Business context and reporting period
Entity discrepancy: The request identifies Palvella Therapeutics, Inc., but the supplied Form 10-Q is for Pieris Pharmaceuticals, Inc. (Nasdaq: PIRS). This summary covers Pieris’s quarter and nine months ended September 30, 2019; the filing was signed November 12, 2019. Pieris is a clinical-stage biopharmaceutical company developing Anticalin-based therapeutics. It reports no product-sales revenue; revenue comes from licensing, collaboration and research arrangements.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
| Metric | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 |
|---|---|---|---|---|
| Revenue | $15.1 | $8.3 | $29.0 | $24.2 |
| Research and development expense | $13.2 | $11.4 | $40.9 | $28.5 |
| General and administrative expense | $4.8 | $4.7 | $14.0 | $13.9 |
| Operating loss | $(2.9) | $(7.8) | $(25.8) | $(18.2) |
| Net loss | $(2.6) | $(6.2) | $(24.7) | $(15.1) |
| Basic and diluted loss per share | $(0.05) | $(0.11) | $(0.50) | $(0.29) |
- Q3 revenue rose 81% year over year, largely because of revenue recognized following Servier’s decision to discontinue co-development of PRS-332. Nine-month revenue increased 20%. Revenue remained collaboration-based, not product sales.
- Nine-month R&D expense increased 44%, reflecting higher respiratory and immuno-oncology program spending, personnel and facility costs; anemia-program costs declined as the PRS-080 study wound down.
- At September 30, cash and cash equivalents were $46.1 million and short-term investments were $40.2 million, totaling $86.2 million. Current assets were $98.0 million versus current liabilities of $39.8 million. No borrowings or other debt are shown on the balance sheet.
- Operating cash flow was $(38.5) million for 9M 2019, compared with positive $8.0 million in 9M 2018. Investing cash flow was positive $11.7 million and financing cash flow positive $0.5 million; cash decreased $28.8 million to $46.1 million.
- Total liabilities were $96.1 million, including $71.4 million of deferred revenue and $12.1 million of other long-term liabilities, primarily deferred rent. Stockholders’ equity was $20.6 million; accumulated deficit was $173.4 million.
Material changes and unusual items
- Pieris adopted ASC 606 on January 1, 2019 using the modified retrospective method; 2018 comparatives were not restated. For 9M 2019, the filing estimates that under prior revenue guidance, revenue would have been $26.3 million and net loss $27.7 million, versus reported ASC 606 revenue of $29.0 million and net loss of $24.7 million. This limits direct period-to-period comparability.
- Servier discontinued co-development of PRS-332 in September for strategic reasons. Pieris said it did not then intend to continue the program, but retained worldwide rights. The decision increased recognized collaboration revenue; other Servier programs, including PRS-344, continued.
- A new German office and laboratory lease is being prepared for occupancy. It has a 12.5-year initial term, approximately $0.2 million monthly base rent for the initial space, and a $12.1 million deferred-rent liability at quarter-end. Pieris expected adoption of the new lease accounting standard to materially increase reported assets and liabilities.
- In November 2019, after quarter-end, Pieris disclosed a private placement with approximately $32.0 million gross proceeds and $31.1 million net proceeds. The units include common stock or convertible preferred stock and warrants; the warrant terms may result in dilution. The company also had an unused $50.0 million at-the-market sales authorization as of the filing.
Outlook, management commentary and risks
- Management said the $86.2 million of cash, cash equivalents and investments at September 30 was expected to fund operating and capital requirements for at least 12 months from the filing date. Pieris also stated that losses and cash needs would continue as it advances clinical and preclinical programs.
- Management planned to advance PRS-060/AZD1402 toward a Phase 2a asthma study in 2020; it reported positive interim Phase 1 multiple-ascending-dose findings after quarter-end. Pieris planned to file an IND for PRS-344 in the first half of 2020 and share final PRS-080 Phase 2a data with ASKA in Q4 2019. These are forward-looking plans, not assured outcomes.
- The filing describes clinical, regulatory, manufacturing, collaboration, intellectual-property and financing risks. Additional capital may be needed; equity financing may dilute shareholders, while collaborations or licenses may require granting rights on unfavorable terms. Foreign exchange movements also affect results.
- Disclosure controls and procedures were deemed ineffective at September 30 due to a previously identified material weakness in the income-tax provision process. Management reported remediation efforts and stated that the financial statements fairly present the company’s financial position and results.
- The filing reported no material pending legal proceedings and no material changes to the risk factors in the 2018 Form 10-K.
Most important facts for investors to verify
- Confirm the intended issuer: the supplied filing is Pieris Pharmaceuticals, Inc., not Palvella Therapeutics, Inc.
- Review the ASC 606 transition effects and use care comparing 2019 revenue and losses with 2018.
- Assess cash burn, the stated 12-month runway, and the effect of the November private placement, warrants and any future ATM sales.
- Track whether the clinical, regulatory and partnering milestones described by management were achieved, particularly for PRS-060, PRS-343, PRS-344 and PRS-080.
- Monitor the Servier collaboration after PRS-332’s discontinuation, the lease obligations, and remediation of the tax-control material weakness.