Pieris Pharmaceuticals, Inc. Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Description of Business, Organization and Liquidity

Description of Business, Organization and Liquidity	12 Months Ended
Dec. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Description of Business, Organization and Liquidity	Note 1. Description of Business, Organization and Liquidity Business Palvella Therapeutics, Inc. (the “Company,” or “Palvella”) (previously named Pieris Pharmaceuticals, Inc. and predecessor company (“Pieris”)), a Nevada corporation, is a late clinical-stage biopharmaceutical company committed to serving individuals suffering from serious, rare genetic skin diseases without approved therapies. The Company’s lead product candidate, QTORIN 3.9% rapamycin anhydrous gel (“QTORIN rapamycin”), is based on the Company’s patented QTORIN platform. QTORIN rapamycin is in clinical development for two rare genetic skin disorders. Since inception, the Company has devoted substantially all of its time to identifying, researching and conducting preclinical and clinical activities for its product candidates, acquiring and developing its platform technology, organizing and staffing the Company, business planning, raising capital and establishing its intellectual property portfolio. The Company’s principal executive offices are located in Wayne, Pennsylvania. Reverse Merger and PIPE Financing On December 13, 2024 (the “Closing Date”), the Company consummated the previously announced merger pursuant to the terms of that certain Agreement and Plan of Merger, dated as of July 23, 2024 (the “Merger Agreement”), by and among the Company, Polo Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Pieris (the “Merger Sub”), and Palvella Therapeutics, Inc., a Delaware corporation (“Legacy Palvella”). Pursuant to the Merger Agreement, on the Closing Date, (i) Merger Sub merged with and into Legacy Palvella, with Legacy Palvella as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of the Company (the “Reverse Merger”) and (ii) the Company’s name was changed from Pieris Pharmaceuticals, Inc. to Palvella Therapeutics, Inc. At the effective time of the Reverse Merger (or immediately prior to, where indicated), the following also occurred: • All of the then outstanding shares of Palvella common stock were converted into 1,770,167 shares of the Company’s common stock, based on the exchange ratio of approximately 0.309469242 (the “Exchange Ratio”). • All of the then outstanding shares of the Company’s convertible preferred stock were converted into 4,753,650 shares of the Company’s common stock, based on the Exchange Ratio. Refer to Note 8, Convertible Preferred Stock, for further detail on the conversion of the Company preferred stock. • All outstanding Pieris Preferred Stock remained outstanding through the completion of the Reverse Merger with no changes to their terms and conditions. • All of the then outstanding convertible notes plus accrued interest of the Company were converted into 1,179,163 shares of the Company’s common stock and 168,503 prefunded warrants based on the Exchange ratio. Refer to Note 7, Convertible Notes, for further detail on the conversion of the Company convertible notes. • All outstanding Pieris stock options were canceled prior to the Reverse Merger because these awards were out of the money. • All of the then outstanding stock options of Palvella were exchanged for options to purchase common stock of the Company, subject to the Exchange Ratio. In connection with the Reverse Merger, the Company entered into a definitive agreement for a private investment in public equity transaction (“PIPE Financing”) with the Investors. The PIPE Financing provided for the issuance to the investors of an aggregate of 1,988,885 shares of common stock and 2,297,953 prefunded warrants for an aggregate purchase price of $60.0 million. On December 13, 2024, immediately prior to Closing, Pieris entered into a contingent value rights agreement (the “CVR Agreement”) with a rights agent, pursuant to which holders of Pieris common stock prior to Closing received one non-transferable contingent value right (each, a “CVR”) for each outstanding share of Pieris common stock held by such stockholder immediately prior to Closing. Each CVR represents the contractual right to receive payments upon the receipt of payments by Pieris or any of its affiliates under certain strategic partner agreements, including existing collaboration agreements pursuant to which Pieris may be entitled to milestones and royalties in the future and other out licensing agreements for certain of Pieris’ legacy assets, and upon the receipt of certain research and development tax credits in favor of Pieris or any of its affiliates, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement. As no amounts related to the CVR Agreement were probable as of the time of the Reverse Merger, no contingencies for the CVR agreement had been recorded at the time of the Reverse Merger. Based on the following factors, the Company determined under the Accounting Standards Codification (“ASC”) 805, Business Combinations, that the Reverse Merger should be accounted for as a reverse recapitalization: • The Company stockholders owned approximately 60% of the voting rights in the Company, and thus had sufficient voting rights to exert influence over the Company. • The Company designated a majority of the Company’s board of directors and maintained a majority of the composition of management. • At the time of Closing, Pieris did not meet the definition of a business and had nominal assets, meeting the definition of a public shell company. As such, the Reverse Merger was treated as a reverse recapitalization in which Palvella is issuing stock for the net assets of Pieris. For further discussion on the Reverse Merger and the related accounting, refer to Note 3, Reverse Merger. Liquidity Since inception, the Company has incurred net losses and negative cash flows from operations. During the year ended December 31, 2024, the Company reported net loss of $17.4 million, and net cash used in operating activities of $10.8 million. At December 31, 2024, the Company had an accumulated deficit of $93.7 million. Management does not expect to generate commercial revenue or operating cash flows for at least the next several years. The Company’s ability to continue as a going concern in the near term is largely dependent on its existing cash and cash equivalents balance and ability to obtain additional sources of financing in order to fund operating expenses, complete development of its product candidates, obtain regulatory approvals, launch, and commercialize its product candidates, and continue research and development programs. Assuming no additional fund raising, the Company’s forecasted cash required to fund operations indicates that the Company has sufficient funds to support operations through the one-year period from the issuance date of these consolidated financial statements.

Description of Business, Organization and Liquidity

12 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business, Organization and Liquidity

Note 1. Description of Business, Organization and Liquidity

Business

Palvella Therapeutics, Inc. (the “Company,” or “Palvella”) (previously named Pieris Pharmaceuticals, Inc. and predecessor company (“Pieris”)), a Nevada corporation, is a late clinical-stage biopharmaceutical company committed to serving individuals suffering from serious, rare genetic skin diseases without approved therapies. The Company’s lead product candidate, QTORIN 3.9% rapamycin anhydrous gel (“QTORIN rapamycin”), is based on the Company’s patented QTORIN platform. QTORIN rapamycin is in clinical development for two rare genetic skin disorders. Since inception, the Company has devoted substantially all of its time to identifying, researching and conducting preclinical and clinical activities for its product candidates, acquiring and developing its platform technology, organizing and staffing the Company, business planning, raising capital and establishing its intellectual property portfolio. The Company’s principal executive offices are located in Wayne, Pennsylvania.

Reverse Merger and PIPE Financing

On December 13, 2024 (the “Closing Date”), the Company consummated the previously announced merger pursuant to the terms of that certain Agreement and Plan of Merger, dated as of July 23, 2024 (the “Merger Agreement”), by and among the Company, Polo Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Pieris (the “Merger Sub”), and Palvella Therapeutics, Inc., a Delaware corporation (“Legacy Palvella”). Pursuant to the Merger Agreement, on the Closing Date, (i) Merger Sub merged with and into Legacy Palvella, with Legacy Palvella as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of the Company (the “Reverse Merger”) and (ii) the Company’s name was changed from Pieris Pharmaceuticals, Inc. to Palvella Therapeutics, Inc.

At the effective time of the Reverse Merger (or immediately prior to, where indicated), the following also occurred:

•

All of the then outstanding shares of Palvella common stock were converted into 1,770,167 shares of the Company’s common stock, based on the exchange ratio of approximately 0.309469242 (the “Exchange Ratio”).

•

All of the then outstanding shares of the Company’s convertible preferred stock were converted into 4,753,650 shares of the Company’s common stock, based on the Exchange Ratio. Refer to Note 8, Convertible Preferred Stock, for further detail on the conversion of the Company preferred stock.

•

All outstanding Pieris Preferred Stock remained outstanding through the completion of the Reverse Merger with no changes to their terms and conditions.

•

All of the then outstanding convertible notes plus accrued interest of the Company were converted into 1,179,163 shares of the Company’s common stock and 168,503 prefunded warrants based on the Exchange ratio. Refer to Note 7, Convertible Notes, for further detail on the conversion of the Company convertible notes.

•

All outstanding Pieris stock options were canceled prior to the Reverse Merger because these awards were out of the money.

•

All of the then outstanding stock options of Palvella were exchanged for options to purchase common stock of the Company, subject to the Exchange Ratio.

In connection with the Reverse Merger, the Company entered into a definitive agreement for a private investment in public equity transaction (“PIPE Financing”) with the Investors. The PIPE Financing provided for the issuance to the investors of an aggregate of 1,988,885 shares of common stock and 2,297,953 prefunded warrants for an aggregate purchase price of $60.0 million.

On December 13, 2024, immediately prior to Closing, Pieris entered into a contingent value rights agreement (the “CVR Agreement”) with a rights agent, pursuant to which holders of Pieris common stock prior to Closing received one non-transferable contingent value right (each, a “CVR”) for each outstanding share of Pieris common stock held by such stockholder immediately prior to Closing. Each CVR represents the contractual right to receive payments upon the receipt of payments by Pieris or any of its affiliates under certain strategic partner agreements, including existing collaboration agreements pursuant to which Pieris may be entitled to milestones and royalties in the future and other out licensing agreements for certain of Pieris’ legacy assets, and upon the receipt of certain research and development tax credits in favor of Pieris or any of its affiliates, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement. As no amounts related to the CVR Agreement were probable as of the time of the Reverse Merger, no contingencies for the CVR agreement had been recorded at the time of the Reverse Merger.

Based on the following factors, the Company determined under the Accounting Standards Codification (“ASC”) 805, Business Combinations, that the Reverse Merger should be accounted for as a reverse recapitalization:

•

The Company stockholders owned approximately 60% of the voting rights in the Company, and thus had sufficient voting rights to exert influence over the Company.

•

The Company designated a majority of the Company’s board of directors and maintained a majority of the composition of management.

•

At the time of Closing, Pieris did not meet the definition of a business and had nominal assets, meeting the definition of a public shell company. As such, the Reverse Merger was treated as a reverse recapitalization in which Palvella is issuing stock for the net assets of Pieris.

For further discussion on the Reverse Merger and the related accounting, refer to Note 3, Reverse Merger.

Liquidity

Since inception, the Company has incurred net losses and negative cash flows from operations. During the year ended December 31, 2024, the Company reported net loss of $17.4 million, and net cash used in operating activities of $10.8 million. At December 31, 2024, the Company had an accumulated deficit of $93.7 million.

Management does not expect to generate commercial revenue or operating cash flows for at least the next several years. The Company’s ability to continue as a going concern in the near term is largely dependent on its existing cash and cash equivalents balance and ability to obtain additional sources of financing in order to fund operating expenses, complete development of its product candidates, obtain regulatory approvals, launch, and commercialize its product candidates, and continue research and development programs. Assuming no additional fund raising, the Company’s forecasted cash required to fund operations indicates that the Company has sufficient funds to support operations through the one-year period from the issuance date of these consolidated financial statements.