Palvella and Pieris Announce Merger Agreement

Palvella Therapeutics, Inc., a clinical-stage biopharmaceutical company, and Pieris Pharmaceuticals, Inc. have announced a definitive merger agreement. This merger aims to create a Nasdaq-listed entity focused on developing and commercializing novel treatments for rare genetic skin diseases with no current FDA-approved therapies. The combined company will be headquartered in Wayne, PA, and will operate under the name Palvella Therapeutics, Inc.

Upon completion, the new entity is expected to have around $80.5 million in cash and cash equivalents, bolstered by a $78.9 million oversubscribed private financing. This financial backing is anticipated to support the combined company through multiple clinical trial milestones until the second half of 2027. The funding will primarily advance Palvella’s lead clinical product candidate, QTORIN™ 3.9% rapamycin anhydrous gel, currently being tested for microcystic lymphatic malformations (microcystic LMs) under the FDA’s Breakthrough Therapy Designation and Fast Track Designation programs.

QTORIN™ rapamycin has the potential to become the first FDA-approved therapy for microcystic LMs and cutaneous venous malformations if successful. Microcystic LMs are a rare, debilitating genetic condition characterized by malformed lymphatic vessels that cause persistent fluid leakage and infections. Cutaneous venous malformations result from overactivation of the PI3K/mTOR pathway, causing dilated and dysfunctional veins in the skin.

Palvella’s QTORIN platform aims to create topical therapies that penetrate deep skin layers to treat severe genetic skin diseases locally. The lead product, QTORIN™ rapamycin, is designed to leverage the therapeutic benefits of rapamycin, an mTOR inhibitor, while minimizing systemic exposure and adverse reactions. It is protected by patents in the U.S. and Japan, with pending applications in Europe and Japan.

The merger agreement stipulates that Pieris will issue shares of its common stock to pre-merger Palvella stockholders, making Palvella a wholly-owned subsidiary of Pieris. Pre-merger Pieris stockholders will hold about 18% of the combined company, while pre-merger Palvella stockholders will own approximately 82%. This ownership ratio may adjust based on Pieris' net cash at closing. Additionally, Pieris pre-merger stockholders will receive contingent value rights (CVRs) linked to potential payments from Pieris' existing partnership agreements with Pfizer and Boston Pharmaceuticals.

The merger is scheduled to close in the fourth quarter of 2024, pending stockholder approvals and other regulatory conditions. Palvella’s CEO Wes Kaupinen will lead the combined company, joined by members of the current Palvella management team. The board of directors will include four members from Palvella’s current board and one from Pieris’ board, expected to be Christopher Kiritsy.

The combined company's cash resources are expected to advance QTORIN™ rapamycin through several clinical trial milestones, including pivotal Phase 3 results. The ongoing clinical trials aim to address the unmet needs of over 30,000 diagnosed patients with microcystic LMs in the U.S. The successful completion of these trials could establish QTORIN™ rapamycin as the standard treatment for this rare condition.

In summary, this merger represents a strategic move to pool resources and expertise, potentially leading to groundbreaking treatments for patients with rare genetic skin diseases. The combined company is well-positioned to advance its clinical programs and achieve significant milestones in the coming years.

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