Greetings. Welcome to Palvella Therapeutics and Pieris Pharmaceuticals' announcement of their merger agreement. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Tom Bures, CFO for Pieris Pharmaceuticals. Thank you. You may begin.
Thank you and good morning, everyone. Thank you for joining us, for our merger announcement with Palvella Therapeutics today. On the call today, we have Steve Yoder, our President and CEO, who will provide a brief introduction of the transaction, along with Wes Kaupinen, founder and CEO of Palvella, and Jeff Martini, Senior Vice President, R&D and Scientific Affairs at Palvella, who will be presenting details about Palvella and their company's focus on developing novel therapies to treat patients suffering from serious, rare genetic skin diseases for which there are no U.S. Food and Drug Administration-approved therapies. You can access the press release issued this morning on the investor relations page of our website at www.pieris.com.
Before we begin, I'd like to caution that comments made during this conference call may contain forward-looking statements involving risks and uncertainties regarding the operations and future results of operations of Pieris and Palvella, including statements relating to the proposed merger transaction and financing transaction, the potential benefits and results of such transactions, the expected timing of the closing of the proposed transaction, the timing and progress of their clinical trials and programs, the anticipated timing for the reporting of data, their partnerships and our financial position, any potential benefits of the contingent value rights, and actual results or events may differ materially from those expressed or implied by such forward-looking statements.
Factors that might cause such differences are described in Pieris's filings with the SEC, including Pieris's annual, quarterly, and current reports, as well as the registration statement on Form S-4 to be filed with the SEC by Pieris in connection with the merger. The information being presented is only accurate as of today, and Pieris and Palvella undertake no obligation to update any statements to reflect future events or circumstances. With that, I will now turn the call over to Steve.
Well, thank you, Tom, and thank you to everyone for joining us today. Our proposed transaction with Palvella, announced earlier this morning, is the culmination of a comprehensive strategic review process initiated in the third quarter of last year, is complementary to the corporate update announced in March of this year, and represents Pieris's deep commitment to delivering value to its stockholders by preserving the future potential milestone and royalty streams from our partnered immuno-oncology bispecifics franchise for Pieris legacy stockholders through contingent value rights, or CVRs, while also providing the opportunity for upside in an attractive late-stage rare disease company.
More specifically, Pieris pre-merger stockholders will receive a CVR representing the right to receive payments from proceeds received, if any, by the combined company in connection with the Pfizer and Boston Pharmaceuticals partnership agreements, potential licensing agreements involving certain of Pieris's legacy assets, and potential historical research and development tax credits, which may or may not be realized. With this proposed merger and proceeds from the concurrent financing that Wes will discuss, we believe Palvella is well-positioned with the anticipated funding and an accomplished management team to advance a phase III clinical trial program, having breakthrough therapy, fast track, and orphan drug designations by FDA, underscoring the clinical potential demonstrated to date in an area of high unmet medical need. I speak on behalf of the entire board of directors of Pieris in stating that we believe the merger with Palvella is in the best interests of our stockholders.
I will now hand the call over to the Palvella team. Wes, over to you.
Thank you, Steve, and thanks to everyone for joining us on this morning's call. Today is a transformative day for Palvella. Our employees, our physician collaborators, our existing investors who have ardently supported us to date, our new investors who are participating in the planned concurrent financing, and most of all, for the rare disease patients we serve. We are pleased to announce our proposed merger with Pieris, enabling Palvella to become a publicly traded company that will vigorously pursue our vision of becoming the leading rare disease biopharmaceutical company focused on developing and commercializing novel therapies to treat patients suffering from serious rare genetic skin diseases. Let's now review the key details of the proposed transaction.
Upon close, the combined company is expected to have cash of approximately $80.5 million, inclusive of the $78.9 million in proceeds expected from Palvella's oversubscribed concurrent private financing, which included participation from a syndicate of leading healthcare dedicated investors. We appreciate those investors' support and their confidence in the Palvella leadership team, our rare disease therapeutic pipeline, and our QTORIN platform. Cash resources are expected to fund operations into the second half of 2027, including two key clinical trial readouts: a pivotal phase III trial of QTORIN rapamycin for the treatment of microcystic lymphatic malformations, and a phase II trial of QTORIN rapamycin for the treatment of cutaneous venous malformations. Upon close, the combined company is expected to be renamed Palvella Therapeutics Inc, trading on the Nasdaq Capital Market. Expected ownership upon closing will be approximately 82% for pre-merger Palvella stockholders.
Pre-merger Pieris stockholders are expected to own approximately 18%, subject to adjustment based on Pieris's net cash at closing. In each case, this is prior to the issuance of the shares under the planned concurrent financing. The existing Palvella management team will lead the combined company. The combined company's new board of directors will include four board members selected by Palvella and one member selected by Pieris. Subject to stockholder approval and customary closing conditions, we expect the transaction to close in the fourth quarter of 2024. We believe the field of rare genetic skin diseases sits at the intersection of high unmet need and low competition. There are an estimated 600 rare skin diseases, the far majority of which today do not have a single approved therapy.
Our vision is to become the leading biopharmaceutical company focused on rare genetic skin diseases, with an ambition to build an enduring biopharma company that both develops and, if approved, commercializes our novel therapies in the U.S., beginning with our lead product candidate, QTORIN 3.9% rapamycin anhydrous gel. As background, Palvella in Finnish means "to serve." I founded this company around the mission of serving patients with no FDA-approved therapy. We exclusively focus our innovations and our development efforts on advancing novel therapies for those serious rare genetic skin diseases. We believe that delivering the first approved therapy for a serious rare genetic skin disease can create outsized positive impact for patients and, importantly, for their families.
I'm truly honored to lead a rare team at Palvella with deep experience in building rare disease companies and achieving regulatory approvals for novel rare disease therapies, including my own experience at Insmed, a company where I initially was involved as a venture capital investor before joining the senior leadership team to lead corporate development and the U.S. commercial team preparing for the launch of Insmed's now FDA-approved drug, Arikayce. Finally, we operate and have operated since our founding in a capital-efficient manner. As a public company, we will maintain this commitment to capital efficiency. What has catalyzed our desire to enter the public markets are both the significant accomplishments our team has recently achieved and important upcoming clinical trial milestones, including our pivotal phase III trial readout evaluating QTORIN rapamycin for the treatment of microcystic lymphatic malformations, which is planned for Q1 of 2026.
Let me begin by the QTORIN platform, Palvella's patented and versatile platform designed to reproducibly generate novel topical therapies that penetrate the deep layers of the skin to treat a broad spectrum of serious rare genetic skin diseases. The QTORIN platform was developed through a multi-year innovation process and with several of the world's leading topical formulation scientists. QTORIN is an anhydrous gel that is designed to deliver a high concentration or payload to the deepest layers of the skin, including the dermis, which is the site of pathophysiology for our initial disease targets, and do so while limiting systemic absorption of the active drug. QTORIN rapamycin is the lead product candidate from our QTORIN platform.
It is a patented 3.9% rapamycin anhydrous gel, which aims to harness the potential therapeutic benefits of rapamycin, an mTOR inhibitor, while minimizing systemic exposure of the drug and potential adverse reactions associated with systemic rapamycin therapy. We are developing QTORIN rapamycin for the treatment of microcystic lymphatic malformations, a serious rare and chronically debilitating genetic disease driven by the PI3K/mTOR pathway and for which there are currently no FDA-approved therapies. We believe QTORIN rapamycin has the potential, if approved, to be the first and only FDA-approved therapy and potentially the standard of care for microcystic lymphatic malformations and could fulfill an urgent unmet medical need for patients who suffer from this disease from a very young age while enduring significant morbidity as a result of this lifelong disease.
In our phase II study, QTORIN rapamycin demonstrated highly statistically significant results, with all patients much or very much improved on the Clinician Global Impression of Change efficacy endpoint. Based on these phase II results, the FDA granted Palvella Breakthrough Therapy Designation, a program intended to expedite the development and review of therapies for serious or life-threatening conditions and whose preliminary clinical trial evidence indicates that the drug may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. Earlier this month, our team initiated a pivotal phase III single-arm baseline controlled study of 40 patients, a trial we believe is designed for success. In parallel to our clinical and regulatory efforts, we have intensified our pre-commercial planning and preparation for a potential U.S. launch, assuming a successful outcome from our phase III clinical trial and an eventual FDA approval.
We believe, based on market research, that the peak U.S. sales of QTORIN rapamycin could exceed $1 billion across our two lead indications, microcystic lymphatic malformations and cutaneous venous malformations. A second target clinical indication for QTORIN rapamycin, which, similar to microcystic lymphatic malformations, is a serious rare genetic disease mediated by the mTOR pathway and for which there are no FDA-approved therapies. Finally, we believe our QTORIN platform can potentially be applied to treat many other of the nearly 600 rare skin diseases that do not yet have an FDA-approved therapy. The first application of the QTORIN platform is seen here. It is to rapamycin, an inhibitor of the mTOR pathway. We developed QTORIN 3.9% rapamycin anhydrous gel, which is designed to directly engage and inhibit the overactivated mTOR pathway that is a causal driver for many rare genetic skin diseases.
QTORIN rapamycin was designed to deliver concentrations to the skin that are approximately 1,000 times higher than systemic rapamycin, which has poor biodistribution to the dermis. In our clinical studies to date, there has been limited to no systemic rapamycin, which we believe translates to the observed safety profile of our product in these clinical trials. Importantly, we have granted U.S. patents for QTORIN rapamycin through at least 2038. Moving now to microcystic lymphatic malformations, which are a serious, chronically debilitating, and lifelong genetic disease without an FDA-approved therapy. The genetics and pathophysiology are well characterized, with hyperactivation of the PI3K/mTOR signaling pathway driving the disease pathology. The disease, as present at birth, can result in significant morbidity to adolescents and has been documented to have no spontaneous regression, resulting in a lifelong impact to quality of life.
The disease is characterized by chronic lymphuria, which is the persistent discharge of lymphatic fluid through the skin and can lead to acute cellulitis and hospitalization. Today, patients are often subjected to invasive procedures, including surgery, that have a high degree of disease recurrence, as well as off-label pharmacotherapies, which have known toxicities. We believe, based on published data, there are greater than 30,000 diagnosed patients with microcystic lymphatic malformations in the United States. As mentioned earlier, there are no FDA-approved therapies for these patients. Our objective at Palvella is to improve significantly the treatment paradigm for this patient population by advancing QTORIN rapamycin to potentially become the first approved therapy for this disease. We were honored to partner with a distinguished team of key opinion leaders on our phase II study evaluating QTORIN rapamycin for the treatment of microcystic lymphatic malformations.
The study was a 12-patient baseline controlled phase two trial evaluating QTORIN rapamycin once daily in this disease. In the study, QTORIN rapamycin achieved clinically and statistically significant results on pre-specified global and individual endpoints. The study also captured the voice of the patient through patient exit interviews, this in an effort to understand the patient's experience in the study. We also collected pre-treatment and post-treatment photography. Data from this phase two clinical study was submitted to the FDA in a breakthrough therapy designation application, and based on the phase two results, FDA breakthrough therapy designation was granted in November 2023, a significant accomplishment for our dedicated R&D team.
Shown here are the results from the phase II study on the Clinician Global Impression of Change, a seven-point change scale that ranges from -3, very much worse, to +3, very much improved, which I'll refer to as the CGIC. Data from the phase II study demonstrated a statistically significant improvement in CGIC at the first time point measured, week 4, and showed a time-dependent improvement over the course of the study. At the final time point, week 12, there was a 2.42 improvement in the CGIC, with all subjects either much improved or very much improved. In the middle panel, QTORIN rapamycin also demonstrated a similar improvement in effect size on the Patient Global Impression of Change. Moving to the far right of the slide, the study demonstrated statistically significant improvements in the individual signs of microcystic lymphatic malformation.
Moving now to our phase III study, we initiated earlier this month our pivotal phase III trial called SELVA, which is a single-arm baseline controlled trial. The primary endpoint is the Microcystic Lymphatic Malformations Investigator Global Assessment, a 7-point change scale with similarities to the CGIC that was used in the phase II study. The study also mimics the phase II trial with a single arm and a baseline controlled design. We are anticipating data from this trial in Q1 of 2026. We further anticipate that the results from this landmark phase III trial, if positive, will support an NDA submission. Moving now to our regulatory status, we completed an end-of-phase II meeting with the FDA in February 2023, and in April 2024, we completed a type B breakthrough therapy designation meeting with FDA.
Assuming a successful phase III trial, we intend to leverage the 505(b)(2) pathway in our NDA submission and will plan for a rolling submission starting in the second half of 2026. Finally, our QTORIN rapamycin program benefits from three FDA designations: breakthrough therapy designation, fast track designation, and orphan drug designation, which we believe together could help to expedite QTORIN rapamycin to FDA approval. Our commercial plan, if we are successful in our phase III trial and potentially receive FDA approval, is to build a standalone commercial organization that launches QTORIN rapamycin in the United States. Importantly, we believe there are favorable commercial dynamics that will enable a successful U.S. launch. Shown here are some of the results from our recently completed market research, which tested the target product profile of a topical 3.9% rapamycin gel.
The data showed that, on average, potential prescribers would prescribe product X to approximately 75% of their microcystic lymphatic malformation patients. In addition, the results showed that 98% would incorporate product X into their clinical practice, and furthermore, 98% would consider product X as a first-line therapy. We believe that QTORIN rapamycin has the potential to be a pipeline-in-a-product. While microcystic lymphatic malformations and cutaneous venous malformations represent substantial standalone commercial opportunities, we have identified several other diseases that are believed to be driven by the mTOR pathway that could be future development targets for QTORIN rapamycin. We are currently evaluating several of these opportunities and look forward to presenting those in more detail in the future. In closing, I'd like to thank both the teams at Pieris and at Palvella for their collaboration in this merger.
We believe this transformative transaction provides a solid foundation to benefit most of all rare disease patients and to provide value to all of our stakeholders. Thank you once again to our syndicate of leading healthcare dedicated investors who intend to participate in the concurrent private financing. I would like to thank everyone for your time today, and I look forward to keeping you updated on our progress.
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.