Aldeyra Therapeutics, Inc. (ALDX) Earnings Call Transcript & Summary

Hello, and welcome to the Aldeyra Therapeutics Announces Top-Line Results from Clinical Trial of ADX-629 in Patients with Atopic Dermatitis. [Operator Instructions] I will now turn the conference over to David Burke, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Today, we issued a press release announcing positive top-line results from the Phase II clinical trial of ADX-629 in atopic dermatitis. A copy of the press release is available on the Investor and Media section of our website, www.aldeyra.com. The press release contains important information and should be read and considered in conjunction with the slides presented and the prepared remarks made on today's call. With me today to discuss the results are Dr. Todd Brady, President and Chief Executive Officer of Aldeyra; and Dr. Matthew Zirwas, founder of the Bexley Dermatology Research Clinic and Board-certified dermatologist, who served as principal investigator of the clinical trial. Turning to Slide 2, this presentation and various remarks which may be made during this presentation, contain forward-looking statements regarding Aldeyra, its investigational drug candidates, including ADX-629 and its plans, expectations and opportunities including potential clinical trials and regulatory activities. 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. These statements are based upon the information available to Aldeyra today and reflect Aldeyra's current views with respect to future events, and are based on assumptions and subject to risks and uncertainties, including the development, clinical and regulatory plans or expectations for Aldeyra's investigational drugs including ADX-629. [ There are ] risks that result from earlier clinical trials or portions of clinical trials may not accurately predict the results of future trials or the remainder of the clinical trial. 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, including the results of operations and financial position. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the press release issued this morning, and in our filings with the Securities and Exchange Commission. I would now like to turn your attention to Slide 3 and introduce Dr. Todd Brady.

Thank you, David. To our knowledge, Aldeyra is the first biotechnology company to exploit the development of new therapeutics that target RASP, or reactive aldehyde species, which are a series of endogenous and exogenous small molecules that are toxic and pro-inflammatory. RASP influence large classes or groups of proteins, particularly proteins that mediate the immune cascade. As illustrated on Slide 4, targeting RASP represents a novel pharmacology. Unlike nearly every drug approved for human use today, RASP modulators do not inhibit or activate specific proteins, and instead modulate systems of proteins. RASP modulation, therefore, has 2 distinct theoretical advantages. Number one, avoidance of the toxicity associated with activating or inhibiting specific proteins, which rarely occurs in nature on a sustained basis. And 2, the ability to down or upregulate, rather than turn on or off, groups of proteins to achieve broad-based improvement in disease. ADX-629 is our first orally administered investigational RASP modulator. And as a signal finding molecule, has demonstrated clinical activity in a number of systemic immune-mediated diseases, including psoriasis, asthma, COVID and chronic cough, as shown on Slide 5. Together, the previously disclosed clinical trials of ADX-629 that we are aware represent the first series of results, potentially supporting the utility of the novel pharmacological approach of RASP modulation. As described on Slide 6, the signal finding results of ADX-629 are intended to support the development of next-generation RASP modulators. ADX-246 is in development for oral administration to treat systemic immune-mediated diseases, and ADX-248 is in development for intravitreal administration to treat retinal diseases associated with inflammation and RASP-mediated formation of toxic metabolites that accumulate in photoreceptors and other cells in the retina. Slide 7 summarizes the clinical features of atopic dermatitis, which, as many of you know, is a common disease of the skin, often affecting children, that is characterized by itching and dermal lesions. The etiology of the disease is thought to be immune dysfunction associated with hyperreactivity to endogenous or internally generated, or exogenous factors, which in either case may include RASP. Atopic dermatitis is typically treated topically, or in moderate or severe cases, with injections. We believe that the demand for safe, tolerable and orally administered therapies, however, especially for mild to moderate patients, is substantial. And to date, there is no generally available or accepted oral therapy for treatment of these patients. The Phase II clinical trial of ADX-629 in atopic dermatitis, outlined on Slide 8, represents another installment in the ongoing signal finding clinical testing of ADX-629 in systemic immune-mediated diseases. The trial was designed to enroll mild to moderate atopic dermatitis patients and evaluate investigator-assessed outcomes, such as the classically employed IGA and EASI scores, as well as patient-reported outcomes, such as itching and depression and anxiety, which are often associated with atopic dermatitis. ADX-629 was administered orally twice daily at a dose of 250 milligrams for 90 days. Slide 9 presents the baseline characteristics of the 8 patients enrolled in the trial, which is consistent with a mild to moderate atopic dermatitis adult population. On Slide 10, the safety profile of ADX-629 in the trial is summarized. Only 2 adverse events deemed to be at least possibly related to ADX-629 were reported. Both were mild. Importantly, no rescue therapy was required and no patients were deemed to have experienced a flare while on ADX-629 therapy. All patients demonstrated clinical improvement during therapy with ADX-629. Slide 11 presents the results of the investigator-assessed EASI Score, which is typically employed to assess the severity of atopic dermatitis. Relative to baseline, reduction in EASI severity approached 60% on average, an effect that was highly statistically significant. The reduction in EASI score was consistently greater with time and by day 90, the end of treatment, 4, 3, and 1 patients improved by 50%, 75% and 90%. The commonly cited EASI-50 and EASI-75 thresholds were therefore 50% and 38%, respectively. Similar statistically and clinically significant patterns of activity were observed in other investigator-assessed outcomes, as is presented for affected body surface area on Slide 12 and IGA on Slide 13. Notably, affected body surface area completely cleared in 1 patient, and the same patient was rated 0 or clear on IGA assessment. Like with the investigator-assessed outcomes, patient reported outcomes improved over the duration of ADX-629 therapy and were statistically and clinically significant, as can be seen on Slides 14, 15 and 16 for itching, eczema scoring or POEM, and depression and anxiety scales, respectively. Clinically relevant threshold reductions in itching, which is a significant morbidity in patients with atopic dermatitis, were achieved in 3 patients. Importantly, 2 patients reported complete resolution of itching. For the POEM score, clinically relevant changes were observed in 6 patients or 75% of the population. Finally, patient-reported depression and anxiety scores improved in a manner that is consistent with investigator and patient assessments of disease severity. As presented on Slide 17, the observed activity of ADX-629 relative to baseline in atopic dermatitis is remarkably similar to that previously disclosed for ADX-629 in psoriasis, supporting the notion that RASP modulation could be broadly beneficial in systemic immune-mediated diseases of the skin. Slide 18 summarizes the results of the trial, which add to the growing body of evidence that RASP modulation, as a novel pharmacology with the potential to affect many factors at once without any consistent toxicities observed to date, could represent a new approach for the treatment of disease. The potential activity of ADX-629 in this signal-finding clinical trial supports the advancement of ADX-246 to a Phase 1/2 clinical trial in patients with atopic dermatitis, which is the first of Aldeyra's systemic RASP indications to advance to formal development with ADX-246. The proposed clinical trial of ADX-246 in atopic dermatitis is summarized on Slide 19. Pending results from single ascending dose and multiple ascending dose testing in normal healthy volunteers, a 2:1 drug to placebo randomization scheme is planned to enroll approximately 30 atopic dermatitis patients for treatment over 90 days. Contingent on U.S. Food and Drug Administration Investigational New Drug Application review and other factors, the trial is expected to begin in the first half of 2024, and top-line results are expected later next year. Operator, I'd now like to open the call for questions.

[Operator Instructions] Your first question comes from the line of Kelly Shi of Jefferies.

Congrats on the progress. It is very interesting efficacy signal observed from this early data. I'm curious if RASP inhibition is associated with the JAK-STAT signaling pathway, which most of the current AD drugs were based upon? And how is the overall AE profile similar or dissimilar to the mainstream drugs? And I also have a follow-up question after this.

Kelly, I think that's a very relevant question. JAK as a target has received a lot of press recently, as has the related molecule TYK2. I think that those pharmacologies are perfect examples of what I described as traditional pharmacology in the beginning of this call. As a medical community, we've identified very specific targets, that is certain proteins. We've identified drugs to target those certain proteins. I think the problem with that, as I mentioned in my prepared comments, is often toxicity. In nature, we do not turn specific proteins on or off for sustained periods of time. And that, I think, is the source of much of the toxicology that we have for many approved drugs on the market today. My concern with specific targets is safety, especially in this patient population. Dr. Zirwas, I don't know if you can hear us now, but if you can, maybe you can comment on the importance of safety and tolerability, especially in a mild to moderate atopic dermatitis population.

Absolutely, Todd. The -- as someone who has been an investigator on most of the JAK trials done in atopic dermatitis and has treated hundreds of patients with them, they certainly are very impressively effective drugs, but the adverse event profile is a real challenge. So the frequency with which patients are hesitant -- extremely hesitant to take it, to use a JAK inhibitor for atopic dermatitis is high, because we have to discuss the boxed warning that comes along with all JAK inhibitors. And in a disease like atopic dermatitis, safety is very paramount in these patients' decision-making. Whether we're talking about young children or adolescents or adults or even the elderly, safety becomes a very big differentiating factor in choosing a therapy. And really a drug like the ADX profile of drugs, these RASP inhibitors, really are completely novel, truly completely novel in the approach to treating atopic dermatitis. So just a very different direction from anything related to the JAK/STAT or TYK pathways.

And then Kelly, your follow-up question.

And also, how do you think about the development path for 629 -- or I should say 246 in atopic dermatitis? Do you see it as a stand-alone therapy and the target mild to moderate rather than severe patients? And also do you see [ there's ] a potential of a combination therapy from this novel mechanism of action?

Well, I think, Kelly, one of the benefits of having a novel mechanism of action is that you can combine with other therapies that have a different mechanism of action. As was stated in the slides regarding the protocol today, we have patients on Dupi in this trial. We had patients on topical corticosteroids, and all patients got better. So I think we have at least preliminary proof of concept that you can combine ADX-629 and presumably ADX-246 with more traditional therapies. And as you pointed out, the safety profile of ADX-629, at least in this trial, was highly favorable, with only 2 mild adverse events. So I think the future could hold either monotherapy, possibly for milder patients, or for moderate patients, combination therapy as well.

Your next question comes from the line of Marc Goodman of Leerink Partners.

This is Rudy on the line for Marc. So I have 2 questions regarding your development path moving forward. So first, just a quick follow-up, like how do you make a decision whether you want to do mild to moderate AD instead of more severe patients? Maybe talk about your rationale. And secondly, regarding the doses, do you plan to run a dose-ranging study? Maybe just talk about how do you determine the right doses move forward and based on the data you have from either 629 or 246.

Rudy. Let me answer the dosing question first, and then we'll go to mild to moderate versus severe. ADX-246 will undergo a single ascending and multiple ascending dose ranging in Phase 1 prior to initiation of the Phase 2 portion of the trial, which, as I mentioned, is expected to involve 30 atopic dermatitis patients randomized to drug and placebo. The target levels of any RASP modulator have to do with the typically observed levels of RASP in plasma. Those are usually single-digit micromolar levels. Obviously in diseased patients, levels of RASP are higher than in normal healthy volunteers. So in Phase 1 with 246, as we did for ADX-629, we hope to dose range upward to achieve a plasma level of drug that's a low single-digit micromolar. We were quite successful in doing that with ADX-629. Regarding the decision about mild to moderate versus severe, let me just make a statement about the regulatory case with atopic dermatitis. And then I'll turn it over to Dr. Zirwas to comment on the relative proportions of the populations. The FDA requires IGA scores of 0 or 1 to be different between drug and a placebo. So typically, in drug development, we want patients that are somewhat sick, because if they're very mild, many patients will get better on placebo. You also don't want patients that are too severe, because they're intractable or more difficult to treat. So the secret is enrolling a mild to moderate population, possibly biased towards moderate, so that we can see a sufficient number of IGAs of 0s and 1s that are greater in the drug group versus the placebo group. That phenomenon, by the way, Rudy, is the same for almost any clinical trial in any indication. You want a moderate population that's not too sick and not too mild. But Dr. Zirwas, perhaps you can comment on the relative proportions of patients that are mild to moderate versus moderate to severe.

Absolutely. So we know that the number of people with atopic dermatitis in the U.S. is in the 2.5 million to 3 million person range, where that's with moderate to severe disease. We know, though, that there are upwards of 15 million to 20 million people in the United States with atopic dermatitis. So we know that the vast majority of disease, so 70%, 80%, 90% of patients with atopic dermatitis, have mild to moderate disease, and that is where there's a real unmet need. So for there to be an oral therapy for individuals who have mild to moderate disease would be incredibly useful and fill a real unmet need in the atopic dermatitis space. So for severe -- moderate to severe disease, we already have multiple agents in multiple other -- multiple additional systemic agents on the way for people with moderate to severe disease. And all of those therapies have limitations, whether they're -- have to be administered by injection or they have safety concerns. But in the mild-to-moderate space, which is a much bigger portion of the atopic dermatitis population, we don't have any oral therapies, let alone any oral therapies that are as safe and well tolerated as the ADX molecules are. And so that -- the unmet need where patients would really prefer a safe, well-tolerated oral rather than having to use creams or ointments or lotions that are time consuming to put on and could be messy, and just are generally not that effective historically, versus a simple pill that they're going to take once a day, is really a no-brainer that these patients will prefer that oral therapy.

Your next question comes from the line of Tom Shrader of BTIG.

Congratulations. It's a nice readout. Firstly, for Dr. Zirwas, can you educate us a little bit on the natural fluctuation of these patients? How often would you see a patient resolve in the placebo group? And then a quick follow-up for Todd. Remind us why you're changing molecules. When you have a signal, why are you taking on new molecule risk? And are the molecules very related? Is it a [ pro-drug ]? Or are you taking on a truly new molecule?

Dr. Zirwas, do you want to go ahead with the first question?

Yes. So the typical -- so it's actually been very interesting recently. There's been new data coming out, linking sort of placebo response rates to baseline disease severity in especially the Phase III trials that have come out. And really, what we would expect is anywhere from 10% to -- depending on what endpoint we're looking at, anywhere from a 10% to a 30% placebo response rate, the individuals who were in -- [ and ] that's in a typical clinical trial. In this particular trial, which admittedly was small, these were patients who are generally well known to me and were on stable baseline therapy. And so I actually would have expected even a lower placebo response rate than a normal clinical trial where we're implementing things like moisturizers, standardized skin care, sometimes adjunctive new topical therapies to go along with the systemic therapy. But with the natural waxing and waning of this severity of disease, would have expected a placebo response rate of probably in the 10% to 20% range.

Just to clarify, when you say response rate, does that mean the rate to clear, or the rate to reduce some percentage?

So the rate to reduce some percentage. So whenever I'm talking about EASI-75, that's where I'm talking about -- I would probably expect about a 10% placebo response rate in this group.

And Tom, your question about 246 is a good one, and thank you for asking. ADX-629 is a signal finding molecule. It is of the era of our first-in-class RASP modulator, reproxalap. And therefore, I think ADX-629 will wind up in orphan diseases with rare patient populations. Instead, we'll transition our mass market diseases, such as atopic dermatitis, to our next-generation RASP modulators. We detailed the results of -- the early results of some of those RASP modulators in our R&D Day last year. ADX-246, as we mentioned in the slides today, is the most potent RASP modulator that we're aware of at this point. It is perfectly designed at this point, we believe, to be orally administered and we eagerly await the Phase 1 results early next year. I would say that in general, ADX-246 is a more active, potentially more bioavailable and newer RASP modulator than ADX-629.

Your next question comes from the line of Yigal Nochomovitz of Citigroup.

Todd and team. I just had a question on the design of the Phase 1-2. Could you just clarify why you're enrolling the healthy volunteers? Presumably, you already have a randomized trial versus placebo with the AD patients. So just curious, is -- are there HV patients getting randomized as well, placebo versus 246? Or is it just a separate cohort just with drug to get some additional safety data?

Right. That's correct, Yigal. ADX-246 has not been in humans. And so 246 will initiate Phase 1 clinical testing, as I mentioned in my response to Rudy's question, in a single ascending and multiple ascending dose format. I think more recently, companies have started to combine a Phase II component with their Phase I, so that as the single ascending dose cohort rolls into the multiple ascending dose cohort, you could then continue the trial in patients in a sort of a Phase 1-2 format. And that's exactly what we intend to do here. So first, we need to identify a safe, well-tolerated dose that reaches target plasma levels that we'd hope to reach, given the levels of RASP in inflamed patients. And then we'll initiate sort of a Phase IIa trial as part of the same protocol in atopic dermatitis patients with 246.

Okay. Got it. And then maybe for Dr. Zirwas, you referenced what you would expect in this population about a 10% response rate. If you were to compute that on this -- in the placebo. If you were to compute that on this cohort, in this small study, what would be your conclusion? Would this still reach a clinically significant results? Or just -- could you comment on that?

So yes, so absolutely. So the -- I would say, when a new Phase 3 readout happens. So I'm just [ taking ] a little bit of background on this. Atopic dermatitis specialists [ adding ] work with all of the drugs that are on the market and pay very close attention to the entire space. And when a new Phase 3 drug reads out, the numbers that I am looking for, kind of the standard results are something like a 30% to 40% drug response rate and about a 10% placebo response rate. So right in line with what we saw for these results.

Okay. and then just one more question. I don't think it was covered, but with respect to looking biochemically at reactive aldehyde species, Todd and Dr. Zirwas, obviously, the skin is a very accessible organ in terms of biopsy. Was that some sort of a secondary endpoint in the randomized trial to look at suppression of RASP in the skin? That would be interesting.

Yes, I agree, Yigal. Possibly one day, we can do something like that. RASP are notoriously difficult to measure in tissue, mostly because the assays in tissue aren't as well developed as they are for plasma. And secondly, it's difficult to know exactly what part of the tissue to assay. But I do think one day, that's a possibility. Broadly, RASP affect systemic disease; that is, even for diseases like psoriasis and atopic dermatitis that are manifested in the skin, RASP are involved systemically. So our thesis, and I think this has been proved out with the data that we presented today, not only in atopic dermatitis but as we previously disclosed for other diseases such as cough and COVID and asthma and psoriasis, that modulation of RASP systemically may affect diseases that are manifested more locally.

Your next question comes from the line of Catherine Novack of Jones Research.

Congrats on the data. I'm just wondering if you can comment on the use of Dupixent in the study? How -- can you tell me how many subjects were on at the start? And what kind of response to improvement they had prior to the study on their other treatments?

Catherine. We had 1 patient on DUPIXENT. We could tell no difference in response across any of the patients. That is, all patients improved, whether they were on DUPIXENT or topical corticosteroids. I believe we have 2 patients on topical corticosteroids throughout the duration of the clinical trial. Which I think highlights the ability of RASP modulation broadly to be administered with, I think, standard of care therapies. To enroll in the trial, patients needed to be on a stable dose of their prior medication. As Dr. Zirwas said, these patients were not adequately responding, otherwise they wouldn't have qualified for enrollment in the trial. To the extent that we made all of these patients somewhat better and a good number of patients significantly better, even against the backdrop of a concomitant therapy, I think, is a good sign for RASP modulation in this disease.

Okay. Great. And then my next question is for Dr. Zirwas. Can you talk about the treatment algorithm for mild to moderate patients? They -- you don't see improvement on topical corticosteroids. What are the primary prescriptions that you tend to write in this population?

Yes. So in the mild to moderate space, and it's one of the challenges with atopic dermatitis in general, the mild to moderate versus moderate to severe is defined by the appearance of the lesions, not by how widespread they are. And so one of the challenges that we often face, and one of the most underserved groups right now, are people with mild disease that is widespread. So you can have severe disease covering 1% body surface area, you can have severe disease covering 90% of your body. Alternatively, you could have mild disease covering 1% to 99% of your body. And so typically, for mild to moderate patients today, we're going to start by giving them topical corticosteroids, usually medium potency. And if that is inadequately effective, we're likely to move up to a high-potency topical steroid. And then if that's inadequately effective, we're likely to then go to a topical calcineurin inhibitor. If that is then ineffective, we're likely to go to a topical JAK inhibitor. Now with any of these therapies for mild to moderate disease, we might use a short-term systemic therapy currently. So typically, that would be an oral corticosteroid like prednisone or an injected corticosteroid like triamcinolone, to try and calm the disease down acutely and then maintain it topically with prescription therapy. And so that area, though, that -- those groups of patients are who the RASP inhibitors will make so much sense for, because it would be a -- what I am imagining as a clinician is somebody comes in with atopic dermatitis, we put them on a low-cost, easily accessible topical steroid for the short term, while we start the RASP inhibitor orally at the same time. And then within a fairly short period of time, 2 weeks, 4 weeks, 6 weeks, we're able to get them off of the topical steroid and just maintain them on the RASP inhibitor, is sort of the approach that makes very much sense to me as a pragmatic clinician. So maintaining what I would call our current standard topical approaches as an initial starting point of therapy, but then adding the RASP inhibitor so that we're able to get the patients off of the topical therapy and let them go on with their lives.

Your next question comes from the line of Yale Jen of Laidlaw & Company.

Congrats on the outcome. 2 questions here. First one is for Todd. Todd, you have -- you reported that the previous study in the psoriasis. And so just curious, what's your thoughts in terms of -- is that going to be something for 246 for both indications? Or what's the plan here going forward?

Well I think, unlike atopic dermatitis, the psoriasis market is relatively well satisfied for a safer, orally administered therapy for mild to moderate patients. That is certainly not the case with atopic dermatitis. And I would expect that our initial foray into immune-mediated diseases of the skin for 246 would be limited at this point to atopic dermatitis for market reasons.

Okay. Great. That's very helpful. Maybe another follow-up here is that in terms of the [ futures that we ] designed, maybe you have beyond the next Phase 2, are you going to try to do a combination study with a corticosteroid? And also whether you are thinking about the pediatric population in the future?

Yes, I think, Yale, those are all excellent ideas and will no doubt be covered in subsequent clinical trials. Initially, I think most companies attempt to focus on naive or treatment-naive patients, or patients that have withdrawn from concomitant therapy. I think we're seeing a trend these days for the addition of concomitant therapies to clinical trials sort of simulate a more real-world environment. But these are all discussions we'll have with the FDA in the near future. And I would expect the answer to your question will evolve over the next 12 to 24 months.

Your next question comes from the line of Matthew Caufield of H.C. Wainwright.

Todd. Is there a sense, just from an overall strategic standpoint, which systemic RASP programs have the highest developmental priority at this point? And then separately, can you remind us of where things stand for the possible AbbVie development plan related to reproxalap?

Great. Thanks, Matt, for the questions. By the end of the year, we will give an update on the systemic RASP platform broadly, which will include ADX-629 and some additional information on ADX-246 and possibly ADX-248. I would say at this point, the focus of ADX-246 is in atopic dermatitis. As I mentioned previously, the focus of ADX-629 will be in orphan diseases. And the focus of ADX-248, as I mentioned in my prepared comments, will be on retinal disease. But we look forward to updating by the end of the year as to the specifics of the systemic RASP platform. And then potentially in the first half of next year, we can hold an R&D Day to go into those compounds and their indications in more detail. Regarding AbbVie, as you know from the previously filed 8-K, AbbVie has the option to extend the current option agreement. That option expires on the 23rd unless a payment of $5 million is made prior to midnight on the 22nd, which is this Friday.

There are no further questions at this time. I will now pass the call over to Todd for some closing remarks.

Well, thank you as always for joining us this morning, and we look forward to updating you on our future progress.

This concludes today's conference call. You may now disconnect.