UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 001-37471 Palvella Therapeutics, Inc. (Exact name of Registrant as specified in its Charter) Nevada 30-078 ...

Exhibit 99.1 Palvella Therapeutics Reports First Quarter 2025 Financial Results and Provides Corporate Update Phase 3 SELVA trial evaluating QTORIN™ 3.9% rapamycin anhydrous gel (QTORIN™ rapamycin) for the treatment of microcystic lymphatic malformations (microcystic LMs) has exceeded enrollment target of 40 patients; enrollment expected to close in June 2025 Phase 3 SELVA trial top-line results anticipated in the first quarter of 2026 Phase 2 TOIVA trial evaluating QTORIN™ rapamycin for the treatment of cu ...

Company Focus and Development - The company is focused on developing novel therapies for serious, rare genetic skin diseases, leveraging its QTORIN platform[504]. - QTORIN rapamycin is currently in clinical trials for microcystic lymphatic malformations and cutaneous venous malformations, with top-line data expected in Q1 2026 and Q4 2025 respectively[506][507]. - The company received FDA Breakthrough Therapy Designation, Fast Track Designation, and Orphan Drug Designation for QTORIN rapamycin, along with a clinical trial grant of up to $2.6 million[508]. - The company initiated its Phase 3 trial, SELVA (PALV-09), in the third quarter of 2024[541]. Financial Performance - Research and development expenses for the year ended December 31, 2024 were $8.2 million, a decrease of 7% from $8.8 million in 2023[540]. - General and administrative expenses increased by 93% to $5.9 million in 2024, compared to $3.1 million in 2023[542]. - Total operating expenses rose by 19% to $14.1 million in 2024 from $11.9 million in 2023[539]. - The net loss applicable to common stockholders for the years ended December 31, 2024 and 2023 was $17.4 million and $17.9 million, respectively[552]. - The company reported a significant shift in other (expense) income, with a net expense of $3.3 million in 2024 compared to income of $30.6 million in 2023[543]. - Interest expense related to the royalty agreement was approximately $3.9 million in 2024, compared to interest income of approximately $6.3 million in 2023[544]. - As of December 31, 2024, the company had cash and cash equivalents of $83.6 million and an accumulated deficit of $93.7 million[554]. - The company does not expect to generate commercial revenue or operating cash flows for at least the next several years[555]. - The company recorded $2.0 million of income related to a German research and development tax credit receivable in 2024[551]. - The company anticipates net cash used in operating activities to be $(10,840) thousand for the year ended December 31, 2024, compared to $(13,703) thousand for 2023[561]. - Net cash provided by financing activities increased significantly to $87.1 million in 2024 from $5.0 million in 2023, primarily due to cash acquired from the Business Combination and proceeds from PIPE Financing[563]. Business Combination and Financing - The business combination with Legacy Palvella was completed on December 13, 2024, resulting in a name change from Pieris Pharmaceuticals, Inc. to Palvella Therapeutics, Inc.[510]. - The PIPE Financing raised approximately $78.9 million, consisting of $60.0 million in cash and $18.9 million from the conversion of convertible notes[512]. - The company is responsible for up to $5.0 million in milestone payments to Ligand upon achieving certain regulatory milestones related to QTORIN rapamycin[557]. - Future funding requirements may necessitate raising additional capital, which could lead to substantial dilution for existing stockholders[558]. - The company entered into the Amended Ligand Agreement in November 2023, receiving an additional $5.0 million and increasing future tiered royalties to 8.0% to 9.8%[566]. - The company’s cash flows from financing activities for 2024 included $60.0 million in gross proceeds from PIPE Financing and $18.4 million from the issuance of Convertible Notes[563]. Operational Risks and Expenses - The ongoing global economic uncertainty poses risks to the company's operations, including inflation and supply chain disruptions[516]. - The company anticipates significant commercialization expenses if QTORIN rapamycin receives regulatory approval, impacting product manufacturing, marketing, and distribution[519]. - General and administrative expenses are projected to rise due to increased headcount and costs associated with operating as a public company[528]. - The effective interest rate for royalty payments under the Ligand Agreement was 39.9% as of December 31, 2024[577]. - The company has potential future milestone payments remaining under the Ligand Agreement totaling $5.0 million as of December 31, 2024[565]. Stock and Compensation - Stock-based compensation is accounted for in accordance with ASC Topic 718, requiring recognition based on fair values[584]. - The fair value of stock options is estimated using the Black-Scholes model, considering factors such as stock price volatility and risk-free interest rate[584]. - Following the Merger, the fair value of common stock is based on the closing stock price on the grant date as reported on the Nasdaq Global Market[586]. - The expected dividend yield is zero as the company has no history of paying dividends and no plans to do so in the near term[586]. - The company did not have any off-balance sheet arrangements during the periods presented[588]. - The company is classified as a smaller reporting company and is not required to provide certain market risk disclosures[590].

Financial Performance - The net loss for the year ended December 31, 2024, was $17.4 million, or $7.83 per share, compared to a net income of $17.9 million, or $2.19 per share, for the previous year[13]. - Net loss for 2024 was $17,434,000 compared to a net income of $17,915,000 in 2023, representing a shift of 197.4%[22]. - Total operating expenses for 2024 were $14,095,000, an increase of 18.5% from $11,869,000 in 2023[22]. Cash and Assets - As of December 31, 2024, cash and cash equivalents were $83.6 million, expected to fund operations into the second half of 2027[2][13]. - Cash and cash equivalents increased dramatically to $83,602,000 in 2024 from $7,350,000 in 2023, a growth of 1030.5%[23]. - Total current assets rose to $88,234,000 in 2024, up from $7,548,000 in 2023, an increase of 1066.5%[23]. - Current liabilities increased to $12,038,000 in 2024 from $2,360,000 in 2023, a rise of 410.3%[23]. - Total liabilities grew to $25,627,000 in 2024, compared to $11,428,000 in 2023, an increase of 124.7%[23]. - Total stockholders' equity improved to $62,607,000 in 2024 from a deficit of $74,483,000 in 2023[23]. Research and Development - Research and development expenses for the year ended December 31, 2024, were $8.2 million, a decrease from $8.8 million in 2023[13]. - Research and development expenses decreased to $8,151,000 in 2024 from $8,793,000 in 2023, a reduction of 7.3%[22]. General and Administrative Expenses - General and administrative expenses increased to $5.9 million for the year ended December 31, 2024, compared to $3.1 million in 2023, primarily due to costs associated with becoming a public company[13]. - General and administrative expenses rose significantly to $5,944,000 in 2024, up 93.5% from $3,076,000 in 2023[22]. Clinical Studies and Pipeline - The company anticipates top-line results from the Phase 3 SELVA study for QTORIN™ rapamycin in microcystic lymphatic malformations in the first quarter of 2026[1][6]. - Top-line results from the Phase 2 TOIVA study for QTORIN™ rapamycin in cutaneous venous malformations are expected in the fourth quarter of 2025[1][9]. - The company plans to broaden its QTORIN™ pipeline by advancing new and existing programs for additional serious, rare genetic skin diseases in 2025[4][8]. - QTORIN™ rapamycin has received Breakthrough Therapy Designation, Orphan Drug Designation, and Fast Track Designation from the U.S. FDA for the treatment of microcystic lymphatic malformations[6][9]. Mergers and Acquisitions - The merger with Pieris Pharmaceuticals was completed in December 2024, along with a concurrent private placement of $78.9 million[8]. - The company estimates that the combined U.S. peak annual sales for the initial indications of QTORIN™ rapamycin could exceed $1 billion[3].

Financial Performance - For the three months ended September 30, 2024, the company reported a revenue of $15,569,000, compared to $6,000 for the same period in 2023, representing a significant increase[16]. - The net loss for the three months ended September 30, 2024, was $(2,887,000), compared to a net loss of $(10,752,000) for the same period in 2023, indicating an improvement in financial performance[16]. - The company experienced a comprehensive loss of $(2,767,000) for the nine months ended September 30, 2024, compared to $(20,044,000) for the same period in 2023, reflecting a reduction in overall losses[16]. - The basic and diluted loss per share for the three months ended September 30, 2024, was $(2.19), compared to $(8.70) for the same period in 2023, showing a decrease in loss per share[16]. - For the nine months ended September 30, 2024, the net loss was $11.369 million compared to a net loss of $19.959 million for the same period in 2023, representing a 43.5% improvement[22]. - The company reported net cash used in operating activities of $8.330 million for the nine months ended September 30, 2024, compared to $34.150 million for the same period in 2023, indicating a significant reduction in cash burn[22]. - Cash and cash equivalents at the end of the period were $19.363 million, compared to $32.894 million at the end of the same period in 2023[22]. - The company has an accumulated deficit of $326.3 million as of September 30, 2024, and expects to continue incurring operating losses for the foreseeable future[31]. - The total stockholders' equity at September 30, 2024, was $16.268 million, down from $30.510 million at September 30, 2023, reflecting a decrease of 46.6%[19]. Merger and Strategic Initiatives - The company is in the process of a merger with Palvella Therapeutics, which is expected to enhance its market position and operational capabilities[5]. - The anticipated benefits from the merger include potential cost savings and capital preservation through workforce reduction and restructuring activities[7]. - The company entered into a merger agreement with Palvella Therapeutics, Inc., which will result in Palvella becoming a wholly-owned subsidiary of the company[28]. - The merger is expected to close in the fourth quarter of 2024, subject to stockholder approval[143]. - Upon the closing of the Merger, pre-Merger Pieris stockholders will own approximately 18% and pre-Merger Palvella stockholders will own approximately 82% of the combined company on a pro forma basis[140]. - The Merger Agreement includes a termination fee of $1.0 million payable by Pieris to Palvella and $2.0 million payable by Palvella to Pieris under specified circumstances[146]. - The gross proceeds from the PIPE Financing are expected to be approximately $78.9 million, before estimated expenses[147]. - The Exchange Ratio for the Merger assumes a valuation for Palvella equal to $95 million and a valuation for Pieris equal to $21 million, with adjustments based on Pieris' net cash at closing[159]. - Pieris plans to amend its articles of incorporation to increase the number of authorized common stock shares and change its name to "Palvella Therapeutics, Inc."[141]. Research and Development - The company has discontinued all research and development efforts and is reducing discretionary expenditures to maximize potential milestones from partnered programs with Pfizer and Boston Pharmaceuticals[32]. - The company announced the discontinuation of all research and development activities on March 27, 2024, which is expected to significantly lower future research and development costs[193]. - Research and development expenses for the three months ended September 30, 2024 were $446,000, down from $9.6 million in the same period in 2023, indicating a decrease of approximately 95.4%[202]. - The company has not generated any revenues from product sales to date and does not expect to do so in the foreseeable future, with revenues primarily coming from license and collaboration agreements[188]. Revenue Recognition and Contracts - Revenue is recognized when a customer obtains control of promised goods or services, with the company applying a five-step process to determine revenue recognition[52]. - The company evaluates the probability of achieving variable consideration in contracts, which may include milestone payments, and re-evaluates this probability each reporting period[55]. - The company classifies payments received under collaborative arrangements as revenue and payments made as a reduction of revenue in the period earned[51]. - The Company recognized total revenue of $19,520,000 for the three months ended September 30, 2023, and $41,511,000 for the nine months ended September 30, 2023[79]. - The Company has not generated revenue from product sales but has generated revenue from contracts with customers, including upfront payments and milestone payments[79]. - The Company recognized all remaining revenue of $12.5 million under the Genentech collaboration after the expiration of all performance obligations[83]. - The Company is eligible to receive various research, development, commercial, and sales milestones under the Pfizer Agreements, with uncertainty regarding achievement due to the nature of clinical development[89]. Cost Management and Expenditures - The company incurred approximately $7.5 million in severance costs and related termination benefits in 2023 due to a workforce reduction of approximately 70%[25]. - The company expects to pay approximately $4.3 million of termination benefits through the end of 2024, with the remainder to be paid in 2025[26]. - The company expects general and administrative costs to be significantly lower than historical amounts due to a leaner organization and the elimination of research and development spending going forward[194]. - General and administrative expenses for the three months ended September 30, 2024 were $3.6 million, a reduction from $11.1 million in the same period in 2023, representing a decrease of about 67.6%[195]. Shareholder Information - The company had 1,320,240 shares of common stock issued and outstanding as of September 30, 2024, an increase from 1,236,688 shares as of December 31, 2023[117]. - The company did not sell any shares under the ATM Program for the nine months ended September 30, 2024, while it sold 24.3 million shares for gross proceeds of $20.3 million under the program in the same period of 2023[128]. - As of September 30, 2024, there are 333,145 shares remaining and available for grant under the 2020 Employee, Director and Consultant Equity Incentive Plan[124]. - The company has reserved 9,375 shares of common stock for issuance under the 2023 Employee Stock Purchase Plan[125].

Company Overview - Palvella Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing therapies for serious, rare genetic skin diseases without FDA-approved treatments [1][7] - The company is developing a pipeline of product candidates based on its patented QTORIN™ platform, with an initial focus on serious, rare genetic skin diseases [7] Product Development - The lead product candidate, QTORIN™ rapamycin, is a 3.9% anhydrous gel designed to treat microcystic lymphatic malformations (microcystic LMs) and other serious skin diseases [5][7] - QTORIN rapamycin has received FDA Breakthrough Therapy Designation, Fast Track Designation, and Orphan Drug Designation for microcystic LMs, and Fast Track Designation for venous malformations [5] - The product aims to minimize systemic exposure and potential adverse reactions associated with systemic therapy [5][4] Clinical Trials - Palvella initiated the SELVA study, a 24-week, Phase 3, single-arm, baseline-controlled clinical trial of QTORIN rapamycin for microcystic LMs, expected to enroll 40 subjects [6] - The study's primary and key secondary endpoints are clinician-reported outcomes [6] Upcoming Presentations - Palvella will present data at the 12th Pediatric Dermatology Research Alliance (PeDRA) Annual Conference on October 24-26, 2024, in Phoenix, AZ [1][2] - Presentations will include data supporting QTORIN rapamycin as a potential targeted therapy for microcystic LMs and a review of the Phase 3 SELVA study [2] Market Context - Microcystic LMs is a rare genetic disease affecting over 30,000 diagnosed patients in the U.S., characterized by malformed lymphatic vessels and associated complications [3] - There are currently no FDA-approved treatments for microcystic LMs, highlighting a significant unmet medical need [3]

Core Insights - Palvella Therapeutics has received a grant of up to $2.6 million from the FDA to support its Phase 3 SELVA trial of QTORIN™ 3.9% rapamycin anhydrous gel for treating microcystic lymphatic malformations [1][2] - The grant highlights the significant unmet medical need for effective treatments for microcystic lymphatic malformations, a rare genetic disease affecting over 30,000 patients in the U.S. [2][3] - QTORIN rapamycin is positioned to be the first approved therapy for this condition, with FDA designations including Breakthrough Therapy, Fast Track, and Orphan Drug [5][8] Company Overview - Palvella Therapeutics is a clinical-stage biopharmaceutical company focused on developing therapies for serious, rare genetic skin diseases without FDA-approved treatments [8] - The company utilizes its patented QTORIN™ platform to create topical therapies that minimize systemic absorption and adverse effects [4][5] - Palvella's lead product candidate, QTORIN rapamycin, is under development for microcystic lymphatic malformations and other skin diseases driven by mTOR pathway overactivation [5][8] Clinical Development - The SELVA trial is a 24-week, single-arm, baseline-controlled Phase 3 clinical trial expected to enroll 40 subjects at leading vascular anomaly centers across the U.S. [7] - The primary and key secondary endpoints of the trial are clinician-reported outcomes [7] - QTORIN rapamycin is currently for investigational use only and has not yet received FDA approval [7] Market Context - The FDA Orphan Products Grants Program awarded grants to only seven out of 51 applications in fiscal year 2024, indicating a competitive landscape for funding in rare disease research [2] - The program has historically facilitated the approval of over 85 products, underscoring its importance in advancing treatments for rare diseases [2]

Group 1 - Monteverde & Associates PC is investigating Pieris Pharmaceuticals, Inc. regarding its proposed merger with Palvella Therapeutics, Inc. [1] - Under the merger agreement, Pieris shareholders are expected to own approximately 18% of the combined company [1]. - Monteverde & Associates PC has been recognized as a Top 50 Firm in the 2018-2022 ISS Securities Class Action Services Report [1]. Group 2 - Monteverde & Associates PC is a national class action securities firm with a successful track record in trial and appellate courts, including the U.S. Supreme Court [2]. - The firm is headquartered in the Empire State Building in New York City [2]. - The firm emphasizes that no company, director, or officer is above the law [3].

Financial Performance - Total revenue for the three months ended June 30, 2024, was $0, compared to $20,055,000 for the same period in 2023, representing a decrease of 100%[15] - Customer revenue for the six months ended June 30, 2024, was $6,000, compared to $22,096,000 for the same period in 2023, a decline of 99.73%[15] - Net loss for the three months ended June 30, 2024, was $3,590,000, compared to a net income of $3,976,000 for the same period in 2023[15] - Basic net loss per share for the three months ended June 30, 2024, was $(2.76), compared to earnings of $3.63 per share for the same period in 2023[15] - The company experienced a comprehensive loss of $3,680,000 for the three months ended June 30, 2024, compared to a comprehensive income of $4,265,000 for the same period in 2023[15] - For the six months ended June 30, 2024, the net loss was $8.482 million, compared to a net loss of $9.207 million for the same period in 2023, indicating a 7.9% improvement in losses[22] - The company has an accumulated deficit of $323.4 million as of June 30, 2024, and expects to continue incurring operating losses for the foreseeable future[30] Operating Expenses - Total operating expenses for the three months ended June 30, 2024, were $4,177,000, down from $17,992,000 in the same period in 2023, a reduction of 76.8%[15] - Research and development expenses for the three months ended June 30, 2024, were $751,000, significantly lower than $14,328,000 for the same period in 2023, a decrease of 94.76%[15] - General and administrative expenses for the three months ended June 30, 2024, were $3,426,000, slightly down from $3,664,000 in the same period in 2023, a decrease of 6.5%[15] - Stock-based compensation expense for the six months ended June 30, 2024, was $893,000, down from $1.932 million for the same period in 2023[22] - The company reported a total lease cost of $30,000 for the six months ended June 30, 2024, compared to $962,000 for the same period in 2023[110] Cash and Investments - Cash and cash equivalents at the end of the period were $19.731 million, down from $44.938 million at the end of June 30, 2023[22] - The company reported a net cash used in operating activities of $8.476 million for the six months ended June 30, 2024, compared to $24.427 million for the same period in 2023, reflecting a significant reduction in cash burn[22] - As of June 30, 2024, cash, cash equivalents, and investments totaled $14.1 million, an increase from $13.2 million as of December 31, 2023[92] - The company had $19.7 million in cash, cash equivalents, and investments, with a total accumulated deficit of $323.4 million[177] Strategic Initiatives - The company expects to extend its cash runway into at least 2027 with new strategies and cost-saving measures, aiming to maximize potential milestones from partnered assets[27] - The company has discontinued all research and development efforts and is reducing discretionary expenditures to maximize potential milestones from partnered programs with Pfizer and Boston Pharmaceuticals[31] - The company engaged Stifel, Nicolaus & Company, Incorporated to explore strategic transactions, including mergers and acquisitions, following the discontinuation of a key study[25] - The company announced a new strategy on March 27, 2024, aimed at extending its cash runway into at least 2027 while maximizing potential milestones from partnered assets, with potential aggregate milestones of up to $55 million[176] Mergers and Acquisitions - On July 23, 2024, the company entered into a merger agreement with Palvella Therapeutics, with Palvella becoming a wholly-owned subsidiary of the company[28] - The merger agreement includes a termination fee of $1.0 million payable by Pieris and $2.0 million payable by Palvella under specified circumstances[121] - The merger values Palvella at $95 million and Pieris at $21 million, with adjustments based on Pieris' net cash at closing[135] - Upon closing of the merger, pre-merger Pieris stockholders are expected to own approximately 18% of the combined company, while pre-merger Palvella stockholders are expected to own approximately 82%[116] Revenue Recognition - The company has not generated revenue from product sales but has generated revenue from contracts with customers, including upfront payments and milestone payments[70] - The Company recognized revenue of approximately $10.1 million for the delivery on its performance obligations related to two programs for the year ended December 31, 2023[79] - The Company received a $2.5 million milestone payment in August 2023 for the first patient dosed in the Phase 1/2 study of PRS-342/BOS-342[76] - Potential milestone payments from existing strategic partnerships total $844 million for research, development, regulatory, and commercial milestones, and $715 million for sales milestones[71] Workforce and Cost Management - The company incurred approximately $7.5 million in severance costs and related termination benefits in 2023 due to a workforce reduction of approximately 70%[26] - The company incurred severance and benefits costs totaling $3.63 million for the three months ended June 30, 2024, with cash payments of $801,000 during the same period[98] - The company has taken measures to preserve cash, including significant workforce reductions and terminating all research and development activities[177][187] Regulatory and Compliance - The company is currently subject to SEC regulations limiting the amount of funds it can raise through primary public offerings, which is capped at one-third of the aggregate market value of its non-affiliate shares[106] - The company is focused on maintaining its Nasdaq listing and ensuring shares issued in connection with the merger are approved for listing prior to closing[28]

Group 1 - Halper Sadeh LLC is investigating Kellanova's sale to Mars, Incorporated for $83.50 per share in cash for potential violations of federal securities laws and breaches of fiduciary duties to shareholders [1] - Pieris Pharmaceuticals' merger with Palvella Therapeutics is noted, with pre-merger Pieris shareholders expected to own approximately 18% of the combined company [2] - The firm may seek increased consideration for shareholders, additional disclosures, and other relief on behalf of shareholders [3] Group 2 - Shareholders are encouraged to contact Halper Sadeh LLC to discuss their legal rights and options at no charge [4] - Halper Sadeh LLC represents investors globally who have experienced securities fraud and corporate misconduct, recovering millions for defrauded investors [4]