Awesome. Excellent. Good afternoon, everyone. Thank you for joining us. My name is Whitney Ijem. I'm one of the biotech analysts here at Canaccord. It's my pleasure to be joined this afternoon by Palvella Therapeutics. Speaking on behalf of Palvella is President and CEO Wes Kaupinen. Wes, thanks for coming. Thanks for having me. For anybody in the room who's not familiar, can you just briefly introduce the company, kind of who you are, what you do? Yeah, great. I founded Palvella Therapeutics. I'll begin with our mission, our strategy, and our vision, which together are the foundation of building an enduring rare disease biopharmaceutical company. Palvella, as Whitney knows, in Finnish means to serve. At the core of our company is a mission of serving patients that have serious, rare genetic diseases and serving them by both developing and commercializing therapies for those diseases. Our strategy can really be summed up by the word "first." We only focus on those diseases where there are no FDA-approved therapies, and we can bring forward that first-approved therapy for a deserving patient population. We think that can be transformative for patients, for the patient communities, for caregivers. We also think that can be transformative for our shareholders. Our vision is to build the leader in the area of rare skin diseases. There's approximately 600 rare skin diseases. Fewer than 2% have a single FDA-approved therapy. It's a high unmet need corridor of the orphan universe. As our management team assessed the competition there, we didn't see a lot of competition. High unmet need, low competition. We think that's an area where we can build an enduring biopharmaceutical company. Excellent. Digging right into your lead indication, microcystic lymphatic malformations, MLM for short. Can you tell us a little bit more about that disease? What causes it, how it presents, kind of the symptomatic burden for patients? Yeah, great. Microcystic lymphatic malformations, this is a serious, rare genetic disease. It's present at birth. It is a lifelong disease. The genetics are well characterized. The biology has been elucidated. The pathogenic tissue of interest is also known, as is the natural history of the disease. It's caused by a mutation, the PI3K pathway. That causes upregulated mTOR, which is mechanistic target of rapamycin signaling. What these patients have clinically, Whitney, is they have genetically malformed vessels proliferating, and they ultimately protrude through the skin. That causes a number of clinical issues, one of which is called lymphorrhea, which is effectively the discharge of internal lymph onto the skin and into the soft tissue. It puts these patients at risk of infections like acute cellulitis and other serious infections. This is a disease, as I mentioned, that's present at birth, and it has a lifelong disease course. Nothing is approved for these patients. It really fits our mission. It fits our strategy. We want to bring forward that first-approved therapy. There are real advantages to the fact that the genetics are known, the biology is known, the disease course has been well documented. We think we're on a trajectory, hopefully here in the near term, to bring forward that first-approved therapy. Perfect. Nothing approved, as you mentioned, but there are some things that patients try to do, patients and doctors try to do. Can you talk about that a little bit in terms of what percentage of patients are getting treated for this now, and what are they doing? Yeah, great. The historical mainstay of therapy has been attempts to surgically remove these lesions. That has not been met with high efficacy. It has been met with high recurrence of the disease, which makes sense given the genetic basis of the disease. More recently, in the last couple of decades, physicians have attempted to do sclerotherapy, which is injecting chemotherapeutic agents like bleomycin into the skin. This also hasn't shown strong efficacy with a lot of disease recurrence. The genetics were really elucidated in the 2015 time frame that showed this PI3K mutation. More recently, there has been off-label use of mTOR inhibitors like rapamycin orally, and in some cases, off-label topical rapamycin. You really see this field moving from these highly invasive, destructive approaches to the skin, trying to move more to more targeted medical therapy for these patients. Perfect. OK, you sort of mentioned this use of rapamycin. Off-label and not approved, as you mentioned, but you're kind of seeing this. You understand the biology. You're seeing this use and saying, we can do that, but better, basically. Can you talk about QTORIN™ rapamycin? Yeah, absolutely. Lymphatic malformations can also present beneath the skin or internally. There is off-label use of systemic oral rapamycin that does show some efficacy. Again, not approved, but it shows some efficacy for these internal malformations. The systemic drug, however, has a lot of shortcomings. It doesn't distribute well to the skin. For patients that have the microcystic skin disease, they're not seeing great efficacy from the systemic oral rapamycin. Oral rapamycin is also an immunosuppressant. It inflicts a number of unwanted side effects, immunosuppression being one of them, other acute toxicities. What we decided to do, we embarked on many years ago, is to try to take this molecule, rapamycin, which presents a lot of challenges technically for a topical formulation. It's insoluble. It's a large molecule. It's really difficult to get it to penetrate through the skin. It's also chemically unstable. We embarked on a product development process and innovation process that took about two years. We went through 80 prototypes. Whitney referenced QTORIN. That's the name of our platform. With QTORIN, we've taken an anhydrous gel. We've married that with rapamycin. We have a 3.9% anhydrous gel QTORIN formulation. That's really designed to be a targeted topical rapamycin for initially microcystic lymphatic malformations. We think over the long term that it may be applicable to other diseases as well. Perfect. OK. You mentioned the oral use of oral rapamycin, but there is some sort of, I don't know, homemade topical rapamycin use. Can you talk a little bit more about that? Yeah, sure. In the absence of FDA-approved therapies, you sometimes see physicians reach for compounded formulations. Those are unapproved, and they're unproven. Compounding pharmacies are not subjected to the same sort of GMP manufacturing requirements that FDA-approved therapies are. There's really a tremendous unmet need for an FDA-approved therapy that gives physicians the confidence, both from a quality perspective and a safety perspective, as you think about the safety of an FDA-approved therapy, and then that transformative, predictable efficacy, which is what physicians desire from an FDA-approved formulation. That's really our goal, to unify the physicians around an FDA-approved therapy. We're in phase 3 right now. We've got to prove that over time and go through the NDA submission process. Our market research has been very encouraging. Should we be successful in getting FDA approval in terms of what percentage of physicians would treat our drug as a first-line therapy? Excellent. OK, perfect. You mentioned phase 3 ongoing now, data expected next year. There is some pretty phenomenal phase 2 data that kind of helped you prepare for that. Can you talk to us a little bit about the phase 2 data, briefly the design of that study, and the key findings on the efficacy side and safety? Sure, absolutely. This was really a landmark phase 2 study. Whenever we go into these disease states where nothing's approved, we're typically the company that's pioneering that disease state. We're selecting the endpoints, we're recruiting the clinical sites, and ultimately, the clinical sites are recruiting the patients in. In our phase 2 study, and the results are published in the Journal of Vascular Anomalies, we had 12 patients that were treated over a 12-week period. There were many different endpoints tested. One of those endpoints was called a clinician global impression of change. On that endpoint, by week 12, all 12 patients were either much or very much improved. That was a clinician-assessed endpoint. We had another endpoint called the patient global impression of change, and it showed similar positive results with statistically significant p-values. Ultimately, we took that data, we submitted it to the FDA, and we were fortunate that they granted us breakthrough therapy designation on those results. Credit to our development team, our clinical operations and regulatory team. We now have the benefit of being an FDA breakthrough therapy designated drug. Excellent. A little bit more on that endpoint, clinician impression. What does that mean? What does that look like at the assessment time point? What is their impression of it? Are they just looking at it and saying, it's better? How is that kind of formalized? Yeah, great. It's done in clinic when the patient presents in the clinic, and the physician investigator is assessing the lesion in clinic. At week 12, just to stick with the phase 2 study, they're looking at the lesion severity at the end of treatment, week 12 in phase 2, compared to the patient's severity, the lesion severity at baseline. They're scoring the change in the lesion. In phase 3, we require them to anchor back to the baseline photo, which we think is an improvement, an enhancement to how we're administering the endpoint. Effectively, you're scoring the change in the lesion at a defined time point. In phase 2, that was week 12. In phase 3, it's week 24. The CGIC is a single item question. All of our patients were much or very much improved after 12 weeks of therapy in this landmark study. Perfect. OK. In terms of you mentioned you're pioneering in this rare disease space, this endpoint. Is the FDA OK with this endpoint? Does it need any validation? Is there any risk around that as you look at the phase 3? Yeah, so we've had extensive discussions with the FDA around the endpoint. We were aided in those discussions by the real thought leaders in microcystic lymphatic malformations, folks like Jim Triet at Children's Hospital of Philadelphia. You're usually sitting collaboratively with the FDA with some sense of unity in the room about how important it is to bring drugs forward for patients that have rare serious diseases where nothing's approved. We feel like we have good alignment with the FDA on this primary endpoint after extensive interactions. We also have additional endpoints that we're including in the study that really track severity, static severity scales. I think those will be important and additive to the efficacy assessment that's performed by the FDA. We were fortunate enough to be the recipient of an FDA orphan drug grant. After we went through all of our interactions, we applied for this sort of lesser-known program where the FDA can grant non-dilutive capital, typically in rare diseases that are high unmet need. There were 51 applications last year, seven recipients. We were the only company in phase 3 that was an awardee of an FDA orphan drug grant. The FDA has been a great collaborator, breakthrough, fast track, orphan designations, as well as an FDA orphan drug grant. Perfect. For the phase 3 study, you mentioned kind of largely the same endpoint, longer follow-up or longer dosing period. Any other changes that are important to keep in mind, positively or negatively or riskily, from phase 2 to phase 3? Yeah, so the primary endpoint in phase 3 has that same scale that goes from very much worse, -3, to very much improved. It's a seven-point change scale. It looks very similar to the clinician global impression of change. We did make a couple of changes to the endpoint that we think are value-added changes. Number one is that at week 24, when the physician is scoring the lesion severity in clinic on the primary endpoint, they have to refer back to the baseline photo. That adds a layer of objectivity by protocol that they're referring to that baseline photo. We've also added short descriptions to each point on the scale, the seven points on the scale. As you expand the number of sites from phase 2 to phase 3, a number of investigators, you want to have consistency in terms of how the investigators are going to score on that scale. Those were a couple of important changes that we made between phase 2 and phase 3. Perfect. OK. Excellent. Can you remind us how many patients were enrolled in the powering of this study? Sure. Our target was to enroll 40 patients, which gave us more than 99% power in the phase 3 study. We just announced about 60 days ago that we've completed enrollment. We actually were fortunate enough to exceed our enrollment target, so we enrolled 51 patients into the phase 3 study. OK, perfect. There's no placebo, no control arm, right? Correct. It's a single-arm design where all patients are placed on drug. We believe that's a viable design, one, based on FDA interactions, but two, also based on the disease, where there is no spontaneous regression of the disease. OK. Excellent. Perfect. All right. I guess assuming success in the phase 3 study and filing, can you talk about how many patients are there in the U.S. with this disease? As can be the case sometimes in rare disease, you know, how fuzzy is that epidemiology? How should we think about that? Yeah, I mean, this is part of the exciting aspect of going after rare diseases where nothing's approved. As an innovator and as a pioneer, you get to do the prospective epidemiological work to really unveil what the market opportunity looks like. In our case, we estimate that there's more than 30,000 diagnosed patients in the U.S. with microcystic lymphatic malformations. That's based on claims data. We recently presented our claims data at a medical meeting. We also estimate that there's more than 1,500 new patients that are coming into the pool of potentially addressable patients for QTORIN™ rapamycin. This is a rare disease, but not that uncommon, not an ultra-rare disease. Most of those patients, from a market dynamic perspective or a meaningful percentage of those patients, are in centers of excellence, which are called vascular anomaly centers. OK, perfect. How, understanding that you need data and it's a little too early, are you thinking about pricing at this point? Yeah, sure. We will price this as an orphan drug, which means, you know, for a small patient population. We haven't given any firm guidance yet on how we're going to price it. We'll do a lot of the pricing testing post phase 3. Once we have phase 3 data, we'll work with payers, lay out the disease burden, lay out the complete absence of FDA-approved therapies, show our phase 3 data, which we're blinded to now, but look forward to the day where we're unblinded. Then we'll put more definition around what the launch price will be. OK, perfect, perfect. OK, high probability phase 3, orphan pricing, large rare disease population. That's pretty compelling. Can you talk to us a little bit more about IP then? How long should we think about the duration there? Are there any lifecycle extension or anything, opportunities in that regard? Yeah, thanks for that question. I mean, this has been an area of very significant investment from Palvella since the early days when we started our QTORIN™ product development with rapamycin. We really have three layers of exclusivity. One is IP. Two is a number of formulation and manufacturing trade secrets. We also have regulatory exclusivities. On intellectual property, we now have six issued U.S. patents. Those are composition of the formulation as well as method of use. Those claims go out until at least 2038. We believe that we may have protection beyond 2038. Some of our most significant innovations were trade secrets that we deliberately did not include in our intellectual property. There may be protection beyond the 2038 time frame. OK, perfect. Maybe switching over to CVM. You touched on the potential of QTORIN™ rapamycin to be used in other diseases. Next up is CVM. Can you talk about that disease again, maybe relative to MLM? How are they similar? How are they different? Yeah, great. CVM is cutaneous venous malformations, also a genetic disease, also a disease where mTOR is really driving the disease process, also a disease where rapamycin has been used off-label systemically to treat the internal manifestation. There is this sort of large growing base of real-world evidence that rapamycin may have clinical benefit. These patients have one of two mutations, either a PI3K mutation like MLM, or they can have a TIE2 mutation. In both cases, mTOR is hyperactivated. These patients have dysregulated veins. They're immature veins. Those veins, similar to micro-LM, are protruding out into the skin. Through the skin, they can have issues with bleeding. They can have issues with ulceration, clotting. There are a number of clinical issues that are serious to these patients. Like all Palvella diseases, there's nothing that's FDA approved. We've been fortunate to have the FDA grant us fast track designation. We have an ongoing phase 2 study. Perfect. Can you walk through the design of that phase 2 trial a little bit as well? Is it similar in the sense that you're pioneering new endpoints and there's some information gathering to come from that study? I think that's a great way to put it, information gathering. This is a true proof of concept study. It does look very similar to our phase 2 study that we ran in microcystic lymphatic malformations. There's no pre-specified primary endpoints and no statistical hierarchy. We anticipate enrolling around 15 patients. We've been really fortunate to work with the key opinion leaders in cutaneous venous malformations, some of which are also in our microcystic lymphatic malformation trial. We expect to have data in Q4 of this year. We're still enrolling patients. We now have many sites that have opened just in the last, call it, 90 days. We'll have top line data in Q4. OK, perfect. Is it also 12-week duration and same dose? Correct. It's a QD dose, single arm study. That's exactly right, with a 12-week primary endpoint. OK, perfect. I guess to what extent does the phase 2 data in MLM have read-through, positive read-through to CVM? Sure. Or negative? Yeah, I mean, they're fundamentally different diseases. They're both vascular anomalies or vascular malformations, but the venous architecture is a little bit different than the microcystic lymphatic malformation architecture. I think fundamentally, they're different diseases anatomically. They do both share mTOR being involved. I think there is that similarity in terms of why would Palvella select these diseases. We think the biology is clear that mTOR is driving the disease process. There's now more than 25 published papers suggesting that rapamycin has some clinical benefit for internal venous malformations, again, off-label, not approved. OK, perfect. What is good data in this phase 2? What are you all looking to see to kind of propel you forward? Yeah, great. In these rare diseases where nothing's approved, particularly in a disease like microcystic lymphatic malformations or cutaneous venous malformations, where the standard of care is laser surgery, sclerotherapy, if we see an effect in, call it, 30% of patients, I think that that could be transformative for this patient community. These are difficult-to-treat diseases. The last drug I worked on prior to founding Palvella, that was a drug called EraCase from InzMed, which has a 29% efficacy rate in phase 3. That drug's been very successful commercially. We'd be excited to see about 30% of these patients respond. If we do see that kind of response rate, we'll be at the FDA advocating for breakthrough therapy designation and then ultimately trying to land on a pivotal phase 3 study design. OK, got it. That may not be relevant. If you were to see something under the 30%, are there things you can do on a dosing perspective or anything in that regard to kind of continue to push that forward? Yeah, I love that question. That's why you run phase 2 studies, is you try to better understand which endpoints are sensitive to the drug effect, who are the right patients for a particular therapeutic. You're absolutely right that you make these key modifications between phase 2 and phase 3, especially in rare disease, that may increase your probability of seeing phase 3 success. Perfect. OK, excellent. Data in the fourth quarter, you said, right? Data in the fourth quarter. Our goal is to announce full enrollment next month. Got it. OK, all right. We will be waiting for that. In this indication, is the IP, should we be thinking about that as the same kind of runway, or is there anything different here? The IP is similar. Our IP on the composition of QTORIN™ rapamycin covers all clinical indications where QTORIN™ rapamycin is used. It is the same drug product with microcystic lymphatic malformations and cutaneous venous malformation. OK, perfect. How many CVM patients are there in the U.S.? Great. Yeah, we've been doing our EPI work there, putting pen to paper. We estimate there's more than 75,000 cutaneous venous malformation patients in the U.S. We're going to continue to do EPI work. We do know this is the most common vascular malformation, so more prevalent than microcystic lymphatic malformations. We'd be very excited, assuming phase 2 and eventually phase 3 success and FDA approval, to add 75,000 patients to our pool of addressable patients for QTORIN™ rapamycin 3.9% anhydrous gel. Excellent. OK. Again, large rare opportunities, but rare. From a commercial perspective, what might that look like? Is that something that Palvella can tackle on its own? Would you be looking for a partner? Yes, we want to launch, and we will launch in the U.S. on a standalone basis. We've just hired a Chief Commercial Officer, Ashley Klein. Ashley previously launched a rare disease drug called Oxervate, which was a topical therapy for a rare eye disease. It was a very successful launch. Our goal as a company, as Palvella, is to bring this medicine to patients with microcystic LMs, with CVMs. We are going to do that by hiring our own team, our own people. We have focused promotion on our drug. That's the goal, again, assuming FDA approval. OK, perfect. We've been speaking about U.S. patient numbers, commercialization. What is the thinking ex-U.S. currently? Yeah, we think the U.S. market, Whitney, is our core competency, both on the development side and then eventually on the commercial side. We'll look at both launch versus license outside the United States. I'd say we have a bias towards thinking through partnership outside the United States and stay true to our focus on the U.S. market. OK, perfect. In the last couple of minutes here, how do you think about building, or are you thinking about building the pipeline from here? Do you kind of stick with QTORIN™ rapamycin? You mentioned there's a lot of places you could go. Can you expand the platform to other molecules? The answer is both. QTORIN™ rapamycin, we think, should have clinical and commercial application longer term to many diseases beyond microcystic lymphatic malformations and cutaneous venous malformations. There is this large, growing real-world evidence base that's suggesting this. Our goal with rapamycin would be to continue to study it in new indications. Assuming we're successful clinically, we would file those with the FDA through a supplemental NDA process and expand our label. We expect to announce, and our Chief Scientific Officer and CFO are both here today, we expect to announce our third indication for QTORIN™ rapamycin later this year. This was a big driver for us to go public. We believe there's a much bigger opportunity with our QTORIN™ platform, again, our platform for reproducibly generating these novel topical product candidates. We have a product that's moving through the late stages of our preclinical development. It will be a non-rapamycin, non-mTOR molecule with QTORIN™. We want to announce that later this year. Our goal is to stay true to our strategy and focus. We want to study that drug in a serious rare genetic disease where nothing's approved, where we can be first. It is really exciting to have some great pipeline catalysts beyond just microcystic lymphatic malformations and cutaneous venous malformations. Excellent, excellent. OK, perfect. Any audience questions in the last 10 seconds? Sure. Also, congratulate you on the FDA approval. I actually had a brain shock question on that. When you are going from phase one, phase two, phase three, do you see a plateau in that, in the lesions being cured or subdued a bit? Or do you see it continually grow through phase two to phase three? Yeah, in phase 2, we did some modeling work based on our phase 2 data. At 12 weeks, the modeling work indicated that some patients were continuing to get better. Whitney asked the question, why we're extending the study duration from 12- 24 weeks. We think that the drug could have, theoretically, and we'll bear it out in a phase 3 study, the drug could potentially show more efficacy in some patients by studying those patients for a longer duration of period and having them apply the drug for an incremental 12 weeks. That's really what drove the decision to go from 12 weeks in phase 2- 24 weeks in phase 3. See the results. Thank you. Excellent. We're out of time, unfortunately. Maybe offline. Thank you so much. Thank you, Whitney. Appreciate it.