ALDX - NASDAQ

Ladies and gentlemen, thank you for standing by and welcome to the Aldeyra Therapeutics Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. I would now like to hand over the conference to the company's Interim Chief Financial Officer, Mr. Bruce Greenberg. Please, go ahead, sir.

Good morning, everyone. With me today is Dr. Todd Brady, our President and Chief Executive Officer. This morning we issued a press release reporting our financial results for the quarter ended September 30, 2022, and recent corporate highlights. A copy of the press release is available on the Investors & Media section of our website at www.aldera.com. 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, but are not limited to, statements regarding submission of potential new drug applications, potential commercialization, the anticipated timing of results from our clinical trials, our projected cash runway, our possible or assumed future results of operations, expenses and financial position and potential growth opportunities. These statements are based on the information available to us today and reflect our current views concerning future events. They are based on assumptions and subject to risks and uncertainties, including the development, clinical and regulatory plans or expectations for Aldeyra's product candidates and systems-based approaches. The risks that result from clinical trials or portions of clinical trials may not accurately predict the results of future trials for the same or different indications and Aldeyra's continuing review and quality control analysis of clinical data. 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 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 our 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 our press release issued this morning and in our filings with the SEC. I will now turn the call over to Dr. Brady.

Thank you, Bruce, and good morning, everyone. Today, I would like to share with you the progress we have made in advancing our lead pre-commercial product candidates, reproxalap, ADX-2191 toward regulatory approval. Individually, these products have the potential to provide us with unique revenue streams, while together, they represent an opportunity to build a formidable ocular franchise, encompassing both large and rare retinal diseases that are significantly underserved by currently available treatments. The success to date in developing reproxalap and ADX-2191 and the commercial potential of both product candidates serve as evidence of Aldeyra's position as a leader in the developments of systems based therapies for diseases characterized by inflammation. Leading off with reproxalap in September, we had a successful pre-NDA meeting with the U.S. Food and Drug Administration gaining alignment on the key aspects of the planned NDA submission. In the fourth quarter of 2022, we plan to submit what we believe will be the most comprehensive regulatory package ever for a dry eye disease drug candidate with results based on five adequate and well-controlled completed clinical trials, we intend to submit the NDA with data for ocular dryness symptom score, ocular redness, Schirmer test, and Schirmer test ≥10 mm responder analysis. The NDA efficacy package is expected to include activity ranging from within minutes of drug administration to up to 12-weeks of treatment, crossover and parallel-group clinical trial designs, and assessment in dry eye chamber challenge and natural environment settings. The NDA package will also include up to 12 months of reproxalap safety data. As a reminder, reproxalap has been studied in more than 2,000 patients with no observed clinically significant safety concerns; with the most commonly reported adverse event being mild and transient instillation site irritation. Complementing our dry eye disease program, we're also advancing reproxalap toward a potential supplemental NDA submission in allergic conjunctivitis. Results from INVIGORATE-2 allergen chamber trial, which could represent our final clinical trial of reproxalap and allergic conjunctivitis are expected in 2023. In October, the previously completed Phase 3 INVIGORATE trial was the subject of the presentation, the American Academy of Ophthalmology 2022 Annual Meeting. Moving to our clinical development programs, targeting diseases in the back of the eye, several planned milestones are approaching for ADX-2191, our pre-commercial product candidate for rare retinal disease. ADX-2191 is the first sterile, non-compounded formulation of methotrexate designed to meet the unique requirements of intravitreal administration. It is intended to be vitreous compatible and optimized for excipient composition viscosity, density, tonicity, pH, active ingredient concentration and volume of administration. Importantly, the volume of administration is less than that of compounded methotrexate, potentially resulting in an improved safety profile. Although compounded methotrexate is injected into the vitreous today, ADX-2191 if approved would represent the first GMP manufactured methotrexate drug product for intravitreal administration. Our ADX-2191 platform is targeting three indications, all of which have received U.S. FDA orphan drug designation. Primary vitreoretinal lymphoma is a rare, aggressive, and fatal cancer that is diagnosed in approximately 300 to 600 patients in the United States per year, Proliferative Vitreoretinopathy or PVR, the site threatening condition and the leading cause of failure of retinal reattachment surgery that affects approximately 4,000 patients in the U.S. per year. And retinitis pigmentosa is a group of rare genetic eye diseases characterized by cell death and loss of vision affecting an estimated 82,000 individuals in the United States and approximately one in 4,000 people worldwide. We've scheduled a pre-NDA meeting with the FDA in the fourth quarter of 2022 to discuss ADX-2191 for the treatment of primary Vitreoretinal Lymphoma. Pending the results of the pre-NDA meeting, NDA submission may occur as soon as the end of 2022. For PVR, this quarter, we announced that ADX-2191 met the primary endpoint in part one of the Phase 3 GUARD Trial. ADX-2191 was statistically superior to historical control for the prevention of retinal attachment due to PVR over six months with a p-value of 0.024. Although not statistically powered for secondary or exploratory endpoints, the results of the GUARD Trial demonstrated numerical superiority of ADX-2191 over routine surgical care and reducing every assessed dichotomous endpoint of ocular disease with an overall p-value of 0.047. The most common adverse event associated with ADX-2191 treatment was punctate keratitis, a well-known side effect of intravitreal methotrexate, that was most commonly mild in severity. Across all other treatment-emergent adverse events occurring in at least 10% of patients in either treatment arm, relative to patients treated with routine surgical care, ADX-2191-treated patients had numerically fewer side effects, with an overall p-value of 0.0002. We plan to discuss the completion of clinical development for PVR and a Type C meeting with the FDA in the first half of 2023. We also expect to announce Phase 2 clinical trial results of ADX-2191 in retinitis pigmentosa in the first half of next year. Eight patients are expected to be enrolled in the trial with half receiving monthly intravitreal injections and the other half for receiving twice monthly intravitreal injections over a period of three months. Turning to ADX-629, our oral RASP modulator platform targeting systemic inflammatory disease, we remain on track to report top line results this year from a Phase 2 clinical trial and acute alcoholic hepatitis. In addition, by year-end, we also plan to initiate Phase 2 clinical trials in Sjogren-Larsson syndrome and minimal change disease. Top line results of the Phase 2 clinical trial and chronic cough are anticipated in the first half of 2023. Now, I'll turn the call over to Bruce for the financial review. Bruce?

Thanks, Todd. Cash, cash equivalents, and marketable securities as of September 30, 2022, were 185.3 million. Based on our current operating plan, we believe that existing cash, cash equivalents, and marketable securities will be sufficient to fund currently projected operating expenses through the end of 2023, including NDA submissions and initial commercialization of both reproxalap and ADX-2191 if approved, and continued early and late stage development of Aldeyra's product candidates in ocular and systemic immune mediated diseases. Net loss for the three months ended September 30, 2022 was 14.6 million or $0.25 per share, compared with a net loss of 15.8 million or $0.27 per share for the comparable period of 2021. Losses have primarily resulted from the cost of clinical trials in research and development programs, as well as from general and administrative expenses. Research and development expenses for the three months ended September 30, 2022 were 11.5 million, compared with 12.9 million for the same period in 2021. The decrease of 1.4 million is primarily related to a decrease in external clinical development costs, offset by increases in our external preclinical development costs, drug product manufacturing expenditures, personnel costs, and consulting expenditures. General and administrative expenses for the three months ended September 30, 2022 were $3.2 million, compared with $2.5 million for the same period in 2021. The increase of $0.7 million was primarily related to higher personnel costs and consulting expenditures. Total operating expenses for the three months ended September 30, 2022 were $14.8 million, compared with total operating expenses of $15.4 million for the same period in 2021. Now, let me turn the call back to Dr. Brady for closing remarks.

Thank you, Bruce. The remainder of 2022 and the beginning of 2023 are shaping up to be an exciting catalyst rich period for Aldeyra, marked by two planned NDA submissions and multiple data readouts. With two late stage candidates in anterior ocular and rare retinal diseases representing potential revenue streams in 2023, and our clinical stage RASP modulator platform and systemic immune mediated diseases, Aldeyra's pipeline represents an innovative opportunity to positively affect patient care in both large and rare diseases. With that, we'll be happy to take your questions. Operator?

Thank you. [Operator Instructions] Our first question today comes from the line of Yigal Nochomovitz from Citi. Please go ahead. Your line is now open.

Hi. This is [Carly] [ph] on for Yigal. Thank you so much for taking our questions. Can you elaborate on what still needs to happen before submitting the reproxalap NDA by the end of the year? Which components of the filing still need to be completed? And we're also curious if at any point you had considered a rolling NDA or was that not really an option with the division of ophthalmology?

Good morning, Carly, and thanks for your question. My answer to what needs to be completed prior to the submission of the reproxalap NDA is a very little. That NDA submission process from our end is well underway. We are reiterating our guidance that NDA will be submitted during this quarter. A rolling NDA is typically reserved for rare and or fatal diseases where lack of therapy is a part of the unmet medical need. I don't think that typically would apply for a dry eye disease. Although I will say the dry eye disease is persistently disturbing, and as a society I think we can do more to address diseases like dry eye disease, which aren't necessarily fatal, but do affect tens of millions of people on a daily basis and are responsible for a significant amount of economic costs as a result.

Okay, got it. That's helpful. And then for the ADX-629 data, in acute alcoholic hepatitis later this year, can you just talk about what you want to see there to establish proof of concept to continue the program? Is this a situation where you, sort of have a clear idea of what is needed or do you need to see the data and then – and sort of make an assessment after seeing it?

Well, we certainly want to see the data before deciding what to do next. A couple of comments about alcoholic hepatitis. This is a disease which really hasn't been addressed pharmacologically by the drug industry. The irony is it affects many millions of people and the unmet need is considerable. There is no drug approved for alcoholic hepatitis. In terms of RASP modulation, the mechanism is particularly appropriate to alcoholic hepatitis. When we consume alcohol, alcohol is metabolized to a RASP, particularly acetaldehyde, which is reactive, immunogenic, toxic, proinflammatory. Our RASP modulator platform, including ADX-629, and theory would reduce acetaldehyde levels and thereby prevent some of the toxicity that we see following chronic exposure to ethanol. In terms of the trial itself, we're assessing both symptoms and signs after acute alcohol exposure. Criteria for advancement typically involve achievement of either a symptom or a sign, so that the drug can be studied in a larger trial. A variety of trial designs are under consideration, but as you point out, Carly, I think we need to see the data to speak with the key opinion leaders in the space. We need to gauge the level of excitement for moving forward given the data, and then make a decision, and we'll update the Street accordingly along those lines.

Okay, great. Thank you for taking our questions.

Pleasure.

Thank you. The next question today comes from the line of Marc Goodman from SVB Securities. Please go ahead. Your line is now open.

Todd, how are you thinking about reproxalap and the commercialization of the product and just the market that it would be entering and how that markets evolved? Over the past year, we've had some new products that have entered over the past couple of years and just your thoughts on what the differentiation and what those products did, what those products didn't do? Thanks.

Marc, that's an excellent question. And as I like to say on these calls, consistent with your experience in the space, something we've been thinking about a lot recently in terms of commercialization of reproxalap and positioning of reproxalap is how the dry eye landscape is changing. On one hand, dry eye remains a tremendous unmet medical need, literally affecting tens of millions of people in the United States alone. We've said for many years and continue to believe that the current therapeutic options for dry disease are inadequate as perceived by both healthcare providers and patients. I think as we look towards 2023, we have a variety of potential new entrants in the dry disease space. We have a novel, oil like product for Meibomian gland dysfunction, where an NDA has been submitted. We have yet another version of cyclosporine where an NDA has been submitted. We have an approach to treat [indiscernible] on the eyelid. We have recently approved a product that's a nasal spray for the treatment of dry disease. Amongst all of those products however, Aldeyra is the only novel drug. And by novel drug, I mean new chemical entity, new target, and most importantly, amongst eye drops, Aldeyra is the only company that has consistently demonstrated activity on an acute basis that is, as I said in my prepared comments, within minutes. So, I think reproxalap is well-positioned. Moving into the market space that I just described, and one of the things you can expect to see from Aldeyra in terms of our commercialization and positioning, its emphasis on that rapid onset, especially as it relates to symptomatic improvement, which correlates not only with symptoms, particularly in our chamber trials, but also the 10 millimeter responder analysis and Schirmer test, another indicator of symptomatic improvement.

Thank you. The next question today comes from the line of Justin Kim from Oppenheimer. Please go ahead. Your line is now open.

Hi, good morning, Todd and team. Thanks for taking the questions and maybe just two from us. When you think about the upcoming pre-NDA meeting for PBR, what sort of are the broad topics and or outcomes that you're looking to cover get agreement on? And then secondly, just as a follow-up to a prior question, I was curious whether the safety study for reproxalap has yet been, sort of met from a requirement standpoint and sort of how that has been [driving] [ph]? Thanks.

Hi, Justin. Good morning. I think typically for pre-NDA meetings, the main objective is to avoid any sort of misunderstandings between the sponsor and the agency in terms of what is required for submission, in particular, efficacy and safety data. Obviously, those questions about the adequacy of the package in terms of efficacy and safety are first and foremost. Other questions often involve what can we submit at the time of the submission versus what can we submit at the 120-day update, which occurs post-submission. And typically, to the FDA broadly across all divisions, we'll accept certain things at the time of the first submission and other things at the time of the 120 update and that's something that we would intend to clarify as we did with the reproxalap pre-NDA meeting. Given that methotrexate is the standard of care in ocular lymphoma, given our discussions with the agency, previously in ocular lymphoma, the material aspects of which we have already disclosed. I don't expect a vigorous discussion on the utility of methotrexate to treat lymphoma rather I think the pre-NDA meeting will be focused on process and structure and to some extent that content. Your second question, the safety trial for reproxalap. Thank you for asking. As I've said before on these calls, investors and analysts often forget that it's not just about efficacy for NDA submissions, it's also about safety and CMC. I think in this case regarding the safety trial, we are very well positioned. The FDA guidance in dry disease very clear as it relates to safety trials. 300 drug treated subjects must complete six weeks of treatment and approximately 100 drug treated subjects must complete 12-months of treatment. Our safety trial is moving along nicely. I think it's safe to assume that the trial is practically complete, otherwise we wouldn't be guiding a submission at this quarter. All-in-all, I think our package is robust. I think it's in excellent shape and I look forward to the submission.

Thanks so much. And looking forward to the update later this year.

Thank you. [Operator Instructions] The next question today comes from the line of Kelly Shi from Jefferies. Please go ahead. Your line is now open.

Hi. This is [indiscernible] on for Kelly. Thanks for taking our questions. I have a question on the new candidates for RASP modulation, can you give us more color on this new candidate? And what are the improvements upon reproxalap and 629? And what are the indications that you will pursue? Thank you.

Hi, [Sean] [ph]. Good morning. Thanks for asking about our systemic platform. I feel like often we get lots of questions about reproxalap and lots of questions about ADX-2191 because those two compounds are the subjects of NDAs that are potential near term revenue generators for our company, but really the core of our development pipeline is RASP modulation as it relates to retinal and systemic disease. As you know, ADX-629, which is vanguard of that effort is involved in clinical trials for alcoholic hepatitis and chronic cough and soon Sjögren-Larsson Syndrome and soon minimal change disease, we hope. Other related molecules that are RASP modulators and we have a [indiscernible] platform of RASP modulators, will be in the clinic that we hope as soon as next year or soon thereafter for the treatment of other autoimmune and inflammatory diseases where RASP are elevated. I think what's so interesting about Aldeyra is that we seem to be the leader in RASP modulation that we are aware no other company is working on modulating RASP. RASP represents a novel pharmacological target. It is one of, if not the only, pharmaceutical target and biotech today that is not a protein. RASP for small molecules, we aim to affect not just one, but many different small molecules that comprise the family of RASP. And RASP are broadly inflammatory and are involved in a large number of diseases. So, this is a true novel platform with novel drugs, novel targets, and really a novel pharmacology that has broad implications for not only a variety of diseases with unmet medical need, but also our understanding of how inflammation occurs and evolves within the body potentially leading to new insights further on down the road.

Thank you very much.

Thanks [Sean] [ph].

Thank you. The next question today comes from the line of Yale Jen from Laidlaw & Co. Please go ahead. Your line is now open.

Good morning and thanks for taking the questions. Just follow-up of the earlier question regarding 629 in acute alcoholic hepatitis, regarding the endpoints and what sort of anticipation you may have on this – for this data release?

Good morning, Yale, and thanks for the question. Well, as I mentioned, we have a variety of endpoints associated with symptoms that is how subjects feel after consuming what I would characterize as a large amount of alcohol, as well as signs. The signs would include objective measures of intoxication and metabolic profiling. I mentioned acetaldehyde, obviously that is one. Cytokines and a variety of tests that can be performed on individuals after alcohol administration. We're familiar with some of them proprioception tests, Romberg test. How many steps can you walk in a straight line, how long can you balance on one foot and so forth. So, I think we'll be able to present the Street with a very interesting collection of endpoints. We'll have to see exactly how the drug performs in an acute setting. Obviously, in the real world, no one wakes up one day and decides to drink a lot of alcohol and never drinks again. I think most individuals that suffer from alcoholic hepatitis have been drinking for many, many years, and how the drug performs in those settings I think would need to be assessed in different types of clinical trials.

Okay, great. That's very helpful. Maybe just one more quick question. I record that [indiscernible] disease that you have way back as a topical drug and show very promising outcomes. And what do you think that impacts on the current 629 development indication, which you're going to start early next year or later this year?

Right. Yale, you've been around long enough to remember our previous clinical development in Sjögren-Larsson Syndrome. For those of you that don't know, many, many years ago reproxalap was developed not only as an eye drop, but also as a dermatologic formulation that we applied in a couple of clinical trials to patients with Sjögren-Larsson Syndrome. Sjögren-Larsson Syndrome is an interesting condition as it relates to RASP because it's an in-born error metabolism, where RASP are not sufficiently metabolized, resulting in high levels of particularly fatty aldehydes. As a result, patients suffer from a severe skin disease called Ichthyosis, which is a fancy way of saying scaly, itchy, inflamed skin. Additionally, the patients suffer from neurological compromise, spasticity, cognitive deficits, and so forth that increases gradually over time. With reproxalap, we saw activity in again, at the same time, we began generating the positive data in dry disease and allergic conjunctivitis and decided to advance reproxalap as a molecule in dry disease and allergic conjunctivitis and then move the treatment of Sjögren-Larsson Syndrome to a systemic treatment. Why a systemic? Well a systemic treatment could in theory affect both the skin and the neurologic compromised characteristic of Sjögren-Larsson Syndrome. As a result, we're thrilled with the potential of ADX-629, which is administered orally. ADX-629 by binding and sequestering the fatty aldehydes could make a difference broadly in Sjögren-Larsson Syndrome patients. This trial will initially assess both skin and neurological outcomes, particularly as they relate to a variety of biomarkers, including the fatty aldehydes and fatty alcohols, and other markers of the Sjögren-Larsson Syndrome neurologically, which have been fairly well-characterized in the past for a variety of reasons, not only the proof-of-concept evidenced by reproxalap, we're excited about ADX-629 the potential in Sjögren-Larsson Syndrome.

Okay, great. Thanks a lot and congrats on the other progress.

Thank you, Yale.

Thank you. The next question today comes from the line of Catherine Novack from Jones Research. Please go ahead. Your line is now open.

Hi. Good morning, Todd. Thanks for taking my questions. Just curious about any further clarity on when in 2023 we expect INVIGORATE 2 data? I understand there's a seasonality component when conducting this trial. And then once you have the data package in hand, what are the steps in terms of when will you be able to file?

Catherine, good morning. You're absolutely right about the seasonality component in allergic conjunctivitis. Allergic conjunctivitis is a very common disease. It probably affects something like one-third of the world. Typically, we think of allergy being caused by histamine, although antihistamines, which we can now buy over the counter don't work in about a third of the patients. So, there's considerable unmet need. That's the good news. The bad news from a clinical trial standpoint is, you can't test an allergic conjunctivitis during pollen season. And the reason for that is, if there's pollen in the air that will confound the pollen where using the allergen chamber. So, allergen chamber trials need to be performed mostly during the winter when there is no pollen, no ambient pollen. So, a hint to the answer to your question is, I did expect that INVIGORATE 2 will be enrolling significantly after the end of this upcoming winter. That is, as we enter spring and summer, our expectation is that enrollment in INVIGORATE 2 would be largely complete, which probably tells you something about the timing of the data for INVIGORATE 2. As I mentioned in my prepared comments, allergic conjunctivitis would be the subject of a supplemental NDA. Supplemental NDAs are filed or submitted after the first NDA is approved, given that we're submitting for dry eye disease in this quarter and a standard FDA review. One could expect a supplemental NDA going in for allergic conjunctivitis towards the end of next year.

Got it. That's very helpful. And then just one final question on 629, curious how you're thinking about prioritizing multiple development programs? And then how will the alcoholic hepatitis data be useful for informing future indications in Sjögren-Larsson or MCD?

Well, alcoholic hepatitis, as I mentioned is interesting because the disease is largely the function of a RASP that we generate when we metabolize alcohol. Activity either symptomatically or in a sign in alcoholic hepatitis would suggest to me at least target engagement, which is important for every condition. We're testing with 629 and soon to be testing with analogs of 629. Your question about program prioritization is also interesting. We have a little bit of embarrassment of riches. RASP, as I mentioned previously are involved in a large number of diseases characterized by inflammation, most diseases are characterized by inflammation to some degree, and so I think we as a biotech need to think carefully about resources and time constraints when we're selecting indications. Our indication selection process from the very beginning has been systematic because RASP modulation is a new approach, a new pharmacology. We're quite keen to establish exactly how these drugs are working? What kinds of inflammatory diseases might optimally respond to RASP inhibition. Our current programs in alcoholic hepatitis and SLS and minimal change disease in chronic cough are an extension of that systematic effort to define our pharmacology and activity. I would expect that we'll read-out the data from said trials. We'll make a decision about how to advance ADX-629 in particular. The good news is, we have backup molecules and analogs and brothers and sisters of ADX-629, it will be able to allocate to other diseases where we think the therapeutic index is sufficient for advancement.

Got it. That's very helpful. Thanks so much for taking my questions.

Thanks, Katherine.

Thank you. The next question today comes from the line of Thomas Shrader, BTIG. Please go ahead. Your line is now open.

Hey, good morning, Todd. This is [Sung Hong] [ph] on for Tom. So, regarding the PBR, could you provide some additional color on which patients will be considered low hanging fruit? And what do you need to broaden its views? And also, is there like a subset of patients that are at a high risk for surgery? Thanks.

Hi, [Sung] [ph]. Good morning. PBR expands a large range of potential patients. In the GUARD Trial, we enrolled two different types of patients. One with recurrent retinal detachments, so-called rhegmatogenous retinal detachments that more or less occur spontaneously the first time. The other group of patients was so-called open globe injury patients. Those patients that suffered trauma to the eye are at high-risk for PBR if there's a retinal detachment associated with that trauma. Within the rhegmatogenous detachment group, risk of PBR increases dramatically, with a number of recurrent detachments. There are other risk factors as well, but in the GUARD Trial, we essentially enrolled [indiscernible] in the rhegmatogenous group where our PBR was present as the data as we presented in GUARD were compelling and the safety data from GUARD were particularly compelling dose safety data will be highlighted not only for PVR but also for the lymphoma NDA submission. I think all-in-all, the market for PBR is exciting. There's no approved drugs. We have orphan designation, we have fast track designation. It will be interesting to see commercially how the drug is used if approved. The drug could be used in a broad array of patients, even patients in theory that have had recurrent retinal attachments without PBR more or less as a preventative. In fact, our orphan designation is for the prevention of PBR. So, I'm eager to see how ADX-2191 if approved is adopted clinically with regard to PBR.

Great. Thanks for the color.

Thank you, [Sung] [ph].

Thank you. There are no additional questions waiting at this time. So, I'd like to pass the conference back over to Todd Brady for any closing remarks.

Thank you for your time this morning and it's always we look forward to keeping you updated on our progress as we continue to endeavor to improve the lives of patients with significant unmet medical need.