes full advantage of them..

Thanks and just one follow up. We've had, I think, at least two competitors in the PD-L1 in 4-1BB space have to pick a recommended Phase II dose kind of below what you would expect to saturate the PD-L1 receptor or at least fully inhibit that that pathway.

Do you think 344 will be able to overcome that or do you think it's okay to kind of fall in a middle dose range on the PD-L1 side?.

Yeah, so to your question on the forward - the recommended Phase II dose of the competitor molecules and the safety profiles that they have observed in the clinic, we certainly have to be aware of the fact that a PD-L1/4-1BB bispecific is going to be very potent.

We see pre-clinically, it's drives T cells into a proliferative burst and also really changes their phenotype. So it's going to be a very powerful bispecific. In terms of our molecule, we certainly have gone with moderate affinity 4-1BB agonists, which we feel is appropriate for activating the pathway.

We have to wait for the clinic to read out to see where what that plays out like from a safety perspective. In terms of do you need to saturate the checkpoint arm here? Well, preclinical data would suggest not, preclinical data would suggest that you can get very strong activation of the T cell compartment without saturating the checkpoint arm.

So I would say that there are opportunities to go forward without saturating that arm in terms of therapeutic window. There may be small nuances between different people's approaches, but in essence, we have to let that read out in the clinic..

Excellent..

There are no additional questions at this time. I would like to turn the call back to Steve Yoder for closing remarks..

Okay. Well, I just want to thank everyone again for your attention and for your continued support of Pieris. I wish you all a great day. Thank you for participating today..

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