Aldeyra Therapeutics Inc (NASDAQ:ALDX): Here's Our Take

Earlier this month we highlighted Aldeyra Therapeutics Inc (NASDAQ:ALDX) as a biotech catalyst play. The company had previously outlined its intentions to publish data from a then-ongoing phase II study investigating its lead development asset in an indication of allergic conjunctivitis.The data just hit press and, as per the market response, it doesn’t look great for Aldeyra. The company is down a little over 14% mid-morning. Management held a conference call to discuss the results. We sat in on the call to get an idea of what’s next for the program.Here’s what we learned.For those new to the drug, it’s called ADX-102 and it’s part of a family of drugs called aldehyde trappers. In our body we have a naturally occurring class of pro-inflammatory and toxic molecules called aldehydes and these molecules are responsible (or so it’s believed) for certain inflammatory conditions.One of these conditions is the allergic conjunctivitis indication noted above as the one that’s in focus with these data. The idea is that by trapping the aldehyde molecules the drug can inhibit their inflammatory impact and – by proxy – reduce the severity of the inflammatory conditions.So this trial was designed to compare the drug against placebo across two doses – one 0.1% and one 0.5%. The primary endpoint of the study was a statistically significant improvement, and absolute levels of improvement of at least one point on a patient-reported scale of 0 to 4, in ocular itching, between active and placebo.The 0.1% concentration basically bombed. The 0.5% concentration didn’t do too badly, however, despite technically failing against the primary endpoint. The numbers revealed a statistically significant efficacy of 0.5% ADX-102 over vehicle in reducing ocular itching over one-hour post-challenge – something that current standard of care treatments struggle to achieve. We also saw that in subjects with seasonal allergy, reductions in itching were up to 0.8 points over vehicle, approaching the one-point threshold of activity required for achievement of the primary endpoint of the trial. Again, not a hit, but not far off. Further, percent improvements in itch score for the 0.5% concentration versus vehicle were 23%, 37%, 55%, and 65% at 10, 20, 30, and 60 minutes’ post-challenge in seasonal allergy patients.The key here is that the 0.1% brought nothing to the table, while the 0.5% did. Why is this important? Because it demonstrates clinical activity. This suggests that, with a bit of tweaking, a phase III protocol could be put together to address the issues from this study and make the chances of a positive pivotal readout more likely.And that’s pretty much exactly what management intends to do. It’s meeting with the FDA near term to hash out a forward path, and there are a couple of things we’d like to see result from this meeting.First, we’d like to see 0.1% scrapped. That the company included it in this study makes a bit of sense, as it’s nice to establish dose dependent benefit and there’s less chance of tolerability issues at a low concentration. To carry it through to pivotal, however, would be a waste of time.Second, we want to see the control arm of the study change from placebo to standard of care. This whole program has to-date been hit by better than expected placebo outcomes. In an indication like this, this could realistically be patients realizing that they are on placebo and seeking out alternative treatment. We’re not saying that’s definitely the case, but an SOC control arm would eliminate this potential altogether.So what’s next?Well, now it’s all about the FDA meeting. This one’s not going to recover immediately (in all likelihood) but it’s probably going to appreciate steadily into the post-trial evaluation. If the FDA green lights a phase III, and if the protocol is reasonably favorable, we’re going to see it jump.Bottom line: not the outcome shareholders were looking for but there remains a path to market in place and the current dip could be an opportunity to pick up a discount exposure or double down on an existing holding ahead of a recovery.We will be updating our subscribers as soon as we know more. For the latest updates on ALDY, sign up below!Disclosure: We have NO position in ALDY and have NOT been compensated for this article.