Aldeyra Therapeutics(ALDX) - 2023 Q3 - Quarterly Report

Part I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements present the company's Q3 and nine-month net losses, balance sheet positions, and a significant subsequent reproxalap option agreement with AbbVie Consolidated Balance Sheets The consolidated balance sheets reflect a decrease in total assets, primarily due to reduced cash and matured marketable securities, alongside a decline in total liabilities and stockholders' equity Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Sep 30, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $143,334,888 | $144,419,364 | | Marketable securities | $0 | $29,881,520 | | Total current assets | $147,210,014 | $181,023,113 | | Total assets | $147,282,247 | $181,291,657 | | Total current liabilities | $21,617,319 | $15,360,538 | | Total liabilities | $24,274,508 | $30,283,628 | | Total stockholders' equity | $123,007,739 | $151,008,029 | Consolidated Statements of Operations The consolidated statements of operations show a reduced net loss for both Q3 and the nine-month period, primarily driven by decreased research and development expenses and higher interest income Key Operating Results (Unaudited) | Metric | Three Months Ended Sep 30, 2023 (USD) | Three Months Ended Sep 30, 2022 (USD) | Nine Months Ended Sep 30, 2023 (USD) | Nine Months Ended Sep 30, 2022 (USD) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $6,961,669 | $11,539,620 | $25,160,437 | $38,344,594 | | General and administrative | $2,588,701 | $3,244,936 | $11,535,868 | $10,638,602 | | Loss from operations | ($9,550,370) | ($14,784,556) | ($36,696,305) | ($48,983,196) | | Net loss | ($8,186,871) | ($14,553,231) | ($32,789,548) | ($49,122,474) | | Net loss per share | ($0.14) | ($0.25) | ($0.56) | ($0.84) | Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate decreased cash used in operating activities, a shift to cash provided by investing activities from marketable security maturities, and minimal cash used in financing activities Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (USD) | Nine Months Ended Sep 30, 2022 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($30,826,568) | ($45,406,010) | | Net cash provided by (used in) investing activities | $30,000,000 | ($56,954,530) | | Net cash (used in) provided by financing activities | ($257,908) | $1,220,092 | | Net decrease in cash and cash equivalents | ($1,084,476) | ($101,140,448) | | Cash and cash equivalents, end of period | $143,334,888 | $128,650,541 | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on the company's business, liquidity outlook, debt financing, and the significant subsequent exclusive option agreement with AbbVie for reproxalap - The company believes its cash and cash equivalents of $143.3 million as of September 30, 2023, are sufficient to fund operations into the first quarter of 2025, excluding potential reproxalap revenue or the impact of the AbbVie option agreement[31][132] - On October 31, 2023, Aldeyra entered into an exclusive option agreement with AbbVie Inc. for reproxalap, including a $1 million option fee and potential for a $100 million upfront payment upon collaboration agreement execution, plus up to $300 million in milestones and a 60/40 U.S. profit split[92][93] - The company has a Loan and Security Agreement with Hercules Capital, with $15.0 million drawn as of September 30, 2023, and an additional $20.0 million potentially available through May 1, 2024, subject to lender approval[57][110] - The company is involved in a putative class action lawsuit and a derivative complaint filed in July and October 2023, respectively, both relating to allegations of false or misleading statements concerning the NDA for ADX-2191, with the company disputing the claims and unable to predict the outcome[91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the decrease in net loss, driven by reduced R&D and higher interest income, highlights the reproxalap NDA and AbbVie agreement, and addresses liquidity and future funding needs Overview This overview describes Aldeyra as a clinical-stage biotechnology company, highlighting its lead candidate reproxalap under FDA review, the recent AbbVie option agreement, and key upcoming clinical milestones - The company's lead product candidate, reproxalap, is under NDA review by the FDA for the treatment of dry eye disease, with a PDUFA target action date of November 23, 2023[101][104] - On October 31, 2023, the company granted an exclusive option to AbbVie Inc. to co-develop and co-commercialize reproxalap in the U.S. and exclusively commercialize it outside the U.S.[103] - Upcoming clinical milestones for 2023 include top-line results from Phase 2 trials of ADX-629 in atopic dermatitis and Sjögren-Larsson Syndrome, and a Type C meeting with the FDA for ADX-2191 in proliferative vitreoretinopathy[104] Results of Operations Results of operations show decreased research and development expenses for both Q3 and the nine-month period, alongside a slight increase in general and administrative expenses and higher net other income Comparison of Expenses (in millions USD) | Expense Category | Q3 2023 | Q3 2022 | Change | 9 Months 2023 | 9 Months 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research & Development | $7.0 | $11.5 | ($4.5) | $25.2 | $38.3 | ($13.1) | | General & Administrative | $2.6 | $3.2 | ($0.6) | $11.5 | $10.6 | $0.9 | - The decrease in R&D expenses was primarily due to reduced external clinical development costs and drug product manufacturing expenditures[120][122] - Net other income increased by $1.2 million in Q3 2023 and $4.0 million in the nine-month period, driven by higher interest income[121][123] Liquidity and Capital Resources The company's liquidity position of $143.3 million cash is expected to fund operations into Q1 2025, but additional capital will be required for full commercialization and R&D, with potential access to an at-the-market facility and credit line - The company has cash and cash equivalents of $143.3 million as of September 30, 2023, which is expected to fund operations into the first quarter of 2025[124][132] - The company will need to secure additional funding for full research, development, and commercialization activities, with future funding needs dependent on factors like the outcome of the reproxalap regulatory review and the potential exercise of the AbbVie option[132] - Net cash used in operating activities decreased to $30.8 million for the first nine months of 2023 from $45.4 million in the same period of 2022, primarily due to a lower net loss and changes in working capital[137] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Aldeyra is not required to provide quantitative and qualitative disclosures about market risk - As a "smaller reporting company," Aldeyra is not required to provide quantitative and qualitative disclosures about market risk[140] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[141] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[142] Part II – OTHER INFORMATION Legal Proceedings The company faces putative class action and derivative lawsuits alleging false or misleading statements regarding the ADX-2191 NDA, which it disputes and intends to vigorously defend - A putative class action lawsuit was filed on July 31, 2023, alleging violations of the Securities Exchange Act related to disclosures about the NDA for ADX-2191[144] - A derivative complaint was filed on October 25, 2023, against certain officers and directors, based on substantially identical allegations as the class action lawsuit[144] Risk Factors This section outlines extensive risks, primarily focusing on the successful regulatory approval and commercialization of reproxalap, along with challenges in capital raising, competition, manufacturing, intellectual property, and historical operating losses - The business is highly dependent on the successful FDA approval and commercialization of reproxalap, and failure or significant delay would materially harm the business[146][149] - The FDA has noted substantive review issues in a late-cycle review meeting for the reproxalap NDA and has indicated an additional clinical trial is needed, which could result in a Complete Response Letter or delay[155] - The company has a history of significant operating losses ($389.5 million accumulated deficit as of Sep 30, 2023) and expects to incur more losses, requiring substantial additional financing to continue operations and commercialization efforts[240][241][246] - The company relies on third parties for clinical trials and manufacturing, and any failure by these parties to perform could delay or derail development programs[148][279][284] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[413] Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[413] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[413] Other Information No other information was reported for the period - None[413] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and required SEC certifications - Exhibits filed include corporate governance documents (Certificate of Incorporation, Bylaws) and required SEC certifications (302 and 906 certifications)[415][416][417]