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 September 30, 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 ...

Exhibit 99.1 Palvella Therapeutics Reports Third Quarter 2025 Financial Results and Provides Corporate Update Palvella's recently expanded rare disease pipeline now comprises QTORIN™-derived product candidates advancing in four serious, rare skin diseases that currently have no FDA-approved therapies Expanded QTORIN™ rapamycin's development into clinically significant angiokeratomas, a rare and debilitating lymphatic disease with no FDA-approved therapies, with Phase 2 study initiation anticipated in second ...

[General Information](index=3&type=section&id=GENERAL%20INFORMATION) This section provides introductory information about Palvella Therapeutics, Inc., clarifying company naming conventions post-merger and outlining the nature of forward-looking statements contained within the report [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section advises readers that the Quarterly Report contains forward-looking statements concerning future operations, product development, financial performance, and regulatory matters, which are inherently subject to risks and uncertainties - The report contains forward-looking statements regarding future operations, product potential (**QTORIN™ rapamycin**), financial performance, regulatory approvals, and market opportunities[13](index=13&type=chunk)[14](index=14&type=chunk) - Actual results may differ materially due to important factors, including those detailed in the 'Risk Factors' section of the 2024 Form 10-K[15](index=15&type=chunk) - The company disclaims any intention or obligation to update or revise forward-looking statements, except as required by law[16](index=16&type=chunk) [Part I. Financial Information](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements for Palvella Therapeutics, Inc. for the periods ended June **30**, **2025**, and December **31**, **2024**, along with management's discussion and analysis of financial condition and results of operations, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This item includes the unaudited condensed consolidated financial statements, comprising the balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity (deficit), and statements of cash flows, along with their accompanying notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position as of June **30**, **2025**, and December **31**, **2024**, showing a decrease in total assets and stockholders' equity, primarily driven by a reduction in cash and cash equivalents and an accumulated deficit Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $70,433 | $83,602 | | Total current assets | $73,747 | $88,234 | | Total assets | $73,747 | $88,234 | | Total current liabilities | $9,616 | $12,038 | | Total liabilities | $25,967 | $25,627 | | Total stockholders' equity | $47,780 | $62,607 | | Accumulated deficit | $(111,391) | $(93,735) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Details the company's financial performance for the three and six months ended June **30**, **2025**, and **2024**, showing a significant increase in net loss and operating expenses, particularly in research and development and general and administrative costs Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Research and development | $5,118 | $1,442 | $9,192 | $2,426 | | General and administrative | $4,132 | $1,466 | $7,929 | $2,241 | | Total operating expenses | $9,250 | $2,908 | $17,121 | $4,667 | | Operating loss | $(9,250) | $(2,908) | $(17,121) | $(4,667) | | Net loss | $(9,471) | $(4,172) | $(17,656) | $(6,708) | | Loss attributable to common stockholders | $(9,471) | $(4,366) | $(17,656) | $(7,096) | | Net loss per share (basic and diluted) | $(0.86) | $(2.47) | $(1.60) | $(4.01) | - Research and development expenses increased significantly, from **$1,442 thousand** to **$5,118 thousand** for the three months ended June **30**, **2025**, and from **$2,426 thousand** to **$9,192 thousand** for the six months ended June **30**, **2025**, compared to the prior year[23](index=23&type=chunk) - General and administrative expenses also rose substantially, from **$1,466 thousand** to **$4,132 thousand** for the three months ended June **30**, **2025**, and from **$2,241 thousand** to **$7,929 thousand** for the six months ended June **30**, **2025**[23](index=23&type=chunk) [Condensed Consolidated Statements of Changes in Preferred Stock, Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Preferred%20Stock,%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) This statement outlines the changes in the company's equity accounts for the six months ended June **30**, **2025**, and **2024**, reflecting the impact of net losses, stock-based compensation, and the exercise of stock options Condensed Consolidated Statements of Changes in Preferred Stock, Convertible Preferred Stock and Stockholders' Equity (Deficit) | Metric | Balance at Dec 31, 2024 (in thousands) | Balance at June 30, 2025 (in thousands) | | :--------------------------------- | :------------------------------------- | :------------------------------------ | | Additional paid-in capital | $156,328 | $159,271 | | Accumulated deficit | $(93,735) | $(111,391) | | Total stockholders' equity | $62,607 | $47,780 | - The accumulated deficit increased from **$(93,735) thousand** at December **31**, **2024**, to **$(111,391) thousand** at June **30**, **2025**, primarily due to net losses[26](index=26&type=chunk) - Stock-based compensation contributed **$2,527 thousand** to additional paid-in capital for the six months ended June **30**, **2025**[26](index=26&type=chunk)[108](index=108&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash inflows and outflows for operating, investing, and financing activities for the six months ended June **30**, **2025**, and **2024**, indicating a significant increase in cash used in operating activities and a shift from cash provided by financing activities in **2024** to cash used in **2025** Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(12,202) | $(2,705) | | Net cash (used in) provided by financing activities | $(853) | $9,892 | | Net (decrease) increase in cash and cash equivalents | $(13,169) | $7,187 | | Cash and cash equivalents at end of period | $70,433 | $14,537 | - Net cash used in operating activities increased substantially from **$(2,705) thousand** in H1 **2024** to **$(12,202) thousand** in H1 **2025**, reflecting increased operating expenses[32](index=32&type=chunk)[177](index=177&type=chunk) - Financing activities shifted from providing **$9,892 thousand** in H1 **2024** (due to convertible notes issuance) to using **$(853) thousand** in H1 **2025** (due to transaction costs and stock option exercises)[32](index=32&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering business description, significant accounting policies, the reverse merger, fair value measurements, strategic agreements, accrued liabilities, stockholders' equity, equity incentive plans, commitments, segment information, and subsequent events [Note 1. Description of Business, Organization and Liquidity](index=11&type=section&id=Note%201.%20Description%20of%20Business,%20Organization%20and%20Liquidity) Describes Palvella Therapeutics, Inc. as a late clinical-stage biopharmaceutical company focused on rare genetic skin diseases, with its lead product candidate **QTORIN rapamycin** in clinical development - **Palvella Therapeutics, Inc.** is a late clinical-stage biopharmaceutical company developing **QTORIN rapamycin** for rare genetic skin diseases[35](index=35&type=chunk) - The company incurred a net loss of **$17,700 thousand** and used **$12,200 thousand** in operating cash flows for the six months ended June **30**, **2025**, with an accumulated deficit of **$111,400 thousand**[38](index=38&type=chunk) - Management expects existing cash and cash equivalents to support operations for at least one year from the financial statement issuance date, but future funding will be required as no commercial revenue is expected in the near term[39](index=39&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting policies used in preparing the financial statements, including the basis of presentation (unaudited, U.S. GAAP, reverse recapitalization for the merger), use of estimates, concentration of credit risk, comprehensive loss, cash and cash equivalents, accounts receivable, fair value measurements, derivative instruments, research and development expenses, stock-based compensation, government grants, income taxes, German R&D tax credit, related party transactions, segments, net loss per share, and recently issued accounting standards - The **Business Combination** was accounted for as a reverse recapitalization, treating **Legacy Palvella** as the accounting acquirer[41](index=41&type=chunk) - Research and development costs are expensed as incurred, and stock-based compensation is recognized based on fair values using the Black-Scholes model[57](index=57&type=chunk)[59](index=59&type=chunk) - The company recognized **$300 thousand** in government grant income as a reduction to R&D costs for the six months ended June **30**, **2025**, related to the **Phase 3 SELVA** trial[64](index=64&type=chunk) [Note 3. Reverse Merger](index=17&type=section&id=Note%203.%20Reverse%20Merger) Details the December **13**, **2024**, **Business Combination** where **Legacy Palvella** merged into Pieris Pharmaceuticals, Inc., which was then renamed **Palvella Therapeutics, Inc.** For accounting purposes, this was treated as a reverse recapitalization, with **Legacy Palvella** as the accounting acquirer - The **Reverse Merger**, completed on December **13**, **2024**, resulted in **Legacy Palvella** becoming a wholly-owned subsidiary of the Company, and the Company's name changed from Pieris Pharmaceuticals, Inc. to **Palvella Therapeutics, Inc.**[76](index=76&type=chunk)[10](index=10&type=chunk) - For accounting purposes, the **Reverse Merger** was treated as a reverse recapitalization, with **Legacy Palvella** deemed the accounting acquirer[77](index=77&type=chunk)[79](index=79&type=chunk) Reverse Merger | Metric | As of December 13, 2024 (in thousands) | | :--------------------- | :------------------------------------- | | Cash | $13,781 | | Total current assets | $14,753 | | Total current liabilities | $3,142 | | Net assets acquired | $11,611 | [Note 4. Fair Value Measurements](index=19&type=section&id=Note%204.%20Fair%20Value%20Measurements) Provides information on financial assets and liabilities measured at fair value on a recurring basis, categorizing them into Level **1**, Level **2**, or Level **3** of the fair value hierarchy Fair Value Measurements | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Cash and cash equivalents (Level 1) | $70,433 | $83,602 | | Derivative liabilities – royalty agreement (Level 3) | $1,840 | $1,647 | | Derivative liabilities – contingent value right liability (Level 3) | $1,978 | $1,978 | | Total liabilities measured at fair value | $3,818 | $3,625 | - Derivative liabilities for the royalty agreement and contingent value rights are classified as **Level 3**, relying on unobservable inputs like probability rates for FDA approval and expected term[52](index=52&type=chunk)[84](index=84&type=chunk) Fair Value Measurements | Assumption | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Discount rate | 19.0% | 20.0% | | Probability rate of achieving FDA approval of a product | 56.6% | 56.6% | | Expected term to FDA regulatory approval of a product | 2.0 years | 2.5 years | [Note 5. Strategic Agreements](index=20&type=section&id=Note%205.%20Strategic%20Agreements) Describes the Development Funding and Royalties Agreement with Ligand Pharmaceuticals, Inc., under which Ligand provided **$15,000 thousand** in funding - The company has a Development Funding and Royalties Agreement with Ligand Pharmaceuticals, Inc., under which Ligand provided **$15,000 thousand** for **QTORIN rapamycin** development[88](index=88&type=chunk) - **Palvella** is obligated to pay Ligand up to **$8,000 thousand** in milestone payments (with **$5,000 thousand** remaining) and tiered royalties ranging from **8.0%** to **9.8%** on net product sales[88](index=88&type=chunk)[90](index=90&type=chunk) Strategic Agreements | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Royalty agreement liability | $14,511 | $11,942 | | Non-cash interest expense – royalty agreement (6 months) | $2,569 | $1,747 | [Note 6. Accrued Expenses and Other Current Liabilities](index=22&type=section&id=Note%206.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Details the composition of accrued expenses and other current liabilities, which decreased from **$5,474 thousand** at December **31**, **2024**, to **$3,081 thousand** at June **30**, **2025**, primarily due to a reduction in compensation expense Accrued Expenses and Other Current Liabilities | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------- | | Professional fees | $399 | $808 | | Compensation expense | $786 | $3,073 | | Research and development expenses | $971 | $404 | | Other | $925 | $1,189 | | Total accrued expenses and other current liabilities | $3,081 | $5,474 | - Accrued compensation expense significantly decreased from **$3,073 thousand** at December **31**, **2024**, to **$786 thousand** at June **30**, **2025**, including **$2,100 thousand** for current and former Pieris employees as of December **31**, **2024**[93](index=93&type=chunk) [Note 7. Stockholders' Equity](index=22&type=section&id=Note%207.%20Stockholders'%20Equity) Outlines the company's authorized capital, including common stock and various series of preferred stock - As of June **30**, **2025**, the company had **11,059,665** shares of common stock outstanding and **2,466,456** pre-funded warrants outstanding, exercisable at **$0.001** per share[94](index=94&type=chunk)[98](index=98&type=chunk) - The company has **15,617** shares of Preferred Stock outstanding across Series A-E, convertible into **13.34** common shares per preferred share, and ranking senior to common stock in liquidation[97](index=97&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) [Note 8. Equity Incentive Plans](index=24&type=section&id=Note%208.%20Equity%20Incentive%20Plans) Describes the company's equity incentive plans, including the **2024 Equity Incentive Plan** and the adjusted **2019 Plan** - The **2024 Equity Incentive Plan**, approved on December **13**, **2024**, reserves **3,455,433** shares of common stock for issuance, with **2,077,974** shares issued as of June **30**, **2025**[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) Equity Incentive Plans | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Research and development stock-based compensation | $900 | $290 | | General and administrative stock-based compensation | $1,627 | $73 | | Total stock-based compensation expense | $2,527 | $363 | - As of June **30**, **2025**, there was **$20,100 thousand** of unrecognized compensation cost related to non-vested stock options, expected to be recognized over **3.25** years[108](index=108&type=chunk) [Note 9. Commitments and Contingencies](index=25&type=section&id=Note%209.%20Commitments%20and%20Contingencies) States that the company accrues liabilities for contingent matters when future expenditures are probable and estimable - The company accrues liabilities for contingent matters when future expenditures are probable and reasonably estimable[110](index=110&type=chunk) - As of the reporting date, the company is not currently subject to any material legal proceedings[111](index=111&type=chunk)[188](index=188&type=chunk) [Note 10. Segment Information](index=26&type=section&id=Note%2010.%20Segment%20Information) Discloses that the company operates in a single reportable segment focused on discovering and developing products for rare genetic skin diseases - The company operates as a single reportable segment, focused on discovering and developing products for individuals with serious and rare genetic skin diseases[112](index=112&type=chunk)[113](index=113&type=chunk) - The CODM (CEO) assesses performance and allocates resources based on consolidated net income or loss and total consolidated assets[114](index=114&type=chunk) Segment Information | Expense Category | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Research and development | $5,118 | $9,192 | | General and administrative | $4,132 | $7,929 | | Loss from operations | $(9,250) | $(17,121) | [Note 11. Subsequent Events](index=27&type=section&id=Note%2011.%20Subsequent%20Events) States that subsequent events have been evaluated through August **14**, **2025**, the date the financial statements were issued - Subsequent events have been evaluated through August **14**, **2025**, the issuance date of the condensed consolidated financial statements[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the company's financial condition, results of operations, and liquidity - The company is a clinical-stage biopharmaceutical company focused on developing novel therapies for serious, rare genetic skin diseases using its **QTORIN** platform[121](index=121&type=chunk) - The lead product candidate, **QTORIN 3.9% rapamycin anhydrous gel**, is in clinical development for microcystic LMs (**Phase 3 SELVA** trial) and cutaneous VMs (**Phase 2 TOIVA** trial)[121](index=121&type=chunk)[122](index=122&type=chunk) - The **Business Combination** was accounted for as a reverse recapitalization, with **Legacy Palvella** treated as the accounting acquirer[133](index=133&type=chunk) [Overview](index=28&type=section&id=Overview) **Palvella Therapeutics, Inc.** is a clinical-stage biopharmaceutical company aiming to be a leader in rare disease therapies for genetic skin diseases - **Palvella Therapeutics, Inc.** is a clinical-stage biopharmaceutical company focused on developing novel therapies for serious, rare genetic skin diseases[121](index=121&type=chunk) - The company's lead product candidate, **QTORIN 3.9% rapamycin anhydrous gel**, is in clinical development for microcystic LMs (**Phase 3 SELVA**) and cutaneous VMs (**Phase 2 TOIVA**)[121](index=121&type=chunk)[122](index=122&type=chunk) [Recent Developments](index=28&type=section&id=Recent%20Developments) Highlights key recent achievements including receiving initial grant proceeds for the **Phase 3 SELVA** trial, being granted a new U.S. patent for rapamycin compositions, and successfully completing enrollment for the **Phase 3 SELVA** trial - In May **2025**, the company received initial proceeds of **$500 thousand** from an FDA grant supporting the **Phase 3 SELVA** trial[124](index=124&type=chunk) - In June **2025**, a sixth U.S. patent (No. **12,329,748**) was granted, covering **0.1-20%** anhydrous compositions of rapamycin and other mTOR inhibitors[124](index=124&type=chunk) - Enrollment for the **Phase 3 SELVA** trial was successfully completed in June **2025** with **51** subjects, exceeding the original target[124](index=124&type=chunk) [Our Novel Product Candidate: QTORIN rapamycin](index=29&type=section&id=Our%20Novel%20Product%20Candidate:%20QTORIN%20rapamycin) **QTORIN rapamycin** is a **3.9%** anhydrous topical gel formulation of rapamycin, being developed for microcystic LMs, cutaneous VMs, and other mTOR-driven skin diseases, with the potential to become the standard of care [QTORIN rapamycin for the treatment of microcystic LMs](index=29&type=section&id=QTORIN%20rapamycin%20for%20the%20treatment%20of%20microcystic%20LMs) **QTORIN rapamycin** is in a **Phase 3** clinical trial (**SELVA**) for microcystic LMs, a rare genetic disease with no FDA-approved treatments - **QTORIN rapamycin** is in a **Phase 3 SELVA** trial for microcystic LMs, a rare genetic disease with no FDA-approved treatments for over **30,000** U.S. individuals[126](index=126&type=chunk)[127](index=127&type=chunk) - The **SELVA** trial completed enrollment in Q2 **2025** with **51** subjects, exceeding the target, and top-line data is expected in Q1 **2026**[127](index=127&type=chunk) - **QTORIN rapamycin** has received **Breakthrough Therapy**, **Fast Track**, and **Orphan Drug Designations** from the FDA for microcystic LMs, and an FDA grant of up to **$2,600 thousand** supports the **SELVA** study[128](index=128&type=chunk) [QTORIN rapamycin for the treatment of cutaneous VMs](index=29&type=section&id=QTORIN%20rapamycin%20for%20the%20treatment%20of%20cutaneous%20VMs) **QTORIN rapamycin** is in a **Phase 2** clinical trial (**TOIVA**) for cutaneous VMs, another serious rare condition with no FDA-approved treatments for an estimated **75,000** individuals in the U.S - **QTORIN rapamycin** is in a **Phase 2 TOIVA** trial for cutaneous VMs, a rare condition affecting over **75,000** individuals in the U.S. with no FDA-approved treatments[129](index=129&type=chunk)[130](index=130&type=chunk) - First patients were dosed in Q1 **2025**, and top-line data from approximately **15** participants is expected in Q4 **2025**[130](index=130&type=chunk) - The venous malformations program has received **Fast Track Designation** from the FDA[130](index=130&type=chunk) [The Business Combination](index=29&type=section&id=The%20Business%20Combination) Reaffirms the December **13**, **2024**, business combination where Pieris Pharmaceuticals, Inc. merged with **Legacy Palvella** and was renamed **Palvella Therapeutics, Inc.** - The business combination, completed on December **13**, **2024**, involved the merger of **Legacy Palvella** into Pieris Pharmaceuticals, Inc., which was subsequently renamed **Palvella Therapeutics, Inc.**[131](index=131&type=chunk)[132](index=132&type=chunk) - The transaction was accounted for as a reverse recapitalization, with **Legacy Palvella** treated as the accounting acquirer for financial reporting purposes[133](index=133&type=chunk) [Contingent Value Rights Agreement](index=30&type=section&id=Contingent%20Value%20Rights%20Agreement) Describes the **CVR Agreement** entered into on December **13**, **2024**, granting pre-Merger stockholders of Pieris one non-transferable CVR for each share - A **Contingent Value Rights (CVR) Agreement** was established on December **13**, **2024**, granting pre-Merger Pieris stockholders CVRs[134](index=134&type=chunk) - CVRs represent the contractual right to receive payments from strategic partner agreements and R&D tax credits related to Pieris's legacy assets, with no assurance of payment[134](index=134&type=chunk) [Ligand Development Funding and Royalties Agreement](index=30&type=section&id=Ligand%20Development%20Funding%20and%20Royalties%20Agreement) Details the agreement with Ligand Pharmaceuticals, Inc., where Ligand provided **$15,000 thousand** for **QTORIN rapamycin** development - Ligand Pharmaceuticals, Inc. provided **$15,000 thousand** in funding for **QTORIN rapamycin** development under the **Ligand Agreement**[135](index=135&type=chunk) - The company is obligated to pay Ligand up to **$8,000 thousand** in milestone payments (with **$5,000 thousand** remaining) and tiered royalties of **8.0%** to **9.8%** on annual worldwide net product sales of **QTORIN rapamycin** products[135](index=135&type=chunk) [Impact of Global and Macroeconomic Events](index=30&type=section&id=Impact%20of%20Global%20and%20Macroeconomic%20Events) Acknowledges significant risks to the business from global and macroeconomic uncertainties, including inflation, tariffs, interest rate fluctuations, new legislation (like the One Big Beautiful Bill Act), economic slowdowns, banking instability, and geopolitical tensions - The company faces significant risks from global and macroeconomic uncertainties, including inflation, tariffs, interest rate and currency fluctuations, and geopolitical tensions[136](index=136&type=chunk) - Management is monitoring these impacts, but the ultimate extent on business, results of operations, liquidity, and capital resources remains highly uncertain[136](index=136&type=chunk) [Components of Operating Results](index=31&type=section&id=Components%20of%20Operating%20Results) Discusses the primary components of the company's operating results, mainly research and development expenses and general and administrative costs [Operating Expenses](index=31&type=section&id=Operating%20Expenses) The company's operating expenses primarily consist of research and development and general and administrative costs - Operating expenses primarily comprise research and development and general and administrative costs[137](index=137&type=chunk) - The company expects to incur significant operating losses for the foreseeable future due to advancing product candidates, regulatory submissions, and public company operating costs[138](index=138&type=chunk) [Research and Development Expenses](index=31&type=section&id=Research%20and%20Development%20Expenses) Research and development expenses, which are expensed as incurred, include costs for preclinical and clinical materials, personnel, vendor services, regulatory compliance, and allocated overhead - R&D expenses are expensed as incurred and include costs for clinical materials, personnel, vendor services, and regulatory compliance[139](index=139&type=chunk)[142](index=142&type=chunk) - R&D expenses are expected to increase substantially due to continued investment in product candidates, particularly late-stage clinical development and regulatory approvals for **QTORIN rapamycin**[141](index=141&type=chunk)[143](index=143&type=chunk) - The duration, costs, and timing of R&D are subject to various factors, including clinical trial completion, side effects, manufacturing, patient retention, and intellectual property rights[144](index=144&type=chunk)[146](index=146&type=chunk) [General and Administrative Expenses](index=32&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses primarily cover personnel costs (salaries, benefits, stock-based compensation) for executive, finance, and administrative functions, as well as professional fees (legal, audit, consulting) - G&A expenses include personnel costs for executive, finance, and administrative functions, and professional fees for legal, audit, and consulting services[149](index=149&type=chunk) - G&A expenses are anticipated to increase substantially due to headcount additions and increased accounting, audit, legal, regulatory, and investor relations costs associated with being a public company[147](index=147&type=chunk)[150](index=150&type=chunk) [Other (Expense) Income](index=33&type=section&id=Other%20(Expense)%20Income) Other (expense) income primarily consists of non-cash interest expense related to the **Ligand** royalty agreement, fair value adjustments on derivative liabilities (milestone payments), and net interest income - Other (expense) income primarily includes non-cash interest expense from the **Ligand** royalty agreement, fair value adjustments on derivative liabilities (milestone payments), and net interest income[151](index=151&type=chunk) - This category is subject to variability due to changes in the fair value of derivative liabilities and the royalty agreement liability, which depend on estimates of future development and commercialization[152](index=152&type=chunk) [Income Taxes](index=33&type=section&id=Income%20Taxes) The company has not recorded income tax benefits for net operating losses (NOLs) since May **2018**, maintaining a full valuation allowance against deferred tax assets due to the unlikelihood of realizing future tax benefits - The company has not recorded income tax benefits for NOLs since May **2018** and maintains a full valuation allowance against all deferred tax assets[153](index=153&type=chunk) - No provision for income taxes was recorded for the three and six months ended June **30**, **2025**, and **2024**[155](index=155&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial results for the three and six months ended June **30**, **2025**, versus **2024**, highlighting significant increases in operating expenses and net loss [Comparison of the Three and Six Months Ended June 30, 2025 and 2024](index=34&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Presents a tabular comparison of key financial metrics, showing a substantial increase in operating expenses and net loss for both the three and six months ended June **30**, **2025**, compared to the same periods in **2024** Comparison of the Three and Six Months Ended June 30, 2025 and 2024 | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | $ Change (3 Months) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | $ Change (6 Months) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------ | | Research and development | $5,118 | $1,442 | $3,676 | $9,192 | $2,426 | $6,766 | | General and administrative | $4,132 | $1,466 | $2,666 | $7,929 | $2,241 | $5,688 | | Total operating expenses | $9,250 | $2,908 | $6,342 | $17,121 | $4,667 | $12,454 | | Operating loss | $(9,250) | $(2,908) | $(6,342) | $(17,121) | $(4,667) | $(12,454) | | Net loss | $(9,471) | $(4,172) | $(5,299) | $(17,656) | $(6,708) | $(10,948) | [Research and Development Expenses](index=34&type=section&id=Research%20and%20Development%20Expenses) R&D expenses significantly increased for both the three and six months ended June **30**, **2025**, compared to **2024** Research and Development Expenses | R&D Category | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | $ Change (3 Months) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | $ Change (6 Months) | | :------------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------ | | QTORIN rapamycin for microcystic LM | $1,235 | $422 | $813 | $2,389 | $425 | $1,964 | | QTORIN rapamycin for cutaneous VM | $354 | $0 | $354 | $700 | $0 | $700 | | QTORIN rapamycin CMC | $1,517 | $40 | $1,477 | $2,289 | $153 | $2,136 | | Salaries and stock-based compensation | $1,501 | $704 | $797 | $2,823 | $1,351 | $1,472 | | Total research and development expenses | $5,118 | $1,442 | $3,676 | $9,192 | $2,426 | $6,766 | - The increase in R&D expenses was primarily due to increased spending on clinical development for **QTORIN rapamycin** (microcystic LMs and cutaneous VMs), including the **Phase 3 SELVA** and **Phase 2 TOIVA** trials, which were initiated in **2024**[157](index=157&type=chunk) - Additional increases were attributed to CMC costs for all programs and higher compensation costs due to headcount additions in late **2024** and early **2025**[157](index=157&type=chunk) [General and Administrative Expenses](index=34&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses significantly increased for both the three and six months ended June **30**, **2025**, compared to **2024** General and Administrative Expenses | G&A Category | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total general and administrative | $4,132 | $1,466 | $7,929 | $2,241 | - The increase in G&A expenses was primarily driven by increased employee compensation due to headcount additions and higher professional services costs related to operating as a publicly-traded company[159](index=159&type=chunk) [Total Other (Expense) Income](index=35&type=section&id=Total%20Other%20(Expense)%20Income) Total other (expense) income, net, decreased from **$1,300 thousand** expense in Q2 **2024** to **$200 thousand** expense in Q2 **2025**, and from **$2,000 thousand** expense in H1 **2024** to **$500 thousand** expense in H1 **2025** Total Other (Expense) Income | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total other (expense) income, net | $(201) | $(1,304) | $(535) | $(1,982) | - Total other (expense) income, net, decreased from **$1,300 thousand** expense in Q2 **2024** to **$200 thousand** expense in Q2 **2025**, and from **$2,000 thousand** expense in H1 **2024** to **$500 thousand** expense in H1 **2025**[160](index=160&type=chunk) [Interest expense – royalty agreement](index=35&type=section&id=Interest%20expense%20%E2%80%93%20royalty%20agreement) Interest expense related to the royalty agreement increased to **$1,400 thousand** for the three months and **$2,600 thousand** for the six months ended June **30**, **2025**, compared to **$900 thousand** and **$1,700 thousand** respectively in **2024**, reflecting changes in the fair value of the royalty agreement liability Interest expense – royalty agreement | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Interest expense – royalty agreement | $(1,354) | $(942) | $(2,569) | $(1,747) | - Interest expense related to the royalty agreement increased by **$400 thousand** for the three months and **$800 thousand** for the six months ended June **30**, **2025**, compared to the prior year, due to changes in the fair value of the royalty agreement liability[161](index=161&type=chunk) [Fair value adjustments on derivative liabilities – royalty agreement](index=35&type=section&id=Fair%20value%20adjustments%20on%20derivative%20liabilities%20%E2%80%93%20royalty%20agreement) The company recorded a non-cash loss on derivative liabilities of **$100 thousand** for the three months and **$200 thousand** for the six months ended June **30**, **2025**, which is a decrease compared to **$300 thousand** for both periods in **2024** Fair value adjustments on derivative liabilities – royalty agreement | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Fair value adjustments on derivative liabilities – royalty agreement | $(118) | $(271) | $(193) | $(329) | - Non-cash loss on derivative liabilities decreased from **$300 thousand** to **$100 thousand** for the three months and from **$300 thousand** to **$200 thousand** for the six months ended June **30**, **2025**, reflecting changes in the fair value of future milestone payment obligations[162](index=162&type=chunk) [Interest income (expense), net](index=35&type=section&id=Interest%20income%20(expense),%20net) The company recorded **$700 thousand** in net interest income for the three months and **$1,400 thousand** for the six months ended June **30**, **2025**, a significant increase from interest expense of **$100 thousand** and **$0** respectively in **2024** Interest income (expense), net | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Interest income (expense), net | $690 | $(86) | $1,442 | $0 | - Interest income, net, increased significantly due to higher average balances held in interest-bearing cash and money market funds[163](index=163&type=chunk) [Net Loss Applicable to Common Stockholders](index=35&type=section&id=Net%20Loss%20Applicable%20to%20Common%20Stockholders) The net loss applicable to common stockholders increased to **$9,500 thousand** for the three months and **$17,700 thousand** for the six months ended June **30**, **2025**, compared to **$4,400 thousand** and **$7,100 thousand** respectively in **2024**, driven by the factors discussed in the results of operations Net Loss Applicable to Common Stockholders | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss attributable to common stockholders | $(9,471) | $(4,366) | $(17,656) | $(7,096) | - Net loss applicable to common stockholders increased significantly due to higher operating expenses, particularly R&D and G&A, as well as interest expenses[164](index=164&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's funding sources, historical losses, current cash position, and future capital requirements [Sources of Liquidity](index=36&type=section&id=Sources%20of%20Liquidity) Since inception, the company has funded operations through the **Ligand Agreement** and debt/equity sales, incurring substantial losses - The company has incurred substantial losses since inception, funding operations primarily through the **Ligand Agreement** and sales of debt and equity securities[165](index=165&type=chunk) Sources of Liquidity | Metric | As of June 30, 2025 (in thousands) | | :------------------------------------ | :--------------------------------- | | Cash and cash equivalents | $70,433 | | Accumulated deficit | $(111,391) | - The company does not expect to generate commercial revenue or operating cash flows for at least the next several years and relies on existing cash and additional financing to fund operations and product development[166](index=166&type=chunk) [PIPE Financing](index=36&type=section&id=PIPE%20Financing) Details the **PIPE Financing** completed concurrently with the Merger Agreement on July **23**, **2024** - The **PIPE Financing**, completed concurrently with the Merger Agreement, raised approximately **$78,900 thousand**[167](index=167&type=chunk) - This included **$60,000 thousand** in cash and the conversion of approximately **$18,900 thousand** of principal and interest from outstanding convertible notes[167](index=167&type=chunk) - Investors purchased **3,168,048** shares of common stock and **2,466,456** pre-funded warrants[167](index=167&type=chunk) [Convertible Notes](index=36&type=section&id=Convertible%20Notes) **Legacy Palvella** issued convertible notes totaling approximately **$18,400 thousand** between June and December **2024**, accruing interest at **SOFR plus 2.0%** per annum - **Legacy Palvella** issued approximately **$18,400 thousand** in convertible notes between June and December **2024**[168](index=168&type=chunk) - Upon the closing of the **PIPE Financing**, these notes and accrued interest converted into **1,179,163** shares of common stock and **168,503** prefunded warrants[168](index=168&type=chunk) [Future Funding Requirements](index=36&type=section&id=Future%20Funding%20Requirements) The company expects to incur increasing losses and requires additional capital beyond its current cash and cash equivalents, which are projected to fund operations into the second half of **2027** - The company expects increasing losses and believes existing cash and cash equivalents (**$70,400 thousand** as of June **30**, **2025**) will fund operations into the second half of **2027**[169](index=169&type=chunk)[171](index=171&type=chunk) - Future funding requirements are dependent on factors such as regulatory review, commercialization costs, scope of R&D programs, and intellectual property maintenance[173](index=173&type=chunk)[175](index=175&type=chunk) - Raising additional capital may lead to substantial stockholder dilution or require relinquishing valuable rights through collaborations[172](index=172&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) Summarizes cash flow activities for the six months ended June **30**, **2025**, and **2024** Cash Flows | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(12,202) | $(2,705) | | Net cash (used in) provided by financing activities | $(853) | $9,892 | | Net (decrease) increase in cash and cash equivalents | $(13,169) | $7,187 | - Net cash used in operating activities increased significantly in H1 **2025** due to greater R&D efforts and increased costs of operating as a public company[177](index=177&type=chunk) - Financing activities shifted from providing **$9,900 thousand** in H1 **2024** (convertible notes) to using **$900 thousand** in H1 **2025** (transaction costs for **Reverse Merger**)[178](index=178&type=chunk)[179](index=179&type=chunk) [Contractual Obligations and Commitments](index=39&type=section&id=Contractual%20Obligations%20and%20Commitments) States that there were no material changes to contractual obligations and cash requirements during the six months ended June **30**, **2025**, outside the ordinary course of business, as previously disclosed in the **2024 Form 10-K** - No material changes to contractual obligations and cash requirements occurred during the six months ended June **30**, **2025**, beyond those disclosed in the **2024 Form 10-K**[180](index=180&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Reaffirms that the preparation of financial statements requires significant estimates and assumptions, particularly concerning R&D expenses, the **Ligand Agreement** (royalty and derivative liabilities), the **CVR Agreement**, stock-based compensation, and deferred income taxes - Financial statement preparation involves significant estimates and assumptions, especially for R&D expenses, **Ligand Agreement** liabilities, **CVR** liability, stock-based compensation, and deferred income taxes[181](index=181&type=chunk) - No material changes to critical accounting policies or estimation methodologies were made during the six months ended June **30**, **2025**[183](index=183&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, **Palvella Therapeutics, Inc.** is not required to provide the information typically required under this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June **30**, **2025**, concluding they were effective in ensuring material information is known and reported timely [Disclosure Controls and Procedures](index=40&type=section&id=Disclosure%20Controls%20and%20Procedures) The principal executive officer and principal financial officer evaluated the effectiveness of the company's disclosure controls and procedures as of June **30**, **2025**, concluding they were effective in providing reasonable assurance that material information is known and reported within SEC specified time periods - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June **30**, **2025**[185](index=185&type=chunk) - These controls are designed to ensure material information is known to officers and reported timely according to SEC rules[185](index=185&type=chunk) [Changes in Internal Control over Financial Reporting](index=40&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No changes in internal control over financial reporting occurred during the fiscal quarter ended June **30**, **2025**, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June **30**, **2025**[186](index=186&type=chunk) [Part II. Other Information](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers other required disclosures, including legal proceedings, risk factors, unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, other information, and a list of exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened legal proceedings that could adversely affect its business, operating results, or financial condition - The company is not currently a party to any material legal proceedings[188](index=188&type=chunk) - No pending or threatened legal proceedings are known that could adversely affect the business, operating results, or financial condition[188](index=188&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company's securities involves a high degree of risk - Investing in the company's securities involves a high degree of risk[189](index=189&type=chunk) - There have been no material changes in risk factors from those disclosed in the **2024 Form 10-K**[190](index=190&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchase of Equity Securities](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds%20and%20Issuer%20Purchase%20of%20Equity%20Securities) This item reports that there were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred during the reporting period[191](index=191&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item reports that there were no defaults upon senior securities during the period - There were no defaults upon senior securities during the reporting period[192](index=192&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[193](index=193&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) This item reports that no directors or officers adopted or terminated a **Rule 10b5-1** trading plan or arrangement or a non-**Rule 10b5-1** trading plan or arrangement during the period covered by this report - No directors or officers adopted or terminated a **Rule 10b5-1** or non-**Rule 10b5-1** trading plan during the reporting period[194](index=194&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Provides an index of exhibits filed as part of this Quarterly Report on Form **10-Q**, including offer letters, severance agreements, certifications, and XBRL documents - The report includes an Exhibit Index listing various documents filed, such as offer letters, severance agreements, and certifications[195](index=195&type=chunk)[197](index=197&type=chunk) [Signatures](index=43&type=section&id=SIGNATURES) This section contains the required signatures of the Registrant's authorized officers, specifically the President, Chief Executive Officer, and Director, and the Chief Financial Officer and Treasurer, certifying the report on August **14**, **2025** - The report is signed by Wesley H. Kaupinen (President, CEO, and Director) and Matthew E. Korenberg (CFO and Treasurer) on August **14**, **2025**[203](index=203&type=chunk)

[Palvella Therapeutics Reports Second Quarter 2025 Financial Results and Provides Corporate Update](index=1&type=section&id=Palvella%20Therapeutics%20Reports%20Second%20Quarter%202025%20Financial%20Results%20and%20Provides%20Corporate%20Update) Palvella Therapeutics reports Q2 2025 financial results and corporate updates, highlighting pipeline progress and strong financial position [Key Highlights](index=1&type=section&id=Key%20Highlights) Overview of Q2 2025 achievements and milestones, including clinical trial progress, pipeline expansion, and financial runway - **Phase 3 SELVA trial** evaluating QTORIN™ 3.9% rapamycin anhydrous gel for microcystic lymphatic malformations completed enrollment, **exceeding the target by over 25%**[1](index=1&type=chunk) - Top-line results for the **Phase 3 SELVA trial** are on track for the **first quarter of 2026**[1](index=1&type=chunk) - Top-line results for the **Phase 2 TOIVA trial** evaluating QTORIN™ rapamycin for cutaneous venous malformations remain on track for the **fourth quarter of 2025**[1](index=1&type=chunk) - The company plans to announce both a **third clinical indication** for QTORIN™ rapamycin and a **second QTORIN™ platform candidate** **before year-end 2025**[1](index=1&type=chunk) Cash and Cash Equivalents | As of | Amount (million USD) | | :--- | :--- | | June 30, 2025 | $70.4 | - Cash and cash equivalents are expected to fund operations into the **second half of 2027**[1](index=1&type=chunk) - Palvella is **well-positioned for continued growth** and execution on its vision, with **strong momentum** and a **solid financial foundation**[3](index=3&type=chunk) [Recent Research and Development Highlights](index=2&type=section&id=Recent%20Research%20and%20Development%20Highlights) Details the advancement of QTORIN™ rapamycin in clinical trials for microcystic LMs and cutaneous VMs, and broader pipeline development [QTORIN™ Rapamycin for Microcystic Lymphatic Malformations (microcystic LMs)](index=2&type=section&id=QTORIN%E2%84%A2%20rapamycin%20for%20the%20treatment%20of%20microcystic%20lymphatic%20malformations%20(microcystic%20LMs)) - Completed enrollment in the **Phase 3 SELVA trial** with **51 subjects**, **exceeding the original target of 40 subjects by over 25%**[6](index=6&type=chunk) - Received initial proceeds from an **FDA Orphan Products Grant**, which could total **up to $2.6 million**, to support the Phase 3 SELVA trial[6](index=6&type=chunk) - The USPTO issued **patent No. 12,268,673** for QTORIN™ rapamycin for the treatment of microcystic LMs, with anticipated patent life **extending into 2038**[6](index=6&type=chunk) - Top-line results from the SELVA trial are on track for the **first quarter of 2026**[6](index=6&type=chunk) [QTORIN™ Rapamycin for Cutaneous Venous Malformations (cutaneous VMs)](index=2&type=section&id=QTORIN%E2%84%A2%20rapamycin%20for%20the%20treatment%20of%20cutaneous%20venous%20malformations%20(cutaneous%20VMs)) - Continued execution of the ongoing **Phase 2 TOIVA trial**, a single-arm, open-label, baseline-controlled clinical trial evaluating QTORIN™ rapamycin for cutaneous VMs, with enrollment ongoing and targeting **approximately 15 subjects**[6](index=6&type=chunk) - Completed a **nationally representative, blinded, real-world observational study** estimating the U.S. annual prevalence of cutaneous VMs, with findings submitted to a peer-reviewed journal[6](index=6&type=chunk) - Top-line results from the TOIVA trial are on track for the **fourth quarter of 2025**[6](index=6&type=chunk) [QTORIN™ Pipeline Development](index=3&type=section&id=QTORIN%E2%84%A2%20pipeline%20development) - The expansion of QTORIN™ rapamycin into a **third serious, rare skin disease** with **no FDA-approved therapies** is progressing, with an announcement planned for the **second half of 2025**[10](index=10&type=chunk) - A **second product candidate** from the QTORIN™ platform for a serious, rare skin disease has achieved **key pre-clinical development milestones**, with an announcement planned for the **second half of 2025**[10](index=10&type=chunk) [Recent Corporate Highlights](index=3&type=section&id=Recent%20Corporate%20Highlights) Covers key corporate achievements, including executive appointments, intellectual property advancements, and market index inclusions - Wes Kaupinen, Palvella's Founder and CEO, participated in the **FDA's CEO Forum** with Commissioner Marty A. Makary, M.D., M.P.H, and other senior FDA officials on **June 5th**[10](index=10&type=chunk) - Strengthened executive leadership team with the appointment of **Ashley Kline**, a rare disease commercial veteran, as **Chief Commercial Officer**[10](index=10&type=chunk) - The USPTO issued **patent No. 12,329,748** encompassing a wide range of composition and method-of-use claims for QTORIN™ rapamycin and other mTOR inhibitors, with patent term expected through **at least 2038**[10](index=10&type=chunk) - The Company was added to the **Russell 3000®** and **Russell 2000® indexes** on **June 27, 2025**[10](index=10&type=chunk) [Second Quarter 2025 Financial Results](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Results) Comprehensive review of Palvella's financial performance for Q2 and six months ended June 30, 2025, including cash, expenses, and net loss [Financial Overview](index=3&type=section&id=Financial%20Overview) Cash and Cash Equivalents | As of | Amount (million USD) | | :--- | :--- | | June 30, 2025 | $70.4 | - Palvella expects its cash resources to be sufficient to fund operations into the **second half of 2027**[10](index=10&type=chunk) Research and Development Expenses (Three Months Ended June 30) | Period | Amount (million USD) | | :--- | :--- | | 2025 | $5.1 | | 2024 | $1.4 | - The increase in R&D expenses was primarily due to **increased spending** on the clinical development of QTORIN™ rapamycin for microcystic LMs and cutaneous VMs, including the **Phase 3 SELVA** and **Phase 2 TOIVA trials** initiated in **2H 2024**[10](index=10&type=chunk) General and Administrative Expenses (Three Months Ended June 30) | Period | Amount (million USD) | | :--- | :--- | | 2025 | $4.1 | | 2024 | $1.5 | - The increase in G&A expenses was primarily driven by **increased employee compensation** due to **headcount additions**, as well as increases in expenses related to operating as a **publicly-traded company**[10](index=10&type=chunk) Net Loss Attributable to Common Stockholders (Three Months Ended June 30) | Period | Net Loss (million USD) | EPS (USD) | | :--- | :--- | :--- | | 2025 | $9.5 | $0.86 | | 2024 | $4.4 | $2.47 | Shares Outstanding | As of | Shares | | :--- | :--- | | August 8, 2025 | 13,735,390 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Condensed Consolidated Statements of Operations (in thousands USD) | Operating Expenses (3 Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Research and development | $5,118 | $1,442 | | General and administrative | $4,132 | $1,466 | | **Total operating expenses** | **$9,250** | **$2,908** | | Loss from operations | $(9,250) | $(2,908) | | Total other income (expense), net | $(221) | $(1,264) | | **Net loss** | **$(9,471)** | **$(4,172)** | | Less: Cumulative Series D preferred dividends | — | $(194) | | **Net loss attributable to common stockholders** | **$(9,471)** | **$(4,366)** | | Net loss per share — basic and diluted | $(0.86) | $(2.47) | | Weighted-average number of common shares used in computing net loss per share — basic and diluted | 11,052,741 | 1,770,167 | | Operating Expenses (6 Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Research and development | $9,192 | $2,426 | | General and administrative | $7,929 | $2,241 | | **Total operating expenses** | **$17,121** | **$4,667** | | Loss from operations | $(17,121) | $(4,667) | | Total other income (expense), net | $(535) | $(2,041) | | **Net loss** | **$(17,656)** | **$(6,708)** | | Less: Cumulative Series D preferred dividends | — | $(388) | | **Net loss attributable to common stockholders** | **$(17,656)** | **$(7,096)** | | Net loss per share — basic and diluted | $(1.60) | $(4.01) | | Weighted-average number of common shares used in computing net loss per share — basic and diluted | 11,033,327 | 1,770,167 | [Condensed Consolidated Balance Sheet Information](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEET%20INFORMATION) Condensed Consolidated Balance Sheet Information (in thousands USD) | As of | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $70,433 | $83,602 | | Other current assets | $3,314 | $4,632 | | **Total current assets** | **$73,747** | **$88,234** | | **Total assets** | **$73,747** | **$88,234** | | **Liabilities and Stockholders' Equity** | | | | Current liabilities | $9,616 | $12,038 | | Non-current liabilities | $16,351 | $13,589 | | **Total liabilities** | **$25,967** | **$25,627** | | **Total stockholders' equity** | **$47,780** | **$62,607** | | **Total liabilities and stockholders' equity** | **$73,747** | **$88,234** | [Conference Call Details](index=4&type=section&id=Conference%20Call%20Details) Provides information regarding the company's Q2 2025 earnings conference call and webcast - Palvella hosted a conference call and live audiovisual webcast to discuss Q2 2025 financial results and provide a corporate update at **8:30 a.m. ET** on **August 14, 2025**[11](index=11&type=chunk) - A replay of the webcast will be available approximately 2 hours after the conclusion of the call and archived for **90 days** on the company's website[11](index=11&type=chunk) [About Palvella Therapeutics](index=4&type=section&id=About%20Palvella%20Therapeutics) Provides an overview of Palvella Therapeutics' mission, focus, and lead product candidates - Palvella Therapeutics, Inc. is a **clinical-stage biopharmaceutical company** focused on developing and commercializing novel therapies for patients suffering from **serious, rare genetic skin diseases** for which there are **no FDA-approved therapies**[12](index=12&type=chunk) - The company is developing a broad pipeline of product candidates based on its **patented QTORIN™ platform**, with an initial focus on **serious, rare genetic skin diseases**[12](index=12&type=chunk) - Palvella's lead product candidate, **QTORIN™ 3.9% rapamycin anhydrous gel** (QTORIN™ rapamycin), is currently being evaluated in the **Phase 3 SELVA clinical trial** in microcystic lymphatic malformations and the **Phase 2 TOIVA clinical trial** in cutaneous venous malformations[12](index=12&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) Standard legal disclosure concerning the nature and risks associated with forward-looking statements made in the press release - This press release contains **forward-looking statements** discussing goals, intentions, and expectations as to future plans, trends, events, results of operations, or financial condition[14](index=14&type=chunk) - Forward-looking statements are based on current beliefs and assumptions subject to **risks and uncertainties**, and actual results could **differ materially** due to various factors, including the ability to raise additional capital, advance product candidates, obtain regulatory approval, and protect intellectual property[16](index=16&type=chunk) - Palvella **does not plan to publicly update or revise** any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise, except as required by applicable law[16](index=16&type=chunk) [Contact Information](index=6&type=section&id=Contact%20Information) Provides contact details for investor and media inquiries - Investor contact: **Wesley H. Kaupinen**, **Founder and CEO**, Palvella Therapeutics, **wes.kaupinen@palvellatx.com**[18](index=18&type=chunk) - Media contact: **Marcy Nanus**, **Managing Partner**, Trilon Advisors LLC, **mnanus@trilonadvisors.com**[18](index=18&type=chunk)

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]