Good morning and welcome to Aldeyra Therapeutics Fourth Quarter and Full Year 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded.

I’d now like to turn the call over to Joshua Reed. Please go ahead..

Good morning, everyone. I am Joshua Reed, Chief Financial Officer of Aldeyra Therapeutics. And welcome to the Aldeyra Therapeutics conference call for year end 2018 financial results. With me today is Dr. Todd Brady, Chief Executive Officer of Aldeyra Therapeutics.

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, 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, and 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.

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 earlier this morning containing financial results for the year ended December 31, 2018 and the company filings with the SEC.

Now, I would like to turn the call over to Dr. Todd Brady, President and Chief Executive Officer of Aldeyra. Dr.

Brady?.

Thank you, Joshua, and thank you all for joining us today. As Joshua mentioned, this morning we issued a press release on our financial results and recent corporate highlights. As always, we encourage you to review the press release as it contains information that is important to consider in conjunction with today’s call.

Over the past few years, we have purposefully expanded our pipeline in support of our corporate strategic initiatives and our mission to invent, develop and commercialize next generation medicines to treat immune-mediated disease.

As we speak this morning, our pipeline consists of six different compounds in development representing three unique mechanisms of action, targeting 10 potential clinical indications. We focused on ocular disease in select systemic conditions. We now have five Phase 3 programs in progress or expected to be initiated this year.

With the advancement of our pipeline and with a number of important late stage programs, Aldeyra is rapidly evolving. And we entered 2019 with a number of important late stage milestones as we began to transition to a commercial stage company. 2018 was a remarkable year for Aldeyra, culminating in positive Phase 2b clinical results in dry eye disease.

The Phase 2b dry eye disease results suggested that our lead product candidate reproxalap has the potential to improve dry eye disease symptoms faster and more broadly than standard-of-care.

And market in dry eye disease is one of the largest in ophthalmology and current drugs used for the treatment of dry eye disease are generally regarded by patients and physicians as inadequate.

We've recently announced that in conjunction with regulatory authorities, we've established a co-primary endpoint for our planned Phase 3 dry eye disease clinical trial, which are ocular dryness symptom score and fluorescein nasal region staining.

And in to our Phase 2b clinical trial, those endpoints were achieved with P values of 0.0048 and 0.0007 respectively. Earlier this year, we were pleased to announce the closing of the acquisition of Helio Vision, a company based on the technology of Dr. Dean Eliott of Harvard's Massa Eye and Ear Infirmary.

The acquisition adds another Phase 3 ready product candidate ADX-2191 to Aldeyra's late stage pipeline. ADX-2191 is being developed for the prevention of proliferative vitreoretinopathy or PVR, a rare but potentially blinding retinal disease with no therapeutic options. ADX-2191 has received orphan drug designation from the FDA.

We look forward to initiating Phase 3 development in PVR in the second half of this year. Our first Phase 3 clinical trial to conclude is the ALLEVIATE trial in allergic conjunctivitis. We remain on track to announce results from ALLEVIATE in early 2019.

The primary endpoint in ALLEVIATE will be met if drug is statistically lower than vehicle, an area under the ocular itch score curve from 10 to 60 minutes post allergen-challenge.

For the 0.5% concentration of reproxalap in the Phase 2b clinical trial which enrolled approximately one-third, the number of patients enrolled in the Phase 3 trial, the P value for this endpoint was 0.004.

As we mentioned at our Research and Development Day last week in the second half of this year we expect to announce Phase 3 results from the SOLACE trial noninfectious anterior uveitis and Part 1 of the RESET trial in Sjögren-Larsson Syndrome.

We look forward to updating you throughout this catalyst build year as we continue to expand on our mission of providing novel therapeutic options for patients with unmet medical need. And with that I’d like to turn call back over to Joshua to review the year end 2018 financial results.

Joshua?.

Thank you, Todd. For the year ended December 31, 2018, we reported a net loss of approximately $38.9 million compared to a net loss of approximately $22.3 million for the year ended December 31, 2017. Basic and diluted net loss per share was $1.79 for the year ended December 31, 2018 compared to $1.40 per share for the same period last year.

Losses have resulted from the cost of our clinical trials, research and development programs, as well as from our general and administrative expenses. R&D expenses were at $29.8 million for the year ended December 31, 2018 compared to $16.3 million for the same period in 2017.

The increase of $13.5 million is primarily related to the increase in research and development expenditures including manufacturing, preclinical and clinical development cost and an increase in personnel costs.

General and administrative expenses were $9.9 million for the year ended December 31, 2018 compared to $6.2 million for the year ended December 31, 2017. The increase of $3.7 million is primarily related to an increase in legal and patent-related costs, consulting costs and personnel costs.

In 2018, total operating expenses were approximately $39.7 million compared to $22.5 million in the prior year. Cash, cash equivalents and marketable securities were $93.6 million as of December 31, 2018 which includes $67.6 million in net proceeds raised in our underwritten public offering of common stock that closed in October of 2018.

Based on our current operating plan, we expect our cash, cash equivalents and marketable securities to fund currently anticipated operating expenses through 2020. This concludes my comments on our year ended 2018 financial results. Now I would like to turn the call back to Todd for summary comments. .

Thanks, Joshua. Before we open the call for questions, I would like to quickly recap our upcoming milestones for 2019. In allergic conjunctivitis, we expect results from the ALLEVIATE Phase 3 clinical trial in early 2019. In dry eye disease we expect to begin enrolling the RENEW Phase 3 clinical trial in the first half of 2019.

In noninfectious anterior uveitis, we expect to report results from the SOLACE Phase 3 clinical trial in the second half of 2019. In Sjögren-Larsson Syndrome we expect to have results from Part I of the RESET Phase 3 clinical trial in the second half of 2019.

We expect to begin an adaptive Phase 3 clinical trial of ADX-2191 in proliferative vitreoretinopathy in the second half of 2019. And lastly, we expect to initiate clinical testing of ADX-629 and ADX-1612 in immune-mediated disease this year. This concludes our prepared remarks for today. Operator, please open the call for questions. .

[Operator Instructions]. And the first question comes from Yigal Nochomovitz with Citigroup..

Hi guys, how are you? Thanks for taking the question. So in AC and DED, obviously there's a lot of symptom overlap.

But in the in the AC trial, you're looking at P doses 0.5% in addition to the 0.25% in the DED study, obviously you're just looking at 0.25%, to get -- so I'm just trying to get a better sense as to the strategy there and wondering what the harm and also looking at 0.5 in DED trial that would potentially just maximize your flexibility on the future product profile and keep everything parallel? Thank you..

Thanks for the question, Yigal. Good morning. Great questions around concentrations of reproxalap and they very much relate to commercial strategy. 0.25% as you point out Yigal is the concentration that is moving forward in dry disease.

There's potential to use reproxalap in both dry disease and allergic conjunctivitis and we would at least like to maintain the option of using the same concentration in both diseases. This is why in the ALLEVIATE trial and allergic conjunctivitis 0.5% and 0.25% were tested.

Generally I am a big fan of additional dose ranging in the first Phase 3 trial because I think it gives you more information about the safe and effective dose that's the lowest dose in the commercial markets. I also think that the 0.25% works in ALLEVIATE, there is as I said the optionality of using the same concentration across both diseases.

So that's generally how we were thinking about it. In dry eye disease we've completed dose ranging, and the most tolerable and most effective dose that we've identified is 0.25% and that is what we'll advance to the RENEW Phase 3 trial that should begin in the first half of this year..

Okay, thank you.

I guess, what is your -- or do you have a base case for whether you're going to have one SKU one product across the AC and DED or is the base case they're going to be different brands or is it just you don't know yet until you see data?.

I think that's to be determined, and as you correctly point out, will be dependent on data. There is commercial precinct for either of those scenarios. In allergic conjunctivitis there is a at least one steroid that is a high dose and for allergic conjunctivitis a low dose.

The other commercial precinct for the same concentration being used across multiple contributes. But I would prefer to see how the clinical data shake out and then we can update you on those scenarios. I can tell you now that a business case can be made for either direction..

And just one other one, not sure how much you said about this, but since you’re looking at the two doses in AC, how are you handling that from a stat plan perspective?.

We have a predefined sequence hierarchy, so that 0.5% will be analyzed first and then subsequently 0.25% and I think that’s fairly standard across the industry we face, to avoid alpha spend. .

Thank you. And then next question comes from Adam Walsh with Stifel. .

Hey, guys. Good morning. Thanks for taking my questions. Todd on the ALLEVIATE trial, you’re getting some data and then on your R&D Day and previously you have talked about perhaps I think a Type-C meeting with FDA after that.

I remember earlier when the original earlier trial data came out, the surprise was that your drug actually worked for longer duration and also at different time points than traditional allergic conjunctivitis drugs.

Is this the purpose of the Type-C meeting, can you elaborate on what will be discussed or what you expect to discuss in the meeting? And then also on 1612, if I recall correctly, that drug showed a positive effect on overall response rate in the investigator study in patients with pleural malignant mesothelioma.

Any update on the discussion with the FDA or the timeline and design details of the Phase 2 that you can share with us? Thanks. .

Thanks, Adam. Good morning. Let me take the second one quickly. For ADS 1612, we will complete dialogue with the agency. We will update the street later on this year as to next steps. The first question about meeting with the agency after ALLEVIATE is a really good question. I am also a big fan of frequent interactions with the agency.

And this is part of a deliberate strategy to meet with the agency, because reproxolap is a new chemical entity. It is not an antihistamine, it is not a steroid.

So, testing the drug in clinical trials and ways are different from those two compounds and how those two compounds have been tested in the past is very important in getting agency buy-in on that plan is very important.

So the current plan as you point out Adam, and as we disclosed at R&D Day last week is to readout ALLEVIATE, examine opportunities for a second Phase 3 trial which instead a direct allergen administration to the eye is environmental exposure at particularly for instance through a chamber administration and discuss that second Phase 3 on the back of ALLEVIATE with the agency.

So we would look for to updating the street likely I think in the second half of this year as to the subsequent Phase 3 plans for allergic conjunctivitis. .

Thank you. And the next question comes from Esther Hong with Janney Montgomery Scott..

Hi, good morning. So my first question is on PVR. Can you discuss the different type of retinal detachment surgeries and if the type of retinal detachment surgery as well as the skill of the surgeon does any impact on the development of PVR and the rate of success or failure with that surgery? And then my second question is on dry eye disease.

So with dry eye disease and upcoming Phase 3 RENEW study, can you provide additional color on the reasons to evaluate QID to BID tapering in what was previously observed to support this dosing regimen? Thanks..

Great. Esther, those are -- I could probably spend two hours on each of those questions. But I will spare you detail. PVR is a serious problem with any retinal detachment, right? Generally the retina comes off the back of the eye. It is surgically reattached, usually with lasers to generate some sort of attachment.

And in almost all cases, though, either oil or air is inserted into the vitreous. And what that does is it allows the retina to remain attached to the back of the eye as long as the patient stays in a face down position for days if not weeks.

That's one of the major problems with the surgery is that post-operatively the patients are required to face -- maintain a face down to the prone position for days or weeks which is to imagine a very difficult to do. Your question about surgical quality and variability from surgeon-to-surgeon is a good one.

I can tell you that we are thinking about this very carefully.

The protocol -- the surgical protocol for reattaching the retina, I can assure you will be nailed down and all those details are going to be systematically [visited] so that there's less variability in surgeon-to-surgeon but of course surgeons are different and that may be something that we have to deal with in the Phase 3 trial.

And a dry eye question on dosing. We were pleased in the Phase 2b clinical trial to see early onset of action, as soon as two weeks. And in fact in Phase 3 as mentioned at R&D Day and Phase 3 will have a one week assessment after dosing.

That's important because the current therapy on the market today for dry eye disease takes weeks if not months to generate even modest efficacy. I think one reason that reproxalap works quickly is that we administer the drug four times a day.

This is a classic [pharmacodynamics] approach where you give a loading dose and then taper the dose down subsequently for a maintenance dose, that’s used all of the time -- it's been used for decades and decades. One thing we don't want to do is abandon the initial four times a day dosing because that early onset of activity is so important.

However, it would be nice to taper dosing down if patients don't need four times a day administration as they feel better, there’s no need to continue the drug at four times a day. That is the intent of the adaptive phase of the Phase 3 RENEW trial in dry eye disease.

That gives us hope that the QID to BID taper will work, I think it’s very evident in the Phase 2b result. Recall that we tested in Phase 2b 0.5% and -- sorry, 0.25% and 0.1%. The low dose 0.1% is less than half of the high dose which is 0.25%. And you could see from the data from the Phase 2b trial that the low dose worked pretty well.

So the other a data point we have is that commercially when you ask patients in marketing studies how they treat themselves, a lot of the treatment is PRN, patients will self taper, they will take the drug when they feel like they need it and we saw a little bit of that in our own Phase 2b trial, so it’s got better.

They took the drug a little bit less. So I think we have lots of reasons to believe that the QID to BID that is four times a day to two times daily dosing will be effective. But that is exactly the point of the adaptive phase of the RENEW Phase 3 trial. .

Okay, great, thanks. And then just a quick follow-up on Sjögren-Larsson Syndrome, so assuming there is positive data, what are your thoughts on expansion in the derm space beyond Sjögren-Larsson? Thanks. .

That’s a great question Esther. We thought about that for years. We see no reason why the activity of reproxolab administered as a dermatologic formulation should be just restricted to Sjögren-Larsson Syndrome.

As you know RASPs are pro-inflammatory, they are for promiscuous in terms of autoimmune disease especially those diseases that affect the skin, for example atopic dermatitis or psoriasis. It’s certainly something we’re thinking about long-term.

I think we’ll be in a position to advice on that expansion of the dermatology franchise in terms of autoimmune disease after the RESET trial in Sjögren-Larsson Syndrome reads out, but it’s a very good thought and one that we have been thinking about carefully for a long time. .

Thank you. And the next question comes from Yale Jen with Laidlaw & Company..

Good morning and congrats on the progress so far and I think going forward. A lot of questions are being answered so there is two I am interested in. First one is that you mentioned -- I mean in the press release you mentioned a number of systemic pipeline products will be getting into clinical study in 2019.

Could you elaborate a little bit more on that front?.

Great question, Yale. I feel like there is so much going on at Aldeyra that the systemic program has taken a back speed, but I really do resonate with your question and Esther’s comment previously, RASP inhibition as a platform that has broad applicability. And we as a company have made a decision to new from the eye to the rest of the body.

We’re so pleased to initiate clinical testing along those lines this year.

I think if you look at Aldeyra five years from now the systemic program will be a key part of our pipeline, maybe even sooner, because RASP represents a new anti-inflammatory immune-mediated mechanism of action that really does apply broadly, not only diseases that I mentioned in response to Esther’s question but also other autoimmune diseases, Rheumatoid Arthritis for instance, Inflammatory Bowel disease.

And there are many diseases that aren't classically thought of as immune-mediated diseases, but are, they do have an immune component, many CNS diseases, cardiovascular diseases, hepatic diseases like NASH and ASH that we're really interested in pursuing.

So I think that aspect of our platform and portfolio while is a little bit behind the ocular franchise, that really represents a bright future for Aldeyra..

Okay, great. That's very helpful. And maybe one follow-up on the ADX-2119. You mentioned business’ adaptive design.

So could you elaborate a little bit more on the sort of first stage what you anticipate before you heading to the second stage?.

Right. In PVR as you can see from some of the slides at R&D Day last week that Dr. Eliott and his team, under an investigator IND, tested a variety of patients with his new approach and the data looked fantastic.

The point of the adaptive phase in the PVR Phase 3 program really is to confirm the kind of results that we saw earlier to clarify the protocol back to Esther’s question to identify changes that we need to make with pivotal chain -- for the pivotal phase of the trial and we're hoping to get that.

Adaptive phase started in the second half of this year with potential results sometime next year. So we're very enthusiastic based on the data that Dr. Eliott generated. It seems like the approach has tremendous potential in a disease that really has zero a therapeutic option today..

Thank you. [Operator Instructions]. And the next question comes from Matthew Cross with JonesTrading.

Good morning and then thanks for taking a couple of questions from me here. So we’ve spent a good bit of time discussing your ocular programs at your R&D Day last. So first off, refining a bit on Yale’s line of questioning. You've now announced a Phase 1 trial for ADX-629 sort of beginning in the second half of the year.

I mean given the exciting potential for systemic targeting of RASP.

I was hoping if you could provide a bit more detail on this trail specifically? Do you expect this to comprise a basket of autoimmune indications, or preclinical studies suggest RASP maybe more closely implicated in any specific ones? And what ultimately do you hope to see from this trial by next year?.

Right so 629 which is our systemic RASP inhibitor will enter Phase 1 testing this year Matt we hope and obviously the intent with Phase 1 trials is to assess safety and tolerability and pharmacokinetic.

There's always the chance in Phase 1 trials to include a certain types of patients where you might measure pharmacodynamic signals and example might be to include obese patients and morbid dyslipidemia. There are other kinds of ways we might be able to do that.

For now, I think we're focused on confirming the safety of 629 and the tolerability and assessing the pharmacokinetics which of course, as you know is different from ocular disease and different from dermatologic disease, the systemic disease is a different ball of wax and that's something that we're looking forward to assessing later this year.

The other program I haven't mentioned is ADX-1612, which is an Hsp90 inhibitor.

We're planning to initiate Phase 2 this year in post transplant lymphoproliferative disease and I think that's also an exciting mechanism that has broad systemic implications not just with PTLD but a variety of other conditions and behind 1612 is a pro drug 1615 which could be taken orally and we look forward to talking more about that next year..

Got it and agree as far as this PTLD and expanding that push on the pipeline out as well.

On the topic two if I can get just a brief update on anything you're able to say regarding the collaboration with Janssen as well just speaking of the kind of systemic part of that pipeline?.

Right, so we announced the partnership last year with Janssen, the J&J Company on systemic autoimmune diseases and RASP inhibition. Today, Janssen remains the only other company we know of that’s working on RASP as a platform and they're doing it in conjunction with Aldeyra. That partnership continues.

We look forward to updating the street subsequently this year in terms of next steps there..

Okay, great. Thanks for that. And then just one last one. Obviously, ALLEVIATE in the AC program is now front and center. And I wanted to touch on the feasibility studies that you're also conducting that as I understand are expected to read out between ALLEVIATE and the beginning of the confirmatory Phase 3.

So could you kind of recap when you anticipate reporting results from those studies and how these findings may inform the second Phase 3 in ways that are distinct from the conclusions we can draw from ALLEVIATE?.

Right. So the plan is to complete the methods development studies that's with environmental exposure to allergen that read out the ALLEVIATE trial, package those data together and aggregate visit with the FDA in Washington, discuss the next Phase 3 trial and then update the street subsequently on next steps..

Okay, perfect. .

And the second part of your question was about what kinds of data do we expect? A different from the conjunctival challenge I believe Matt. .

Yes, that's correct..

Right so there's two ways of testing patients with allergic conjunctivitis. The most controlled way is just to administer allergen directly through the eye and the more real world way is either testing patients in the field during allergen or exposing patients in [air sterilized] manner to allergen.

That is the chamber study that I mentioned earlier in the call. We have a couple of good options there and we look forward to wrapping up those methods development studies and meeting with the agency and advising on next steps..

Thank you. This concludes our question-and-answer session as well as the conference call. Thank you for attending today's presentation. You may now disconnect your lines..