Aldeyra Therapeutics, Inc.
Q1 2017 Earnings Call Transcript

Published: 11 Aug 2017

[Operator:]

Good day and welcome to the Aldeyra Therapeutics’ Second Quarter 2017 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 would now like to turn the conference over to Steve Tulipano. Please go ahead.

[Stephen Tulipano:]

Good morning, everyone. I’m Steve Tulipano, CFO of Aldeyra and welcome to the Aldeyra Therapeutics conference call to discuss Aldeyra’s our Q2 2017 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 and other market being, competitive position, industry environment, and potential growth opportunities amongst 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 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. Dr. Brady?

[Todd Brady:]

Thank you, Steve. Today we issued a press release summarizing our financial results for the second quarter and as always, I encourage you to review the press release as it contains important information relevant to our comments today. The second quarter marks the transition of Aldeyra’s third clinical development program from Phase 2 to Phase 3, which now includes Allergic Conjunctivitis, Non-infectious Anterior Uveitis and Sjögren Larsson Syndrome. All three of these late stage programs validate the potential of our novel aldehydes trap platform to treat inflammatory disease and inborn errors of aldehyde metabolism. As a company, Aldeyra continued in the second quarter and moved forward from the demonstration of efficacy to regulatory strategy and pre-commercialization activity. I’d like now to discuss the programs and plans in each of our Phase 3 programs as well as provide important updates on our earlier stage clinical pipeline. Our most recent results were reported from our Allergic Conjunctivitis program consistent with the Phase 2a results announced last year, the Phase 2b results released in the second quarter clearly demonstrates statistically superior efficacy relative to control and reducing ocular itching in a sustained manner that is distinguished from standard of care therapy. In addition to statistical significance, and based on subsequent details analysis of the Phase 2/b results, we believe that the results are also clinically meaningful. Further, recent market research indicates that millions of patients in the United States do not achieve adequate symptomatic relief from antihistamines and that many patients are treated with topical corticosteroids, a class of medication that requires weeks of administration prior to efficacy and that leads to serious ocular toxicities such as glaucoma and cataracts ocular infection and corneal ulceration. We believe that the sustained drug activity of ADX-102 demonstrated in Phase 2/b has not been previously demonstrated in a late stage clinical trial and may address an adequate response to antihistamines that affects approximately one-third of patients with allergic conjunctivitis, the prevalence of which is between 20% of 40% of the population worldwide. ADX-102 for the treatment of allergic conjunctivitis could represent one of the largest market opportunities in ophthalmology and we plan to discuss Phase 3 clinical testing and other requirements for marketing approval with regulatory authorities later this year. Also in the second quarter, we completed enrolment in our Phase 2/a Dry Eye diseases clinical trial which was designed to test three formulations of topical ocular ADX-102 over one month of treatment with a goal of selecting a formulation to advance the subsequent Phase 2 testing. We expect to announce data from the trial in September of this year. Like allergic conjunctivitis, Dry Eye disease represents one of the largest ophthalmic markets and patients and physicians generally regard current therapeutic options to be inadequate. By diminishing inflammation and protecting lipids necessary for lubrication of the interior surface of the eye, ADX-102 represents a novel and potentially important therapeutic option for Dry Eye disease. Our Phase 3 programs in non-infectious Anterior Uveitis and Sjögren Larsson Syndrome continue to progress in the second quarter. The vehicle control Phase 3 for non-infectious Anterior Uveitis initiated enrolment in the second quarter and we continue to expect results from the trial in the second half of next year. Non-infectious Anterior Uveitis is a potentially blinding inflammatory disease that today is treated with corticosteroids the only FDA approved medication for the disease despite the potentially severe and chronic side effects I mentioned previously. Thus, the market need for an efficacious for the safe drug is considerable and we continue to remain optimistic about the prospects for ADX-102, which as we announced last year in a Phase 2 clinical trial demonstrated efficacy equivalent to topical steroids, but without the elevation of intra-ocular pressure observed in steroid treated patients. Following completion of new non-clinical regulatory requirements for the commercial dermatologic formulation of ADX-102 for the treatment of Sjögren Larsson Syndrome, we expect to initiate Phase 3 enrolment late this year or early next year with initial data from Part 1 of the trial available in the second half of next year. Sjogren Larsson Syndrome is a rare inborn error of aldehyde metabolism, characterized by severe dermatologic and neurologic disease and for which there is no approved therapy. ADX-102 is the first drug to be rigorously tested for this disease and since ADX-102 traps the aldehyde that are believed to cause the disease and given the positive Phase 2 results announced last year, this drug could represent a major treatment advance for patients that are today not effectively treated. Overall, our novel aldehyde trap platform continues to advance to late stage clinical testing and diseases were current therapy is absent or inadequate and we remain committed to the goal of commercializing our product candidates to provide a new safe and effective therapeutic option for patients with inflammatory disease or inborn errors of aldehyde metabolism. Now before I turn the call back over to Steve to review the second quarter financial results, I’d like to mentioned that in the fourth quarter of this year, we intend to hold a research and development day, during which in addition to preclinical and clinical program updates, we expect to release new clinical utility data for the Phase 2b allergic conjunctivitis trial as well as new market data focusing on a substantial unmet medical need in allergic conjunctivitis. Steve?

[Stephen Tulipano:]

Thank you, Todd. For the second quarter of 2017 we had a net loss of $5.3 million which compares to a net loss of $4.3 million for the same period in 2016. Basic and diluted net loss per share was $0.35 for the quarter compared to $0.41 per share in Q2 2016. Losses have resulted from the classified clinical trials and research and development programs, as well as some general and administrative expenses. Research and development expenses were $3.8 million for the three months ended June 30, 2017 compared to $2.8 million for the same period last year. The increase of $1 million is primarily related to increases in our external research and development, expenditures including clinical and preclinical activities partially offset by a reduction in manufacturing expenses. G&A expenses were $1.5 million for each of the second quarters of 2017 and 2016. In Q2 2017 total operating expenses were $5.3 million compared to total operating new expenses of $4.2 million in the prior year. For the six months of 2017 we had a net loss of $10.4 million compared to a net loss of $9.3 million for the same period in 2016. For the six-month periods of 2017 and 2016 basic and diluted net loss per share was $0.72 and $0.91 respectively. Research and development expenses were $7.2 million for the six month of 2017 compared to $6.3 million for the same period last. The increase of $0.9 million is related to the increases in our external research and development expenses including clinical preclinical activities partially offset by manufacturing expenses. G&A expenses were $3.2 million for the six months 2017, compared to $2.9 million in 2016 for the same period. The increase is related to an increase in personnel costs including stock based compensation and legal costs. We ended Q2 2017 with $25.8 million in cash, cash equivalents and marketable securities. That concludes our remarks today. Thank you for your participation. Operator, if you’re on line, please open the call to questions.

[Operator:]

Thank you. And we will now begin the question-and-answer session [Operator Instructions] And our first question will come from Adam Walsh with Stifel. Please go ahead with your question.

[Adam Walsh:]

So, I have a question for you Todd on the Dry Eye trial, where we’re going to see some data in the second half of this year. When you look across the multitude of symptomatic secondary endpoints that you’re looking at, can you kind of frame up for us how you are thinking about those in terms of a go, no go decision in terms of future development?

[ToddBrady:]

Yeah, I think as I mentioned, that’s an excellent question. I think I mentioned the goal of this trial is to select the formulation to move forward. And as we all know there are three active parts [ph] in this study. Everyone [Indiscernible] and the safety and tolerability of each of the formulations as well as what we would call the preliminary efficacy of the drug. It's difficult to assess efficacy in Dry Eye disease over the course of one month and if you look at most Dry Eye disease trial base on many months, two to three at least and so I think any data that we glean from this trial in terms of efficacy is preliminary, but could be important in terms of moving forward and selecting a formulation. All the standard Dry Eye disease endpoints will be evaluated, that is in combination of science, which is corneal [ph] and symptoms such as how the patients feel and patients reported assessments of their own symptoms will be considered as part of the trial.

[Adam Walsh:]

And then just one for you Steve, as we look at the balance sheet and we think about moving forward into a Phase 3 trial in Allergic Conjunctivitis. Is this an indication given how large it is that you are still thinking about or would you consider partnering that out how do you kind of triangulate between the balance sheet and running so many clinical trials in parallel? Thanks.

[Stephen Tulipano:]

So, we actively engage in partnering discussions from time-to-time, obviously if we were to commit to something, we’d let the street know, but at this time, we’re moving forward with our plan.

[Adam Walsh:]

And you feel well capitalized to be able to execute into what kind of timeframe?

[Todd Brady:]

So, what we said publicly and this is in our 10-Q is that the $25.8 million in cash and cash equivalents that we have in the books as of June 30, would be sufficient to get us into Q3 of 2018.

[Operator:]

Our next question will come from John Newman of Canaccord. Please go ahead.

[John Newman:]

Hi, good morning guys. Thanks for taking my question. I just wondered, Todd if you could comment on some of the items that we should focus on coming out of your meeting with the regulators on ADX-102 for Allergic Conjunctivitis. I’m just curious if you are at this point thinking about discussing the dose with them or it’s going to be more focused on sort of the plan for Phase 3? Thanks.

[Todd Brady:]

Yes. Thanks, John. Absolutely, these regulatory discussions which are a large part of our focus, our corporate focus these days are critically important. Our approach with the FDA on Allergic Conjunctivitis is to demonstrate statistical significance on the clinical utility. And a Phase 3 setting is that they would agree is sufficient for approval. I think coming out of a meeting, what we hope to be able to relay is our understanding in conjunction with the FDA of the endpoints of that Phase 3 program. My expectation is that the trial design itself will not change dramatically that is what we performed in Phase 2a and what we performed in Phase 2b in terms of an allergen challenge model, I don’t expect that to change. What I do expect to change, are the endpoints required for assessment of those clinical trials and the reason is that ADX-102 represents a novel mechanism. And it represents a treatment for a population that today is largely not treated in Allergic Conjunctivitis. And as I mentioned in the call today, that could be up to one-third of the population which is about one-third of the Allergic Conjunctivitis population which is 20% to 40% of the world. This is a tremendous market. So, the outcome of these meetings will be important in terms of exactly how do we assess Phase 3 and we’re prepared to relay that information as it becomes available following our end of Phase 2 meeting with the FDA.

[John Newman:]

Great. And let me just add one question on the Dry Eye study, as you mentioned earlier the duration of this study is on the shorter side by design. And I’m just curious if coming under this data read, will you be able to get any information on the lipid composition in the patient's eyes after treatment versus before in terms of whether the lipids have been broken down? Thanks.

[Todd Brady:]

Yeah. I think that’s an excellent point, as the mechanism of ADX-102, like [Indiscernible] and like lithograph [ph] which are the two drugs that appear for Dry Eye today is anti-inflammatory and thus we are optimistic it will see some positive trends in terms of symptomatology and clinical science. But as you point out the advantage that ADX-102 has is that the drug is lipid protected that is it protects the fat that lubricate the eye, which is important because as anyone did ever have chapped lip, noes, if there are no waxes or lipids or fats in the material you put on your lips to protect them from being chapped or treat them from chapped, there is no efficacy and the eye to prevent dryness we all need some layer, some level of fats and lipids. Aldehydes as mediators are not only pro-inflammatory that also disruptive to lipids, and aldehyde traps such as ADX-102 in theory could prevent the destruction of lipids. The various surrogates as you know John for lipid function the eye one is tier film breakup time there are others as lipids are degraded they themselves become pro-inflammatory mediators. So, I think there is lots of ways we can directly and indirectly assess the viability of the lipid layer in the tier film as we look at these results. You are correct, trials are on the short side but still I think it'd be important to analyze preliminary trends at this point.

[Operator:]

Our next question will come from Corey Davis with Wainwright. Please go ahead.

[Corey Davis:]

Thanks very much also on the dry eye and sorry if I missed this earlier. Are you trying to set expectations that given the shorter duration that the trial perhaps is not as rigorously powered for all efficacy end points as would be a larger trial and therefore we should really focus more on safety efficacy, picking a right dose, picking a right formulation and not the disappointed if you don’t hit on all efficacy end points?

[Todd Brady:]

Right, now that’s one-point Corey, the trial has empowered it all, I mean the trial is designed to select a formulation and move forward and Phase 2A prior to any data on efficacy technically there is no power because you don’t know your effect size. So, our goal is -- and I think the output this treat expects to see is, A, whether we are advancing a formulation forward and B, what is that formulation. I think C, could be preliminary evidence of efficacy and so forth. As Adam mentioned the no-go is that there is no safe and tolerable formulation, but whether we see preliminary changes in efficacy or science or symptoms really is not a go or no-go given the size and the short duration of the trial. So, I think you are correct in your statement, Corey that these are preliminary findings.

[Corey Davis:]

Okay so could be something where you just find the optimal formulation that’s safe, but you don’t hit of efficacy and you move forward and we shouldn’t be disappointed by that?

[Todd Brady:]

Right and if you our trial description and clinicaltrial.gov and so forth safety is the end point and all other end points are exploratory.

[Corey Davis:]

And then for allergic conjunctivitis, were you trying to suggest that given that the end points might change, that they would become less rigorous than seen in previous trials on other products in the past?

[Todd Brady:]

Well I don’t think they’ll be less rigorous. In the past couple of decades, the FDA I think has rightly focused not only on statistical significance, but also clinical significance especially in markets where there are existing or diseases where there are existing therapies. What we will argue have argued and we’ll continue to stay publicly is that our drug is different from antihistamines and the end points typically used today are designed for antihistamines. So, it doesn’t make sense for us to continue to use the same end points and by that, I mean acute, quick, rapid changes in ocular itching that are short in duration, that’s not how aldehyde traps, work that is not an underserved segment of the market. And so, our approach publicly and with regulatory agencies will continue to be that the end point used assess antihistamines are not relevant to our drug. And so, I think a statistical significance will continues to be important as it should be in any drug program versus the control but what’s most interesting would be how the agency and its sponsors at Aldeyra continue to assess clinical relevance in a way that’s different from that use for anti-histamines.

[Corey Davis:]

Okay. And when did you say you’re going to have your R&D day?

[Todd Brady:]

We’re planning in the fourth quarter and we’ll update this of the exact timing, but during that day a major subject will be the question you just ask that is how do we think about clinical utility and how we think about positioning the drug not only from a scientific and regulatory standpoint but from a market standpoint as well.

[Corey Davis:]

And presumably that’ll come after the Dry Eye data as well?

[Todd Brady:]

Correct, correct Dry Eye data in September, R&D in the fourth quarter.

[Corey Davis:]

Okay. And last question for Steve. I know you said you got enough cash to get your sort of Q3 of 2018, but maybe a little help in guidance just in terms of your R&D spend in the coming quarters, I’m assuming it's going to tick up those all these trials accelerate, is that a good assumption?

[Stephen Tulipano:]

It’s a very good assumption Corey. It will be a little bumpy, some quarters will be greater than others, but it’s a fair assumption.

[Operator:]

[Operator Instructions] Our next question will come from Yale Jen of Laidlaw and Company. Please go ahead.

[Yale Jen:]

Good morning and thanks for taking the questions. In your prepared statement, you indicated there is sort of occupational [ph] give more detail about the phase 3 study for the Sjögren Larsson Syndromes. Could you elaborate a little bit more regarding some specific, what the first portion of the study as well as the second portion of the study may entail?

[Todd Brady:]

Yes, good morning Yale and thanks for the question. Our Phase 3 in Sjögren Larsson Syndrome is a two-part study, the first part of which will readout in the second half of next year. The reason it’s in two parts is because for Phase 3 and transitioning to marketing will require to use a commercial formulation that is we are require to use the dermatologic formulation that we intend to market and because that is a very slightly different from what we used in the prior trial, the FDA for safety reasons requires that we escalate dosing in patients prior to the second part of the study. And by escalation, I mean, escalation in body surface area treated. As you know, many of these patients with Sjögren Larsson Syndrome are afflicted with a severe squinty is called ichthyosis, over 80% to 90% of the body surface area. The intention in Part 1 is to escalate body surface area treatment overtime in a subset of patients approximately nine to assess the safety and tolerability of drug before longer-term treatment again and that’s why the trial is in two parts. I will say that the data from Part 1 should portend the data from Part 2, which is a crossover design measuring changes from base line and treated patients but the -- we will have visibility on the first data from Phase 3, that’s our Part 1 concludes in the second half of next year.

[Yale Jen:]

So, the sides of the Part 1 or Part 2 will be determined by the outcome of Part 1 or you have some rough estimate of what [indiscernible] for the Part 2?

[Todd Brady:]

Yeah. Knowing what we know today and based on the Phase 2 data which were quite compelling, Part 1 is approximately nine patients. As you said Part 1 to some degree will be used to power Part 2 which we currently estimated approximately 20 patients. But of course, that will depend on the data from Part 1.

[Yale Jen:]

Okay. That’s very helpful. One other things is the end of Phase 2 meeting for the conjunctivitis. Have you give us any more detail regarding the timing for that to happen and the possibility of having those well that when you might start of Phase 3 study?

[Todd Brady:]

Yes, great questions. I’m happy to elaborate, in the Phase 2 meeting we expect to occur prior to the end of the year conservatively, this is a type B regulatory meeting, so the FDA has a certain period of time within which to schedule a meeting. And based on our submission timelines, we’re comfortable with the meeting occurring by the end of the year conservatively. If that occurs, then Phase 3 can begin early next year. So, our guidance has been in the Phase 2 meeting this year or early next year initiation of Phase 3. As you know the clinical studies in Allergic Conjunctivitis those that use allergen challenge are very efficient, they are relatively quick. So, I think by the second half of next year, if the timelines hold as I’ve mentioned them, I think by the second half of next year we should have Phase 3 data for Allergic Conjunctivitis.

[Yale Jen:]

And then final question I have is that in terms of Allergic Conjunctivitis or even the Uveitis, all together you have two Phase 3 studies that’s up based on the numbers is roughly is 300 patients plus what you have in to Phase 2 and other studies. In total, you think is this size of patients is sufficient for safety data based from [indiscernible] what the FDA might look, might see or you think you need additional patients just for in the study complete just for the safety database and thanks.

[Todd Brady:]

Yes, that’s an excellent point, the safety database will require an additional study, so typically what happens in topical ophthalmology is that drugs are given in Phase 2 and Phase 3 efficacy study. There is a separate study, the so-called safety study that evaluates more patients not necessarily disease patients, sometimes healthy volunteers to assess the safety of a drug over multiple dosing frequencies and shrinks [ph] and time periods. And that’s an additional requirement that any sponsor including Aldeyra has to complete. I will say though we have now tested this drug topically in over 200 patients, we have not seen safety signals of concern and I don’t expect any going forward but that will have to be proven and the safety requirement still holds, for any new topical drug.

[Operator:]

[Operator Instructions]. Our next question will come from Ritu Baral with Cowen. Please go ahead.

[Ritu Baral:]

Hi, guys thanks for taking the question. Just on your Noninfectious Uveitis, can you tell us how enrollment and site activation is going in that study?

[Todd Brady:]

Hi, Ritu, good morning. The Uveitis study is the Phase 3 and Uveitis is up and running. We are still in the process of site activation. As you know noninfectious anterior uveitis is a rare disease. Not only is it a rare disease but the patients [indiscernible] active disease before being enrolled. So, the condition itself is generally active in patients so that’s once per year on average. And those patients are treated for four to six weeks. So, with the background of a rare disease waiting for patients to flair, it is a long process as we have and other companies have evidenced in Phase 2. Thus, the need for many clinical sites and we are attempting to front run, our site's enrollment as we increase the number of sites we expect to have enrollment increase as well. We will update formally on our progress there at the R&D day at Q4, I think at this point it's too preliminary to give you some feedback there.

[Ritu Baral:]

Can you remind me again how many sites you are planning for this study?

[Todd Brady:]

A significant number, there is only about 30 leading Anterior Ocular Inflammation centers in the U.S. and we’re attempting to get as close to that number as possible to capture the greatest number of patients that flow through those centers. So, I would expect in the 20 to 30 range.

[Ritu Baral:]

And you’ve ruled out going to ex-U.S. sites for combat [ph] reasons?

[Todd Brady:]

At this point that is correct.

[Ritu Baral:]

Got it. And then moving to Allergic Conjunctivitis, in your prepared remarks you’ve mentioned I believe 'recent work on clinical meaningfulness of the data generated', can you talk a little more about how you’ve looked at the data generated, how do you factor the magnitude effect at the timeline that the FDA has traditionally looked at and any additional detail [Indiscernible] that you have around that [Indiscernible]?

[Todd Brady:]

Sure. I’m happy to give you a high-level preview. There’s lots of ways to assess clinical utility, one of which we actually presented during the data release and that is percent of patients that are cured or have minimal itch. Other ways of thinking about that are time to cure or time to minimal itch. The FDA has traditionally considered a one-point change in its score to be clinically relevant as you recall ocular itch is rated by patients on a scale of 0 to 4. In terms of one-point changes, it's possible to assess one-point changes versus base lines. It’s also possible to measure time to one-point change, one-point improvement, it is also possible to measure a time to one-point improvement from peakish scores within visits. So, I think there’s lot of ways with and without one-point changes to assess, I think what most people would call are clinically relevant. And that’s what you’ll hear more about in the fourth quarter.

[Ritu Baral:]

Got it. And then last question. You mentioned regulatory agencies, plural, are there plan to approach Europe around Allergic Conjunctivitis or have you retained European regulatory drivers to think about that?

[Todd Brady:]

I think Europe and Asia are both in the mix in terms of how we’re thinking about ocular development. And as Steve mentioned, we are from time-to-time engaging in partnership -- potential partnership discussions, especially regarding territories outside the United States. So, the answer to your question would be yes, as we continue those discussions.

[Ritu Baral:]

But it does seem like something you would rather have a partner potentially spearhead, is that accurate?

[Todd Brady:]

Correct. I think as you think about topical ocular drug administration, outside the U.S. not only is the clinical development program is different, but also the pricing is different. And I think our view of all that is, it’s probably better for us to work with a partner that experience in those territories rather than internal focus on those areas.

[Operator:]

Ladies and gentlemen this will conclude our question-and-answer session and we will conclude the Aldeyra Therapeutics second quarter 2017 financial results conference call. We thank you for attending today’s presentation. You may now disconnect your lines.