Aldeyra Therapeutics Inc (ALDX) Q4 2018 Earnings Conference Call Transcript

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Aldeyra Therapeutics Inc  (NASDAQ:ALDX)
Q4 2018 Earnings Conference Call
March 08, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the 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’ll now turn the call over to Joshua Reed. Please go ahead.

Joshua ReedChief Financial Officer

Good morning, everyone. I’m Joshua Reed, Chief Financial Officer of Aldeyra Therapeutics, and welcome to the Aldeyra Therapeutics conference call to discuss our 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, lad like to turn the call over to Dr. Todd Brady, President and Chief Executive Officer of Aldeyra. Dr. Brady?

Todd BradyPresident and Chief Executive Officer

Thank you, Joshua, and thank you all for joining us today. As Joshua mentioned, this morning we issued a press release and 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 that treat immune-mediated diseases. 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’re focused on ocular disease and select systemic conditions, and we now have five Phase 3 programs in progress or expected to be initiated this year. With the advancement of our pipeline and with the number of important late-stage programs, Aldeyra is rapidly evolving, and we enter 2019 with a number of important late-stage milestones, as we begin 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 in 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 the co-primary endpoints for our planned Phase 3 dry eye disease clinical trial, which are ocular dryness symptom score and fluorescein nasal region staining, and in 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 Mass. 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 (ph) is statistically lower than vehicle and area under the ocular itch score curve from 10 to 60 minutes post allergen-challenged. 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 & Development Day last week, in the second half of this year, we expect to announce Phase 3 results from the SOLACE trial in non-infectious anterior uveitis and Part 1 of the RESET trial in Sjogren-Larsson Syndrome. We look forward to updating you throughout this catalyst filled year as we continue to expand in our mission of providing novel therapeutic options for patients with unmet medical needs.

And with that, I’d like to turn the call back over to Joshua, to review the year end 2018 financial results. Joshua?

Joshua ReedChief Financial Officer

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 $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, pre-clinical and clinical development costs, 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 the currently anticipated operating expenses through 2020.

This concludes my comments on our year ended 2018 financial results. Now, we’d like to turn the call back to Todd for summary comments.

Todd BradyPresident and Chief Executive Officer

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 this second half of 2019. In Sjogren-Larsson Syndrome, we expect to have results from Part 1 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 and immune-mediated disease this year.

This concludes our prepared remarks for today. Operator, please open the call for questions.

Questions and Answers:

Operator

Yes. Thank you. We will now begin the question and answer session. (Operator Instructions) And the first question comes from (inaudible).

Unidentified Participant— Analyst

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 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%. I guess I’m just trying to get a better sense as to the strategy there and wondering, what’s the harm in also looking at 0.5% in the DED trial that would potentially just maximize your flexibility on the future product profile and keep everything parallel? Thank you.

Todd BradyPresident and Chief Executive Officer

Thanks for the question, Yugol (ph). Good morning. Great questions around concentrations of reproxalap and they very much relate to commercial strategy. 0.25%, as you point out Yugol is the concentration that is moving forward in dry disease. There is 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 in 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 and in the commercial markets, I also think that if 0.25% works in ALLEVIATE, there is, as you 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 least tolerable and most effective dose that we’ve identified it 0.25%, and that is what we will advance to the RENEW Phase 3 trial that should begin in the first half of this year.

Unidentified Participant— Analyst

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 AC and DED or is the base case, there are going to be different brands? Or is it just, you don’t know yet until you see data?

Todd BradyPresident and Chief Executive Officer

Yes. I think that’s to be determined. And as you correctly point out, will be dependent on data. There is commercial precedents for either of those scenarios. In allergic conjunctivitis, there is at least one steroid that is high dose and for allergic conjunctivitis the low dose. There are other commercial precedents for the same from — the concentration being used across multiple diseases. 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.

Unidentified Participant— Analyst

Nice. And just one other one. I am not sure how much you’ve said about this, but since you are looking at the p-doses in AC, how are you handling that from that (ph) plan perspective?

Todd BradyPresident and Chief Executive Officer

We have a pre-defined sequence hierarchy. So that (Technical Difficulty) 0.5% will be analyzed first and then subsequently 0.25% and I think that’s fairly standard across the industry these days to avoid the alpha spent (ph).

Unidentified Participant— Analyst

Great. Thank you.

Operator

Thank you and the next question comes from Adam Walsh with Stifel.

Adam WalshStifel — Analyst

Hey, guys. Good morning. Thanks for taking my questions. Todd, on the ALLEVIATE trial, you’re getting some data and then in your R&D Day and previously you’ve talked about, perhaps having 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, and 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 for the Phase 2 that you can share with us? Thanks.

Todd BradyPresident and Chief Executive Officer

Thanks, Adam. Good morning. Let me take your second one quickly. For ADX-1612, we’ll complete our 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’m also a big fan of frequent interactions with the Agency. And this is part of a deliberate strategy to meet with the Agency because reproxalap is a new chemical entity. It is not an antihistamine. It is not a steroid. So testing the drug in clinical trials in ways that are different from those two compounds and how those two compounds have been test in the past is very important, and 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 read out ALLEVIATE, examine opportunities for a second Phase 3 trial, which instead of direct allergen administration to the eye is environmental exposure, 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 forward to updating the Street likely I think in the second half of this year as to the subsequent Phase 3 plans for allergic conjunctivitis.

Adam WalshStifel — Analyst

Thanks.

Operator

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

Esther Lannie HongJanney Montgomery Scott LLC — Analyst

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 has 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, and what was previously observed to support this dosing regimen? Thanks.

Todd BradyPresident and Chief Executive Officer

Great. Actually, those are — I can probably spend two hours on each of those questions, but I will spare you. PR (ph) it is a serious problem with any retinal detachment, right. Generally, the retina comes off of the back of the eye, it is surgically reattached usually with lasers to generate some sort of attachment. 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, sort of prone position for days or weeks, which as you can imagine is 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 elucidated, so that there is less variability surgeon-to-surgeon, but of course, surgeons are different and that’s maybe something that we have to deal in the Phase 3 trial.

The 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 we mentioned it R&D day, in Phase 3 we’ll have a one week assessment after dosing. That’s important because the current therapy on the market today for dry 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 pharmacodynamic approach, where you give a loading dose and then taper the dose down subsequently for a maintenance dose, (inaudible) all the time has 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 to day administration. As they feel better, there’s no need to continue to administer the drug four times a day. That is the intent of the Adaptive Phase of the Phase 3 RENEW trial in the dry eye disease.

What gives us hope that the QID to BID taper will work? I think it’s very evident in the Phase 2b results. 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 can see from the data from the Phase 2b trial that the low dose worked pretty well. The other data point we have is that, commercially, when you ask patients in marketing studies how they treat themselves, a lot of the treatment is PRM. Patients will help 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. As scopes 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.

Esther Lannie HongJanney Montgomery Scott LLC — Analyst

Okay. Great. Thanks. And then just a quick follow up. On Sjogren-Larsson Syndrome, so assuming there’s positive data, what are your thoughts on expansion into derm space beyond Sjogren-Larsson? Thanks.

Todd BradyPresident and Chief Executive Officer

That’s a great question, Esther. We’ve thought about that for years. We see no reason why the activity of reproxalap administered as a dermatologic formulation should be just restricted to Sjogren-Larsson Syndrome. As you know, RASP are pro-inflammatory, they are promiscuous in terms of auto immune disease, especially those disease 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 advise on that expansion of the dermatology franchise in terms of autoimmune disease after we finish that trial and Sjogren-Larsson Syndrome reads out, but it’s a very good thought and one that we’ve been thinking about carefully for a long time.

Esther Lannie HongJanney Montgomery Scott LLC — Analyst

Okay. Great. Thank you.

Operator

Thank you. The next question comes from I-Eh Jen with Laidlaw & Company.

I-Eh JenLaidlaw & Company — Analyst

Good morning. And congrats on the progress so far and going forward. A lot of questions have been answered, so there is two I’m interested in. First one is that, you mentioned — I mean in the press release, you mentioned a number of systemic pipeline product will be getting into the clinical study in 2019. Could you elaborate a little bit more on that front?

Todd BradyPresident and Chief Executive Officer

Great question Jen. I feel like there is so much going on at Aldeyra, that the systemic program has taken a back seat, but I really do resonate with your question and Esther’s comment previously. RASP inhibition as a platform has broad applicability. And we as a Company have made the decision to move 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 it really does apply broadly, not only in 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 CNF 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, but really represents a bright future for Aldeyra.

I-Eh JenLaidlaw & Company — Analyst

Okay. Great. That’s very helpful. And maybe one follow up on the ADX-2191. You mentioned this is the adaptive design, so could you elaborate a little bit more on the sort of first stage, what to anticipate before you head in to the second stage?

Todd BradyPresident and Chief Executive Officer

Right. In PVR, as you can see from some of the slides at R&D Day last week, Dr. Eliott and his team under an investigator IND, tested the variety of patients with this new approach and the data looks 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 for 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. Elliott has generated, it seems like the approach has tremendous potential in a disease that really has zero therapeutic option today.

I-Eh JenLaidlaw & Company — Analyst

Okay. Great. Thanks a lot. And again congrats on the quarter.

Todd BradyPresident and Chief Executive Officer

Thank you, Jen.

Operator

(Operator Instructions) And the next question comes from Matthew Cross with Jones Trading.

Matthew CrossJones Trading. — Analyst

Hey, guys. Good morning and then thanks for taking a couple of questions for me here. So, you spent a good bit of time discussing your ocular programs at your R&D Day last week. So first off, refining a bit on Jen’s line of questioning. You’ve now announced a Phase 1 trial for ADX-629 to begin in the second half of the year and given the exciting potential for systemic curve you are doing with RASP, I was hoping you could provide a bit more detail on this trial specifically? Do you expect this to comprise a basket of auto immune indications or have pre-clinical studies suggested RASP maybe more closely implicated any specific ones? And what ultimately do you hope to see from this trial by next year?

Todd BradyPresident and Chief Executive Officer

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. An example might be to include obese patients and look at dyslipidemia. There are other kinds of ways we might be able to do that, but 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 dermatological disease. The systemic diseases is a different ball of wax, and that’s something that we’re looking forward to testing later that year.

The other program I haven’t mentioned is ADX-1612, which is an HSP-90 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 can be taken orally and we look forward to talking more about that next year.

Matthew CrossJones Trading. — Analyst

Got it. And agreed as far as PTLD and expanding that portion of the pipeline out as well. On the topic too, if I can get just a brief update on anything you’re able to say regarding the collaboration with Janssen as well, just speaking to the kind of systemic part of that pipeline?

Todd BradyPresident and Chief Executive Officer

Right. So we announced a partnership last year with the Janssen, which is a J&J company on a systemic autoimmune diseases in RASP inhibition. Today, Janssen remains the only other company we know of that’s working on a 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 their.

Matthew CrossJones Trading. — Analyst

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?

Todd BradyPresident and Chief Executive Officer

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

Matthew CrossJones Trading. — Analyst

Okay. Perfect.

Todd BradyPresident and Chief Executive Officer

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

Matthew CrossJones Trading. — Analyst

Yes. That’s correct.

Todd BradyPresident and Chief Executive Officer

Right. So there’s two ways of testing patients with allergic conjunctivitis. The most controlled way is just to administer allergen directly to the eye and the more real-world way is either testing patients in the field during allergen season or exposing patients in aerosolized 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.

Matthew CrossJones Trading. — Analyst

Great. Okay. Thank you for the responses today, and congrats on the progress.

Todd BradyPresident and Chief Executive Officer

Thanks, Matt.

Operator

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.

Duration: 38 minutes

Call participants:

Joshua ReedChief Financial Officer

Todd BradyPresident and Chief Executive Officer

Unidentified Participant— Analyst

Adam WalshStifel — Analyst

Esther Lannie HongJanney Montgomery Scott LLC — Analyst

I-Eh JenLaidlaw & Company — Analyst

Matthew CrossJones Trading. — Analyst

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