going on. More and more going on. Great to have you join. Maybe just set the stage with us and frame for the audience where Palvella is today and where we're headed.
Great, Josh. Thanks so much for having me and the Palvella team here today. I'll start with our mission. Palvella in Finnish means to serve, so our mission is to serve patients that have serious rare diseases, and we only focus on those diseases where there are no FDA-approved therapies. The vision of the company, where we're going, we want to build the enduring leader addressing two areas in the orphan universe, rare skin diseases and rare vascular anomalies. Both of those are high unmet need, low competitive intensity corridors of the orphan universe, where we believe we can be the leading company serving these patients. Our strategy can be summed up in the word first. We are built to go from zero to one. In each of the diseases in which we develop, we want to be that first FDA-approved therapy.
Where we are today, we filed our NDA on our lead product candidate, which is QTORIN rapamycin for microcystic lymphatic malformations. We anticipate FDA approval in the first half of 2027. Behind that, Josh, looking forward to getting into this, we have a late-stage pipeline and we also have a platform for reproducibly generating novel topical product candidates called QTORIN.
Perfect segue into the next question, which is the key that you have to unlock all of these unmet medical needs is the QTORIN platform. This is where we're starting to hear really interesting investor dialogue. If you can hear me, is that better? Around the barriers that the QTORIN platform will erect around potential generic competition. Maybe describe to us what QTORIN is, what it allows you to do, and how you think about that defensive mode against potential competitive threats.
Sure. QTORIN is our platform for reproducibly generating novel topical product candidates. It can be evaluated in these rare skin diseases and rare vascular malformations. From an intellectual property perspective, we have a multi-layered exclusivity strategy, beginning number one with patents, two, also trade secrets, and three, regulatory exclusivities. To use a concrete example of QTORIN rapamycin, our lead product candidate, we now have six issued patents on QTORIN rapamycin. We have over 150 claims across those patents, and it is the breadth of the claims across composition of the formulation, as well as method of use on the patents. Those patents expire and at least have claims through 2038. We also have pending patents that, if issued, Josh, would give us protection on QTORIN rapamycin into the mid-2040s. Very active patent strategy around our formulations and methods of use. Trade secrets.
Some of our most significant innovations we have intentionally not included in our patents, both manufacturing and formulation. Without those trade secrets, as we get into topical formulations, generics are likely to get a very different drug product than QTORIN rapamycin. Third part of the exclusivity strategy is orphan exclusivities. In our lead indication, microcystic lymphatic malformations, we have FDA's orphan designation, which would provide seven years of exclusivity on the active moiety rapamycin in the indication microcystic lymphatic malformation. As we think about durable and defensible barriers to generic entry, we think about a broad patent estate that if generics develop too closely to the patents, they are going to be in a position of potential infringement. If they move away from the patents, they are designing a new drug product, which is very likely to require clinical work.
What we know about QTORIN is that small changes in the formulation or the manufacturing are likely to result in significant changes to the product performance.
Many directions we can take that in because that was such a rich description. Maybe though to start with, what is QTORIN?
Sure. QTORIN, there is three elements to it, Josh. There is formulation, there is manufacturing, and there is IP. On the formulation front, we start with an anhydrous base. That anhydrous formulation is the base formulation for QTORIN rapamycin and QTORIN pitavastatin, as well as future QTORIN product candidates. With that formulation, we do molecule specific optimization to try to achieve things like high drug loading, ensuring that we are getting adequate amount of the active into the vehicle to ensure we are also getting, in many cases, dermal engagement. In many of the diseases that we target, the disease pathology is deep in the skin. It is in the dermis. And thirdly and importantly, with the molecules we are working with, we are really looking to keep the drug in the dermis and minimize systemic exposure.
We think about the value to the patient as local therapeutic activity for these localized diseases, where we are harnessing the mTOR pathway and the inhibition of the mTOR pathway with rapamycin while minimizing systemic exposure, trying to reduce or eliminate things like immunosuppression and other acute toxicities. In terms of QTORIN, cannot emphasize enough, there is molecule specific Product development that occurs with each program, which opens up IP opportunities as we are optimizing each of these QTORIN programs.
Okay, got it. Now there is a bit of an investor debate that I think is easily settled, because when you call some compounding pharmacies, they will tell you that they can make 4%-6% topical rapamycin, therefore, what unmet need are you really serving? How do you kind of address that discussion and debate amongst investors?
Sure. I think first and foremost, there is a major difference between an FDA-approved therapy, which is our ambition and our near-term ambition, hopefully becoming reality in the first half of 2027, and therapies that are not approved by the FDA, that are therefore unapproved and unproven. To answer your question specifically on that 4%-6% nominal concentration, I think it is really important, as you dive into topical formulation development, to really look at what a 4%-6% concentration means. What a 4%-6% concentration does not mean is it does not necessarily translate into the amount of the active that is in the dermis. So that is really key. First aspect of formulation is thinking through what percentage can be solubilized in the base while preserving the physical and chemical properties and keeping it stable. Two is releasing the drug from the vehicle, making it bioavailable to the skin.
Three is driving it deep into the skin, and then four is keeping it in the skin and really minimizing that systemic exposure. A headline 4%-6% concentration doesn't mean that you're getting the right amount of active into the dermis. What we've shown pre-clinically is that we get levels of rapamycin into the dermis that exceed the IC90 for mTOR inhibition, scientifically. Clinically, we think that that translates into what we showed in the SELVA trial, which was 95% of our patients improving and 86% that were much or very much improved.
If a generic company were to try to take just an alternate anhydrous formulation approach, what are the barriers that they'll run into? What is so hard around working around your IP estate and just kind of coming up with a slightly different formulation that doesn't infringe the IP but is otherwise bioequivalent?
Sure. So very different, developing a generic topical compared to a generic oral small molecule. As we all know, a generic oral small molecule, systemic PK studies are run to show bioequivalence. Topicals like QTORIN are generally considered by the FDA to be "complex products." The process for getting a generic through the FDA oftentimes can involve more technical work for a complex topical, including in vitro release testing, or IVRT, showing that the drug is released from the vehicle at a similar rate to the innovator product. In many cases, oftentimes, the FDA will hold generics to also showing similar in vitro skin penetration or permeation characteristics through an IVPT study.
We believe this is a materially higher threshold for demonstrating bioequivalence compared to an oral small molecule, and again, getting back to what we know about QTORIN from our nearly decade of development work, is that small changes in the formulation or in the manufacturing are likely to result in large changes to the product performance.
What about taking a non-anhydrous or aqueous type approach? Is that a viable workaround path as far as you know?
Two challenges with aqueous formulations. One is solubility, so you are likely unable to achieve the sort of drug loading that we think is ultimately essential to onset of therapeutic activity and peak therapeutic effect. Rapamycin is also known to be subject to hydrolysis, so when exposed to water, the active can break down into impurities or degradant products. That is why we think the anhydrous formulation is novel and ultimately what is best for the patient.
It is interesting, your point about orphan drug protection around QTORIN rapamycin. That would, in theory, block any anhydrous or aqueous approach unless they offered some clear incremental advantage. That is fair?
That is correct.
Yeah.
The Orphan Drug Act is designed to protect the active moiety
Right
in the indication, which for us is rapamycin, otherwise known as sirolimus in microcystic lymphatic malformations.
One other part of the investor debate is whether we would ever see a generic version of a QTORIN rapamycin. Do you think we would, or are these nuances such that they are just so onerous and hard for any company to execute on almost indefinitely?
Sure. Important question, and I want to answer that with people, which is one of our recruits about a year ago, was we recruited David Osborne as our Chief Innovation Officer to Palvella. David is most recently known as the co-founder and first employee of Arcutis Biotherapeutics. Over multiple decades, David has been involved in about three dozen products that have been approved topically. Some, Josh, to your point, innovative products, some generics. We are thrilled to have David on board. We think David would not have joined Palvella had it not been for this strong exclusivity strategy, but he is actively at work to erect additional barriers to eventual generic entry. Our goal, of course, is to have a durable and defensible moat that keeps generic entrants out as long as possible.
All right. Why don't we go onto the specific programs now, leading with the microLM indication. You've completed the NDA filing as a 505(b)(2). What do you anticipate any review issues to be on ultimately a path to likely approval?
Well, first of all, our R&D team did an excellent job of going from phase III data in February to a first module submission soon after our pre-NDA meeting to a full NDA submission, which we announced in August. That submission, we expect to be accepted within this 60-day review and acceptance period. We've applied, Josh, for Priority Review. With Priority Review, if granted, we would have a six-month review period, which puts us in that window of the first half of 2027. We believe that this product should be expedited to patients. We're thrilled that the FDA has granted us, one, Breakthrough Therapy designation, two, Fast Track designation, and most recently, a Rolling Review. It's a serious disease. Nothing's approved. It affects kids. It's lifelong. We're pushing as hard as we can to get this therapy to patients as soon as possible.
Another debate point around the microLM unmet need is really the number of addressable patients out there, because it's going to be difficult for us to go and try to count them. Certainly not in the way that you're able to. Can you frame what you envision as the spectrum of the unmet need and the patient population? What might be a conservative projection for the number of patients you think you can treat versus perhaps a more aggressive assumption?
Sure. We want to answer your questions with data when that's possible. What we've done to address that is what I think most rare disease companies should do when they go into these rare diseases where nothing's approved, which is to really invest in epidemiologic science to try to understand how many patients are affected with the disease. We've invested in claims analysis. That claims analysis was presented at a medical congress. The estimates from that team that was assembled to look at the claims, patients with lymphatic malformations claims, and then the subset we estimate with microcystic LMs, produced a result of about 45,000 to 95,000 patients in the United States, and that's a diagnosed prevalence, so not a total prevalent pool.
There's another published study by Jack Gallagher in Orphanet Journal of Rare Diseases, where he went out to a representative sample of physicians to understand how many patients today are within clinical medicine with microcystic lymphatic malformations, and that produced a result of about 80,000, and that was published in 2022. Our estimates, we anchor on at least 30,000 that we think are diagnosed within clinical medicine. That's not a total prevalent pool, Josh. Some of your research and others' research have indicated that when the first drug in a rare disease comes to market, there is an improvement across the physician spectrum in disease state awareness and in diagnosis. The number over time may grow from there.
On the prevalence front, we also know from the claims analysis that there's an estimated about 1,500 to 6,000 patients that are coming into that pool every year as part of the annual incident. This, we think, is an order of magnitude greater than an ultra-rare disease. It's a rather common rare disease.
Are you able to pressure test claims data analysis by taking a small subset and figuring out of those how many you can actually confirm and identify? Is there a way to do that so that perhaps the claims analysis is even more robust?
Sure. That's something that Ashley Kline, our Chief Commercial Officer, has a lot of experience with and that she's done. We continue to believe that there's more than 30,000 patients. The other thing we're doing, Josh, is field checks. Now that we've hired a medical science liaison team and we're building a commercial team, we're able to go out to centers. We have about 400 centers that make up, we think, about half of the market, or 15,000 patients. We've been out to more than 200 of those centers. In rare diseases where there is no FDA-approved therapy, you're always triangulating the size of the market, but our additional deep dives on claims and our field checks and our real-world occurrence studies are all pointing to greater than 30,000 diagnosed within clinical medicine.
Just some basic math around that. 400 centers, 15,000 patients, that is around 3,400 per center. Do those numbers sound right? These are high concentration practices then.
400 centers have about 40 patients.
Oh, sorry, 400 centers, 40 patients each.
On average gets you to That is right.
My math was wrong.
It's okay.
I missed a zero. Thank you for correcting me on that one.
Well, you're good.
I have a zero problem. This is why I am terrible with anything in JPY.
But you were actually right because some of the higher volume centers, you were right, because some of the higher volume centers do have hundreds of patients. As you can imagine, within that 400, which is what I think you are drawing out, there are some centers, Children's Hospital Philadelphia, Cincinnati Children's, Stanford, that have even higher patient volumes. As we think about commercialization after a potential FDA approval, we will have a disproportionate amount of our medical and sales and marketing and patient services focused on those higher volume centers.
All right. Are there likely to be a number of undiagnosed patients and/or misdiagnosed patients? Which do you think you are likely to discover more of?
I think misdiagnosed, we are likely to discover more of, because the disease is rare, because there are other superficial type of lymphatic malformations like angiokeratomas, which could be a misdiagnosed. In terms of undiagnosed patients, I think in any rare disease where there has not been an approved therapy, you can find undiagnosed patients. As we think about our commercial models and our commercial success, it is not predicated on finding new patients. We think that prevalent pool of patients of the 30,000 can make for a very attractive commercial case, a drug that at peak could do north of $1 billion, but I think we will end up identifying both, likely more misdiagnosed than undiagnosed.
About 80%-90% of patients, according to the literature, do have a diagnosis by the age of two or three, because of the hallmark clinical feature, which is these fluid-filled, lymphatic fluid-filled, or blood-filled vesicles that present on the skin and the lymphorrhea process, the process of the leaking or the discharge from those vesicles.
What are they likely to be misdiagnosed as?
Angiokeratomas would be one potential misdiagnosis according to our field checks and our physician interactions. There's probably some other types of vascular malformations that they could be misdiagnosed as, but angiokeratomas would be one that would be towards the top of the list.
Which eventually should be on the label, so it really doesn't matter if they're diagnosed or misdiagnosed because one way or another you can get to them.
Correct, and that's our goal.
All right, excellent. Again, assuming timely approval, what do you think happens to the compounders of topical rapamycin currently? Because oftentimes we see the compounders step aside when there's an approved product, but in this case, there will be an approved product for one of the indications of topical rapamycin, but not all of them. How do you envision that ultimately evolving and is there anything you can do to help the compounders step aside beyond the label indication?
Sure. Our market research with physicians indicates that 98% of physicians would consider our drug first-line therapy, and that they would prescribe our drug to 75% of patients. That's before we put significant capital resources and a very talented commercial and medical team behind the promotion of this drug, pending our FDA approval in the first half of next year. We think the physicians will gravitate towards the FDA-approved product. When it is approved, it will have reliable safety, efficacy, and product quality. We think that's very important for physicians, particularly given the kids and adults that suffer from this disease. In terms of the compounders, the compounders operate where they're providing individualized therapies based on physician demand. To the extent there's other conditions that are mTOR-driven, the compounders can provide compounded therapy.
For our indications, we want to steer patients with cutaneous venous malformations, angiokeratomas, and that fourth rapamycin indication, which we'll announce into our clinical trials. Because our goal is to get the drug on label. Once the drug is FDA approved in each of those indications and on label, we believe we can make it broadly available to those patients who need us, and that's our objective.
Do compounders typically know what indication they are compounding for?
I would think they would based on the individualized intake that they would have from physicians.
The appropriate response from the compounder in this case would be to say, "For this indication, there is an approved drug, so you should be getting that and not coming to us," whereas they could continue compounding for other indications that are not on the label.
Yeah. For the other indications, they are serving individualized patients. Compounding as a business model is not set up to replicate the sort of mass marketing and production of the pharmaceutical industry, I think you have stated it accurately.
You have guided to QTORIN rapamycin pricing in the $100,000-$200,000 type range. What incremental work is there to do to finalize where ultimately you are likely to price? As you think about that span of potential prices, what type of pushback would you envision seeing at a $200,000 a year price that you might not see at $100,000 per year?
Sure. We have been able to do some of that payer testing, credit to Ashley Kline, our Chief Commercial Officer, since we received the phase III SELVA data. At $100,000 to $200,000 per patient per year, we think we would have favorable coverage policies at those price points. What the payer testing taught us is that payers do recognize this as a genetic vascular malformation that is rare, that is serious, chronically debilitating, where there is no alternative FDA-approved therapy. We did sensitivity testing to understand, Josh, if there would be differences between $100,000 and $200,000 price point. We did not see any tightening of coverage policies, even when we went to price points beyond $200,000. That, I think, reflects the rarity of the disease, the absence of FDA-approved therapies.
I think it is unlikely at this point that we would price the drug at $100,000 per patient per year, more likely to be at the upper end of that corridor, and that is really based on the robustness of the phase III SELVA data that we saw in February.
If you have not had pushback above $200,000, have you started to consider or contemplate a price even above the range that you have indicated?
Sure. It will absolutely be something that we consider, but we are going to keep our guidance for now at the $100,000-$200,000 per patient per year price point.
Another area of discussion amongst investors is the CVM indication, not getting Breakthrough designation, what the implications might be for a path forward and/or even getting another shot at Breakthrough designation. Maybe frame the outlook for that indication from a regulatory and then a pivotal path perspective, because those will kind of go together.
Great. Cutaneous venous malformations, this is the most common type of vascular malformation. We estimate that there is more than 75,000 patients that are diagnosed with this condition in the United States. There are no FDA-approved therapies. Recent genetic findings have shown that they are typically driven by TIE2 or PIK3CA. mTOR is hyperactivated in both of those genotypes. There is a lot of off-label evidence showing that rapamycin demonstrates clinical benefit in patients with venous malformations who have internal manifestations, who are leveraging a lot of human proof-of-concept data. We developed QTORIN rapamycin as a second indication to go after CVMs, announced positive phase II data last December. 73% of our patients improved in that trial. 67% were much or very much improved. We look at this as we have an active and efficacious drug based on phase II data.
We have got to prove that out in phase III. We applied for Breakthrough designation, with the goal of accruing the benefits of Breakthrough, like we have in microLM. We appreciate the Cantor research that was done recently that showed that 94% of Breakthrough medicines actually translate to FDA-approved therapies, and the analysis that you and your colleagues did. We will always push for these types of designations because we think it allows us to expedite therapies to patients faster. We did not get Breakthrough on the first pass. We think that we can round out the FDA's understanding of our drug by augmenting the data package that we submitted on our Breakthrough designation, which included things like effect sizes on pre-specified endpoints and P values with patient experience data, Josh, and patient qualitative data. Really rounding out that clinical meaningfulness story.
We're focused right now on our end-of-phase II meeting, which is imminent, and then starting the phase III study by the end of the year. We also will consider a resubmission for Breakthrough as well.
Do you have a line of sight to what the registration trial may look like at this point, or is that still under discussion with the FDA?
Absolutely still under discussion. We will push, as we always do, for our patients and for an expedited pathway. We showed a large effect size in phase II. There's a lot of real-world evidence that rapamycin is active in this disease, and we have Fast Track designation. We're looking forward to the meeting with the agency. Some of our major key opinion leaders will be joining us at that meeting to educate not only on the disease state, but in terms of the large effect sizes and the patient impact of our drug that was seen in the phase II TOIVA study.
I have way too many questions because there's so much to ask about and so much going on at Palvella to squeeze into 30 minutes. Maybe let's just finish off on the DSAP program, because that is an indication that I'm actually starting to hear a lot of early buzz from investors who've done a little bit of market analysis and really believe this is a tremendous unmet medical need. So maybe just bring that to the forefront of the discussion.
Sure. Large commercial opportunity, let's start there. More than 50,000 patients we estimate in the U.S. that are diagnosed with disseminated superficial actinic porokeratosis. This is a genetic disease. The biology is well-defined. Patients suffer from pruritus, an impact to quality of life, and also there's risk of malignant transformation. Keith Choate has done a lot of foundational work here to discover the role of the mevalonate pathway and the buildup of toxic intermediates in that pathway that is causing these lesions to proliferate. We're building on Keith's work. We've licensed IP from Yale. We've done robust QTORIN formulation development work, in which we looked at seven different mevalonate pathway inhibitors or statins. We emerged with QTORIN and pitavastatin. We're moving through the IND-enabling stages, Josh, and our goal is to start a phase II study later this year.
On the claims front, since we love to talk about claims, there's a dedicated claims code for DSAP, L56.5. We're doing claims work right now to be able to augment the work we've done on the real-world occurrence study. But we're excited about this program. Also consistent with the rest of the Palvella pipeline, there is some existing human proof-of-concept data from off-label use of statins that indicate that modulating this pathway can have clinical benefit. We want to amplify that by applying QTORIN and to pitavastatin.
Amazing. What's amazing is I think you're around two years into being in the public markets and really having more meaningful access to capital, and how quickly this company is evolving and advancing, and a testament to the QTORIN platform, to the general strategy, the unmet need, and all the literature out there that is guiding your path forward in record time. It really is remarkable. Wes, thank you so much for joining. Thanks, everyone, for coming out, and looking forward to a lot more updates from Palvella in the months and years to come.
Thank you, Josh.