Palvella Therapeutics reported a $24.64 million net loss

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For the quarterly period ended June September 30, 2026

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The number of shares of Registrant's common stock outstanding as of July 31, November 2, 2026 was 14,408,407 14,618,457 .

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Financial Statements (Unaudited) 4 changes

Condensed Consolidated Balance Sheets as of June September 30, 2026 and December 31, 2025

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Nine Months Ended June September 30, 2026 and 2025

Condensed Consolidated Statements of Changes in Preferred Stock and Stockholders' Equity (Deficit) for the Three and Six Nine Months Ended June September 30, 2026 and 2025

Condensed Consolidated Statements of Cash Flows for the Six Nine Months Ended June September 30, 2026 and 2025

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Forward-looking statements 1 change

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• expectations regarding the timing of completion of the New Drug Application ("NDA") submission;

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Financial statements 28 changes

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Current portion of derivative liabilities – royalty agreement

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Long-term portion of derivative liabilities – royalty agreement

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Common stock, $ 0.001 par value; 200,000,000 shares authorized; 14,395,705 14,607,244 and 12,380,933 shares issued and outstanding at June September 30, 2026 and December 31, 2025

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Fair value adjustments on derivative liabilities – royalty agreement ( 114 1,648 ( 118 82 ( 230 1,878 ( 193 275

Fair value adjustments on derivative liabilities – contingent value right liability ( 238 ( 238

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Six Months Ended June 30, 2026

Nine Months Ended September 30, 2026

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Exercise of common stock options for cash, net of expense

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Exercise of common stock options for cash, net of expense

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Issuance of 3,250 shares of common stock upon settlement of employee performance stock units and restricted stock units, net of 957 shares withheld for taxes

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Stock-based compensation

Issuance of 3,250 shares of common stock upon settlement of employee performance stock units and restricted stock units, net of 938 shares withheld for taxes

Exercise of common stock options for cash, net of expense

Settlement of performance stock units

Conversion of prefunded warrants to common stock

Foreign currency translation loss

Unrealized gain (loss) on investments

Balance at September 30, 2026

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Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

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Exercise of common stock options for cash, net of expense

Stock-based compensation

Foreign currency translation gain

Balance at September 30, 2025

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Six Months Ended June 30,

Nine Months Ended September 30,

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Accretion on marketable securities

Accretion of marketable securities

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Business 41 changes

Palvella Therapeutics, Inc. (the "Company," or "Palvella") (previously named Pieris Pharmaceuticals, Inc. ("Pieris")), a Nevada corporation, is a late clinical-stage biopharmaceutical company committed to serving individuals suffering from serious, rare skin diseases and vascular malformations anomalies without approved therapies. The Company's lead product candidate, QTORIN 3.9% rapamycin anhydrous gel ("QTORIN rapamycin"), is based on the Company's patented QTORIN platform. QTORIN rapamycin is in clinical development for microcystic lymphatic malformations ("microcystic LMs"), cutaneous venous malformations ("cutaneous VMs") and clinically significant angiokeratomas. The Company is conducting IND-enabling development for QTORIN pitavastatin for disseminated superficial actinic porokeratosis ("DSAP"). Since inception, the Company has devoted substantially all of its resources to identifying, researching and conducting preclinical and clinical activities for its product candidates, and developing its platform technology, organizing and staffing the Company, business planning, raising capital and establishing its intellectual property portfolio. The Company's principal executive offices are located in Wayne, Pennsylvania.

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Since inception, the Company has incurred net losses and negative cash flows from operations. During the six nine months ended June September 30, 2026 and 2025, the Company reported a net loss of $ 37.6 62.3 million and $ 17.7 29.0 million , respectively, and net cash used in operating activities of $ 23.7 38.1 million and $ 12.2 20.1 million , respectively. At June September 30, 2026, the Company had an accumulated deficit of $ 173.1 197.7 million and cash and cash equivalents and short-term investments of $ 250.6 236.7 million .

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The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States ("U.S. GAAP") for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to fairly present the results of the interim periods. The results of operations and cash flows for the six nine months ended June September 30, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 2026 or any other future period.

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At June September 30, 2026 and December 31, 2025, the carrying amounts of financial instruments, which include cash and cash equivalents, accounts payable, and accrued expenses and other liabilities, approximate their fair value due to their short maturities. At June September 30, 2026 and December 31, 2025, the fair value of the royalty agreement liability, which is based on Level 3 inputs (including probability-weighted cash flow estimates of the Company's potential future royalty payments and a weighted-average cost of capital of 16.0 15.5 % and 18.0 % , respectively) is approximately $ 97.3 148.8 million and $ 61.5 million , respectively. The Company records its investments and derivative liabilities at fair value.

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The Company recognizes grants from governmental agencies when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. The Company evaluates the conditions of each grant as of each reporting period to evaluate whether the Company has reached reasonable assurance of meeting the conditions of each grant arrangement and that it is expected that the grant will be received as a result of meeting the necessary conditions. Grants are recognized in the condensed consolidated statements of operations on a systematic basis over the periods in which the Company recognizes the related costs for which the government grant is intended to compensate. Specifically, grant income related to research and development costs is recognized as such expenses are incurred. Grant income is recorded as a reduction of research and development costs in the condensed consolidated statements of operations. In September 2024, the Company received a grant award notice from the Department of Health and Human Services in connection with its ongoing Phase 3 clinical trial, SELVA. During the three and six months ended June September 30, 2026 and 2025, , the Company recognized $ 0.2 0.5 million and less than $ 0.3 0.1 million , respectively, of grant income as a reduction to research and development costs in the accompanying condensed consolidated statements of operations The Company did not recognize any grant income During the three and six nine months ended June September 30, 2026 and 2025, the Company recognized $ 0.5 million and $ 0.4 million , respectively, of grant income as a reduction to research and development costs in the accompanying condensed consolidated statements of operations.

In accordance with ASC 270, Interim Reporting , and ASC 740, Income Taxes , the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. For the three and six nine months ended June September 30, 2026 and 2025, the Company recorded no tax expense or benefit due to the expected current year loss and its historical losses. The Company has not recorded its net deferred tax asset as of either June September 30, 2026 or December 31, 2025 because it maintained a full valuation allowance against all deferred tax assets as of these dates as management has determined that it is not more likely than not that the Company will realize these future tax benefits. As of June September 30, 2026 and December 31, 2025 , the Company had no uncertain tax positions.

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Basic net loss per share is calculated by dividing net income loss by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, preferred stock, stock options and warrants are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. For the three and six nine months ended June September 30, 2026 and 2025 , basic and diluted net loss per share are the same.

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Cash and cash equivalents as of June September 30, 2026 and December 31, 2025 includes cash and investments in money market funds. Money market funds, which are cash equivalents, are highly liquid investments and are actively traded. The pricing information on the Company's money market funds is based on quoted prices in active markets for identical securities. This approach results in a classification of these securities as Level 1 of the fair value hierarchy.

There were no transfers between Levels during the period ended June September 30, 2026. The Company uses the services of its investment manager, which uses widely accepted models for assumptions in valuing securities with inputs from major third-party data providers.

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The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed maturity securities as of June September 30, 2026 are as follows:

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As of June September 30, 2026 , the Company had seven available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses. Unrealized losses on governmental debt securities have not been recognized into income because the issuers' securities are of high credit quality (rated AA+ or higher) and the decline in fair value is largely due to market conditions and or changes in interest rates. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely payments on the securities. The fair value is expected to recover as the securities approach maturity.

As of June September 30, 2026, accrued interest receivable on available-for-sale investment debt securities totaling $ 0.4 0.3 million is excluded from the estimate of credit losses and is included in prepaid expenses and other current assets.

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The key assumptions used to determine the fair value of the derivative liabilities – royalty agreement at June September 30, 2026 and December 31, 2025 are as follows:

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(1) Source: Clinical Development Success Rates and Contributing Factors 2011-2020 study of drug approval success from February 2021. The probability assumption used reflects the study's estimate of the likelihood of approval of a Phase 3 drug that has not yet submitted its full NDA to the FDA.

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Balance at September 30

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As of September 30, 2026, $ 2.6 million of the derivative liabilities – royalty agreement is classified as long term current and $ 1.4 million is classified as long-term on the Company's condensed consolidated balance sheets according to the estimated timing of the occurrence of the potential payments. As of December 31, 2025, the derivative liabilities – royalty agreement was classified entirely as long-term.

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Balance at September 30

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The Company applies a scenario-based method and weighs them based on the possible likelihood of certain contingencies triggering payments due under the contingent value right ("CVR") for the liability recognized. The fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820, Fair Value Measurement . The estimated value of the CVR is based upon available information and certain assumptions, which the Company's management believes are reasonable under the circumstances. In January 2026, the Company paid out approximately $ 2.0 million to holders of CVRs in accordance with the CVR Agreement entered into immediately prior to closing of the Merger on December 13, 2024. As of June September 30, 2026 , the fair value adjustment for the CVR is driven from foreign currency translation. The change in fair value has been recorded in fair value adjustments on derivative liabilities - contingent value right liability on the condensed consolidated statement of operations.

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The total amount of potential future milestone payments remaining under the arrangement was $ 5.0 million as of June September 30, 2026. The potential future milestone payments represent derivative liabilities with a fair value of $ 2.3 3.9 million as of September 30, 2026, of which $ 2.6 million and $ 2.0 1.4 million are classified as "current portion of June 30, 2026 derivative liabilities – royalty agreement" and "long-term portion of derivative liabilities – royalty agreement," respectively, on the accompanying condensed consolidated balance sheets. The potential future milestone payments represent derivative liabilities with a fair value of $ 2.0 million as of December 31, 2025, respectively, which are classified as "long-term portion of derivative liabilities – royalty agreement" on the accompanying condensed consolidated balance sheets. See Note 3 for fair value measurements.

The Company's obligation to pay tiered royalties under the Ligand Agreement was determined to be a debt instrument based on the likelihood of repaying the amounts provided to fund the development of QTORIN rapamycin and that the Company has significant continuing involvement in the generation of the cash flows potentially due to Ligand.

The Company's obligation to pay tiered royalties under the Ligand Agreement was determined to be a debt instrument based on the likelihood of repaying the amounts provided to fund the development of QTORIN rapamycin and that the Company has significant continuing involvement in the generation of the cash flows potentially due to Ligand. This obligation is reflected as royalty agreement liability which is classified as a long-term liability on the accompanying condensed consolidated balance sheets and was $ 22.1 24.9 million and $ 17.8 million as of June September 30, 2026 and December 31, 2025, respectively. Interest expense with respect to the royalty agreement liability is determined using the effective interest method based upon probability-adjusted cash flow estimates of the Company's potential future royalty payments under the Ligand Agreement, yielding an effective interest rate of 45.1 50.2 % and 44.9 % as of June September 30, 2026 and December 31, 2025, respectively. Changes in these estimates impact the amount of interest expense recognized through the accompanying condensed consolidated statements of operations. In the third quarter of 2026, the Company completed the rolling submission of its NDA seeking approval of QTORIN rapamycin for the treatment of microcystic LMs and increased the corresponding probability of successful commercialization. The Company incurred non-cash interest expense of $ 2.3 2.8 million and $ 1.4 1.5 million for the three months ended June September 30, 2026 and 2025, respectively, and $ 4.3 7.2 million and $ 2.6 4.1 million for the six nine months ended June September 30, 2026 and 2025, respectively, all of which is a component of the royalty agreement liability on the accompanying condensed consolidated balance sheets.

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Research and development expenses

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Research and development expenses

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Upon closing of the Reverse Merger, pursuant to the terms of the Amendment to the Company's Amended and Restated Articles of Incorporation with the Nevada Secretary of State, the Company was authorized to issue up to 200,000,000 shares of common stock, par value $ 0.001 per share ("Common Stock"). As of June September 30, 2026 and December 31, 2025, 14,395,705 14,607,244 and 12,380,933 shares of Common Stock were issued and outstanding, respectively.

The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $ 0.001 per share ("Preferred Stock"). As of December 31, 2025, BVF has fully converted its shares of Preferred Stock to shares of Common Stock and no shares of Preferred Stock were outstanding as of June September 30, 2026.

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The Company has pre-funded warrants outstanding to purchase an aggregate of 1,226,258 and 1,394,761 shares of Common Stock as of June September 30, 2026 and December 31, 2025, . respectively. In July 2026, the Company issued to Integrated Finance Group 168,501 shares of Common Stock upon the exercise of pre-funded warrants. The pre-funded warrants are exercisable at any time for an exercise price of $ 0.001 , except that the pre-funded warrants cannot be exercised by the holders if, after giving effect thereto, the holders would beneficially own more than 9.99 % or 4.99 % of the outstanding Common Stock, depending on the investor and subject to certain exceptions. However, any holder may increase or decrease such percentage to any other percentage (not in excess of 19.99 %) upon at least 61 days' prior notice from the holder to the Company. The holders of the pre-funded warrants will not have the right to vote the shares underlying the pre-funded warrants on any matter except to the extent required by Delaware law. These warrants were classified as equity.

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As of June 30, 2026, 2,794,172 options were outstanding under the 2024 Plan.

On June 10, 2026, the Company stockholders approved Amendment No. 1 to the 2024 Plan, which increased the number of shares reserved for issuance under the 2024 Plan by 750,000 shares. Accordingly, the number of shares reserved for issuance under the 2024 Plan is equal to 4,205,433 shares of Common Stock as of June September 30, 2026.

As of September 30, 2026, 2,901,020 options, 19,418 restricted stock units ("RSUs"), and 6,500 performance stock units ("PSUs") were outstanding under the 2024 Plan.

In connection with the Reverse Merger, all of the options outstanding under the Company's 2019 Equity Incentive Plan (the "2019 Plan") were adjusted with respect to the number of shares and exercise price to reflect the Exchange Ratio. As of June September 30, 2026, 477,811 shares of Common Stock 443,898 options were outstanding under the 2019 Plan and no further grants will be made under the 2019 Plan.

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The following table summarizes stock option activity for the Company's equity incentive plans for the six nine months ended June September 30, 2026:

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Outstanding at June September 30, 2026

Exercisable at June September 30, 2026

The aggregate intrinsic value of options outstanding and options exercisable as of June September 30, 2026 was $ 396.8 391.8 million and $ 155.8 174.2 million , respectively.

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the three and six nine months ended June September 30, 2026 and 2025 is as follows (in thousands):

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As of June September 30, 2026, there was approximately $ 55.2 61.5 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a remaining weighted-average service period of 2.75 2.60 years.

The we ighted average fair value of stock options granted during the six nine months ended June September 30, 2026 was $ 60.61 67.03 per share which was estimated using the Black-Scholes option pricing model with the following weighted ave rage assumptions:

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The Company grants time-based restricted stock unit ("RSU") awards and performance-based restricted stock unit ("PSU") awards to certain employees. RSU awards vest over a four-year period subject to the employee's continued employment or service with the Company through the vesting date. PSU awards have a performance period of one year and vest depending on the Company's achievement of predetermined performance goals. For the three and six nine months ended June September 30, 2026, , the Company recorded $ 0.8 0.5 million and $ 5 thousand 1.3 million of stock compensation expense for PSUs and RSUs, respectively. For the three months ended September 30, 2026, $ 0.5 million and less than $ 0.1 million were included in general and administrative expense and research and development expense, respectively, in the statement of operations. For the nine months ended September 30, 2026, $ 1.3 million and less than $ 0.1 million were included in general and administrative expense and research and development expense, respectively, in the statement of operations.

As of September 30, 2026, there was approximately $ 2.8 million and $ 0.3 million of unrecognized compensation cost related to RSUs and PSUs, respectively, which is expected to be recognized over a remaining weighted-average service period of 3.02 years.

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Outstanding PSU and RSU Grants at June September 30, 2026

(1) Amount includes 3,250 6,500 PSU awards ( 2,293 4,605 shares, net of employee tax withholdings, paid in shares) that vested based on the achievement of performance goals during the performance period ended June September 30, 2026.

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Legal proceedings 3 changes

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The Company is comprised of one reportable segment, the Company operations. As of June September 30, 2026, the Company operations segment has not generated any product revenue since inception, as it does not yet have approved products for sale. However, the Company operations segment anticipates future revenue generation upon the successful development and commercialization of product candidates either independently or through partnerships.

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QTORIN rapamycin for microcystic LM - Government grant income ( 212 484 ( 339 53 ( 484 ( 392

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Subsequent events have been evaluated through August 4, November 5, 2026, which is the date the accompanying condensed consolidated financial statements were issued.

MD&A 59 changes

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• In April 2026, we dosed our first patients in the Phase 2 LOTU trial, a baseline-controlled clinical study of QTORIN rapamycin administered topically once daily for the treatment of clinically significant angiokeratomas. Topline results are expected in the second half of 2027.

• In April 2026, we announced the appointment of John D. Doux, M.D., M.B.A. to the Board of Directors.

• In April 2026, we submitted an application to the FDA for Breakthrough Therapy Designation for our cutaneous venous malformation program. Following the FDA's recent decision in July 2026 to not grant the designation at this time, we are currently planning a resubmission incorporating TOIVA patient interview transcripts and new 24-week data.

• In May 2026, at the 83rd Annual Meeting of the Society for Investigative Dermatology ("SID"), we presented new data from our Phase 2 TOIVA trial of QTORIN rapamycin for the treatment of cutaneous VMs demonstrating 100% of patients with bleeding at baseline demonstrated improvement on the Cutaneous Venous Malformations Investigator Global Assessment Bleeding scale ("cVM-IGA Bleeding") at Week 12.

• In May 2026, additional clinical data from our Phase 3 SELVA and Phase 2 TOIVA studies was presented by James Treat, MD at the International Society for the Study of Vascular Anomalies ("ISSVA") World Congress 2026, which demonstrated that QTORIN rapamycin produced clinical improvements across multiple efficacy measures in patients with microcystic lymphatic malformations and cutaneous VMs.

• In May 2026, a patent that we exclusively licensed from Yale University was granted by the United States Patent and Trademark Office, further supporting the QTORIN pitavastatin program for porokeratosis.

• In May 2026, we completed a pre-NDA meeting with the FDA. The pre-NDA meeting addressed nonclinical, clinical pharmacology, and clinical information for the planned NDA and included an in-person discussion with FDA and receipt of official meeting minutes.

• In June 2026, the FDA granted rolling review of our NDA for QTORIN rapamycin for the treatment of microcystic LMs. Rolling review is an FDA regulatory feature available to programs with Fast Track or Breakthrough Therapy designation and is intended to facilitate expedited FDA review of applications for therapies addressing serious conditions with unmet medical need.

• In June 2026, we submitted the first module of our rolling NDA. We remain on track to submit the remaining modules and complete the NDA submission in the second half of 2026.

• In June 2026, we announced the appointment of Matthew Pauls, J.D., M.B.A. to the Board of Directors.

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 and vascular malformations anomalies for which there are no FDA-approved therapies. We envision a future treatment paradigm in which individuals suffering from serious, rare skin diseases and vascular malformations, anomalies, and the physicians treating those diseases, have significantly improved treatment options which address the underlying causes of those diseases. We intend to leverage our versatile QTORIN platform to minimize the challenges and timelines typically associated with generating novel topical product candidates that penetrate the deep layers of the skin to locally treat a broad spectrum of rare skin diseases and vascular malformations. anomalies. Our lead product candidate, QTORIN 3.9% rapamycin anhydrous gel ("QTORIN rapamycin"), is currently in clinical development for microcystic lymphatic malformations ("microcystic LMs"), cutaneous venous malformations ("cutaneous VMs"), and clinically significant angiokeratomas. 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. We introduced a new QTORIN product candidate, QTORIN pitavastatin, for the treatment of disseminated superficial actinic porokeratosis ("DSAP"), which leverages our proprietary QTORIN platform and is designed to be the first pathogenesis-directed therapy for DSAP.

We announced positive topline results for two 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 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.

• In August 2026, we completed the rolling submission of our NDA seeking approval of QTORIN rapamycin for the treatment of microcystic LMs.

• In September 2026, we announced the appointment of James R. Treat, M.D. as our Chief Medical Officer, effective December 21, 2026.

• In October 2026, we presented three poster presentations at the 26th Annual Fall Clinical Dermatology Conference, which highlighted findings from patient, caregiver and clinician interviews conducted as part of the Phase 3 SELVA study evaluating QTORIN rapamycin in microcystic LMs, systemic exposure data from the SELVA maximal-use pharmacokinetic substudy and a real-world claims analysis estimating the U.S. population diagnosed with DSAP.

• In October 2026, we presented two posters featuring previously reported results from our Phase 3 SELVA and Phase 2 TOIVA clinical studies of QTORIN rapamycin, along with additional new pediatric analyses, at the Pediatric Dermatology Research Alliance ("PeDRA") Annual Conference.

• In October 2026, the FDA accepted for filing and granted Priority Review to the NDA for QTORIN rapamycin for the treatment of microcystic LMs. The FDA assigned a Prescription Drug User Fee Act ("PDUFA") target action date of February 28, 2027. We are preparing for a planned standalone U.S. commercial launch in the first half of 2027, if approved.

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In May 2026, we presented new microcystic LM data from our Phase 3 SELVA study demonstrating that QTORIN rapamycin produced significant improvements across multiple efficacy measures in patients with microcystic LMs, at the 2026 ISSVA World Congress. 100% of participants (13/13) aged 6–11 years were rated as "Much Improved" (+2)

In May 2026, we presented new microcystic LM data from our Phase 3 SELVA study demonstrating that QTORIN rapamycin produced significant improvements across multiple efficacy measures in patients with microcystic LMs, at the ISSVA. 100% of participants (13/13) aged 6–11 years were rated as "Much Improved" (+2) or "Very Much Improved" (+3) on the Microcystic Lymphatic Malformation Investigator Global Assessment (mLM-IGA) scale at Week 24, with a mean improvement of +2.46 (p<0.001). 87% of participants (20/23) in SELVA with moderate or worse leaking/bleeding at baseline were rated as "Much Improved" (+2) or "Very Much Improved" (+3) on the mLM-IGA Leaking/Bleeding at Week 24, with a mean improvement of +2.48 (p<0.001). 100% of SELVA participants who completed the efficacy evaluation period (43/43) were at least somewhat satisfied with QTORIN rapamycin on the TSQM-9 overall satisfaction item at Week 24, with 84% reporting extremely satisfied, very satisfied, or satisfied. A blinded independent review demonstrated pre-treatment stability during the 8-week run-in period, followed by marked improvement on QTORIN rapamycin, supporting SELVA's single-arm, baseline-controlled design.

In October 2026, we presented new microcystic LM data from our Phase 3 SELVA study of QTORIN rapamycin in microcystic LMs at the Fall Clinical Dermatology Conference. In the SELVA maximal-use pharmacokinetic substudy ("PK-MuST"), 24 participants aged 6 years and older were evaluated under maximal intended clinical use conditions. Mean systemic rapamycin exposure ("AUC0–24") was at least 40-fold lower than reported exposure with oral sirolimus, and systemic concentrations remained low and stable over 24 hours. Exposure was consistent across age groups, treated lesion areas, administered doses, and disease severities.

In October 2026, we presented new microcystic LM data from our Phase 3 SELVA study at the 2026 PeDRA Annual Conference. In SELVA, a blinded independent review of standardized photographs showed that QTORIN rapamycin reduced lesion severity on the Microcystic Lymphatic Malformation Multicomponent Static Score ("mLM-MCSS"), a composite of lesion height, leaking/bleeding, and vesicle appearance, in both pediatric age groups (6-11 and 12-17 years) at Week 24. Mean changes from baseline were −5.23 in participants aged 6–11 years (n=13) and −3.96 in participants aged 12–17 years (n=13) (nominal p<0.001 for both).

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We have received Breakthrough Therapy Designation, Fast Track Designation, and Orphan Drug Designation from the FDA for QTORIN rapamycin for the treatment of microcystic LMs. Orphan Drug Designation has also been granted by the European Medicines Agency. In addition, we have been awarded an FDA Products Clinical Trials Grant for up to $2.6 million supporting the SELVA Phase 3 study and have received $1.1 $1.6 million to date, including $0.5 million during September 2026.

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In June 2026, we submitted the first module of our rolling NDA, We remain on track to submit the remaining modules and complete in August 2026, we completed the NDA rolling submission. In October 2026, the second half FDA accepted for filing and granted Priority Review to our NDA. The FDA assigned a PDUFA target action date of 2026. February 28, 2027. We are preparing for a planned standalone U.S. commercial launch of QTORIN rapamycin for the treatment of microcystic lymphatic malformations LMs in the first half of 2027, subject to obtaining FDA approval.

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After completing our Preliminary Breakthrough Therapy Designation Advice meeting with the FDA, we applied to the FDA for Breakthrough Therapy Designation in the second quarter of 2026. Following the FDA's decision in July 2026 to not grant the designation at this time, we are currently planning a resubmission incorporating TOIVA patient interviews and new 24-week data.

In October 2026, we presented a poster featuring previously reported results from our Phase 2 TOIVA clinical study of QTORIN rapamycin at the 2026 PeDRA Annual Conference, highlighting improvements in overall disease severity and reductions in lesion bleeding among pediatric participants with cutaneous VMs.

We are planning for our End-of-Phase 2 meeting with FDA and expect to commence a Phase 3 pivotal study in the fourth quarter of 2026 following completion of the planned End-of-Phase 2 meeting with FDA and receipt of meeting minutes.

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In October 2026, we presented a poster presentation at the 26th Annual Fall Clinical Dermatology Conference, featuring an eight-year analysis of U.S. paid claims data that identified an estimated 154,986 diagnosed DSAP patients in the U.S. from 2018–2025, providing the first real-world, claims-based characterization of the diagnosed DSAP population.

We received written feedback from the FDA in the first quarter of 2026 on the proposed design of a Phase 2 study to evaluate QTORIN pitavastatin for the treatment of DSAP. Trial initiation is anticipated in the second half fourth quarter of 2026.

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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

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 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, the current conflicts in Venezuela and the Middle East (including any escalation or expansion) and increasing tensions between China and Taiwan, 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 2025 Form 10-K.

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Our other (expense) income for the three and six nine months ended June September 30, 2026 and 2025 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; (iii) fair value adjustments related to the CVRs, which met the definition of a derivative; and (iv) interest income, net.

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We had no provision for income taxes for the three and six nine months ended June September 30, 2026 and 2025.

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Comparison of the Three and Six Nine Months Ended June September 30, 2026 and 2025

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Fair value adjustments on derivative liabilities – royalty agreement (114 (118 (230 (193 (37 (1,648 (82 (1,566 (1,878 (275 (1,603

Fair value adjustments on derivative liabilities – contingent value right liability (238 (238

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QTORIN rapamycin for microcystic LM - Government grant income (212 (339 (484 (53 (431 (484 (392 (92

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Research and development expenses for the three months ended June September 30, 2026 were $12.5 $10.8 million, as compared to $5.1 $6.5 million for the three months ended June September 30, 2025. Research and development expenses for the six three months ended June September 30, 2026 were $21.8 $32.6 million, as compared to $9.2 $15.7 million for the three months ended June September 30, 2025. The increase in research and development expenses was primarily due to increased spending on clinical, manufacturing and controls ("CMC") activities, the clinical development of QTORIN rapamycin for the treatment of angiokeratomas, costs associated with the submission completion of the first module submission of our rolling NDA, and costs resulting from increased headcount and consulting services in 2026.

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General and administrative expenses for the three months ended June September 30, 2026 were $8.9 $11.9 million, as compared to $4.1 $3.6 million for the three months ended June September 30, 2025. General and administrative expenses for the six nine months ended June September 30, 2026 were $14.5 $26.4 million, as compared to $7.9 $11.6 million for the six nine months ended June September 30, 2025. The increase in general and administrative expenses was primarily due to increased headcount in 2026, as well as increased professional services related to operating as a publicly-traded company.

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Total other (expense) income, net for the three months ended June September 30, 2026 was $0.5 $1.9 million of expense, as compared to $0.2 $1.2 million of expense for the three months ended June September 30, 2025. Total other (expense) income, net for the six nine months ended June September 30, 2026 was $1.4 $3.3 million of expense, as compared to $0.5 $1.7 million of expense for the six nine months ended June September 30, 2025. The significant components of other (expense) income are more fully described below.

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During the three months ended June September 30, 2026, we recorded interest expense of approximately $2.3 $2.8 million, as compared to approximately $1.4 $1.5 million for the three months ended June September 30, 2025. During the six nine months ended June September 30, 2026, we recorded interest expense of approximately $4.3 $7.2 million, as compared to approximately $2.6 $4.1 million for the six nine months ended June September 30, 2025. Interest expense recorded in all periods related to accretion under the change in fair value effective interest method, including effects of our royalty agreement liability. revised probability-adjusted cash-flow estimates.

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During the three months ended June September 30, 2026, and 2025, we recorded a non-cash loss on derivative liabilities of approximately $1.6 million, as compared to approximately $0.1 million for the three months ended September 30, 2025. During the six nine months ended June September 30, 2026, and 2025, we recorded a non-cash loss on derivative liabilities of approximately $0.2 $1.9 million, as compared to approximately $0.3 million for the nine months ended September 30, 2025. 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.

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During the six nine months ended June September 30, 2026, we recorded non-cash income of approximately $0.2 million related to fair value adjustments related to the CVRs which were issued in 2024 in connection with the Business Combination and determined to be derivative liabilities.

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During the three months ended June September 30, 2026, we recorded interest income, net of $2.0 $2.6 million, as compared to $0.7 $0.6 million for the three months ended June September 30, 2025. During the six nine months ended June September 30, 2026, we recorded interest income, net of $3.0 $5.6 million, as compared to $1.4 $2.1 million for the six nine months ended June September 30, 2025. The increase during each of the three and six nine months ended June September 30, 2026, as compared to the corresponding periods in 2025, was primarily due to increases in the average balances held in interest-bearing cash and money market funds.

As a result of the factors discussed above, our net loss applicable to common stockholders for the three months ended June September 30, 2026 and 2025 was $21.9 $24.6 million and $9.5 $11.3 million, respectively, and our net loss applicable to common stockholders for the six nine months ended June September 30, 2026 and 2025 was $37.6 $62.3 million and $17.7 $29.0 million, respectively.

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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 nine months ended June September 30, 2026, we incurred a net loss of $37.6 $62.3 million and reported net cash used in operating activities of $23.7 $38.1 million. As of June September 30, 2026, we had an accumulated deficit of $173.1 $197.7 million and cash and cash equivalents and short-term investments of $250.6 $236.7 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.

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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"). As of June September 30, 2026, the Company has pre-funded warrants outstanding to purchase an aggregate of 1,394,780 1,226,258 shares of Common Stock.

On June 6, 2024, Legacy Palvella initiated a sequence of convertible notes with certain investors via a Convertible Note Purchase Agreement, pursuant to which the Company issued convertible notes in the aggregate principal amount of approximately $18.4 million (the "Convertible Notes") between June 2024 and December 2024. Simple interest accrued on the outstanding principal amount of the Convertible Notes at an annual rate of SOFR plus 2.0% per annum. Unless earlier converted, the maturity date of the Convertible Notes was the earliest to occur of (i) the date that Legacy Palvella received approval of an NDA by the FDA of QTORIN rapamycin in the United States, or (ii) June 3, 2027. Upon the closing of the PIPE Financing, the entire outstanding principal amount and unpaid accrued interest on the convertible notes automatically converted into an aggregate of 1,179,163 shares of Common Stock and 168,503 pre-funded warrants, with all such pre-funded warrants remaining outstanding converted into Common Stock as of June September 30, 2026.

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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 September 30, 2026, we had approximately $250.6 $236.7 million in cash and cash equivalents and short-term investments. 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 and to build our commercial organization in preparation for the launch of our lead product candidate, QTORIN rapamycin for the treatment of microcystic LM, which is currently under review at the FDA, 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.

Based upon our current operating plan, we believe that our cash and cash equivalents and short-term investments on hand as of June September 30, 2026 will be sufficient to fund our operating expenses for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. To continue to finance our operations beyond that point, we may need to raise additional capital, the success of which cannot be assured. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we currently expect. If we receive regulatory approval for QTORIN rapamycin for the treatment of microcystic LM, cutaneous VMs, clinically significant angiokeratomas, QTORIN pitavastatin for the treatment of disseminated superficial actinic porokeratosis, or any of our future product candidates, we expect to incur significant commercialization expenses related to manufacturing, sales, marketing, and distribution, or from any out-licensing of the product. We are also responsible for up to $5.0 million in milestone payments to Ligand under the Amended Ligand Agreement upon the achievement of certain regulatory milestones by us related to QTORIN rapamycin, which may be triggered prior to the commercialization of any of our product candidates and ability to generate revenue.

To the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences detrimental to the rights of our common stockholders. Any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we has have sufficient funds for our current or future operating plans.

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Six Months Ended June 30,

The following table summarizes our cash flows for the six nine months ended June September 30, 2026 and 2025 (in thousands):

Nine Months Ended September 30,

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Net cash used in operating activities for the six nine months ended June September 30, 2026 and 2025 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 2026, increased costs to operate as a public company, as well as the timing of payments and increase in accounts payable.

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For the six nine months ended June September 30, 2026, net cash used in investing activities was $62.5 $42.9 million, consisting of the purchase and maturities of marketable securities.

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For the six nine months ended June September 30, 2026, net cash provided by financing activities was $216.0 $216.5 million, consisting of proceeds from the issuance of common stock in connection with the equity financing in February 2026, the payment to holders of CVRs in accordance with the CVR Agreement entered into immediately prior to closing of the Merger on December 13, 2024, and proceeds from the exercise of stock options.

For the six nine months ended June September 30, 2025, net cash used in financing activities was $0.9 $0.6 million, consisting primarily of payments of transaction costs incurred in connection with the Business Combination and proceeds from the exercise of stock options.

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During the six nine months ended June September 30, 2026, there were no material changes outside the ordinary course of our business to our contractual obligations and cash requirements, as disclosed in our 2025 Form 10-K.

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During the six nine months ended June September 30, 2026, 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 2025 Form 10-K.

Controls and procedures 12 changes

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Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June September 30, 2026. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of June September 30, 2026, our disclosure controls and procedures were (1) designed to ensure that material information relating to us is made known to our principal executive officer and principal financial officer by others, particularly during the period in which this report was prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

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There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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(c) Consistent with Item 408 of Regulation S-K, the following table reflects Rule 10b5-1 trading arrangements and non-Rule 10b5-1 trading arrangements (as defined in Item 408 of Regulation S-K) entered into by any director or officer (as defined in Rule 16a-1(f) of the Exchange Act) during the quarter ended June September 30, 2026:

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Chief Scientific Officer

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(d) On August 3, 2026, the Board of Directors approved the Change in Control Acceleration Policy (the "Policy"), effective August 3, 2026, to provide for accelerated equity vesting benefits to eligible employees in the event of certain qualifying terminations following a Change in Control (as defined in the Policy), subject to the employee signing a general release of claims. Participants under the Policy include all Vice Presidents and above, including the Company's current named executive officers (the "Eligible Employees").

Under the Policy, in the event of an Eligible Employee's termination (i) by the Company or its successor without Cause or (ii) by the Eligible Employee for Good Reason (as such terms are defined in the Policy) during the period beginning three months prior to the effective date of a Change in Control (as defined in the Policy) and continuing for the 12 months immediately following such Change in Control (the "Change in Control Period"), subject to (i) the Eligible Employee signing a general release of claims (the "Release"), and (ii) the Release becoming effective within 60 days after the date of the Eligible Employee's termination (the "Date of Termination"), all then unvested and outstanding equity awards (collectively, the "Equity Awards"), shall become fully vested; provided that, any awards subject to performance-based vesting shall vest based on target performance unless otherwise explicitly set forth in the applicable award agreement.

If the Release has not become effective as of such Date of Termination, then acceleration of vesting shall be tolled until the earlier of (x) the effective date of the Release, at which point the Equity Awards will be automatically fully vested, or (y) the date upon which the Release can no longer become fully effective, at which time the unvested portion of the Eligible Employee's Equity Awards will be forfeited. The forfeiture of such awards shall be delayed until the earlier of (A) the effective date of the Release or (B) the date that the Release can no longer become fully effective.

The foregoing description of the Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Policy, a copy of which will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ending September 30, 2026.

May 12, October 6, 2027 or such earlier date upon completion of all trades under the plan (or expiration of the orders relating to such trades without execution) or the occurrence of such other termination events as specified in the plan.

Sale of up to 55,000 50,000 shares of Common Stock

Our officers and directors from time to time may adopt trading plans to transact in our securities for reasons such as satisfying vesting-related income tax requirements, investment diversification, or other personal reasons. On June 12, July 13, 2026, George Jenkins, a member of Jeffrey Martini, our Board of Directors, Chief Scientific Officer, entered into a Rule 10b5-1 trading plan that provides for the potential future sale of a limited portion of his Common Stock, as part of Mr. Jenkins Martini's long-term financial planning objectives. The plan was adopted during an open trading window, at a time when Mr. Jenkins Martini was not in possession of material non-public information and was reviewed and approved in accordance with the Company's Insider Trading Policy. The plan establishes fixed criteria for potential transactions and removes discretion over the timing of trades.

Other than as disclosed above, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K) during the quarter ended June September 30, 2026.

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Exhibits 7 changes

Amendment No. 1 to the Palvella Therapeutics, Inc. 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on June 16, 2026).

Form of Notice of Grant of Performance-Based Restricted Stock Unit Award under the Palvella Therapeutics, Inc. 2024 Equity Incentive Plan.

Palvella Therapeutics, Inc., Change in Control Acceleration Policy

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Date: August 4, 2026

Date: November 5, 2026

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Date: August 4, 2026

Date: November 5, 2026

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