Welcome, everyone, to the Piper Sandler Healthcare Conference of Day Three. To kick it off, we have Aldeyra Therapeutics. Welcome, Todd Brady, CEO of Aldeyra. So Todd, a lot going on. You've got a PDUFA coming up. How are you feeling going into the PDUFA date?
Optimistic as always. Aaron, thanks for inviting us. First of all, it's great to be here at Piper. And I gotta say, amongst the analysts, I think you win the award for the analyst I've known the longest. I think we first talked in 2013.
Oh, wow.
Maybe you were one of the first analysts, and yet here we are, staged together. No, I'm optimistic. I mean, I'm always optimistic. I think, obviously, if we knew something really terrible, I wouldn't be here. But we do have a PDUFA on December the 16th, obviously a big decision for us. That's Reproxalap for the treatment of dry eye disease. And then if that PDUFA is positive, we have a partnership with AbbVie, and they have 10 business days to exercise an option, which is sort of a co-promotion option that, you know, if they exercise after approval, that's worth almost $200 million to us. So I looked at 10 business days from December 16th on my online date calculator, and it's December 31st. So we'll have a big December. And, you know, fingers crossed.
And the $200 million, that's upfront payment?
Right. So the way the deal works, it's, it's $100 million upfront for them to opt in. They paid us $6 million already. So it's 100 minus 6, which is 94, plus an additional 100 if the drug is approved. So 100 plus 100 minus 6 is 194, as far as I know.
And then what are the economics in terms of royalties?
Right. So after that, there are two other $100 million milestones, one of which is a sales milestone, one of which is a coverage, insurance coverage milestone. And then there is a 60/40 split of the P&L, for the U.S. Outside the U.S., it's a pure royalty.
And for the 60/40 split, I mean, typically, you know, one would say that year one, year two of launch, it could be more of an L than a P, you know, until you get to a certain threshold on sales. How do you limit that exposure on the loss side? Is it capped per year? And can you talk a little bit about that?
Yes. Yes, it is capped, and I can talk about it. I think typically in the drug world, it's three to four years to profitability. All that depends on how much money you spend, right? If a P&L is profit and loss, and so, you have revenues and you have expenses, and how aggressively you expense that P&L determines, to some extent, when you're profitable. It also determines your peak sales, and I would say in the last five years, there's been a number of dry eye drugs that have been approved. I think from what I can tell, AbbVie is quite reasonable about expensing the P&L. I don't think they're gonna spend $1 billion in year one or $500 million like Shire did with Xiidra or whatever back in the day. I think they're quite reasonable about that.
Whether or not they're reasonable, we have a 50/50 Joint Management Committee, so we get to help decide how aggressive that spend is and when profitability would occur pending revenues. Then there's a cap. The amount of the cap isn't disclosed. It's low single-digit tens of millions above which we defer against profit. We'll accumulate a payable against profit down the road. The way the deal was designed was so that they could, like any other large pharmaceutical company, couldn't spend the smaller company into the. I think we're from a cash flow standpoint, if you think about the roughly $200 million upfront, you think about the cap, you think about three years to profitability, we're cash flow positive.
And the deferred loss, is that, you know, over how many years? And is that distributed equally over those years, or is it more front-end loaded versus?
I think the deferral is just paid out as profit comes.
Got it.
I think your initial assessment is correct. From the Aldeyra standpoint, the P&L may turn profitable in two or three or four years, depending on how much expense is accrued against profit. By the time you're three or four years out, the P&L should be quite profitable. So I would expect that accrued expense to be paid off fairly rapidly.
That's fair. How do you, how do you think about, you know, dry eye market? There's a significant number of patients out there. You know, there's also a number of therapies, different modalities that have been approved, you know, cyclosporines, steroids. Yeah, where does Reproxolap, where would that fit in? And, you know, so let me maybe ask that and then, as a follow-up.
We're old enough to remember back when Restasis was the only dry eye drug, which it was for 10 years. It's kind of a remarkable thing. You know, you mentioned cyclosporine, which is an old immunosuppressant drug for organ transplant. That's what people used it for. It became generic, and then someone thought about, "Why don't we put it in an eye drop and stick it in someone's eye?" and people seem to have dry eyes these days. This is back in the early 2000s, and maybe this will help because, you know, the dry eyes are pro-inflammatory, and they're red and hot and angry and painful. And lo and behold, it sort of worked, and Restasis was approved in 2006. For 10 years, as I said, they were the only dry eye drug.
Xiidra was another immune-modulating drug that came out in 2016, I believe. And since then, we have, as you mentioned, two other cyclosporines. I think, as a medical community, we're really good at getting cyclosporines in eye drops and putting in people's eyes. I'm not sure how many more of those we need at this point, but we have a, a maybe three, not including generics, three different versions of cyclosporines. We have a menthol analog that was approved in May. Menthol has been used over-the-counter as a cooling agent, I guess you'd call it, as we think of menthol. And, you know, we have a nasal spray now that makes you tear. And there's a few other things, but, you know, if you look at the labels of all these drugs, they talk about activity in weeks or months.
That's not what patients want. If you come in to the see, your optometrist or your ophthalmologist, you don't wanna wait weeks. You wanna feel better immediately, especially if your eye's hot, right? You've got a red, puffy, painful, swollen eye. You don't wanna hear, "Take this for a month, and then you might have some activity." You wanna hear, "Here, here's a drop. Put it in your eye. I'm gonna come back and ask you how you feel in five minutes." And that's the beauty of Reproxalap. So, the reason that we're comfortable saying things like this is that we tested the drug in a dry eye chamber, which is a room much smaller than this where they blow hot, no-humidity air in your face. It's like sitting on an airplane, which I did yesterday.
You get this vent right in your face, except there's no humidity. Imagine. And you have to keep your eyes open. And the beauty of that is that you can assess activity, whether it's redness or whether it's symptoms, in minutes. That I'm aware, Reproxalap is the only drug that's done that. And because of that, in the label, in theory, you have to describe the chamber in minutes. And that's what is, I think, the breakthrough here. I think, I don't know, I think that's why AbbVie brought this option with us, primarily because of onset of action. I think the secondary reason it's also commercially unique is redness. So it turns out, lo and behold, people care about how they look, you know, almost more than how they feel. And so, none of us wanna have red eyes.
In fact, a major complaint with dry eye disease is, "My colleagues think I'm on drugs," and it sounds funny to say it like that, but that is a very common complaint, like, "I partied too much the night before," so this cosmetic aspect of dry eye, where your eye is red, is a major issue, and so I think a secondary reason why AbbVie may have struck this option is that there is a redness component to the activity, which, again, was assessed in dry eye chambers, again, assessed over a period of minutes, so that is commercially unique. There is a steroid approved for dry eye disease, which you can use for a sum total of 14 days, after which you should not use unless you're interested in getting cataracts or glaucoma or some of the other issues that relate to the toxicity of steroids.
Reproxalap would be unique in that it would be acute onset and anti-redness, and those two things really matter.
Have you done payer research, or is that AbbVie's purview? I mean, they haven't opted in yet. Would that be something that you've kinda laid the groundwork on, from the Aldeyra standpoint?
Yes and yes to those questions. We have done our own payer research, per the terms of the deal. Aldeyra influences pricing. But I would say broadly that, in my view, AbbVie has done everything you would think a large pharma would do just ahead of a launch, including pricing, including payer discussions. I mean, it's not like you can get a drug approved and then start preparing for a launch. Usually, that's a 24-month or 18-month process. I gotta say, it's been a pleasure working with AbbVie and watching them operate in sort of pre-launch period. But I think your assumption is safe. Both companies have thought carefully about pricing.
How do you think about step-through? You know, there's generics out there. Do you envision that plans will require step-through before they, you know, patients go on Reproxalap?
The Restasis is generic now. It took forever for generics to come on the market. So Allergan, now AbbVie. Allergan was the Restasis innovator. And the brilliance of what they did is they made a suspension, not a solution. A suspension is when you have a liquid and little particles are suspended in it, and it's really hard to replicate that for a generic. So it took years and years and years, long after the original patents expired, to finally, generics have come on the market. Another one was just approved, I believe, last.
You know, the step-through question I get a lot, which is, "Well, if you're a payer, wouldn't you require your patient to go through the generic first because it's cheaper?" It's the easy answer to that is most patients, because Restasis was approved in 2006, most patients with moderate to severe disease have already been on Restasis. And the reason they're back is they don't, they're not satisfied with it, but we actually haven't seen prior authorizations. We haven't seen step-throughs. And I think the reason for that is, from the payer standpoint, you're thinking about diabetes and COPD and hypertension and heart disease and cancer and everything else but dry eye disease. So I'm not sure the class is big enough for them to actively manage in that way yet.
Got it. You talked about doing pricing work. Can you share a little bit of, you know, what you've observed?
No.
Not a fair.
No, I can't. I mean, I can just say broadly, you anyone can go to GoodRx and look at all the dry eye drugs, and sort of see where they come out. And I guess you could sort of guess where our drug might come out. But these days, payers are willing to pay for the drug at relatively high prices because eventually, we're all gonna get dry eye disease, and it's a persistently disturbing condition that affects your life. And I don't mean people think you're on drugs. I mean, you know, your eyeball hurts, and you can't focus, literally, figuratively and literally. You have visual acuity problems. You can't think about what you're supposed to do at work. I think for payers not to cover this condition would be troublesome for them.
I don't see any issues with payers down the road.
I guess, you know, we talked a little bit about the market, but you know, and the PDUFA. But going into the PDUFA, you know, maybe a couple of questions. Have you had labeling discussions? First question. Second question, you know, given the history that you've had with FDA, CRLs, do you believe that you've addressed, you know, the agency's concerns? I guess second question. And the third, you know, given, you know, the changes at FDA recently, a lot of articles coming out today, there was a Wall Street Journal article saying that, you know, reviews, centers have lost 20% of their staff. Do you believe, you know, what have your interactions been given, you know, these new developments?
So thank you for the three-part question. The first part is, we don't update on the day-to-day interactions with the FDA. I don't know why companies do that. There's no upside for the company. Label yes or no, I don't know what that means these days, honestly. The second piece is, regarding the FDA in general. From a policy standpoint, I personally am somewhat disturbed by what's going on. I think like everyone else in biotech, you don't want turnover. You want stability. You want a well-resourced agency that can accurately review your application. I, in this particular case, have not witnessed. I'm not aware of any turnover in the ophthalmology division. Now, there may have been turnover.
It's not like they call us every week and say, "Here's our org chart." But I personally have seen the same people I have seen for five years, more or less, at this agency. You know, Wiley Chambers, who ran the division for many years, left before all this turnover happened. Bill Boyd, his longtime deputy, now the director of the division, stepped in. I personally am not aware of any loss of quality or staff in the division.
Good, so it feels like everything's on track.
I wouldn't be here if I knew of anything that threw us off track.
Got it. Got it. And then I guess, you know, beyond dry eye, there's also a potential for allergic conjunctivitis. Can you just talk about that opportunity?
Right. The allergy gets sort of left under the rug these days because the PDUFA for dry eye is so close. But allergy is probably one of the most common front-of-the-eye diseases there is. I read a study once that about a third of the world has allergies, ocular allergies, which is in part because of pollution, in part because of genetics, in part because of pollen. The pollution and pollen pieces are definitively getting worse, so allergy as a class is growing. I think the challenge from a pharma standpoint is you can go to CVS or Walgreens, and you can buy an eye drop that has an antihistamine in it, which is fine for about two-thirds of patients, but not fine for 30% of the patients, so what have physicians and optometrists left us?
You're left with steroids, and we already talked about those, right? You can only use them for limited periods of time, and the allergy season isn't two weeks. In fact, for me, it's spring and fall, like many people. It's seasonal allergy. That's not two weeks. That's two months, three months, four months. And so there needs to be a new drug that's not a steroid that you can use chronically that's also not an antihistamine. And I think that's where Reproxolap fits in. In our corporate deck, we have two trials featured. They're phase 3 trials, and they show a reduction in itching, which is the approvable endpoint for ocular allergy. For anyone that has ocular allergic conjunctivitis or ocular allergy, you know you wanna claw your eyeballs are so itchy, you just wanna claw them right out.
I mean, they, you cannot stop itching of them, and they turn red, and then you look worse than you do when you have dry eye. So it's a challenge. And whether allergy winds up on the label, I'm hoping is an AbbVie Aldeyra decision down the road. That would be a supplemental NDA. A question, so TBD on that. But the good news is, certainly, there's evidence in late-stage clinical trials or pivotal clinical trials that Reproxalap works in allergy.
Is that the Invigorate and Invigorate 2?
Invigorate 1 and 2. Yep.
And so, both of those are considered to be pivotal studies?
We would consider them to be pivotal.
Have you had discussions with FDA in terms of what you would need, you know, for potential approval?
Many, many discussions. In fact, we started with allergy first. Now, what we haven't had is a pre-NDA discussion with the FDA. So the next step, I think, pending how things go with the PDUFA this month, would be to talk to the FDA about a submission package and get their feedback there, if the AbbVie Aldeyra team are interested in putting this on the label.
So if I draw out the timeline, let's assume that you get approved on PDUFA for dry eye, at some point in 2026, is it reasonable to assume that you could file that NDA?
Correct. I think it depends on a lot of different things, but it's certainly feasible. It would be the only drug approved in that case for both diseases, unless you wanna consider a short-term use steroid.
How do you think that would, you know, that would clearly drive adoption, because it's that's an easier sell than having just one indication?
I think so. I think it's, in a sense, allergy is a differentiator for dry eye. Half of dry eye patients have itching, so you would assume that half of dry eye patients have allergic conjunctivitis. Today, you would treat them with two drugs. The problem is antihistamines often make your eye drier, so your allergy drug exacerbates your dry eye, and eliminating all that with a one-stop shop would be attractive commercially.
Good. Good. So a lot of progress there. And I guess we'll have to wait and see. And I guess, you know, you've got several programs in the pipeline. You know, we've got a couple of minutes. Which are you most excited about?
I get most questions I get are about atopic dermatitis and maybe dry AMD/geographic atrophy. Those are hot therapeutic areas in the minds of investors. The reason why is because there are no good therapeutic options, particularly for mild to moderate patients in those areas. You know, we have injections for atopic dermatitis. They work just fine. Kids don't want injections. Mild patients don't want injections. There are issues with, you know, antibodies and injecting and so forth. So a safe oral with even modest efficacy for mild to moderate patients in atopic dermatitis would be, in a sense, transformational. I liken it to Otezla in psoriasis, and in dry AMD, this is a condition like dry eye that we're all gonna get. If we're fortunate to live long enough, we'll get dry AMD.
We just have accumulations in our retina over time, that are the basis of the dry form of age-related macular degeneration. We have drugs today, but they're clinical data are based on lesions. I don't think people wake up in the morning thinking, "I wonder how my lesions are." I think they wake up thinking, "Man, I can't see anymore at night. I can't drive at night. I have halos." All the issues you get with the early-stage dry AMD. RASP, which is the target of Reproxolap and 248, 246, are intimately related with seeing at night. You know, if you have RASP in your retina, you're not gonna see well at night, especially under dark conditions. It's a logical match for us to assess vision in low-light conditions, and that's the direction we wanna go.
Got it. And then I guess, you know, do you believe you have the funding or, you know, with the PDUFA and the, you know, OptAid and the cash coming through, is that gonna be sufficient to take both programs? So do you feel like that you're gonna be well-resourced from that standpoint?
Well, particularly if AbbVie opts in, for sure. In fact, I'm not even sure we haven't issued any guidance in that scenario because it hasn't happened yet, but I'm not even sure what our cash runway would be. It would be sufficiently far out into the future. It's difficult for me to say now. Without that opt-in and putting Reproxalap aside or excluding Reproxalap, we've guided into the second half of 2027. So we're, you know, maybe a little bit less than two years of cash right now, even if Reproxalap goes away somehow. But I think we're well-financed in either.
Great. I think we're about out of time. This has been great to catch up with you, Todd, after,
12 years?
After a few years. Yeah. And congrats on all the progress.
Yeah. Thank you. Thank you, Barry. Good to be here.