ALDX - NASDAQ

Ladies and gentlemen, thank you for standing by, and welcome to the Aldeyra Therapeutics Second Quarter 2020 Financial Results Conference Call. [Operator Instructions]. I would now like to introduce the company's Chief Financial Officer, Mr. Josh Reed -- Mr. Joshua Reed. Thank you. You may begin.

Thank you, and good morning, everyone. On the call with me are Dr. Todd Brady, Aldeyra President and Chief Executive Officer; and David McMullin, our Chief Commercial Officer. Dr. Brady will begin with an overview of our recent highlights and upcoming clinical milestones. I will discuss our second quarter financial results, and then we'll take your questions. Please note that this morning's conference call contains forward-looking statements regarding future events and the future performance of Aldeyra. Forward-looking statements include statements regarding the timing of planned clinical trial initiations, Aldeyra's possible or assumed future results of operations, expenses and financial position, business strategies and plans, research, development and commercial plans or expectations, trends, market sizing, competitive position, industry environment and potential growth opportunities, among other things. These statements are based upon the information available to the company today. As a result of the COVID-19 pandemic, clinical site availability, staffing and patient recruitment have been negatively affected, and the time lines to complete our clinical trials may be delayed. Aldeyra assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from those projected in the company's forward-looking statements, including the current and potential future impact of the COVID-19 pandemic on our business, results of operations and financial position. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company's press release issued this morning containing financial results for the quarter ended June 30, 2020, and the company's filings with the SEC. And with that, I'll turn the call over to Dr. Todd Brady, our President and Chief Executive Officer.

Thank you, Joshua, and good morning, everyone. As our industry and health care first responders continue working together to defeat the worst public health crisis in a century, our thoughts are with those affected by COVID-19. The seemingly relentless spread of the novel coronavirus has made 2020 a tragic and surreal year, but we remain hopeful and confident in the abilities of our industry to develop the therapies necessary to extinguish the virulent disease. I, again, want to especially thank our team for their work and dedication to our mission, developing first-in-class medicines to improve the lives of patients with immunological diseases whose conditions are not being adequately treated by the current standard of care. From our perspective, the key pipeline development in the second quarter was our Type C meeting with the FDA, which charted the remaining clinical pathway to an NDA submission for topical ocular reproxalap in dry eye disease. The meeting culminated in an agreement to use levels of Reactive Aldehyde Species or RASP, the therapeutic target for reproxalap, as an objective sign endpoint for subsequent clinical evaluation. In the fourth quarter of this year, we plan to initiate clinical testing to assess the activity of topical ocular reproxalap in reducing tier levels of RASP and other objective signs of dry eye disease, and we expect preliminary results by the end of the year. The timing of the clinical trial is, of course, subject to finalization of trial design, RASP assay development and potential disruptions due to COVID 19. Initiation of a safety study in dry eye disease patients is also planned for the fourth quarter, and NDA submission is expected by the end of 2021. Our optimism for the use of RASP as an objective sign of dry eye disease is supported by data from our successful Phase IIa trial in which reproxalap treatment diminished levels of RASP tear -- RASP in tears as measured by ELISA following 28 days of treatment. For the upcoming RASP trials, the longest duration of dosing under consideration is also 28 days, whereas the shortest dosing duration is 1 to 2 days. Additionally, the upcoming RASP trials will include a chamber assessment to measure the effect of acute changes in dryness on RASP and other signs and symptoms of dry eye disease. We'll be sharing additional details of the protocol following RASP assay validation and FDA requirement and look forward to providing trial designs shortly. From a safety perspective, topical ocular reproxalap already has been evaluated in more than 1,000 patients with no observed safety concerns. In short, the safety, consistency and clinically significant activity of reproxalap across numerous clinical trials suggest that reproxalap could be an important addition to the limited number of therapeutic options for dry eye disease, which affects more than 30 million patients in the United States. Looking at other ocular programs in our pipeline. Top line results from the Phase III INVIGORATE allergen chamber trial of reproxalap in allergic conjunctivitis are expected in the first half of 2021. In the retinal disease area in the second quarter of this year, the European Commission granted orphan medicinal product designation to ADX-2191 for the treatment of retinal detachment, opening a new market opportunity for ADX-2191 in the European Union as drugs receiving the orphan medicinal product designation are eligible to protocol assistance, research funding and upon approval, 10 years of EU market exclusivity. ADX 2191, our novel and proprietary intravitreal methotrexate injection is being evaluated in the Phase III GUARD trial for proliferative vitreoretinopathy. PVR is a rare but sight-threatening condition and the leading cause of failure of retinal detachment surgery, affecting roughly 4,000 patients per year in the United States and nearly twice as many in Europe and Japan combined. Given the nature of PVR and given the clinical site delays caused by COVID-19, the progress of GUARD has been slow, although we expect to provide you with an update by the end of this year. As many of you know, there is no approved therapy for PVR, and ADX-2191 has received orphan drug and fast track designations from the FDA. ADX-2191 is also the subject of our new clinical program and primary vitreoretinopathy lymphoma or PVRL, a rare, aggressive high-grade cancer that affects approximately 2,900 people in the United States with about 600 new cases diagnosed annually. There are no approved treatments for the disease, although the standard of care is pharmacy-compounded methotrexate that has been injected into the eye. We have recently filed for orphan drug designation for ADX-2191 in PVRL. Turning to our systemic disease programs. We are very excited about ADX-629, which to our knowledge is the first systemically available RASP inhibitor. The clinical testing of which represents the first time systemic RASP inhibition has been assessed clinically, marking an exciting new milestone in the development of this novel mechanism of action. An IND has been filed with the FDA for Phase II clinical testing of ADX-629 in patients with COVID-19 in order to prevent cytokine release syndrome and respiratory compromise. Clinical development is expected to begin this year. In an animal model with cytokine storm, ADX 629 demonstrated a broad and highly statistically significant reduction in cytokine levels, including TNF alpha, interferon gamma and IL-17 while upregulating the key anti-inflammatory cytokine, Il-10. The data suggests that RASP inhibitors have the potential to represent immunological switches, which may modulate immune systems from pro-inflammatory states to anti-inflammatory states. In the fourth quarter of this year, we also expect to initiate clinical trials of ADX-629 in psoriasis, an autoimmune disease; and atopic asthma, an allergic disease. In combination, trials in COVID-19, psoriasis and asthma cover the gamut of inflammation, and the results of the trial will characterize the immune modulating activity of ADX-629 and RASP inhibition more generally. Switching to ADX-1612, our novel HSP90 inhibitor, enrollment has been completed in the investigator-sponsored Phase II EUDARIO trial in ovarian cancer. Regarding the ADX-1612 COVID-19 program, consistent with FDA feedback, additional preclinical antiviral testing of ADX-1612 against SARS-CoV-2, the virus that causes COVID-19, will be performed by the National Institute of Allergy and infectious Diseases, which has accepted our request to evaluate ADX-1612 in in-vivo models. We plan to update on the ADX-1612 COVID program by the end of 2020. We approached the midpoint of the third quarter in a strong financial position, enhancing our flexibility with recent common stock sales to 2 health care-focused funds: Perceptive Advisors and Avidity Partners. These transactions raised gross proceeds of approximately $19.5 million, completing our previously announced at-the-market offering program. We expect our cash runway to be sufficient to fund operations through 2022, including potential reproxalap approvals in dry eye disease and allergic conjunctivitis. Now with that, I'd like to turn the call back over to Josh for the financial review.

Thanks, Todd. For the quarter ended June 30, 2020, we reported a net loss of $7.5 million compared with a net loss of $13.3 million for the quarter ended June 30, 2019. Net loss per share was $0.25 for the quarter ended June 30, 2020 compared with $0.49 for the same period in 2019. Losses have resulted from the cost of clinical trials and research and development programs as well as from general and administrative expenses. Research and development expenses were $4.9 million for the quarter ended June 30, 2020 compared with $10.7 million for the same period in 2019. The decrease of $5.8 million is primarily related to a reduction in clinical and preclinical development, manufacturing and personnel costs. General and administrative expenses were $2.2 million for the quarter ended June 30, 2020 compared with $3.1 million for the same period in 2019. The decrease of $900,000 is due to lower personnel-related costs, including stock-based compensation and other miscellaneous administrative costs. In the second quarter of 2020, total operating expenses were $7.1 million compared with total operating expenses of $13.7 million for the same period in 2019. As of June 30, 2020, cash, cash equivalents and marketable securities were $66.2 million. Subsequent to June 30, 2020, $25.2 million in cash was received from at-the-market offering program sales to Perceptive Advisors, Avidity Partners and other investors. Based on current operating plans, cash, cash equivalents and marketable securities as of June 30, 2020, plus the additional at-the-market offering program proceeds are expected to be sufficient to fund operations through the end of 2022, including potential NDA approvals for reproxalap in dry eye disease and allergic conjunctivitis, assuming positive clinical trial results and planned NDA submissions, acceptances and approvals. Use of cash, cash equivalents and marketable securities are also expected to include the continuation of Part I of the Phase III GUARD trial in PVR and Phase II clinical testing of ADX-629 and orally-administered RASP inhibitor in inflammatory diseases. Now I'll turn the call back to Todd for closing comments.

Thanks, Josh. We have a number of milestones planned for the second half of 2020 and look forward to executing on our clinical development strategy across our ocular and systemic programs. Looking at our IR calendar. Next week, we'll be presenting at the BTIG Virtual Biotechnology Conference and Wedbush PacGrow Virtual Healthcare Conference. These events will be webcast. Please check the Events and Presentations section of our website for details. We always look forward to meeting with investors and hope to connect with you at these or other upcoming events. As always, we remain committed to executing efficiently on our strategic plan and bringing to market novel therapies that improve the lives of patients with serious unmet medical needs. With that, Josh, Dave and I will be happy to take your questions. Operator?

[Operator Instructions]. First question comes from the line of Louise Chen with Cantor.

So first question I have for you is, could you get into more detail on significant the FDA's recognition of RASP as a sign for dry eye disease is and what that means for you in terms of potential approval and market opportunity? And then the second question I had for you was on your COVID trials. How adaptive are those trials in light of the constantly evolving landscape for the treatment of COVID? And then how has enrollment gone? And then my last question here is you noted that there's been some headwinds to clinical trial progression due to COVID. Can you give more color on which trials may be impacted here?

Louise, thanks for your excellent questions. The RASP development is truly transformative for Aldeyra. RASP is the pharmaceutical target upon which the company was founded many years ago. To our knowledge, no company has ever therapeutically addressed RASP. And yet, RASP represents a very broad-based anti-inflammatory approach that probably applies to many, many diseases, not only ocular diseases such as dry eye disease, but also systemic diseases. So for all those reasons, we were thrilled about the FDA's decision to classify RASP as an objective sign of dry eye disease, which, as you know, is an inflammatory condition. What it means practically for the company is that the ongoing clinical trials that are about to start regarding the assessment of RASP should be likely to work based on the fact that the mechanism of reproxalap and our other RASP inhibitors is the direct inhibition of RASP. These compounds bind covalently to RASP. So what we're really measuring is a chemical reaction in vivo. And in this case, in the tear fluid of patients that have been administered reproxalap. And all that leads us to believe that we'll be in a position to file an NDA for dry eye disease next year as we have previously announced. Regarding the COVID trial designs, we anticipate for both programs enrolling approximately 30 patients. I think there'll likely be a 2:1 randomization drug to placebo. At this point, we have not included adaptive designs. I think the nature of the results of these first trials will help us determine subsequent clinical testing, which is obviously going to be much more significant if there are positive results from the preliminary outputs that we have here. Enrollment hasn't started. The IND has been filed for 629, as I mentioned on the call today, 1612 is the subject of further in-vivo investigation in COVID that is being performed by NIAID, and we're absolutely thrilled about NIAID's decision to test ADX-1612 on our behalf. The COVID impact, as you mentioned, Louise, across the industry has been significant. The one trial, in our case, in our pipeline that has been affected by COVID-19 is the Guard trial, the Phase III GUARD trial for PVR. What seemed to have happened during the peak of COVID cases back in March, April, May and so forth was that many patients simply were not coming into the hospital despite vision changes, despite losing sight. The number of patients coming in was diminished during that time frame. And furthermore, many clinical sites, as you know, simply did not have research staff, which were considered for a while to be non-essential. Such that it was difficult, if not impossible, in some cases, to enroll patients. However, the good news is, regarding the rest of the pipeline, we do not seem to be been overtly affected by COVID in terms of enrollment. The dry eye program was largely under discussion with the FDA during the peak number of cases in the spring. The allergy program, the Phase III allergy program was on a planned hold because of pollen. As you know, you cannot enroll allergy programs with Amb and pollen, and we expect the INVIGORATE program to reinitiate again in the fall. So we were quite fortunate in terms of timing with regard to our other clinical programs relative to the impact of COVID.

[Operator Instructions]. Your next question comes from the line of Justin Kim with Oppenheimer & Co.

Congrats on the progress. I know it's early days, but as you think about establishing reproxalap action on RASP as a sign of dry eye, we've had some discussion with investors on what would be an appropriate duration of observation to assess this activity. Can you just talk a little bit about the rationale behind the acute versus 4-week time points from a trial perspective, disease perspective and labeling perspective?

As I highlighted in my comments this morning, the potential range of dosing duration for the RASP trials is anywhere from 1 to 2 days on the acute end to 28 days on the more chronic or subchronic end, which reflects the Phase IIa trial. That is the data in our corporate deck showing that after 28 days of administration of reproxalap, there was a highly statistically significant reduction in RASP levels as measured by ELISA. I want to spend a few seconds talking about the 2 different ways to measure RASP. RASP exists in our body in two forms, so-called free RASP that RASP that are sort of floating around and then RASP that are bound to proteins. The ELISA measures RASP bound to proteins. And as you know, ELISA is an antibody-mediated detection assay. The reason why we're able to generate antibodies to bound RASP is that when RASP bind to proteins, they're antigenic and form antibodies, in some cases, antibodies against self-protein. So the ELISA measures bound RASP, and bound RASP generally accumulate over time, which is why in the Phase IIa study over 28 days, we use the ELISA to assess RASP levels. On the other end of the spectrum, regarding 1 to 2 day or acute dosing of reproxalap, we think that techniques such as LCMS, mass spec might be more relevant to assessing RASP because there, we'd be looking at free RASP levels that would change acutely following dosing. So somewhere within those 2 ranges of dosing paradigms and those 2 different assay techniques, we will end up validating the precise technique and then establishing protocol design for the first of the RASP studies to begin shortly.

Okay. Great. Got it. And maybe then, how do you think about dosing regimens to be investigated? And have you had conversations with the FDA on whether you'd have to do sort of QID or BID just to appreciate that you would be tapering in sort of the disease state eventually?

Right. And that gets back to the first part of your question, how might the clinical community perceive duration of dosing and dosing regimens? First of all, I think that signs of diseases, including dry eye disease, are primarily, or first and foremost, regulatory milestones. I do not believe it's certainly in the case of dry eye disease that either physicians or patients are particularly worried about signs. Patients do not wake up in the morning thinking, I wonder what my Schirmer's test is. I wonder what my corneal stain is and so forth. Instead, we view signs, and I think most patients and physicians use signs as regulatory milestones. So the dosing paradigm for trials associated purely with signs, I think, is a lot less important. In this case, for 1 to 2 dose -- day -- the 1 to 2 day dosing paradigm, you're thinking of a limited number of doses. For the 28-day dosing paradigm, I would expect we would dose QID, which is the first phase of our induction maintenance dosing paradigm, which was established with the release of the Phase III RENEW trial back in December. In terms of how physicians look at the dosing paradigm for reproxalap in general and in terms of treating patients, I think that the induction maintenance paradigm established with RENEW over 12 weeks really sets the tone and more precisely the label for how the drug will be used, and that is a QID dosing initially, followed by BID dosing for the maintenance space.

Okay. That's really helpful. Maybe just a clarification question. I know in the press release, it says that there's going to be a dry eye NDA filing by the end of next year. Is the current thinking still to continue onward with the concurrent filing? Just -- I know later, it says that it is also going to be paused. Just wondering if the expectation is that you would expect them together still.

Our current thinking is that both will be filed together, pending positive clinical data, of course. It turns out that the time lines for dry eye disease and allergic conjunctivitis continue to overlap. The safety studies, the efficacy studies, the time line for filing the NDA, all of those seem to overlap for dry eye and allergic conjunctivitis at this point. Would suggest that a concurrent NDA is perhaps the best regulatory strategy. But of course, we'll have to see how events play out over the latter part of this year and the early part of next year before we can guide specifically on the possibility of a concurrent NDA. We really do like the concurrent NDA paradigm, however, because of the overlap between dry eye disease and allergic conjunctivitis. There seems to be about a 50% overlap, such that about half of the patients with dry eye disease complain of ocular itching, and about half the patients with allergic conjunctivitis complain of dryness. And a single compound that could treat both diseases or as indicated for both diseases would be highly advantageous, not only to physicians, but also to patients as well.

Right. Great. That makes a lot of sense. My last question is just on the safety study, is there an expectation for what the size and scope, duration as well as number of patients you would anticipate for it?

Right. For dry eye disease, my current understanding is that the FDA generally requires 100 patients complete 1 year of dosing. However, based on other sponsors' interactions with the agency, we believe that we can file based on 6 months of safety data. So what happens is most sponsors will over-enroll. They'll begin with more than 100 patients such that they have 100 completers at 12 months. And to our knowledge, the safety trials are fairly standard in dry eye disease. I will say, as I mentioned in my prepared comments, that we've tested well over 1,000 patients. We have seen no safety signals, no changes in intraocular pressure, no retinal findings, no aberrant corneal findings or any other safety signals that would suggest that there has been an issue with reproxalap dosing in any patient that's received drug so far.

And there are no further questions at this time. I will turn the call back over to Dr. Brady for closing remarks.

Well, thank you all again for joining us today. As always, we look forward to keeping you updated on our progress. Have a nice day. Thank you.