Stephen Tulipano - CFO Todd Brady - President and CEO.

Ritu Baral - Cowen and Company Adam Walsh - Stifel Yale Jen - Laidlaw.

Good day and welcome to the Aldeyra Therapeutics Third Quarter 2016 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to the Company's CFO Stephen Tulipano. Please go ahead sir..

Good morning, everyone. I’m Steve Tulipano, CFO of Aldeyra Therapeutics and welcome to the Aldeyra Therapeutics conference call to discuss the third quarter 2016 financial results. With me today is Dr. Todd Brady, President and Chief Executive Officer of Aldeyra Therapeutics.

Before we get started, we would like to remind you that this conference call contains forward-looking statements regarding future events and the future performance of Aldeyra.

Forward-looking statements include statements regarding Aldeyra's possible or assumed future results of operations and expenses, business strategies and plans, research and development 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 and Aldeyra assumes no obligation to update these statements with circumstances change. Future events and actual results could differ materially from those projected in the company's forward looking statements.

Additional information concerning factors that cause results to differ materially from our forward-looking statements are described in greater detail in the company's press release and the company's filings with the SEC. Now I would like to turn the call over to Dr. Todd Brady, President and Chief Executive Officer of Aldeyra..

Thank you Steve, and thank you all for joining us today to discuss Aldeyra’s third quarter 2016 financial results. As Steve mentioned, this morning we issued a press release summarizing our financial results. And in addition, later today we expect to file a 10-Q with the Securities and Exchange Commission.

I encourage you to review these documents which contain important information that is material to our company. 2016 has been a momentous year for Aldeyra, having announced three positive controlled phase II clinical trials that validate the role of aldehyde in human disease.

And thus our novel aldehyde traps continue to represent a potential new therapeutic approach for the treatment of inflammation and inborn errors of aldehyde metabolism. Based on the encouraging results of these clinical trials this year, we have announced that we intend to initiate four new clinical trials, two of which are phase III trials in 2017.

In the first half of 2017, we expect to initiate the first ever vehicle controlled phase III clinical trial in noninfectious anterior uveitis as well as a phase IIB clinical trial in allergic conjunctivitis and a phase IIa clinical trial in dry eyes syndrome.

In the second half of 2017, we expect to initiate the first ever phase III clinical trial in Sjögren-Larsson Syndrome or SLS. The phase III trial in SLS will be designed and performed based on United States Food and Drug Administration feedback which we expect in the first quarter of 2017.

We also expect to solicit SLS pivotal trial feedback from European regulatory authorities. For our oral programs in SLS and succinic semialdehyde dehydrogenase deficiency or SSADH deficiency. We expect to initiate clinical testing in late 2017 or 2018.

I want to note that in addition to advancing our lead product candidate ADX-102 into late-stage clinical trial, we have made substantial progress in the development of novel aldehyde traps that represent different chemical structures and are covered by different composition of matter intellectual property.

Thus for our clinical programs in dry eye syndrome and our oral programs in SLS and SSADH efficiency, we may advance ADX-102 or a novel aldehyde trap depending on a variety of factors including completion of pre-clinical testing.

With the addition of a number of clinical trial and new therapeutic indications and the potential advancement of new molecules, we intend to continue to build a robust product pipeline at Aldeyra. And in so doing, we continue to seek to address unmet medical need and create value for our shareholders.

With that I'd like to turn the call back over to Steve to discuss our financial results for this quarter.

Steve?.

Thank you, Todd. R&D expenses were approximately 3.4 million compared to 2.1 million for the three months ended September 30, 2016 and 2015 respectively. The increase of 1.3 million is related to the increase in our R&D efforts including manufacturing and pre-clinical efforts and an increase in personnel cost associated with an increase in headcount.

G&A costs were 1.4 million compared to 1.3 million for three months ended September 30, 2016 and 2015, respectively, the increase related to an increase in personnel costs due to increased headcounts and increased legal costs.

Our net loss for the period was $4.8 million or $0.38 per share compared to $3.4 million or $0.35 per share for the three months ended September 30, 2016 and 2015 respectively. R&D expenses were approximately 9.7 million for the nine months ended September 30, 2016 and that compares to 4.5 million for the same period in 2015.

The increase of 5.2 million is related to the increase in our external research and development expenditures, including manufacturing and pre-clinical activities, increases in personnel and clinical development costs.

G&A expenses were approximately 4.3 million for the nine months ended September 30, 2016 compared to 3.2 million for the same period of 2015. The increase related to an increase in legal and professional service costs and personnel costs.

Our net loss for the nine month period of 2016 was $14 million or $1.28 per share compared to $7.7 million or $0.94 per share in 2015. At September 30, 2016, we have stockholders equity of 25.7 million, cash, cash equivalents and marketable securities of 28.9 million.

Based on our current business plan, we believe that our cash, cash equivalents and marketable securities as of September 30, 2016 will be adequate to fund operations through the second quarter of 2018. That concludes our remarks today, thank you so much for your participation. Operator, if you won’t mind let’s open the call for questions..

[Operator Instructions] And we’ll go first to Ritu Baral with Cowen and Company..

Todd, can you take us through your current thoughts right now on the trial design for NIAU [ph] the pivotal and the orphan disorders as well.

I guess where I'm going with this is will you be - what are you thinking right now and will you be seeking scientific advice meetings from EU to harmonize the requirements so that one trial in these I guess relatively small or orphan patient populations could serve as registrational in both geographies?.

The harmonization between the United States and the EU is in our view, particularly important regarding the orphan metabolic diseases and in this case SLS.

The notion of performing a single study or two closely related pivotal studies such that the results that could allow for approval in the United States and the EU is absolutely something worth thinking about.

Which is why I mentioned on the call that the pivotal study in SLS will be performed in accordance with the FDA and possibly EU feedback depending on the timing of that feedback. Either way, the intent is to build in flexibility such that one trial or a couple of very closely related trials could allow for approval across the US and EU.

So I think that's a very good pot for two. For uveitis, we’re focusing on the United States initially.

And because this is the first vehicle controlled phase III in anterior uveitis that we're aware of, we want to make sure our doctor in a row in terms of the trial design and harmonizing domestically at least initially for this study and then pending the results of the phase III study in the US for uveitis will then approach the European regulators..

What are your current thoughts on the uveitis trial size and powering?.

It’s difficult to power the study because the vehicle control data are relatively sparse. But we have we think a fairly good ideas about how the vehicle arm will perform. And of course theoretically vehicle treated patients while they may occasionally get better should get better at a rate that is much slower than patients treated with an active drug.

So, we've done our best based on the available literature which is decades old by the way in vehicle treated patients in uveitis studies to power this study. I believe that the study will be larger obviously than the one we performed for the phase II.

But I also don't think it needs to be tremendously large, I don't think you'll see us breaking any records in terms of trial sizes in anterior uveitis. So I think it's a very feasible study and obviously because its vehicle controlled, we're quite optimistic about the results..

We will go next to Adam Walsh with Stifel..

Thanks for taking my question. First of all, as you look towards the larger indications for instance, dry eye and allergic conjunctivitis, can you remind us of how you're thinking about that development path in terms of potential partnerships down the road for potentially a large development program. And then I have a follow-up..

Yes. Thanks, Adam. That’s a great question and one we intend to shed more light on as more data come out and we continue to advance the molecules. The first thing I’d say Adam is that as we mentioned on the call, dry eye -- the dry eye program may feature ADX-102.

It may also feature a novel aldehyde trap, which as you know, has pricing implications for -- partnering implications for both of those molecules that could be somewhat differential.

I think in terms of do it alone versus partnering strategy in the ocular inflammation space, it first depends on the clinical data that’s coming about next year and in 2018. I think it also depends on the commercial feasibility of marketing to the anterior segment ocular inflammation experts.

We believe that there is some optionality now in the space that it is possible for even a small company to hire a reasonably sized sales force to market especially pharmaceutical that can compete with ocular steroids, but I think again some of this remains to be seen as we announce data and continue our pre-commercial planning efforts.

Overseas, Adam, I would expect to see partnerships..

Terrific.

And just a quick follow-up here, with the recent introduction of Xiidra in the dry eye space, as we think about your molecule going into that indication, what are the theoretical advantages that you think an aldehyde trap would have over what’s out there?.

Well, one obvious one is that aldehydes represent novel targets. There aren't any other drugs that we're aware of that target aldehydes.

Dry eye syndrome probably like most other forms of ocular inflammation, it has a multi-factorial ideology, meaning that there are lots of different causes of dry eye and what that tends to mean is that using multiple drugs to treat patients may be better than using a single drug with a single mechanism of action.

So I think one huge advantage that ADX-102 or another analog of ADX-102 may have is that the mechanism is different from the available therapies, either restasis or Xiidra. And I think there's always room in any inflammatory disease for different mechanisms and novel drugs to help treat disease.

I think the other potential advantage mechanistically is that a huge component of dry eye is the degradation of fats or lipids in the tears. We need fats, we need lipids in our tears to help lubricate the eye. I always give people the analogy of putting water on chapped lips.

If you don't have any fat or a lipid in your chapped lip therapy, it's just not going to work and the same happens with dry eye. The challenge is that a lot of these fats and lips are degraded by aldehydes.

So in an aldehyde trap, while being anti-inflammatory has the second advantage of protecting the fats in your tears and allowing for more effective ocular surface lubrication. And so I think ADX-102 or an analog may represent one of the first as we say dual-acting agents in the dry eye space..

[Operator Instructions] And we’ll go next to Yale Jen with Laidlaw..

Hey, good morning and thanks for taking the questions, Todd and Steve. Just one follow-up a little bit on the earlier question that in terms of, you make it new trap instead of 102 for some of the indications if those are appropriate.

Could you provide more in terms of what kind of metrics for you to determine which one to take and maybe a little bit color on that?.

Thanks, Yale and thanks for highlighting that. We're quite excited by this. I think it really marks the transition in theory from having a single lead product to advancing multiple products into the clinic, which could happen as soon as next year.

The assessment and evaluation and advancement of novel aldehyde traps, it depends on a variety of factors and I think Yale, they're all fairly standard in the drug development field. So the IP has to be novel and protectable. The aldehyde trapping capacity of the molecule has to be sufficiently high.

We need certain pharmacokinetic parameters, including metabolism and toxicity studies and so forth. There are certain traps that are particularly suited for ocular applications and especially in diseases like dry eye where we're intending to protect the lipid compartment of tears.

You want traps that are possibly lipid soluble or traps that can integrate within tears and the tear lipid effectively. We want traps that are efficacious in a broad variety of non-clinical models of inflammation. So I think that we have fairly specific criteria for advancing these traps and of course it's all very data driven.

I think the good news is that the company has been able to generate a whole family of these novel traps and now we have, I think, the high class problem at choosing which to advance..

Okay, great. That's very helpful. And maybe another follow-up question here, which is for the systemic aldehyde trap element, which is critical, especially from the SSADH development, what is -- could you share some updates on what’s the current status and how would that also potentially apply to the SLS in your logical side and thanks..

Thank you, Yale. The advancement of the oral program is important to our company and it's also important to the patients that suffer from SLS and SSADH deficiency.

As you know, both SLS SSADH deficiency have neurological components to the disease and of course it would be advantageous to have a systemically administered drug and one that could be administered on a chronic basis. All this leaves us to support our oral program.

We are very serious obviously about advancing to the clinic orally and as I mentioned on the call, now have two different options. One is ADX-102 and the other we believe is an analog or a novel trap for advancement. The formulation is the first step and following that is pre-IND enabling toxicology. Obviously, we know a great deal about ADX-102.

I believe that we're learning a great deal about other aldehyde trap approaches and either way, we're comfortable with the guidance we've given, which is that we'll enter the clinic with an oral program for these diseases in late 2017 or 2018..

Maybe just a quick follow-up on that, I mean, initially I thought that the systemic delivered drug was intravenous and certainly oral drug to be certainly better ones and so when you guys have decided to pursue the oral route and what specifics, maybe technology or other formulations are enabling you guys to having this more potentially more popular means of administrating the drug for aldehyde traps?.

Yes. So the chronic administration of any drug is difficult to accomplish intravenously. And initially, we weren't certain that we would be able to formulate an aldehyde trap that would be orally bioavailable in a way that would be sufficient to trap the aldehyde to affect the disease.

I think fortunately we have moved beyond that and now feel much more comfortable about an oral program, which is really the Holy Grail to treat the systemic components of SLS and SSADH deficiency. So we view this as very positive signs that for chronic therapy, we believe we’ll be able to develop an orally administered drug. .

And at this time, there are no further questions. This does conclude today's conference. We thank you for your participation..