Aldeyra Therapeutics, Inc. (ALDX) Q1 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the Aldeyra Therapeutics’ First Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Sam Martin. Thank you, Mr. Martin. You may begin.

Good morning everyone and welcome to the Aldeyra Therapeutics’ first quarter conference call and audio webcast. With me today are Dr. Todd Brady, President and Chief Executive Officer; and Stephen Tulipano, Chief Financial Officer of Aldeyra Therapeutics. Earlier this morning, Aldeyra issued a press release announcing the Company’s financial and operating results for the first quarter of 2015. We encourage everyone to read today’s press release which is available on our Aldeyra’s website at www.aldeyra.com. In addition, this conference call is being webcast through the Company’s website and will be archived there for future reference. Please note that various statements we make during this call about the Company’s business, financial position, business strategy and plans and objectives for Aldeyra’s future operations are considered forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks, changes in circumstance, assumptions and uncertainties associated with the Company’s business. These risks are described in the Risk Factors and Management Discussion and Analysis of Financial Condition sections of Aldeyra’s Annual Report on Form 10-K for the year ended December 31, 2014, which is on file with the SEC and available on the SEC and Aldeyra websites. Additional factors may also be set forth in those sections of Aldeyra’s quarterly report on Form 10-Q for the quarter ended March 31, 2015 which is expected to be filed with the SEC later this week. We encourage all investors to read these reports and our other SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 13, 2015. Aldeyra undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With that, I would now like to turn the call over to Dr. Todd Brady. Todd?

Thank you, Sam. And thank you all for joining us this morning for our first quarter 2015 conference call. This quarter was very active for us, both clinically and financially. During the quarter, we initiated two Phase II clinical trials with our lead candidate in Sjögren-Larsson Syndrome and noninfectious anterior uveitis. And in addition, we raised approximately $10 million in two private placements and last week priced a follow on offering of approximately $20 million. Regarding clinical development as most of you know, our lead candidate is NS2, a novel molecule that traps free aldehydes, which are an endogenously occurring class of toxic chemicals. High levels of aldehydes have been show to mediate certain diseases, both rare and common, especially inflammatory diseases. And NS2 traps aldehydes and facilitates the metabolism or degradation of those aldehydes. We are initially focusing on two different diseases with NS2, Sjögren-Larsson Syndrome or SLS and noninfectious anterior uveitis. We were pleased to initiate Phase II clinical studies for both of these indications during the first quarter. SLS is a rare disease caused by genetic mutations that lead to the loss of the function of a particular enzyme. In March, we opened enrollment for a Phase II clinical trial and the first patient was enrolled one week later. Our clinical trial site at the University of Nebraska Medical Center is the top treatment center for SLS in the United States. We anticipate clinical data from this trial by the end of 2015. Completing this trial will be a major step towards demonstrating the efficacy and safety of our novel aldehyde trap in a rare disease, which currently has no FDA approved therapy. We also made significant clinical progress in the first quarter on our second disease indication, noninfectious anterior uveitis, which is also a rare disease that maybe mediated in part by pro-inflammatory aldehyde. Noninfectious anterior uveitis is characterized by inflammation in the front of the eye, pain, impaired vision and photophobia. We opened enrollment in a Phase II clinical trial in late March and enrolled the first patient in April. This trial has been conducted at top anterior uveitis clinical trial sites in the United States and is led by Dr. Stephen Foster, a recognized clinical expert in ocular inflammation. This is a major milestone for Aldeyra as we strive to demonstrate the ability of our aldehyde trap to treat in array of inflammatory diseases. And in this sense noninfectious anterior uveitis is a proof-of-concept of NS2 in inflammation. Now importantly, we expect that any anti-inflammatory signal, in this trial, may lead to other clinical trials in other inflammatory diseases that may involve the eye or other organs. Let me now turn to our activities in the capital markets which has allowed us to further strengthen our balance sheet. Our increase in cash reserves will allow us to continue with our present clinical development and also expand our aldehyde trapping platform to include the clinical testing of additional indications. You will recall that during the quarter, we completed two capital raises for an aggregate net amount of $9 million. And in addition, last week, we announced the pricing of our third capital raise since closing our IPO last May. The net proceeds of this follow on offering, which is expected to close this week, will be approximately $18.8 million, our largest capital raise to-date. In addition, to the initiation of other clinical trials of topical NS2, the use of proceeds of our recent financings will be directed to the expansion of R&D infrastructure as well as to development of systemic that is injectable or oral formulations of NS2 and other aldehyde traps that maybe used in future clinical trials, which may include severe inflammatory diseases such as autoimmune crises, further trials in Sjögren-Larsson Syndrome to address neurological aspect of a disease and another aldehyde dehydrogenase loss of function disease called succinic semi-aldehyde dehydrogenase deficiency where NS2 or other aldehyde traps have the potential to act as a form of enzyme replacement therapy. Let me also take this opportunity to highlight the considerable attention that NS2 is receiving from the scientific community. In February, novel anti-inflammatory effects of NS2 in three different animal models were presented at the 2015 American Academy of Allergy Asthma & Immunology Annual Meeting. In March, novel data on the effects of NS2 in a cell model of SLS were presented at the Society for Inherited Metabolic Disorders Annual Meeting. Last week at the 2015, Association for Research in Vision and Ophthalmology Annual Meeting, we presented novel data on the effects of topically administered NS2 in two different models of ocular inflammation, one of which is an animal model of uveitis, and one of which is an animal model of ocular fibrosis or scarring. Lastly novel data on the effects of NS2 in an animal model of radiation-induced mucositis, have been accepted for the 2015 Multinational Association of Supportive Care in Cancer annual meeting which will be held in Copenhagen in June and is the premier cancer supportive care conference worldwide. The data suggest the potential of NS2 as a prophylactic and therapeutic approach for mucositis and other diseases characterized by severe inflammation. Overall we are very excited about the direction of the company. We began 2015 with the quarter full of significant clinical scientific and financial achievements and momentum and we look forward to continuing this trend. Now, I will ask Steve Tulipano, our Chief Financial Officer, to discuss our financial results for the first quarter of 2015. Steve?

Thank you, Todd. Good morning everyone. I hope everyone is well. Let me just point to a few highlights in the quarter and then we’ll open it up for questions. As Todd pointed out, we raised $9 million in net proceeds through our two private placements in January. Additionally, we have commitments on another $18.8 million in net proceeds through our follow-on. We initiated Phase 2 clinical trials of NS2 for the treatment of noninfectious anterior uveitis and SLS in the quarter. Additionally, we presented two posters in Q1 and two in the month of May and we have another scheduled for June; each of these were at major scientific meetings. From a financial perspective, the company itself is fundamentally different than what it was last year. So, I only indicate that because financial comparisons last year may not be entirely meaningful. Our current balance sheet is very clean; our capital structure has been simplified; and our P&L is fairly straight forward now without the complexities of the accounting for derivative instruments that we had in the past. With that being said, in the first quarter of 2015, we reported basic net loss of $2.1 million or $0.32 per share, based on a weighted average of 6.7 million shares outstanding that compares to a basic net loss of $13,000 or $0.04 per share based on 327,000 shares in the same period in 2014. R&D expenses totaled approximately $1.1 million for the first quarter of 2015 compared to $444,000 in 2014. The year-over-year increase of approximately $692,000 in R&D was primarily related to increase in our external research and development expenditures and increased headcount. In Q1 2015 G&A expenses were approximately $972,000 compared to $801,000 for Q1 2014. The increase of $171,000 is related to costs associated with being a public company and additional G&A personnel. Total operating expenses for Q1 were approximately $2.1 million compared to $1.2 million in Q1 of ‘14. Included in operating expenses for the quarter were $640,000 in non-cash stock-based compensation expense. We ended the quarter with $15.7 million in cash. And as Todd has indicated and I’ve indicated previously, we have commitments for another $18.8 million in net. So that concludes our prepared remarks. We’re happy to open it up for questions at this point. Adam?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Yale Jen with Laidlaw. Please go ahead with your question.

Good morning gentlemen and congrats on the enriched balance sheet. And the first question I have is that was this enriched balance sheet -- could you give us a little more color in terms of potentially other R&D expending sort of directions or activity you might have for the remaining of this year or even going to 2016?

It’s a good question. As I mentioned previously in my comments that the primary use of proceeds for the raise will be to allow us to continue our current clinical development programs and by that I mean, have the opportunity to perform subsequent trails in Sjögren-Larsson Syndrome and uveitis. And in addition, as I’ve mentioned in my remarks, I think there is the opportunity given the platform nature of aldehyde trapping to test other indications with the topical forms of NS2. And then finally, again as we stated, I think that the systemic formulation of aldehyde traps is critical for the future of this company as we attempt to treat the systemic complications of inflammatory diseases and Sjögren-Larsson Syndrome in general. So, throughout this year, you might expect to hear about activities in all of those areas, Yale.

And the next question is that the timeline for the release of the top-line data for both SLS and noninfectious anterior uveitis are both toward the end of the year or there is any other sort of details colors in terms of information in terms on the day data releases?

Yes, specifically, in terms of each program, we have not provided additional information as to the timing of data. The Sjögren-Larsson Syndrome as you know Yale is a much smaller trial and I think from our standpoint much more attractable in terms of enrollment. And we’re continuing to believe that those data should be by the end of the year. Uveitis is more difficult to predict simply because to enroll a patient, patients have to first flare with the disease, not all uveitis patients are constantly flaring. In fact, the average flare rate for uveitis patients is over 12 months -- once every 12 months at least. And so, the flare rate depends on a patient-by-patient basis and then those patients report to the clinic for the clinical trial. So, I think we have a little less of visibility on the timing of those data. But we’re reiterating our previous disclosures that data from both of these trials should begin to come in by the end of the year.

And the last question here is a just follow-up on earlier questions which is that these indicated that there will be -- you will develop, systemically deliver NS2 or other derivatives. Would that be crucial for you to expand it into other clinical indications, or you could expand it to other indications possibly using the current formulation or more so, the regional delivery systems?

So, the answer is yes to both questions. First of all on the topical, there are lots of topical diseases, especially in the eye that are likely mediated by aldehydes in terms of generating inflammation that’s the first thing I’d say. Systemically Sjögren-Larsson Syndrome and this disease that like Sjögren-Larsson Syndrome called succinic semi-aldehyde dehydrogenase deficiency or SSADH for short are both aldehyde loss of function diseases and both have neurological complications. And I think for the treatment of those complications in a potential cure for the symptomatology systemically, we would need a systemic formulation and that’s the whole point of the efforts we have now and developing a formulation that can be administered either as an injectable or an oral or both to treat the sort of broader complications of these diseases. And in addition other inflammatory diseases such as autoimmune crises would be a minimal to this approach as well.

Thank you. [Operator Instructions] Thank you. Ladies and gentlemen, there are no further questions at this time. I’d like to turn the floor back over to management for closing remarks.

We appreciate all of you joining us again for another quarterly conference call. And as I think you can appreciate Aldeyra has had a great first quarter. And we look forward to continuing to update you all on our progress going forward. Thanks again.

Thank you. Ladies and gentlemen, this does conclude our teleconference for today. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.