PALVELLA THERAPEUTICS, INC.

Previous wording

We are a clinical-stage biopharmaceutical company whose vision is to become the leading rare disease biopharmaceutical company focused on developing and, if approved, commercializing novel therapies to treat patients suffering from serious, rare genetic skin diseases for which there are no FDA-approved therapies. We intend to leverage our versatile QTORIN platform to treat these patients. The QTORIN platform is designed to generate potential new therapies that penetrate the deep layers of the skin to locally treat a broad spectrum of rare genetic skin diseases. Our lead product candidate, QTORIN 3.9% rapamycin anhydrous gel (“QTORIN rapamycin”), is currently in clinical development for microcystic lymphatic malformations (“microcystic LMs”) and cutaneous venous malformations (“cutaneous VMs”). QTORIN rapamycin contains the active pharmaceutical ingredient (“API”) rapamycin, also known as sirolimus, which is an inhibitor of mTOR, a kinase that has been known to play a key role in cell growth and proliferation.

Current wording

We are a clinical-stage biopharmaceutical company whose vision is to become the leading rare disease biopharmaceutical company focused on developing and, if approved, commercializing novel therapies to treat patients suffering from serious, rare skin diseases for which there are no FDA-approved therapies. We intend to leverage our versatile QTORIN platform to treat these patients. The QTORIN platform is designed to generate potential new therapies that penetrate the deep layers of the skin to locally treat a broad spectrum of rare skin diseases. Our lead product candidate, QTORIN 3.9% rapamycin anhydrous gel (“QTORIN rapamycin”), is currently in clinical development for microcystic lymphatic malformations (“microcystic LMs”) and cutaneous venous malformations (“cutaneous VMs”). QTORIN rapamycin contains the active pharmaceutical ingredient (“API”) rapamycin, also known as sirolimus, which is an inhibitor of mTOR, a kinase that has been known to play a key role in cell growth and proliferation.

Previous wording

We currently have two ongoing clinical trials: (i) SELVA, a Phase 3, single-arm, baseline-controlled study evaluating the safety and efficacy of QTORIN rapamycin for the treatment of microcystic LMs in patients 3 years and older and (ii) TOIVA, a Phase 2, single-arm, open-label, baseline-controlled study evaluating the safety and efficacy of QTORIN rapamycin for the treatment of cutaneous VMs in patients 6 years and older. We also have additional preclinical research programs based on our QTORIN platform for the treatment of serious, rare genetic skin diseases for which we believe there are significant unmet needs. As we work to expand our pipeline into additional rare skin diseases, we plan to generate new product candidates based on our QTORIN platform.

Current wording

We currently have two ongoing clinical trials: (i) SELVA, a Phase 3, single-arm, baseline-controlled study evaluating the safety and efficacy of QTORIN rapamycin for the treatment of microcystic LMs in patients 3 years and older and (ii) TOIVA, a Phase 2, single-arm, open-label, baseline-controlled study evaluating the safety and efficacy of QTORIN rapamycin for the treatment of cutaneous VMs in patients 6 years and older. We also have additional preclinical research programs based on our QTORIN platform for the treatment of serious, rare skin diseases for which we believe there are significant unmet needs. As we work to expand our pipeline into additional rare skin diseases, we plan to generate new product candidates based on our QTORIN platform.

Previous wording

In the first quarter of 2025, we announced the first patients have recently been dosed in TOIVA, a multicenter, single-arm, open-label, baseline-controlled, Phase 2 clinical trial designed to evaluate the safety and efficacy of QTORIN rapamycin for the treatment of cutaneous VMs. We expect to report top-line data for the TOIVA study in approximately 15 participants with cutaneous VMs in the fourth quarter of 2025.

Current wording

In the third quarter of 2025 we completed enrollment in TOIVA, a multicenter, single-arm, open-label, baseline-controlled, Phase 2 clinical trial designed to evaluate the safety and efficacy of QTORIN rapamycin for the treatment of cutaneous VMs, with 16 subjects enrolled, meeting the original recruitment target of approximately 15 subjects. We expect to report top-line data for the TOIVA study in mid-December 2025.

Previous wording

Pursuant to the Merger Agreement, on the Closing Date, (i) Merger Sub merged with and into Legacy Palvella, with Legacy Palvella as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of the Company (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”) and (ii) the Company’s name was changed from Pieris Pharmaceuticals, Inc. to Palvella Therapeutics, Inc.

Current wording

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

Previous wording

Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including increases in inflation, increased U.S. trade tariffs and retaliatory tariffs, interest rate and currency rate fluctuations, new laws and regulations enacted by the Trump administration, including, but not limited to, the recently enacted One Big Beautiful Bill Act, economic slowdown or recession, banking instability, monetary policy changes, and geopolitical factors, including the ongoing conflict between Russia and Ukraine and the responses thereto, rapid changes in our regulatory landscape in the United States, including significant staffing reductions and unexpected shifts in leadership of certain federal agencies, and an uncertain legislative environment and supply chain disruptions. While our management is closely monitoring the impact of the current macroeconomic conditions on all aspects of our business, including the impacts on its participants in its Phase 3 clinical trials, employees, suppliers, vendors and business partners, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside our control and could exist for an extended period of time. Management will continue to evaluate the nature and extent of the potential impacts to our business, results of operations, liquidity and capital resources. For additional information, see Part I, Item 1A “Risk Factors” of our 2024 Form 10-K.

Current wording

Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including increases in inflation, increased U.S. trade tariffs and retaliatory tariffs, interest rate and currency rate fluctuations, new laws and regulations enacted by the Trump administration, including, but not limited to, the recently enacted One Big Beautiful Bill Act, economic slowdown or recession, banking instability, monetary policy changes, and geopolitical factors, including the ongoing conflict between Russia and Ukraine and the responses thereto, rapid changes in our regulatory landscape in the United States, including significant staffing reductions and unexpected shifts in leadership of certain federal agencies, and an uncertain legislative environment and supply chain disruptions. While our management is closely monitoring the impact of the current macroeconomic conditions on all aspects of our business, including the impacts on its participants in its clinical trials, employees, suppliers, vendors and business partners, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside our control and could exist for an extended period of time. Management will continue to evaluate the nature and extent of the potential impacts to our business, results of operations, liquidity and capital resources. For additional information, see Part I, Item 1A “Risk Factors” of our 2024 Form 10-K.

Previous wording

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates, if any, or experienced by competitors who are developing topical rapamycin products or who are targeting the same indications in the rare genetic skin diseases space;

Current wording

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates, if any, or experienced by competitors who are developing topical rapamycin products or who are targeting the same indications in the rare skin diseases space;

Previous wording

Our other (expense) income for the three and six months ended June 30, 2025 and 2024 primarily consists of: (i) non-cash interest (expense) income related to our obligation to make future royalty payments pursuant to the Amended Ligand Agreement, which was determined to be a debt instrument; (ii) fair value adjustments related to our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability; and (iii) interest income (expense), net.

Current wording

Our other (expense) income for the three and nine months ended September 30, 2025 and 2024 primarily consists of: (i) non-cash interest (expense) income related to our obligation to make future royalty payments pursuant to the Amended Ligand Agreement, which was determined to be a debt instrument; (ii) fair value adjustments related to our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability; and (iii) interest income (expense), net.

Previous wording

We had no provision for income taxes for the three and six months ended June 30, 2025 and 2024.

Current wording

We had no provision for income taxes for the three and nine months ended September 30, 2025 and 2024.

Previous wording

The increase in research and development expenses during each of the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024, was primarily due to increased spending on the clinical development of QTORIN rapamycin for the treatment of microcystic LMs and cutaneous venous malformations, including conducting our Phase 3 SELVA and Phase 2 TOIVA trials, which were initiated in 2024. Additional increases include CMC costs for all programs and increased compensation costs as a result of headcount additions in late 2024 and early 2025.

Current wording

The increase in research and development expenses during each of the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024, was primarily due to increased spending on the clinical development of QTORIN rapamycin for the treatment of microcystic LMs and cutaneous venous malformations, including conducting our Phase 3 SELVA and Phase 2 TOIVA trials, which were initiated in 2024. Additional increases include CMC costs for all programs and increased compensation costs as a result of headcount additions in late 2024 and early 2025.

Previous wording

30, 2025 were $7.9 million, as compared to $2.2 million for the six months ended June 30, 2024. The increase in general and administrative expenses during each of the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024, was primarily due to increased employee compensation expense due to headcount additions, as well as increased professional services related to operating as a publicly-traded company.

Current wording

General and administrative expenses for the three months ended September 30, 2025 were $3.6 million, as compared to $1.9 million for the three months ended September 30, 2024. General and administrative expenses for the nine months ended September 30, 2025 were $11.6 million, as compared to $4.1 million for the nine months ended September 30, 2024. The increase in general and administrative expenses during each of the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024, was primarily due to increased employee compensation expense due to headcount additions, as well as increased professional services related to operating as a publicly-traded company.

Previous wording

Total other (expense) income, net for the three months ended June 30, 2025 was $0.2 million of expense, as compared to $1.3 million of expense for the three months ended June 30, 2024. Total other (expense) income, net for the six months ended June 30, 2025 was $0.5 million of expense, as compared to $2.0 million of expense for the six months ended June 30, 2024. The significant components of other (expense) income are more fully described below.

Current wording

Total other (expense) income, net for the three months ended September 30, 2025 was $1.2 million of expense, as compared to $1.7 million of expense for the three months ended September 30, 2024. Total other (expense) income, net for the nine months ended September 30, 2025 was $1.7 million of expense, as compared to $3.8 million of expense for the nine months ended September 30, 2024. The significant components of other (expense) income are more fully described below.

Previous wording

During the three months ended June 30, 2025, we recorded interest expense of approximately $1.4 million, as compared to approximately $0.9 million for the three months ended June 30, 2024. During the six months ended June 30, 2025, we recorded interest expense of approximately $2.6 million, as compared to approximately $1.7 million for the six months ended June 30, 2024. Interest expense recorded in all periods related to the change in fair value of our royalty agreement liability.

Current wording

During the three months ended September 30, 2025, we recorded interest expense of approximately $1.5 million, as compared to approximately $1.0 million for the three months ended September 30, 2024. During the nine months ended September 30, 2025, we recorded interest expense of approximately $4.1 million, as compared to approximately $2.8 million for the nine months ended September 30, 2024. Interest expense recorded in all periods related to the change in fair value of our royalty agreement liability.

Previous wording

During the three months ended June 30, 2025, we recorded a non-cash loss on derivative liabilities of approximately $0.1 million, as compared to approximately $0.3 million for the three months ended June 30, 2024. During the six months ended June 30, 2025, we recorded a non-cash loss on derivative liabilities of approximately $0.2 million, as compared to approximately $0.3 million for the six months ended June 30, 2024. The non-cash loss recorded in all periods related to the change in fair value of our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability.

Current wording

During the three months ended September 30, 2025, we recorded a non-cash loss on derivative liabilities of approximately $0.1 million, as compared to approximately $0.1 million for the three months ended September 30, 2024. During the nine months ended September 30, 2025, we recorded a non-cash loss on derivative liabilities of approximately $0.3 million, as compared to approximately $0.4 million for the nine months ended September 30, 2024. The non-cash loss recorded in all periods related to the change in fair value of our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability.

Previous wording

During the three months ended June 30, 2025, we recorded $0.7 million of interest income, net, as compared to $0.1 million of interest expense for the three months ended June 30, 2024. During the six months ended June 30, 2025, we recorded $1.4 million of interest income, net, as compared to $0 for the six months ended June 30, 2024. The increase during each of the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024, was primarily due to increases in the average balances held in interest-bearing cash and money market funds.

Current wording

During the three months ended September 30, 2025, we recorded interest income $0.6 million, as compared to $0.2 million for the three months ended September 30, 2024. During the nine months ended September 30, 2025, we recorded interest income of $2.1 million, as compared to approximately $0.4 million for the nine months ended September 30, 2024. The increase during each of the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024, was primarily due to increases in the average balances held in interest-bearing cash and money market funds.

Previous wording

As a result of the factors discussed above, our net loss applicable to common stockholders for the three months ended June 30, 2025 and 2024 was $9.5 million and $4.4 million, respectively, and our net loss applicable to common stockholders for the six months ended June 30, 2025 and 2024 was $17.7 million and $7.1 million, respectively.

Current wording

As a result of the factors discussed above, our net loss applicable to common stockholders for the three months ended September 30, 2025 and 2024 was $11.3 million and $7.0 million, respectively, and our net loss applicable to common stockholders for the nine months ended September 30, 2025 and 2024 was $29.0 million and $14.1 million, respectively.

Previous wording

Since inception, we have incurred substantial losses, and have primarily funded our operations with proceeds from the Amended Ligand Agreement and the sale of debt and equity securities, including common stock, convertible preferred stock and convertible notes. During the six months ended June 30, 2025, we incurred a net loss of $17.7 million and reported net cash used in operating activities of $12.2 million. As of June 30, 2025, we had an accumulated deficit of $111.4 million and cash and cash equivalents of $70.4 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and, to a lesser extent, general and administrative expenditures.

Current wording

Since inception, we have incurred substantial losses, and have primarily funded our operations with proceeds from the Amended Ligand Agreement and the sale of debt and equity securities, including common stock, convertible preferred stock and convertible notes. During the nine months ended September 30, 2025, we incurred a net loss of $29.0 million and reported net cash used in operating activities of $20.1 million. As of September 30, 2025, we had an accumulated deficit of $122.7 million and cash and cash equivalents of $63.6 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and, to a lesser extent, general and administrative expenditures.

Previous wording

We do not expect to generate commercial revenue or operating cash flows for at least the next several years. Our ability to continue as a going concern in the near term is largely dependent on our existing cash balance and our ability to obtain additional sources of financing in order to fund operating expenses, complete development of our product candidates, obtain regulatory approvals, launch, and commercialize our product candidates, and continue research and development programs.

Current wording

We do not expect to generate commercial revenue or operating cash flows in the near-term, including the next two years. Our ability to continue as a going concern in the near term is largely dependent on our existing cash balance and our ability to obtain additional sources of financing in order to fund operating expenses, complete development of our product candidates, obtain regulatory approvals, launch, and commercialize our product candidates, and continue research and development programs.

Previous wording

Concurrently with the execution of the Merger Agreement on July 23, 2024, Pieris entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors, including BVF Partners, L.P., an existing stockholder of Pieris (the “PIPE Investors”), pursuant to which, among other things, on the Closing Date and immediately following the consummation of the Merger, the PIPE Investors purchased (either for cash or in exchange for the termination and cancellation of outstanding convertible promissory notes issued by Legacy Palvella), and the Company issued and sold to the PIPE Investors, (i) 3,168,048 shares of common stock and (ii) Pre-Funded Warrants, exercisable for 2,466,456 shares of common stock, at a purchase price of $13.9965 per share or $13.9955 per Pre-Funded Warrant, which represents the per share purchase price of the common stock less the $0.001 per share exercise price for each Pre-Funded Warrant, for an aggregate purchase price of approximately $78.9 million, consisting of approximately $60.0 million in cash and the conversion of approximately $18.9 million of principal and interest under outstanding convertible notes issued by Legacy Palvella (the “PIPE Financing”).

Current wording

Concurrently with the execution of the Merger Agreement on July 23, 2024, Pieris entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors, including BVF Partners, L.P., an existing stockholder of Pieris (the “PIPE Investors”), pursuant to which, among other things, on the Closing Date and immediately following the consummation of the Merger, the PIPE Investors purchased (either for cash or in exchange for the termination and cancellation of outstanding convertible promissory notes issued by Legacy Palvella), and the Company issued and sold to the PIPE Investors, (i) 3,168,048 shares of Common Stock and (ii) Pre-Funded Warrants, exercisable for 2,466,456 shares of Common Stock, at a purchase price of $13.9965 per share or $13.9955 per Pre-Funded Warrant, which represents the per share purchase price of Common Stock less the $0.001 per share exercise price for each Pre-Funded Warrant, for an aggregate purchase price of approximately $78.9 million, consisting of approximately $60.0 million in cash and the conversion of approximately $18.9 million of principal and interest under outstanding convertible notes issued by Legacy Palvella (the “PIPE Financing”).

Previous wording

We have not generated product revenue or achieved profitability since our inception and expect to continue to incur net losses for the foreseeable future. As of June 30, 2025, we had approximately $70.4 million in cash and cash equivalents. Based on our current business plans, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operations for at least the one year period following the date of the filing of this Quarterly Report on Form 10-Q. Moreover, we expect our losses to increase as we continue to advance our product candidates through clinical trials and regulatory submissions. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates, which may not be currently contemplated in our planned operations. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our primary uses of capital have been, and we expect will continue to be, compensation and related expenses, third-party clinical research, manufacturing and development services, license payments or milestone obligations that may arise, manufacturing costs, legal and other regulatory expenses and general overhead costs.

Current wording

We have not generated product revenue or achieved profitability since our inception and expect to continue to incur net losses for the foreseeable future. As of September 30, 2025, we had approximately $63.6 million in cash and cash equivalents. Based on our current business plans, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operations for at least the one year period following the date of the filing of this Quarterly Report on Form 10-Q. Moreover, we expect our losses to increase as we continue to advance our product candidates through clinical trials and regulatory submissions. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates, which may not be currently contemplated in our planned operations. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our primary uses of capital have been, and we expect will continue to be, compensation and related expenses, third-party clinical research, manufacturing and development services, license payments or milestone obligations that may arise, manufacturing costs, legal and other regulatory expenses and general overhead costs.

Previous wording

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024 (in thousands):

Current wording

The following table summarizes our cash flows for the nine months ended September 30, 2025 and 2024 (in thousands):

Previous wording

Net cash used in operating activities for the six months ended June 30, 2025 and 2024 consisted of net loss for the period adjusted for non-cash items and changes in components of operating assets and liabilities. The primary use of cash was to fund our operations related to the development of our product candidates, including general and administrative support, which increased due to greater research and development efforts in 2025, increased costs to operate as a public company, as well as the timing of payments and increase in accounts payable.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2025 and 2024 consisted of net loss for the period adjusted for non-cash items and changes in components of operating assets and liabilities. The primary use of cash was to fund our operations related to the development of our product candidates, including general and administrative support, which increased due to greater research and development efforts in 2025, increased costs to operate as a public company, as well as the timing of payments and increase in accounts payable.

Previous wording

For the six months ended June 30, 2025, net cash used in financing activities was $0.9 million, consisting primarily of payments of transaction costs incurred in connection with the Business Combination and proceeds from the exercise of options.

Current wording

For the nine months ended September 30, 2025, net cash used in financing activities was $0.6 million, consisting primarily of payments of transaction costs incurred in connection with the Business Combination and proceeds from the exercise of options.

Previous wording

For the six months ended June 30, 2024, net cash provided by financing activities was $9.9 million, entirely attributable to proceeds from issuance of convertible notes payable of $10.0 million less issuance costs of $0.1 million.

Current wording

For the nine months ended September 30, 2024, net cash provided by financing activities was $12.3 million, entirely attributable to proceeds from issuance of convertible notes payable of $12.4 million less issuance costs of $0.1 million.

Previous wording

During the six months ended June 30, 2025, there were no material changes outside the ordinary course of our business to our contractual obligations and cash requirements, as disclosed in our 2024 Form 10-K.

Current wording

During the nine months ended September 30, 2025, there were no material changes outside the ordinary course of our business to our contractual obligations and cash requirements, as disclosed in our 2024 Form 10-K.

Previous wording

During the six months ended June 30, 2025, there were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Form 10-K.

Current wording

During the nine months ended September 30, 2025, there were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Form 10-K.