Good morning and welcome to the Conference Call Entitled Aldeyra Therapeutics' Provides First Quarter 2018 Financial Results. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Steve Tulipano, Chief Financial Officer. Please go ahead sir.

Good morning, everyone. I am Steve Tulipano, CFO with Aldeyra Therapeutics and welcome to the Aldeyra Therapeutics conference call to discuss our first quarter 2018 financial results. With me today is Dr. Todd Brady, 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, competitive position, industry environment and potential growth opportunities among other things. These statements are based upon the information available to the company today and Aldeyra assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from those projected in the company's forward-looking statements. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company's Press Release 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?

Thank you, Steve. Thank you all for joining us today to discuss our first quarter 2018 financial results. We are pleased with our progress in the first quarter of 2018 as we continue to advance our product pipeline for the treatment of immunological diseases. In particular, we've recently initiated two late stage clinical trials and announced collaboration with Janssen at Johnson & Johnson Company to develop novel medicines for the treatment of inflammation. Our pipeline continues to grow and we look forward to announcing Phase 2b clinical results in dry eye disease in the second half of this year. Phase 3 results in allergic conjunctivitis late this year or early next year and Phase 3 results in noninfectious Anterior Uveitis and Sjögren-Larsson Syndrome in 2019. Our lead product candidate reproxalap and related compound developed by our Aldeyra represent a novel approach for the treatment of inflammation and other diseases caused by aldehydes mediators which we refer to as RAS or Reacted Aldehydes Species that are proven inflammatory. And which represent a new therapeutic target. In January of this year, we announced the initiations of our Phase 2b clinical trial of topical ocular reproxalap in dry eye disease. And in April of this year we announced the initiation of Phase 3 clinical trial of topical ocular reproxalap in allergic conjunctivitis. We believe that the potential markets for reproxalap and ocular inflammation are large. Dry eye disease is a chronic condition that affects an estimated 20 million patients in the United States, and approximately 30 million patients in the United States are thought to suffer from allergic conjunctivitis that is not sufficiently treated with currently available medicines. For dry eye disease, reproxalap could represent a novel mechanistic approach for a condition that is generally considered by patients and physicians to be inadequately…

Thank you, Todd. For the first quarter of 2018, we reported a net loss of approximately $8.4 million compared to a net loss of approximately $5.1 million for the same period last year. Basic and diluted net loss per share was $0.43 compared to $0.37 per share last year 2017. Losses have resulted from the costs of our clinical trials and research and development programs, as well as from our general and administrative expenses. R&D expenses were $6.6 million for the first quarter of 2018, compared to $3.4 million for the same period in 2017. The increase of $3.2 million was primarily related to the increase in research and development expenditures, including manufacturing, preclinical, and clinical development costs, and an increase in personnel costs. General and administrative expenses were $1.9 million for the first quarter compared to $1.7 million for the same period last year. The increase of $200,000 is primarily related to an increase in legal and patent-related costs, rent, consulting costs, and personnel costs. In the first quarter of 2018, total operating expenses were approximately $8.5 million, compared to $5.1 million in the prior year. Cash, cash equivalents, and marketable securities were $38.9 million as of the end of the first quarter of 2018. That concludes our remarks today. Thank you for your participation. Operator, we would now like to open the call to questions.

[Operator Instructions] The first question comes from Adam Walsh of Stifel. Please go ahead.

Good morning, guys. This Neil Carnahan on for Adam. I was wondering if you could help us understand what to be looking for in the upcoming dry eye data? What would define a positive outcome there?

Great. Neil, good morning and thanks for your question. It's a great question and it's important to note that the Phase 2 trial and dry eye is not powered to detect differences from vehicle although we do have a vehicle arm in the study. The purpose of that is to design and power a Phase 3 so success is what do we -- what is Phase 3? Are we moving to Phase 3? If so, that is success-- that success how big is Phase 3? What kinds of trends do we see in Phase 2b be like any other Phase 2b or Phase 2 program this initiative is designed to plan Phase 3 and so I would look for in a successful scenario what do we say about Phase 3.

The next question comes from John Newman of Canaccord. Please go ahead.

Hey, guys. Good morning. Thanks for taking my question. So just follow up on the last question for Todd. So, Todd, if I can remember correctly for dry eyes of course will trend Phase 2 studies and I think if I can remember that neither one of those Phase 2s hit statistical significance but it did -- I think they did show enough of a trend for the companies to go ahead and run a successful Phase 3. So can you maybe just remind people of the normal those finding process that a company goes through in Phase 2 and then also could you remind us the characteristics of your vehicle I think it's a bit more on the watery side than the orally side. Thanks.

Great. Thanks for the question. John. Yes, Phase 2 in dry eye is an interesting process. The patients with dry eye suffer really probably from many different ideologies. The concept of dry eyes is really comprised of a bunch of different diseases. So in a small patient population in a Phase 2 trial one does not typically expect to see statistically significant findings versus vehicle. The other part of Phase 2 as you mentioned John is a dose ranging process. We have two doses or two concentrations of topical ocular reproxalap in the trial. The point is obviously to find the lowest effective dose and then move that dose into Phase 3 versus vehicle. The other part of Phase 2 is to identify which symptoms and which signs and signs are findings that the physician measures in the patient that you will test directly in Phase 3. As you know the FDA requires statistical significance versus vehicle on a sign in on a symptom in Phase 3. So really Phase 2 as I mentioned earlier in response to Neil's question is a design process. What are your endpoints for Phase 3 that is what particular signs and what particular symptoms are you intending to test. What dose strengths are you going to move forward into Phase 3? And once those things are figured out you obviously have a higher chance of seeing success in Phase3. But you're correct the Phase 2 trials for [Indiscernible] and to some extent for [Indiscernible] are generally a very high bar and were tough to evaluate in terms of statistical significance. Let me address your question about the vehicle, vehicle is important because if a company is going to compare efficacy versus vehicle it's important that the vehicle not have a lot of activity. As you know in dry eye disease, oily vehicles probably do have a large effect not just a placebo effect, but there is a real vehicle effect and that oil on top of the eye is soothing, it may prevent moisture loss and importantly as you mentioned our vehicle is not oily. In fact, it doesn't contain any oil at all. And the hope is that the water and the vehicle would evaporate quickly than any kind of symptomatic or sign improvement with our vehicle would be more transient than it would be if we had an oily vehicle. So thanks that's a -- thanks for the question. John. That's an important point.

The next question comes from Yale Jen of Laidlaw & Company. Please go ahead.

Good morning, gentlemen. And thanks for taking the questions. Maybe let's still let the follow up on the dry eye, given that let's assume the Phase 2 read out suggest a couple sign few signs and symptoms that could be the candidate and for pursuing further. What might be the different possible causes going forward? In other words one is potentially doing that maybe even a larger Phase 2 studies and focusing on those signs and symptoms and try to see whether you get something much further. I mean consistency on that and move to the Phase 3 or you want to directly go to Phase 3 and how you --also how do you think about the financing for that a study with the difference scenarios.

That's a good question. Yale. I certainly would hope we'll be able to move to Phase 3. Larger Phase 2s than what we're running now are possible, but again I think the intent of the current trial is to figure out how to statistically power a large trial. I think the good news for our program is we've already been through a Phase 2a trial. We have a good sense of the tolerability of our drug in this patient population. I think we have a reasonable sense of what kinds of signs and symptoms are likely to improve. And thus I think with a 100 patients per arm in the current Phase 2b trial we should be assuming the drug as active versus vehicle well-positioned to go ahead plan a Phase 3 and initiate that Phase 3. I don't think that the trials are that expensive relative to most those three Phase 3 programs in this --in the drug development industry. The beauty of topical ocular administration is that there's no --there's nothing fancy about treating these patients, drug can be self administered and the signs and symptoms are not invasive in terms of assessment. There's no complex hospitalization or diagnostic tests that need to be run. So I think that even for small companies financing a Phase 3 trial in dry disease or allergic conjunctivitis or even uveitis which we're running now is not that expensive, and it's entirely feasible.

Okay, great. That's very, very helpful. And may be just follow-up one more questions on conjunctivitis and the data to be available against fourth quarter of this year or early next year. What sort of expectation you might have at this time and what might be to follow-up after?

Yes. It's an allergic conjunctivitis is something we're very excited about. As I mentioned in my comments there really has been no new therapy in allergic conjunctivitis in decades. In fact, today the disease is primarily treated with antihistamines and in severe cases steroids, but steroids as you know can't be used long term. From a patient population number, the number of patients in the United States with allergic conjunctivitis that are not well served we believe with current medicines is about 30 million. So actually larger than dry eye. We're excited about Phase 3 because one of the ways we're attempting to differentiate our program is to use a responder analysis. We have disclosed a couple of different responder analyses from our Phase 2b trial whereby we're comparing the proportion of patients that respond on drugs versus the proportion of patients that respond on vehicle, and even from the small numbers in Phase 2, we were able to achieve statistical differences. To our knowledge, this has never been done in allergic conjunctivitis. And I think not only the date of powerful potentially from a regulatory standpoint, but also from a marketing standpoint where we're really looking at something that physicians can explain to patients it's meaningful to patients rather than just comparing mean scores across groups and statistics and so forth. And I think that the data when they come out this year will be supportive of those kinds of clinical utility readouts and in that way should be quite interesting, yes.

The next question comes from Corey Davis of Seaport. Please go ahead.

Thanks very much. I was going to ask a different question but bringing up the responder analysis kind of peeked a question in my mind. And I'm sorry if this has been disclosed before but can you remind us what criteria are you using for patients to be counted as a responder? And if this has never been done on allergic conjunctivitis before what was the impetus to use that as an endpoint? Was that the FDA is urging or your idea?

Well I -- the trial design has been used for decades that is the conjunctival allergen challenge model is a well-worn path for approval. That part we're not changing. We're still bringing patients with a history of disease and where the allergen is instilled in their eye, and that patience will rate their ocular itching on a scale of 0 to 4 over a period of about an hour after the allergens put into their eye. There's nothing terribly unique about that with one exception that that is antihistamines in clinical trials will typically only ask patients to assess itch over seven minutes. 3, 5, 7 minutes something like that which is for those of us that suffer from allergic conjunctivitis an incredibly short period of time. Obviously patients in any disease are not taking medication for seven minutes of relief and so what we have done is extended the period of time up to an hour where we're asking patients to assess it. That's the only unique aspect of the trial design otherwise it's the same that's been used for twenty or thirty years for regulatory approval. What is unique Corey as you point out is the way we're assessing response. And of course everyone just compares itch scores to vehicle 0 to 4. There's nothing different about that either. What we've added, however, is a response and I think a responder analysis and I think the field of clinical medicine in the field of regulatory medicine is moving more towards clinical utility. That is what's meaningful to patients not only do your scores need to be statistically different from your control. They also need to be meaningful, meaningfully different in a clinical sense. And so that's something that we added in. We've discussed with the FDA. And I think it's highly consistent with the 2009 regulations from the FDA on assessing clinical utility. In general, Corey, I think the field is moving in that direction and we've had a robust dialogue with our colleagues at the FDA along these lines.

In what level of response to patients need to achieve in order to be counted as a responder?

Right, right. I neglected to address that part of your question. If the scale is 0 to 4, we have defined response was a two point response from peak itch score. So recall right after you put the allergen in a few minutes itching is at its most severe point on a patient basis. And we've defined response of a two point change that is a two point improvement if the patient's score a few minutes after installation is three then they will become or that that person would become a responder when they assess their itching at 1or 4 to 2 or 2 to 0 et cetera. The reason why two points is important is because it doesn't matter where you are. Whether you're starting at 4 or 3 or 2 a two point change is dramatic right. So in the case of 4 to 2 for example 4 is an incapacitating itch, incapacitating, 2 is a mild itch. So those two point changes are a priority representative of a definitive clinical response. And that's why we've picked that amount to qualify responders.

And then secondly I want to go back to one of the original questions that were asked about dose and you mentioned finding the minimally effective dose, which is more important when side effects are a bigger issue but given that your product doesn't seem to have as many side effects as some others, how sure can you be that you found the highest dose that can give you the maximal efficacy? I am thinking more dry eye than --

Yes, no, good question. I mean you and I have been in this industry a long time. That sometimes more of an art than a science is picking the right dose. It's always easy if there's a tolerability signal or if there's a lack of efficacy signal, but we really haven't seen those with the doses we're currently testing in Phase 2b though we'll see what the data show later this year. My guess is that if both concentrations and just to be clear we're testing 0.1% or 0.25% in this trial. If both concentrations show the same amount of efficacy and the same amount of tolerability, we'll pick the lower dose, which is the regulatory standard. These minimally effective doses the regulatory is standard for obvious reasons. Yes, there is however an efficacy advantage with the higher concentration of course we would pick the higher concentration assuming tolerability is reasonable across both groups. But, yes, this is sort of it a question that's answered when the data arrived. It's not always easy. I hope in this case both doses work well. And both doses are tolerable and in that case we'll pick the lower dose to advance.

This concludes today's question-and-answer session and the conference call. Thank you for attending today's presentation. You may now disconnect.