U.S. Markets closed

Edited Transcript of PIRS earnings conference call or presentation 10-May-19 12:00pm GMT

Q1 2019 Pieris Pharmaceuticals Inc Earnings Call

BOSTON May 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Pieris Pharmaceuticals Inc earnings conference call or presentation Friday, May 10, 2019 at 12:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Allan Reine

Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer

* Louis A. Matis

Pieris Pharmaceuticals, Inc. - Senior VP & Chief Development Officer

* Stephen S. Yoder

Pieris Pharmaceuticals, Inc. - CEO, President & Director

================================================================================

Conference Call Participants

================================================================================

* Biren N. Amin

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* Joseph Pantginis

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Matthew Christopher Phipps

William Blair & Company L.L.C., Research Division - Analyst

* Pamela Ann Barendt

Cowen and Company, LLC, Research Division - Associate

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to the Pieris Pharmaceuticals, Inc. First Quarter 2019 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Allan Reine, Chief Financial Officer for Pieris Pharmaceuticals. Thank you. You may begin.

--------------------------------------------------------------------------------

Allan Reine, Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer [2]

--------------------------------------------------------------------------------

Thanks. Good morning, everyone, and thank you for joining us for our first quarter 2019 conference call and corporate update. On the call today, we have Steve Yoder, our President and CEO; and Lou Matis, SVP and Chief Development Officer, who will be available for Q&A. You can access the press release released this morning on the Investor Relations page of our website at www.pieris.com.

Now 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, including statements related to the timing and progress of our clinical trials and preclinical programs. Our partnerships and our financial position, and actual results or events may differ materially from those expressed or implied by such forward-looking statements. Factors that may cause such differences are described in our filings with the SEC, including our annual, quarterly and current reports. The information being presented is only accurate as of today, and Pieris undertakes no obligation to update any statements to reflect future events or circumstances.

With that, I will turn the call over to Steve.

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [3]

--------------------------------------------------------------------------------

Thank you, Allan, and thank you to everyone for joining us today for our 2019 first quarter earnings call. I will begin the call by giving a brief introduction to Pieris, before discussing our pipeline progress and our plans for the remainder of the year.

At Pieris, we are leveraging our proprietary Anticalin platform technology to develop protein therapeutics. Anticalin proteins are engineered human lipocalins, which are proteins that are naturally abundant in the body and serve, supply and transport various molecules. Because lipocalins and by extension Anticalin proteins are smaller and typically more stable and engineer-able than antibodies, they offer unique advantages to other treatment options, such as inhaled delivery to treat respiratory disorders locally or creating more complex bispecific formats to drive a desired biology as we are doing in immuno-oncology.

I'll now turn to a brief overview of our respiratory strategy. Anticalin's capacity for inhaled delivery informs our growing respiratory franchise. We are developing multiple inhaled drug candidates for respiratory disease in collaboration with AstraZeneca, as part of a 5-program respiratory alliance, showcased by our lead program PRS-060 and 4 other programs. Within this alliance, we have retained co-development and co-commercialization options for PRS-060 and 2 other programs.

PRS-060 is an inhalable, IL-4 receptor alpha antagonist in development for the treatment of asthma, and is our lead respiratory asset. We look forward to presenting first-in-man data at the 2019 American Thoracic Society International Conference later this month. In that trial, a single ascending dose Phase I Study PRS-060 was demonstrated to be safe and well tolerated in healthy volunteers in nebulized doses ranging from 0.25 milligrams to 400 milligrams. This was the first Anticalin protein to be administered to human subjects via inhalation. And we believe that the single ascending dose Phase I data helped to derisk this Anticalin protein from a safety perspective. Further, as our lead program, PRS-060 serves as proof of concept for the inhalable administration potential of our platform, in addition to PRS-060 being a promising commercial opportunity itself.

Looking beyond this first-in-human trial, we plan to present data from the ongoing placebo-controlled multiple ascending dose Phase I study of PRS-060 in patients with mild controlled asthma with prescreened elevated levels of fractional exhaled nitric oxide, or FeNO, and elevated levels meaning ppb is greater than 35, we present to -- we look forward to presenting it at an upcoming medical meeting alongside our partner, AstraZeneca, with FeNO being a validated marker of lung inflammation.

As a reminder, the objective of the study is to ascertain a meaningful pharmacodynamic and pharmacokinetic or PK/PD profile for the drug candidate. More specifically, we are evaluating the safety, tolerability and PK profile of this drug candidate, along with its capacity to reduce FeNO in mild asthmatic patients dosed with PRS-060 versus placebo. The ability of PRS-060 to reduce FeNO could reflect effective IL-4 receptor alpha target engagement locally in the lung, demonstrating PRS-060's therapeutic potential and better informing a Phase II dosing regimen.

As a reminder, our R&D strategy is focused on addressing clinically validated targets in new ways to develop differentiated drugs with relatively lower biology risk that are first-in-class therapy and we believe PRS-060 is a great example of this strategy. In this respect, PRS-060 engages the same target IL-4 receptor alpha as the approved drug DUPIXENT or dupilumab. DUPIXENT, which is an injectable monoclonal antibody, was approved earlier this week by the EMA for severe asthma in patients with either high eosinophils or high FeNO. And this is the first time to our knowledge that FeNO has been the basis of an approval for an asthma biologic, which reinforces our conviction that the FeNO reducing potential of PRS-060 in our ongoing Phase I multiple ascending dose study, could create a significant inflection point for this program.

Looking forward, assuming successful completion of the ongoing multiple ascending dose study, AstraZeneca will sponsor the Phase II study, details of which will be made available in due course. Once this Phase II study is complete, Pieris may exercise its options to codevelop and separately to co-commercialize PRS-060 in the United States.

Additionally, we continue to advance 2 discovery-stage programs we initiated last year as part of our respiratory collaboration with AstraZeneca, under which AstraZeneca may initiate up to 2 additional programs. We also continue to advance the 2 proprietary discovery-stage programs we initiated last year and we plan to initiate additional proprietary respiratory programs later this year.

I'd now like to turn to our immuno-oncology pipeline. As a reminder, our lead oncology asset, PRS-343 is a fully proprietary 4-1BB/HER2 bispecific designed to preferentially activate tumor-specific T-cells in the tumor microenvironment. We continue to enroll patients in our PRS-343 Phase I dose escalation trial for HER2 positive solid tumors, with the objective of ascertaining the appropriate exposure levels of a drug candidate, as measured by a desired PD response. We intend to report comprehensive data from the PRS-343 Phase I monotherapy dose escalation study later this year. And we also continue to enroll patients in the Phase I dose escalation trial in combination with atezolizumab, an approved PD-L1 inhibitor under a drug supply agreement from Roche, and we intend to report data from that study later this year as well.

Beyond PRS-343, we plan to file an IND application later this year for PRS-344, which is a PD-L1/4-1BB antibody Anticalin bispecific molecule and is the lead program in our 5-program immuno-oncology collaboration with Servier. We also recently presented preclinical data for PRS-342, a GPC3/4-1BB bispecific drug candidate and a poster session at the 2019 American Association for Cancer Research, AACR annual meeting. Additionally, our Seattle Genetics immuno-oncology collaboration continues to advance according to plan.

And finally, I'll provide a brief update on PRS-080, which is a half-life-optimized hepcidin antagonist for anemia. We intend to report results from the Phase IIa multiple ascending dose study for this program at the 24th European Hematology Association Congress, or EHA, on June 16, 2018 (sic) [2019]. We'll also be sharing the data set with ASCO Pharmaceutical, who have an opted right to develop and commercialize PRS-080 in Japan and other Asian territories.

This concludes my prepared remarks, and I would now like to hand back over to Allan to guide you through our financial results for the first quarter of 2019.

--------------------------------------------------------------------------------

Allan Reine, Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer [4]

--------------------------------------------------------------------------------

Thank you, Steve, and good morning again, everyone. For revenue, we recognized $8.5 million for the quarter ended March 31, 2019, and compared to $4.2 million revenue in the quarter ended March 31, 2018, reflecting higher amounts of revenue recognized from upfront the milestone payments, along with billing for development services from our partners. Research and development expenses were $14.3 million for the quarter ended March 31, 2019, as compared to $7.9 million for the quarter ended March 31, 2018. This increase in R&D expenses reflects increased clinical, drug supply, manufacturing and salary and benefit costs associated with the advancement of our clinical and preclinical programs.

General and administrative expenses were $4.9 million for the quarter ended March 31 as compared to $4.4 million for the quarter ended March 31, 2018. This increase in G&A expenses is attributable to both higher personnel costs and professional service fees such as audit and tax. The net loss for the quarter was $10.3 million or $0.20 per share compared to a net loss of $8.7 million or $0.17 per share for the quarter a year earlier.

And turning to the balance sheet. Total cash, cash equivalents and investments as of the quarter ended March 31, 2019, totaled $110.8 million, as compared to cash of $128.1 million as of December 31, 2018. This reflects increased operating expenses as well as annual bonus payments, which are made in the first quarter. Our quarter end cash balance was also impacted by higher prepayments in the quarter of $1.8 million, and the timing of payments from our strategic partners, which is reflected in the $4.4 million increase in accounts receivables on our balance sheet.

With that, I will turn the call back over to Steve.

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [5]

--------------------------------------------------------------------------------

Thanks, Allan. And just in conclusion. I'd like to say we look forward to sharing the data from the single ascending dose study of PRS-060 in the coming weeks at ATS and the data from the ongoing multiple ascending dose study of that program at its upcoming medical meeting. We also look forward to sharing data from the monotherapy and atezolizumab combination studies of PRS-343 later this year in addition to the filing of the IND for PRS-344.

Thank you for joining us on the call today, and we now would like to open the call for your questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from the line of Umer Raffat with Evercore ISI.

--------------------------------------------------------------------------------

Unidentified Analyst, [2]

--------------------------------------------------------------------------------

This is [Paul] for Umer and Jon. Have some quick question on the PRS-060 program. First on the single ascending dose, what -- in terms of the systematic exposure, what dose in the single ascending dose is comparable to dupi, and how should we think about that? And also on the long residence time of the PRS-060, how should we think about that? And what informed you to have the BID dosing in multiple ascending dose? And also on the formulation bridging Phase I, you mentioned on the clinicaltrial.gov you are going to use a mono dose inhaler for the dry powder inhaler. Should we assume that this is going to be the device you'll use in Phase II and beyond? And could you remind us what are the -- some of the approved drugs using this device and your confidence level with this?

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [3]

--------------------------------------------------------------------------------

All right. Thanks, [Paul]. I was scribbling furiously there to catch all those questions. So we will start with the first one, what is the rapid dosing -- the dosing regimen and information from the dosage of the (inaudible) data you mentioned from the single-ascending dose trial. What to infer around long residence time, and Allan is happy to take that question.

--------------------------------------------------------------------------------

Allan Reine, Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer [4]

--------------------------------------------------------------------------------

Yes. So what's public so far though is the abstract from ATS. Honestly, the poster you'll see in a couple of weeks. So when we look at systemic exposure, we're not trying to get to dupi-like systemic exposure. Now when we see the full data set, can we get there with high enough doses of our drug? The answer is we can -- as you see in the abstract, we can show a pretty robust [stat] inhibition of very high doses that last a significantly long time. You think you would get consistent systemic knockdown of that drug. But again, to remind you, this is -- we believe asthma is a local disease and this is a local therapy to address that, again, local inflammation.

So that's our target here. We're not saying a systemic exposure is necessary to drive efficacy with our drug. Now we can get some systemic exposure depending on where we dose, and we'll look at what the efficacy looks like both in the Phase Ib from the multi-ascending dose study in mild asthmatic and looking at the FeNO reduction and we compare that to the systemic exposure that we end up seeing with those different dose levels. And then again in the Phase IIa, we will be able to test that in the moderate-to-severe population as well.

In terms of long residence times, there's going to be some more information at ATS, so I'm not going to disclose anything more on that today. And why BID, I think at the present time, as you say, we think BID is a reasonable dose level for efficacy. Doesn't rule out that one day that we're going to look at once a day and determine if that is also an effective way to dose this drug. But we know that BID or believe BID gives us the coverage we need, and there's always potential to go to once a day from that.

When we think about the bridging study, we're using the InnoSpire nebulizer, which was the same as the Phase Ia study and as we said the [Plastdea] monodose inhaler. We've said previously our intention is that our Phase IIa study, we'll use the dry powder formulation and AstraZeneca is developing that. And Astra is taking the lead on the DPI formulation and all the bridging work. So we're not giving additional details on that at this time. However, it's a small study to bridge the DPI formulation, and it continues to progress according to plan. So I'm not going to comment any more on device or anything like that, that's for AstraZeneca or Plastdea and what the approved drugs are that have been using that. With that, next question -- or sorry, Lou, did you want to...

--------------------------------------------------------------------------------

Louis A. Matis, Pieris Pharmaceuticals, Inc. - Senior VP & Chief Development Officer [5]

--------------------------------------------------------------------------------

I just want to add another point that we are very pleased with the fact that we were able to show substantial treatment because it's really a demonstration that the drug remained stable. And it also shows the ability of the drug, even in transit and treat a lung to continue to inhibit its target. And it's a direct demonstration of IL-4 inhibition as well. So it's a very nice proof-of-concept in those studies.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Our next question comes from the line of Chris Shibutani from Cowen and Company.

--------------------------------------------------------------------------------

Pamela Ann Barendt, Cowen and Company, LLC, Research Division - Associate [7]

--------------------------------------------------------------------------------

This is Pam Barendt on for Chris. How does your respiratory strategy differ between your proprietary programs and the programs you started to discuss a little more, at least making us aware of them the discovery stage programs? And then I have a follow-up.

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [8]

--------------------------------------------------------------------------------

Pam, it's Steve here again. Happy to take a stab at that one. When we set out to form the respiratory alliance with AstraZeneca, we had a discussion not just across on what types of targets we might want to engage, but also areas outside of asthma, but yet within respiratory disease that's all driven by the ability to drive local biology. And as part of that discussion, part of the alliance, we crafted a set of targets that would generally guide the operations going forward. Now we didn't lock in 100% of the targets that they won, but we had a pretty clear idea of what those were. And as that is a high priority alliance, we wanted to take advantage of all of the target biology expertise that have been going on at AstraZeneca for years. Those targets that we put onto a target risk, which have some limited degree of cycling, those are generally informing how we're working together with AstraZeneca. And we're fine with that structure because, as you know, these are really, truly collaborative programs and we have the ability to codevelop 2 of those 4 early-stage programs largely in the same way that we are able to codevelop PRS-060 Phase IIa data are positive.

As for programs that we're advancing on our own, we go through a pretty rigorous target validation process. Of course, we read the literature, we have our extensive key opinion network. I think we have one of the best respiratory ad boards in the world with really well published, enthusiastic, very engaging advisers. And I think the way I would leave it today is to say our targets, which we're not prepared to disclose for competitive reasons, for intellectual property reasons right now they -- 2 points. One is we like the strategy in the near term of addressing validated targets locally, targets that are validated clinically maybe more systemically to go after them locally.

And number two, not being constrained to asthma. Asthma comes with large or longer development times than some other respiratory disease. And so it's a mix, it's part of our portfolio balancing. And I hope that gives you a flavor of how we're striking that balance between what we're working on with Astra and what we're working on, on our own. And look forward to in the future, probably not this year, of disclosing some of the targets, once we feel more comfortable from a competitive, intelligence and an IP perspective.

--------------------------------------------------------------------------------

Pamela Ann Barendt, Cowen and Company, LLC, Research Division - Associate [9]

--------------------------------------------------------------------------------

My follow-up question was on the I-O program. So you mentioned the IND that you're hoping to submit this year with Servier. Can you provide any insight into your philosophy in this collaboration with regard to potential indications, whether there would be any overlaps with 343? Or if you'd be looking at a completely different direction, so there wouldn't be any competition there or necessarily readthrough?

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [10]

--------------------------------------------------------------------------------

Sure, Pam. So I'm going to let Lou take an answer on this question.

--------------------------------------------------------------------------------

Louis A. Matis, Pieris Pharmaceuticals, Inc. - Senior VP & Chief Development Officer [11]

--------------------------------------------------------------------------------

Yes. So with this slide, which is the PD-L1 bispecific molecule, we're not disclosing indications. One thing that we can say is that PD-L1 is the anchoring to a microenvironment because the molecules are expressed both on tumor cells as well as lung cells within the tumor microenvironment in both myeloid and lymphoid as well. The range of different tumor types that one can address with a PD-L1 tumor microenvironment binding would be activating bispecific is really quite large. And so it does give us a larger landscape of tumors to address. And I think that we are, in our discussions and strategizing with our partners in this, ultimately we'll make the decision about what we're going to do first, but we're not mentioning that now.

As far as the combination, it's very attractive to us because it's a combination of a triple inhibitor and a immuno simulator in one molecule. And there's abundant evidence from certainly lots of preclinical literature that PD-1 pathway inhibition combined with 4-1BB activation is quite synergistic, not only in generating an antitumor immune response, but in generating antitumor activity as well.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

Our next question comes from the line of Biren Amin from Jefferies.

--------------------------------------------------------------------------------

Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [13]

--------------------------------------------------------------------------------

Just on the asthma Phase Ib trial, are you measuring antibodies and how should we think about immunogenicity with this drug?

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [14]

--------------------------------------------------------------------------------

Biren, Steve here again. So yes, here's an easy, maybe simple answer to this. Yes. We are measuring for [odds] and we are not at liberty to talk about any data from the ongoing trial. As a reminder, it is obviously confidential information on the AstraZeneca alliance. And we look forward to presenting really a comprehensive data set at an upcoming medical meeting once the trial is complete.

--------------------------------------------------------------------------------

Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [15]

--------------------------------------------------------------------------------

Got it. And then I guess on the other respiratory collaboration with AZ, when would we start to learn about additional targets that AZ's interested in? I think you also have some in-house proprietary programs as well. So when we will learn more about those targets as well?

--------------------------------------------------------------------------------

Allan Reine, Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer [16]

--------------------------------------------------------------------------------

Biren, this is Allan here. So as far as AstraZeneca is concerned, that's -- the disclosure of the targets is really dependent on AstraZeneca. So we're not free to disclose what they are developing, so you'd have to stay tuned for either their pipeline disclosures, their potential presentations at medical meetings and things like that. As we've talked about, we've already started 2 additional programs on top of PRS-060. We have another 2 programs that'll initiate likely this year, which will round out the total of 5 from that program.

As far as our proprietary pipeline, I think it's the same thing as Steve said earlier, for IP reasons and competitive reasons, we don't want to disclose everything for our target sets, but we're very, I guess, excited about our discovery efforts within the respiratory area. And as we get further along with data and get some preclinical data in-house that we feel good about presenting, I think we'll at some point -- and file IP, I think we'll get more comfortable about relaying to The Street what those targets are.

--------------------------------------------------------------------------------

Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [17]

--------------------------------------------------------------------------------

And I guess just from a proprietary respiratory pipeline standpoint, Allan, is the company looking at large indications like asthma or are there orphan indications that you could pursue with those targets?

--------------------------------------------------------------------------------

Allan Reine, Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer [18]

--------------------------------------------------------------------------------

Yes. It's -- everything is on the table. When we think about respiratory diseases, there's many diseases out there. Asthma is just one of them. There's a lot of blockbuster drugs within the asthma paradigm. And when we look at T2 asthma, there is a lot of low-hanging fruit on targets that you can go after for asthmatic disease. Plus as you said, there's plenty of other indications out there, both orphan and larger indications that we can think about within respiratory. As Steve said earlier, we've built up a really broad, impressive network of respiratory KOLs and a really impressive scientific advisory board. In addition, we have really bulked up our scientific expertise in-house when we think about translational work within respiratory diseases. So we're really looking at the full gamut of anything respiratory.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

Our next question comes from the line of Matt Phipps with William Blair.

--------------------------------------------------------------------------------

Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [20]

--------------------------------------------------------------------------------

I guess I'll start with PRS-343. So continuing to enroll patients there. I believe kind of one of the last updates you were at the approved Herceptin dosage level. I was wondering, are you dosing above that or is this really more backfilling previous dose levels with kind of the IL response of tumor types? And then additionally, are you seeing -- I don't know what you can say at this point, but since you are using the same 4-1BB Anticalin and some of your other projects. I mean are you getting confidence from 343 that this Anticalin is definitely active in the tumor microenvironment?

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [21]

--------------------------------------------------------------------------------

Thanks, Matt. I'm going to let Lou take a stab at this one.

--------------------------------------------------------------------------------

Louis A. Matis, Pieris Pharmaceuticals, Inc. - Senior VP & Chief Development Officer [22]

--------------------------------------------------------------------------------

Yes. As we've said, we're not going to comment on data we look forward to presenting really a complete data set about the monotherapy as well as a combination study by the end of the year. The -- are continuing dose escalation to determine the best exposure for the drug. Again, not at liberty to say whether we've seen 4-1BB activation. But what we can say, which is actually we think there's -- we were very pleased to see that -- in a plenary session at the AACR, that's the Association for Cancer Research meeting, a little over a month ago, Roche has a very similarly designed bispecific tumor-targeted anti 4-1BB molecule. Their tumor target was FAP, fibroblast activating protein, which is found in elevated levels in the stronger different tumors. And they presented a single patient from a plenary session, one patient from their trial, who had achieved a clear partial response. So that was basically their validation of the fact that a tumor-targeted 4-1BB bispecific can work, both with respect to activating the tumor microenvironment and eliciting an objective response to the tumor itself. That's probably data from the presentation. So we are looking forward to presenting our data later this year as well.

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [23]

--------------------------------------------------------------------------------

And I'd just add to that. You had asked around doses in the indicated Herceptin levels. There are different -- so we are exploring exposure levels of our drug to -- that would probably be higher than what you would dose with trastuzumab, given that their bispecific target generics at stake, so I would say that there are 2 ways to do that. You could do absolute dose amounts as well as frequency. And so those are things that we're looking at as we continue to escalate. But of course, we also have the flexibility, as you mentioned, to backfill and our protocol has a lot of flexibility to go out to at least 10 patients per arm. And so we are also exploring that and are guided by fatality data from drug-like properties in PD patients in any of those given arms on the way to asthma.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from the line of Joe Pantginis with H.C. Wainwright.

--------------------------------------------------------------------------------

Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [25]

--------------------------------------------------------------------------------

Wanted to focus my question on the co-development option for 060. First from a logistical standpoint, can you just remind us how long you have to make the decision on your front. And then number two, even if it's just a broad stroke financial question -- financial answer with regard to maybe the net effect of your co-development participation, meaning obviously, your expenses would increase with the co-development, but there would also be an offset from milestones from AstraZeneca, so maybe what the general net effect might be for your participation if you were to codevelop?

--------------------------------------------------------------------------------

Allan Reine, Pieris Pharmaceuticals, Inc. - Senior VP, CFO & Treasurer [26]

--------------------------------------------------------------------------------

Joe, so I'll take a first cut at that. If anybody wants to add, feel free. So there's 2 questions there, so maybe the mechanics of being able to look at the data, share the data and decide whether to opt-in. And then the second part is the return on investment as a function of our co-investment, if we choose to go down that path. So on the first point, we -- these are all confidential terms under the contract unless otherwise disclosed, so the precise timing of the opt-in decision, which again is after the Phase IIa data, are available from the forthcoming Phase IIa trial. We haven't disclosed the specific time period. However, what we have disclosed is that it was important for Pieris to be able to disclose the essence of those data, to be able to get credit for them if they're positive in order to inform the potential for the drug going forward in order to then access the necessary capital to go forward in co-development if we choose to do so. So there will be an opportunity for the Street to be able to understand what those data are to understand our basis for moving forward, if we want to move forward in co-development at that time.

Number two, as for the leverage on return on investment as a function of sitting back and adjusting to a milestone and royalty income versus co-developing going forward with AstraZeneca. We, again, haven't disclosed specific details on the milestones or the royalties or the full impact if we were to go at the full threshold of co-development. However, what we can say is that beyond just sitting back and enjoying the milestone and royalty income with no investment, we can invest in multiple tiers. And depending on the level of investments that we would take, we can in some instances increase the milestones and the royalties into the high-teens and that royalty stream would continue as long as sales continue. And at the highest threshold, we can convert the royalty into a gross profit split on the basis of global sales. Again, for so long as sales continue. And we've structured the deal that in our belief allows us to with each dollar invested in the program allows for a more leveraged return on investment. And so if the data were, in fact, positive, looking again at lung function improvements. Today, as I sit here today, I think we would really like to be able to invest as much as we can in that program because we believe that's a significant derisking for the program. And number two, the way the mechanics are of the contract that would be the best return for Pieris shareholders as well.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Yoder for any final comments.

--------------------------------------------------------------------------------

Stephen S. Yoder, Pieris Pharmaceuticals, Inc. - CEO, President & Director [28]

--------------------------------------------------------------------------------

Thank you. I just want to thank everyone, again, today for your attention and for your continued support. We look forward to keeping you updated on our progress, and the disclosure of data for PRS-060 in about 2 weeks. Thank you again for joining the call, and have a great day.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.