Aldeyra Therapeutics' (ALDX) CEO Todd Brady on Q2 2016 Results - Earnings Call Transcript

| About: Aldeyra Therapeutics, (ALDX)
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Aldeyra Therapeutics, Inc. (NASDAQ:ALDX) Q2 2016 Earnings Conference Call August 10, 2016 8:00 AM ET

Executives

Todd Brady - President and Chief Executive Officer

Stephen Tulipano - Chief Financial Officer

David Clark - Chief Medical Officer

Analysts

Ritu Baral - Cowen & Company

Adam Walsh - Stifel Financial Corp.

Yale Jen - Laidlaw & Company

Operator

Good day and welcome to the Aldeyra Therapeutics announce the Second Quarter Financial Results and provides Business Update Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Stephen Tulipano, Chief Financial Officer of Aldeyra Therapeutics. Please go ahead sir.

Stephen Tulipano

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

Before we begin our discussion today, let me read Aldeyra's Safe Harbor statement. This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, including 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 size and competitive positions, industry environment, potential growth opportunities among other things.

Forward-looking statements include all statements that are not historical facts and in some cases can be identified by terms such as may, might, will, objective, intend, should, could, can, would, expect, believe, anticipate, project, target, design, estimate, predict, potential, plan or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Aldeyra's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Aldeyra is at an early stage of development and may not ever have any products that generate significant revenue. Important factors that could cause actual results to differ materially from those reflected in Aldeyra's forward-looking statements include, among other things, the timing of commencement, enrollment and completion of Aldeyra's clinical trials, the timing and success of preclinical studies and clinical trials conducted by Aldeyra and its development partners; the ability to obtain and maintain regulatory approval to commercialize Aldeyra's product candidates, and the labeling for any approved products; the scope, progress, expansion, and costs of developing and commercializing Aldeyra's product candidates; the size and growth of the potential markets for Aldeyra's product candidates and the ability to serve those markets; Aldeyra's expectations regarding its expenses and revenue, the sufficiency or use of Aldeyra's cash resources and needs for additional financing; the rate and degree of market acceptance of any of Aldeyra's product candidates; Aldeyra's expectations regarding competition; Aldeyra's anticipated growth strategies; Aldeyra's ability to attract or retain key personnel; Aldeyra's ability to establish and maintain development partnerships; Aldeyra's expectations regarding federal, state, and foreign regulatory requirements; regulatory developments in the United States and foreign countries; Aldeyra's ability to obtain and maintain intellectual property protection for its product candidates; the anticipated trends and challenges with Aldeyra's business and the market in which it operates; and other factors that are described in the risk factors and management's discussion and analysis of financial condition and results of operations, sections of Aldeyra's Annual Report on Form 10-K for the year ended December 31, 2015 and quarterly report on Form 10-Q for the quarter ended March 31, 2016 and June 30, 2016, which are on file with the Securities and Exchange Commission and available on the SEC's Web site at www.sec.gov.

In addition to the risks described above, and in Aldeyra's other filings with the SEC, other unknown or unpredictable factors also could affect Aldeyra's results. No forward-looking statements can be guaranteed and actual results may differ materially from such statements. The information in this presentation is provided only as of August 10, 2016 and Aldeyra undertakes no obligation to update any forward-looking statements contained in this presentation on account of new information, future events, or otherwise, except as required by law.

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

Todd Brady

Thank you, Steve, and thank you all for joining us again today. Before I turn the call back over to Steve to summarize the financials, I'd like to provide a brief corporate update. In 2016 we have made tremendous progress in the advancement of our lead compound NS2 across multiple well-controlled clinical trials.

Yesterday we announced the results of a randomized, double-blind vehicle controlled multicenter clinical trial of topical dermatologic NS2 in subjects with moderate to severe ichthyosis due to Sjögren-Larsson Syndrome. The trial demonstrated that NS2 led to reductions in ichthyosis severity that were clinically significant and superior to that of vehicle. This is the first rigorous industry sponsored clinical trial for any therapeutic in SLS.

In May, we announced the results of a randomized investigator masked, active-controlled multicenter Phase II clinical trial of topical ocular NS2 in subjects with noninfectious anterior uveitis. The trial demonstrated that the efficacy of NS2 and anterior uveitis was at least as good as standard of care topical corticosteroid, but NS2 patients did not manifest the elevations in intraocular pressure, which can cause glaucoma in some patients that were observed in corticosteroid treated patients.

In February, we announced the results of a randomized, double-masked, vehicle-controlled Phase II clinical trial of topical ocular NS2 in subjects with allergic conjunctivitis. The trial demonstrated that the efficacy of NS2 in reducing ocular itching and tearing was statistically superior to vehicle.

In all clinical trials there were no serious adverse events and NS2 was generally well tolerated. In total this year, we’ve announced positive data from three controlled clinical trials. These clinical trials are the first trials to explore the therapeutic activity of aldehyde trapping in any disease. And we believe that the evidence supporting the activity of NS2 our lead aldehyde trap in inflammation and inborn errors of aldehyde metabolism, two different classes of disease, is strong.

We are currently in discussions with the Food and Drug Administration about future clinical plans in allergic conjunctivitis and separately noninfectious anterior uveitis. And as we announced yesterday, we intend to meet with the FDA and European Regulatory Agencies about our recent clinical trial results in patients with Sjögren-Larsson Syndrome. We expect regulatory clarity on all programs either by the end of this year or early in 2017.

As Steve will describe, our current cash is sufficient to support operations through the third quarter of 2018 based on our current business plan, which includes six additional clinical trials, pending regulatory feedback. These trials are: number one, a dose ranging Phase II/III clinical trial of topical ocular NS2 in allergic conjunctivitis. Number two, a Phase II/III clinical trial of topical ocular NS2 in noninfectious anterior uveitis. Number 3, a Phase II clinical trial of topical ocular NS2 in another ocular inflammation indication. Number 4, a Phase I clinical trial of a systemic aldehyde trap. Number 5, a Phase II a clinical trial of systemic aldehyde trap in SLS, and number 6, a phase II/a clinical trial of a systemic aldehyde trap in SSADH Deficiency which like SLS is another inborn error of aldehyde metabolism.

Thus we believe that we are well capitalized based on our current operating and regulatory plans, and we look forward to executing on the six clinical trial milestones I have outlined.

Now with that, I’d like to call -- turn the call back over to Steve, to describe the second quarter 2016 financial results.

Stephen Tulipano

Thank you, Todd. Let me begin by discussing the first -- the three months ended June 30, 2016 compared to 2015. R&D expenses were approximately $2.8 million compared to $1.2 million for the three months ended June 30, 2016 and 2015, respectively. The increase of $1.6 million is related to the increase in our R&D efforts, including manufacturing and preclinical efforts, and an increase in personnel costs associated with an increase in headcount.

G&A costs were approximately $1.5 million compared to $955,000 for the three months ended June 30, 2016 and 2015, respectively. The increase related to increases in personnel costs due to headcount and legal costs.

Our net loss for the period was $4.3 million or $0.41 per share compared to $2.2 million or $0.27 per share for the three months ended June 30, 2016 and 2015, again respectively. For the six months ended June 30, 2016 compared to 2015, R&D expenses were $6.3 million, compared to $2.4 million for the same period in 2015. The increase of $4 million related to increases in our R&D efforts, including manufacturing and preclinical efforts, and increase in personal costs due to headcount and of course clinical costs.

G&A expenses were approximately $2.9 million for the six month period ending June 30, 2016 compared to $1.9 million for the same period in 2015. The increases there related to an increase in legal and professional service costs and personnel costs. Our net loss for the six-month period of 2016 was $9.3 million or $0.91 per share compared to $4.4 million or $0.58 per share in 2015. At June 30, 2016 we have total stockholders' equity of approximately $29.5 million and cash, cash equivalents and marketable securities of $32.5 million.

As you might remember, on June 1, 2016, we closed an underwritten public offering which we sold 2.8 million shares of common stock including a fully exercised [shoe] [ph] that netted approximately $12.6 million, after deducting commissions and other expenses.

We believe that our cash, cash equivalents and marketable securities as of June 30, 2016 will be adequate to fund operations through the end of the third quarter 2018, based on our current business plan which includes the six potential trials that Dr. Brady outlined earlier.

That concludes our remarks today. Thank you so much for participating. Operator, we would like to now open it up for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And we will take our first question from Ritu Baral with Cowen & Company.

Ritu Baral

Hi, guys. Thanks for taking the question. I guess, my first question is in your path forward of trials, the dose ranging, Phase IIs and Phase Is, there is no outline of another study in SLS ichthyosis. Wondering what your thoughts there are? And as we look at the five studies, can you give us what you’re thinking now as far as potential trial starts and when top line data maybe available just to give us our catalyst flow over the next 12 to 18 months?

Todd Brady

Thanks for the question, Ritu. Good morning. Yes, we have specifically not commented on the next clinical steps for topical dermatologic NS2 and SLS. What those next steps are depend on our discussions with the regulatory agencies in the United States and in Europe. So, at this time we are simply unable to comment. I will say that I think it's obvious from our call yesterday and our comments today, that we think these data are very, very strong.

On the starts and ends of the clinical trials in ocular, I would expect that we will be able to initiate most, if not all of the ocular clinical trials by the end of this year, and certainly we're busily preparing to do so at the moment. My expectation is that in allergic conjunctivitis, which obviously is not a rare disease, that data would be available next year. For uveitis and the other ocular inflammation clinical trial, I believe that depends on the size of the trial, the speed of enrollment, and our discussions with the regulatory agencies as to what would be required for eventual approval.

Ritu Baral

So this could be 2017 or 2018, depending on scope of the study?

Todd Brady

For the rare diseases, that is correct.

Ritu Baral

Okay. And for the systemic?

Todd Brady

The systemic, so -- and consistent with our comments that we made yesterday and I believe the quarter priors, we intend to initiate clinical testing of a systemic formulation next year. We are well on our way in terms of meeting that milestone, obviously we’ve not filed an IND and we would intend to do so next year. There will be, as I mentioned in today's call, a Phase I clinical trial that’s required for the systemic and pending results of our discussions with the agency, and then also the results of Phase I, we look to initiate Phase II, but we’ve projected that’s a 2018 event.

Ritu Baral

Understood. And have you had any interactions with regulatory agencies around the systemic formulation or any insights into what their potential safety points of focus maybe?

Todd Brady

That's a very interesting question, Ritu. So as you know, we’re talking about NS2, this is the active ingredient in all of these formulations. To initiate a topical critical trial whether it be topical ocular or topical dermal, the FDA does require some systemic toxicology particularly for dermal. And so, yes the FDA has by definition seen some systemic data with NS2. However launching a Phase I clinical trial and Phase II clinical trial for systemic formulations with NS2 will require more studies and obviously further interactions with the agency. But that's an excellent question.

Ritu Baral

Got it. Thanks for taking all the questions.

Todd Brady

Thanks, Ritu.

Operator

And we’ll take our next question from Adam Walsh with Stifel.

Adam Walsh

Hi, good morning, guys. Thanks for taking my questions here. A follow-up on, Ritu’s question, Todd, your answer about the topical SLS treatment, does that imply that you will at least explore with the agency the possibility of filing an NDA based on the data that were announced yesterday?

Todd Brady

I don’t want to comment in detail about exactly what we submit to the agencies. But I think you can derive from the nature of my comments that we intend to present the data of the trial as a fairly definitive indication of the activity of NS2 in this very rare disease.

Adam Walsh

That's great. And then just a separate question on the SLS topical -- the NS2 topical for SLS. Do you feel that there would be a need at some point to compare NS2 topical to some of the [indiscernible] or the moisturizers that are out there? I understand that they’re not improved for that indication, but at least for marketing purposes would there be a need to make that comparison in some kind of a structured way?

Todd Brady

Well, we didn’t present these data but in a way we’ve already done that. On the contralateral aspects of these patients, that is the side of the patient that wasn’t treated standard of care was allowed to some degree. And as we may have mentioned yesterday the untreated skin certainly did not look as good as the treated skin. I think going forward to the extent there are additional trials for instance in Europe, I do believe that that practice will continue, and that aspect of the subject’s body surface area that is not treated with NS2 would be treated with standard of care. Which does occasionally include acids and [indiscernible] as you mentioned occasionally will include retinoids, which can’t be used on a chronic long-term basis. I will say and Dr. Rizzo has made these comments in the past that those agents while they may provide a temporary effect generally are not used long-term by SLS patients just simply due to the impracticality of covering the whole body with those agents and this more or less de minimis activity of them.

Adam Walsh

Very helpful. Thank you.

Todd Brady

Thanks, Adam.

Operator

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

Yale Jen

Good morning, and thanks for taking the questions. Just for the Phase II/III studies for the uveitis as well as for the conjunctivitis, could you define the nature of those study a little bit in other words, is that potentially a part of the pivotal study or that's just additional sort of dose finding and more confirming the specific dose as well as the efficacy of that study?

Todd Brady

Yes, good morning, Yale. Thanks for the question. The allergic conjunctivitis study is dose ranging study. Dose ranging studies are required by the FDA for allergic conjunctivitis approval. Whether those studies in the past, let me comment generally, not necessarily specifically NS2, whether those studies in the past have been pivotal depend on the statistics used to analyze the primary endpoint which is as you know, itching. So I guess the answer is, whether it's pivotal depends on the strengths of the data and how the trial is analyzed. And in this case, I guess it would be possible that this is a pivotal study. But again that depends on how the FDA interprets the data from that trial. The uveitis trial is likely not dose ranging. I’m not sure that it's ethical to a dose range in that disease. This is a disease that can cause blindness or significant loss of sight. We’ve identified a dose of NS2 that makes sense to theoretically based on tissue levels in animals and based on aldehyde levels that we expect in inflammation. That dose demonstrated activity that was at least equivalent to standard of care corticosteroid. So I do not anticipate that we will dose range in uveitis. However I much caveat that comment with further discussions with the FDA.

Yale Jen

Okay.

Todd Brady

With that trial the pivotal study, I mean again I think it depends on discussions with the FDA and it depends on the strength of the data. But I would suspect that in this rare disease, generally fewer studies are required for approval.

Yale Jen

Would you guys intent at least initially when you start with -- discuss with the FDA whether uveitis you intend to do as part of the pivotal or you want more discussions with FDA before you made up your mind as how the study will be designed as the purpose of that?

Todd Brady

Yes, so the -- well, discussions with the FDA will determine precisely how we design the trials I’ve outlined here in allergic conjunctivitis and noninfectious anterior uveitis, because obviously -- and I think this is the point you’re making is that, if a trial has the potential to be pivotal we certainly would like to design it in a way rather than not design it in a way, so that it's not pivotal.

Yale Jen

Okay, great. That's very helpful. Just one more follow-up question. On the six indications -- the studies that you will conduct, you mentioned one which is a systemic one, but not specific to what indication of that. And also I recall earlier you guys have mentioned there is a number of inflammatory -- sort of also inflammatory indications you are exploring the possibility. So can I connect the dots for those two or I’m just stretching too much?

Todd Brady

Well, you have a good memory, Yale. Let me just comment briefly on the development program for systemic. So the Phase I study that we’ve outlined is in normal healthy volunteers and the point of that study is to assess the pharmacokinetics as well as the safety and tolerability of the compound. Subsequently, we would intend to test the compound in SLS and SSADH assuming that the pharmacokinetics safety and tolerability are acceptable from Phase I. We have in the past suggested that there are other indications where a systemic aldehyde trap might have utility and one of those is autoimmune or severe inflammatory crisis where a systemic immune suppressant such as steroids would be given acutely to impact the course of the disease over a day or two. We’re continuing to think about that and explore those possibilities, but I think that the data -- the clinical data and the pre-clinical data we’ve received in SLS and SSADH have moved those indications up to the top of the list to test systemically, and I think the data from, we announced yesterday would support that prioritization.

Yale Jen

Okay, great. Thanks a lot, and congrats again.

Todd Brady

Thanks, Yale.

Operator

[Operator Instructions] And it appears there are no further questions at this time. That concludes today's conference. Thank you for your participation.

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