Good day, ladies and gentlemen, and welcome to the Aclaris Therapeutics 2017 Earnings and Confluence Acquisition Conference Call. At this time, all participants are in a listen-only-mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions]. I would now like to introduce your host for today’s conference call, Ms. Kamil Ali-Jackson. You may begin.

Thank you. I’m Kamil Ali-Jackson, Chief Legal Officer for Aclaris. Please note that earlier today, Aclaris issued its press release announcing second quarter 2017 financial results. For those of you who have not yet seen it yet, you will find the release posted in the Investors section of our website at www.aclaristx.com. Joining me for the call today are Dr. Neal Walker, President and Chief Executive Officer; Chris Powala, our Chief Operating Officer; Dr. Stuart Shanler, our Chief Scientific Officer; Frank Ruffo, our Chief Financial Officer; and Brett Fair, our Senior VP of Commercial Operations. Before we begin our prepared remarks, I would like to remind you that various statements we make during this call about the company’s future results of operation and financial position, business strategy, and plans and objectives for Aclaris’ future operations are considered forward-looking statements within the meaning of the federal securities laws. Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties that could cause actual results to differ materially from those reflected in such statements. These risks are described in the Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of Aclaris’ quarterly report on Form 10-Q for the quarter ended June 30, 2017 filed with the SEC today; our annual report and Form 10-K for the year ended on December 31, 2016 filed with the SEC on March 15, 2017; and other filings Aclaris makes with the SEC from time to time. We encourage all investors to read these reports and our other SEC filings. These documents are available under the Financial Information section of the Investors page of Aclaris’ website at www.aclaristx.com. All the information we provide on this conference call is provided as of today, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. Please be advised that today’s call is being recorded and webcast. A link to the webcast is posted in the Investors section of our website. I’ll now turn the call over to Dr. Neal Walker, President and CEO of Aclaris. Neal?

Thank you, Kamil. Hello, everyone, and thank you for joining our second quarter conference call today. I will start with an update on our A-101 clinical development program, and then I’ll hand it off to Stuart Shanler, our Chief Scientific Officer, who will then briefly address our other ongoing clinical activities and our IP estate. Brett Fair, our Head of Commercial, will provide an update on our pre-commercial activities related to our lead assets. And then Frank Ruffo, our CFO, will review our financial results for the second quarter. I will then provide an overview of the Confluence transaction that we announced this morning, and after our prepared remarks, we’ll open up the line to take your questions. Chris Powala, our Chief Operating Officer, will also be available during the question-and-answer portion of our call. Regarding our lead program, A-101 40% topical solution for the treatment of seborrheic keratosis, as you are all aware, our PDUFA target action date for approval in the United States is December 24 of this year, and we are in the expected dialog with the FDA as the evaluation process progresses. Regarding the ex-U.S. approval process, earlier this month we filed our MAA for A-101 40% topical solution for the treatment of SK in the EU. If approved, A-101 40% would become available to become commercialized in 16 countries in the European Union, and we expect to begin hearing on the approvals in about a 12 to 15-month timeframe. As a reminder, we are building a commercial infrastructure for A-101 in the U.S. market, but we do not intend to commercialize A-101 outside the United States ourselves, but instead we’ll seek to partner, and those discussions are ongoing. I will now turn the call over to Dr. Stuart Shanler, our Chief Scientific Officer, to provide an update on our other clinical programs and on our intellectual proprietary estate. Stu?

Thanks, Neal. Firstly, regarding our other ongoing clinical activities, in June, we initiated 2 Phase 2 clinical trials of A-101 45% topical solution for the treatment of common warts. These Phase 2b clinical trials are designed to evaluate the safety, tolerability and dose frequency of A-101 45% compared with its matching vehicle or placebo. Approximately 240 patients are expected to be randomized in the 2 double-blinded trials, which are being conducted at 30 investigational centers within the United States. As a reminder, we plan to position A-101 45% as a prescription product, and as such, patients are self-applying the drug in these trials. Turning to our Janus kinase, or our JAK inhibitor portfolio, as you all know, we are targeting multiple dermatologic diseases including all alopecia areata, both patchy alopecia areata and alopecia totalis universalis, vitiligo and androgenetic alopecia. Late last month, we submitted an investigational new drug application, it’s an IND application, to the U.S. FDA for our topical JAK 1/3 inhibitor, ATI-50002, for the treatment of alopecia areata. Following FDA clearance of the IND, we expect to initiate two Phase 2 clinical trials of ATI-50002 in patchy alopecia areata during this, the second half of 2017. These are randomized, double-blinded, vehicle-controlled studies, and will be conducted at multiple investigational centers across the United States. We also continue to expect to initiate a Phase 2 trial of ATI-50002 for the topical treatment of vitiligo in the second half of 2017. And to initiate a Phase 2 dose ranging trial of our oral JAK candidate, that’s ATI-50001, for the oral treatment of alopecia totalis and alopecia universalis in the second half of 2017. As a reminder, we are developing both oral and topical dosage forms for alopecia areata in order to address the phenotypic spectrum of disease inherent in this, as in many other dermatologic disorders. Regarding our IP estate, in June, the U.S. PTO issued U.S. Patent No. 9675639, or the 639 patent, peroxide formulations and methods and applicators for using the same. In all, 70 claims were issued covering the formulations and methods of use of A-101 40% topical solution for the treatment of seborrheic keratosis, A-101 45% topical solution for the treatment of common warts, and additional subject matter. This patent provides additional protection for our topical formulations, and has an expiry date in July 2035, and we are continuing to pursue additional claims in continuation applications. I will now pass the call over to Brett Fair, our Senior Vice President of Commercial Operations, who will discuss our launch planning activities for A-101 40% for SK. Brett?

Thank you, Stu, and good morning, everyone. I would like to provide an update on our progress regarding the infrastructure build and launch readiness activities for A-101. With respect to our infrastructure build, our commercial teams continues to expand with the addition of several key hires, including our director of trade and customer service, our director of sales operations, and our director of training and development. I’m impressed with the level of talent that we’ve been able to attract to date, and I’m encouraged by the Influx’s individuals expressing interest in joining the Aclaris team. We believe that a strong team across all levels of the commercial organization is essential as we pave the way for a successful launch. To that end, we are currently in the process of recruiting and hiring a team of 6 sales managers with the goal of having these individuals on board in October. In turn, these managers will begin recruiting our 50 to 60-person sales team, and extending contingent offers in the fourth quarter of this year. With respect to our launch readiness activities, our launch positioning for A-101 will focus on lesions located in cosmetically sensitive areas. We believe facial and neck lesions represent the greatest market opportunity for A-101 at launch, and will best showcase the benefits of A-101 in clinical practice. We also have a clear view on a SKU strategy to support positioning, and furthermore, we continue to hone in on our pricing and have made excellent progress with our professional campaign development. Externally, Aclaris continues to have a strong presence at the various dermatology meetings and conferences, and we are encouraged by the feedback that we have received regarding our company and the anticipated approval of A-101. We have also begun working on our consumer campaign. With a prevalence of over 80 million sufferers, we believe that we have an excellent opportunity to engage patients and drive awareness for SK treatment. Based upon the work that we have done with patients to date, we understand that many patients have a willingness to pay out of pocket for SK treatment. Particularly for treatment that limits the risk of scarring, pain, and or dyspigmentation. We recognize that physicians are careful about treating lesions in cosmetically sensitive areas such as the face and neck, and that patients have a willingness to pay more when treating facial and neck lesions. In summary, the current market dynamics align well with our target product profile, we are pleased with the progress that we have made and continue to be excited by the opportunities in front of us. With that, I’d like to turn the call over to Frank Ruffo, our CFO. Frank?

Thanks, Brett. Good morning, everyone. As I take you through our second quarter financial results, please reference the financial tables that can be found in today’s press release. For the 6 months ended June 30, 2017, our operating cash burn was $22.7 million. We also raised $19.3 million in net proceeds from new issuances of common stock. As a result, our June 30, 2017 balance sheet had cash and investment balances of approximately $170 million. As part of the Confluence acquisition earlier this month, we paid approximately $10 million in common stock of Aclaris and $10 million in cash as an upfront consideration for the business. We believe that the current cash and investments on hand after this acquisition are sufficient to fund our current operating activities through at least the fourth quarter of 2018. This estimate does not give effect to funding from any potential new business development transactions, additional financing activities, or potential milestone payments payable under the Confluence agreement. For the 6 months ended June 30, 2017, our total operating expenses were $28.2 million compared to $26.1 million for the same 6-month period in 2016, while our net loss was $27.4 million for the 6 months ended June 30, 2017 compared to $25.9 million for the same period last year. During the second quarter of 2017, our total operating expenses were $15.3 million compared to $13 million for the second quarter of 2016, while our net loss was $14.8 million for the second quarter of 2017 compared to $12.9 million for the same quarter in 2016. R&D expenses decreased by $1.9 million in Q2 2017 compared to Q2 2016. The change was primarily as the result of a $4.6 million decrease in clinical trial costs associated with our A-101 Phase 3 trial for SK, which was completed…

Thank you, Frank. We are very pleased to announce our latest acquisition this morning. I would now like to provide you with a brief overview of the Confluence assets and business. I would ask that you turn to the slides that were provided, and we’ll start on slide 3. This is a summary of the transaction. So what do we get? There are really 3 main components: assets, a platform, and world-class industry leaders. On the asset front, I would like to highlight the following: we have next-generation JAK inhibitors, both oral and topical; ITK inhibitors, which can be thought of as IL-17 inhibitors; and oral MK-2 inhibitors, which can be thought of as IL-17 inhibitors; and oral MK-2 inhibitors, which can be thought of as oral anti-TNF agents. We also secured a proprietary drug discovery engine called the KINect platform, which is combined with the disease biology and immunology expertise inherent in the team. And finally, we will onboarding a wonderful group of domain experts. These scientists were co-inventors of tofacitinib, and were former leaders of Pfizer’s kinase program, and the team has over 300 years of combined drug discovery experience. Turning to the next slide, Slide 4. How did we identify Confluence Life Sciences as a transaction? Actually, we were working with the team for over a year, and working with them on soft JAK inhibitor technology on a collaboration since the 2006 time period. And pre-transaction, you can see in the top of the slide what we look like with both oral, topical assets, a robust intellectual property estate, drug development infrastructure and scientific leadership position in hair loss in particular. In addition to a near-commercial cash pay program. And now we layer on, again, assets, platform and people on the Confluence side on our way to…

[Operator Instructions]. Our first question comes from Louise Chen with Cantor Fitzgerald.

Hi, guys. It’s Brandon on for Louise. Congratulations on the deal this morning and all the progress during the quarter. What are your thoughts regarding the upcoming FDA Ad Com, and will you be present or be in attendance? And then secondly, who would you compete with in the hair loss market both in terms of commercialized products at the moment and those in development? Thank you.

Okay, I’ll handle that question. Thank you. On the FDA Ad Com, I assume you’re referring to the alopecia areata meeting in early September to discuss patient reported outcomes. I think it’s a very positive signal. Obviously it matters what -- how the patients feel about their disease. And we really want to understand how to integrate that thinking into endpoints that are definable in a clinical study. So I think this is a great sign. It shows the interest that the FDA has in this indication. On the second question, how do we compete with upcoming -- with other development products. Again, I assume you’re talking about on the alopecia areata front. I think it’s just important to note that we are targeting both oral and topical programs. I think we’re one of the only companies that is doing that. And I think that’s important when we think about being able to look at the market opportunity in full, and just looking at how many dermatology indications are treated. It’s usually treating with an oral and then transitioning to a topical. And we feel, again, this is one of the reasons that we acquired Confluence. When you look at how this market evolves over time, people are going to get more specific, more selective in their JAK inhibitor technology and in their kinase technology. And I think now with the great leadership that we have on board here in-house, it gives us quite a nice competitive advantage.

Our next question comes from Paul Ellis with JMP Securities.

Don Ellis. Couple questions. Good morning, guys. Are you expecting any data to come out this year to help us distinguish between the efficacy side effects of the various JAK 1, 2 and 3 inhibitors? And then with respect to common warts, can you give us some information about the primary, secondary endpoints and maybe the duration of these trials and when you expect results? And then the last question is about the MAA you field for seborrheic keratosis. How do you plan on marketing and launching your product in Europe? Thanks.

Thanks, Don. I think on the first question kind of pulling forward some of that data. We talked about, once we start our trials on our JAK inhibitor, both on the oral and topical side, that we would have a full data set in 2018. We’re always looking at ways to pull that data forward, and I think you can look at open label setting on the side or looking at interim results, or taking an interim look in Phase 2 to look at pulling some of the value forward. And we’re still exploring some of those strategies. On the wart front, the primary endpoint is clearance. That’s where you have to get. Near-clear doesn’t count in treating warts. I think the duration of the trial is very similar to what we had conducted last year in our IIa study. It was an 8-week trial where we administer the product weekly for 8 weeks, and then we look at the primary endpoint 1 week post the last treatment. And then of course, as you’re well aware, you like to follow those patients for 3 months to ensure durability of response. So that’s what we’ll be looking at in this trial. And the major difference between this trial and the last one, I think two major differences are one, the patient will be applying the drug, and then we also are studying it in children, down to about 8 years old. So that’ll be a slightly difference versus last year study. And then in terms of the MAA, we are in active dialog on looking for a partner in the EU, so a nice milestone just a few months after filing the NDA to get this filed in the MAA I think is very efficient drug development process. And now we turn our attention to looking for the right partner on a country and region-specific basis.

If I could throw in one additional question. Again, you have a broad pipeline you’re working on now. Have you guys given any thought to molluscum?

Yes, we have. It’s a very similar condition to warts. That is in the planning process. We’ve certainly had a lot of discussions with KOLs about that particular indication. And I think as we all know, there’s not necessarily an approved product in molluscum at the moment. And we think we would potentially stack up very nicely in that regard, given the lack of discomfort versus other treatment options with our product. So that is in the planning process.

Our next question comes from Tim Lugo with William Blair.

For the Confluence acquisition, I can’t tell from the pipeline slide. Are you taking a soft JAK inhibitor into alopecia areata, and can you just give us maybe your general confidence still around 5001 and 5002? Has anything changed over the past month? I know obviously with this upcoming Ad Com, there will be a light on the indication.

Thank, Tim, and nothing’s changed on our plans for the lead assets. Those are moving full steam ahead. The soft JAK that we’ve been looking into, we always have an eye on how the market will evolve, and I think people will differentiate their products in multiple ways, based on onset of action, durability, safety, things like that. And we view the soft JAK as applicable to things like male-female pattern baldness. We think it’s the lead for an indication such as that that’s chronic and has to demonstrate a next level of safety. And I think also when we look at potentially getting into areas like atopic dermatitis, mild to moderate atopic derm, which is more in kids with abraded skin, we like the soft JAK concept. This acquisition for us just continues to build, and just to reiterate I think builds on the existing development processes that we already have in place, and importantly adds world-class expertise to the table as we continue to delve into this area. And as a reminder, if you look at some of the excitement that’s been going on in a lot of the derm meetings, it’s been around this category of drugs. So we felt that it was important to continue to build our knowledge and scientific leadership position in this area.

Understood. What’s the timing for the soft JAK program entering the clinic? I’m not sure I heard that.

We will be giving a more full guidance on that at our Investor Day. We’re looking at approximately 2 years for some of our pipeline assets.

Okay. And maybe pivoting to A-101. It sounds like you continue to do work on the prevalin [ph] side and maybe some market research. Has there been any movement in your general feelings about what the dollar amounts per treatment people are willing to pay? And maybe at the initial launch, are there areas of the body which you’ll be targeting first? Maybe the face versus the trunk? Can you just give me some updated thoughts?

Sure. I’ll start and then I’ll hand it off to Brett. I think we’re locked and loaded on targeting the face and neck area at launch. We think that’s where the aesthetic need is greatest, and that’s where the product does extremely well. So we will continue to target that area. And I think, Brett, maybe if you want to comment a little bit on the pricing.

Yeah, sure thanks. How are you Tim? So, in terms of price, particularly as we’re honing in on face and neck lesions in those cosmetically sensitive areas, we understand that patients have a greater willingness to pay when treating there, and that helps us. I think we’re going to be at the high end of where we’ve been guiding on the price and feeling pretty good about that with our positioning. And that’s where a big unmet need is currently. They’re changing what they do when they’re changing those cosmetically sensitive areas. They’re either going lighter with a cryosurgery or they’re toggling over to lesser desiccation or something like that. Our target product profile is very strong there, so we’re feeling pretty encouraged about where we’ll land with price ultimately, and we’re very pleased with where we’re positioning the product at launch.

Our next question comes from Seamus Fernandez with Leerink Partners.

Congrats on the progress on this quarter. Just a couple of quick questions for me. Wondered if you could provide any color on the pace of enrollment for the upcoming warts study. Just to try to get a sense, again, of how motivated the patient population is for treatment. And the second one was on the Confluence deal. Wanted to get a sense of how the new mechanisms that you’ve highlighted, like the ITK and MK-2. Could be positions versus oral JAKs in autoimmune. Thanks.

Sure. On the first question, pace of enrollment, it’s going as expected. We anticipate having initial top line data. What we’ve messaged is January timeframe. But we actually think with how the enrollment’s going that we could have top line data in December. We’ll see. But we think that’s going as planned. On the Confluence side, I think the portfolio is extremely complementary. So we have the ITK, which affects IL17, which is, as we know now, is more germane to things like psoriasis but also atopic. And I think we’ve seen the need both for oral and topical treatments in both atopic and psoriasis. And I think the MK-2 is very much applicable. In fact, the team was looking at that originally for things like COPD, RA, other therapy areas, but also included in that were things like psoriatic arthritis and psoriasis. I think one of the things with the hang-ups with the p38 kinase class was the tachyphylaxis. And give the team’s expertise, they were able to figure out how to get around that issue. And so we’re really excited about the potential for that product. And so we view it as a very complementary portfolio. We get of course the JAK expertise and a pipeline of molecules under that. And then now we’re expanding into these new areas, which allow us to look at not only additional disorders, like atopic and psoriasis, even some additional dermatologic disorders and even look at some adjacencies.

Our next question comes from David Steinberg with Jefferies.

I apologize if you’ve already covered this. There are a number of calls going on. On common warts, there’s not really a pharmaceutical market right now. And I was just curious, what sort of work have you done in terms of reimbursement of Aldara and some other products used off label, but there’s nothing yet approved? And also, just in terms of patient populations, what’s the current thinking in terms of addressable population? Thanks.

Brett, would you like to handle that question, please?

Yes, sure. In terms of common warts, it’s viral, it’s contagious. It will be reimbursed by the payers. They’re currently reimbursing, as you say, products like Aldara and some of the other drugs that are indicated for external genital warts. Based off the work that we’ve done with payers, we’re confident that we’ll have coverage there. Particularly if we’re pricing the product appropriately. In terms of the patients, the addressable patient market, there’s about 2 million patients in the offices currently. It starts with derm, so it starts with the dermatologist, and then you’re able to cascade out to targeted pediatricians, primary care providers. I think it’s a good market, it’s a tight market. It’s one that we can address quite easily. And I think the Rx retail chain path is the right path for this particular product.

Okay. And then just sticking on pricing. I know it’s really early, but you’re spending a lot more time talking about the JAK program. Any analogous products in the product that you think you’d use as a reference for pricing? I’m just trying to get a rough sense of the size of the dollar market. The patient population is pretty well elucidated. Thanks.

Brett, would you like to handle that?

Yeah, it’s early days yet, David, so we’re still looking at the pricing there. What we do know is that there’s a real big unmet need. There aren’t any -- there’s a great need there for these products. The payers, they understand that the utility for JAKs in this condition, they understand that these are high science molecules that they’re reimbursing at high levels today. So for alopecia areata, for vitiligo, they’re going to cover them individually, so they’re not going to cover the drug across all. They’re going to cover by indication. So they’ll look at each product for vitiligo, for alopecia areata. And there are differences between the oral and the topical, so we’re refining that. I think the market will bear a fair amount.

I think, if I can step in and add one comment to that, I think when we look at particularly the oral side, we’ve seen the Otezla pricing on the small molecule side for psoriasis, and I think that’s a useful analog to thing about when you think about some of the small molecule novel science that we’re developing.

And I’m not showing any further question at this time. I would like to turn the conference back over to our host.

Thank you, everybody, for joining the call today. We’re really excited about this new acquisition, and we think it bolts on really nicely to our existing core operation. And we now feel like we have a fulsome pipeline to feed our operation. We’re really excited to be joined by new colleagues here at Confluence, and just leaders in the kinase field. And we’ll be updating folks on an Investor Day in the back part of the year, and we really appreciate you joining the call today. Thank you.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.