Earnings Call Transcript - ALDX Q2 2021

Operator, Operator

Thank you all for joining us today for the Aldeyra Therapeutics Second Quarter 2021 Financial Results Conference Call. I will now turn the call over to our Chief Financial Officer, Joshua Reed. Please proceed.

Joshua Reed, CFO

Good morning, everyone. With me is Dr. Todd Brady, President and Chief Executive Officer of Aldeyra. This morning, we issued a press release reporting our financial results for the quarter ended June 30, 2021. A copy of the press release is available on the Investors & Media section of our website, www.aldeyra.com. Please note that this morning's conference call contains forward-looking statements regarding future events and the future performance of Aldeyra. Forward-looking statements include statements regarding submission of potential new drug applications, potential commercialization, the anticipated timing of results from our clinical trials, our projected cash runway, our possible or assumed future results of operations, expenses and financial position and potential growth opportunities among other things. These statements are based upon the information available to the company today. These statements 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 product candidates and systems-based approaches; the risk that results from clinical trials or portions of clinical trials may not accurately predict the results of future trials for the same or different indications; and Aldeyra's continuing review and quality control analysis of clinical data. As a result of the COVID-19 pandemic, clinical site availability, staffing and patient recruitment have been negatively affected, and the timelines to complete our clinical trials may be delayed. 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 current and potential future impact of the COVID-19 pandemic on our business, 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 company's press release issued this morning and our filings with the SEC. I will now turn the call over to Dr. Brady.

Todd Brady, CEO

Thank you, Joshua, and good morning. We began this morning with the exciting news relating to our retinal disease program. Over the past few weeks, the FDA has granted orphan drug designation to ADX-2191, the lead product candidate in our retinal disease pipeline for the treatment of 2 additional rare disorders: Primary vitreoretinal lymphoma and retinitis pigmentosa. Primary vitreoretinal lymphoma is a rare, aggressive high-grade cancer that affects approximately 2,800 people in the United States with approximately 600 new cases diagnosed annually. Retinitis pigmentosa is a clinical group of rare genetic eye diseases that affects an estimated 82,000 to 110,000 individuals in the United States and approximately 1 in 4,000 people worldwide. As noted in this morning's news release, we plan to initiate a Phase II clinical trial of ADX-2191 in patients with retinitis pigmentosa this year. ADX-2191 has now received orphan drug designation for 3 distinct clinical indications that affect the retina: primary vitreoretinal lymphoma, retinitis pigmentosa, and proliferative vitreoretinopathy, a sight-threatening condition and the leading cause of failure of retinal detachment surgery for which we have received fast track designation from the FDA. The prevention of proliferative vitreoretinopathy, as many of you know, is the focus of our ongoing Phase III GUARD trial, part 1 of which is scheduled to conclude enrollment at the end of this year. Together, these designations highlight the broad platform potential of ADX-2191 to treat a spectrum of rare, yet serious retinal disorders, none of which have approved therapies. Particularly as a result of the recent orphan designations in primary vitreoretinal lymphoma and retinitis pigmentosa, we will be updating you on future calls as to regulatory timelines and the development process for ADX-2191 across the retinal disease platform. Turning to our anterior segment ophthalmology pipeline. We remain on track to discuss results of our Phase III INVIGORATE trial and our regulatory strategy for reproxalap in ocular allergy with the FDA this year. The discussion follows the successful completion of INVIGORATE in April, where reproxalap demonstrated highly statistically significant improvement over vehicle for the primary endpoint of ocular itching and the key secondary endpoint of ocular redness as well as all secondary endpoints. Patient enrollment continues in our Phase III TRANQUILITY trial of reproxalap for dry eye disease with enrollment in the identical TRANQUILITY-2 trial on track to begin this quarter. Ocular redness is the primary endpoint of these 2-day trials with RASP levels, Schirmer's test, and dry eye symptoms as secondary endpoints. We expect to enroll approximately 150 patients per arm in each trial, and top-line results are planned for the fourth quarter of this year. In parallel with TRANQUILITY, we've initiated a multicenter, double-masked randomized vehicle-controlled parallel group Phase II clinical trial in dry eye disease. The purpose of this trial is to optimize the tear collection process to measure RASP. Similar to TRANQUILITY, the primary endpoint of the trial is ocular redness. In addition to our ocular programs, we remain excited about the extension of the therapeutic potential of RASP inhibition to systemic inflammatory disease. Initial results from Phase II trials in asthma, psoriasis, and COVID-19 of ADX-629, our first-in-class orally available and irreversible covalent inhibitor of pro-inflammatory RASP, are anticipated in the fourth quarter of 2021 or the first quarter of 2022. In addition to the disease areas currently under study, we're evaluating the possibility of expanding clinical testing of ADX-629 to other systemic indications where RASP may mediate pathology and where current therapy is either inadequately effective or toxic. We look forward to updating you on our progress along these lines later this year. With that, I'll turn the call back over to Joshua to review our second quarter financial results.

Joshua Reed, CFO

Thank you, Todd. Cash and cash equivalents as of June 30, 2021, were $249.7 million. Based on our current operating plan, we believe that existing cash and cash equivalents will be sufficient to fund currently projected operating expenses through the end of 2023, including potential NDA submissions for reproxalap, initial commercialization of reproxalap if approved and continued development of our product candidates in ocular and systemic immune-mediated diseases. Turning now to our second quarter 2021 results. Research and development expenses were $11.5 million for the quarter ended June 30, 2021, compared with $4.9 million for the same period in 2020. The increase of $6.6 million is primarily related to the increase in clinical research and development expenditures. General and administrative expenses were $3.1 million for the quarter ended June 30, 2021, compared with $2.2 million for the quarter ended June 30, 2020. The increase of $900,000 is primarily due to an increase in personnel-related costs and other miscellaneous administrative expenses. The net loss for the second quarter of 2021 was $14.9 million or $0.28 per share compared with a net loss of $7.5 million or $0.25 per share for the quarter ended June 30, 2020. Looking at our investor calendar, Todd and I will be participating in a number of investor conferences in the coming months, including events hosted by Jefferies, Citi, BTIG, H.C. Wainwright, and Berenberg. Please check the Events and Presentations section of our website for details. Now I'll hand the call back over to Todd for closing comments.

Todd Brady, CEO

Thank you, Joshua. Aldeyra continues to make significant progress toward our goal of developing effective and highly differentiated new therapies to treat immune-mediated diseases with significant unmet medical need. We are excited about the first-line potential for reproxalap as a treatment for anterior surface inflammatory diseases that, for a significant percentage of patients, are not being adequately controlled by standard of care approaches. Beyond the anterior segment, we are developing innovative medicines for retinal inflammatory diseases that we believe will create near-term high-value commercial opportunities for our pipeline. Finally, we're committed to expanding our therapeutic applications to systemic inflammatory diseases, representing a myriad of conditions that are today not sufficiently treated. With that, Josh and I will be happy to take your questions. Operator?

Operator, Operator

Your first question comes from the line of Marc Goodman with SVB Leerink.

Marc Goodman, Analyst

Can you talk about this new indication for the RP? So I guess, first of all, your other ideas there came from the docs at Mass Eye and Ear, and you bought the technology out. Did this one come from them too? Or I'm just kind of curious where the idea came from, why starting the study now? Has the methotrexate off-label been used for this indication before? Maybe you could just give us a little history of that. And then is there a screening that takes place because this is a genetic disease? Just curious about that. And then also on the Phase II to optimize the RASP level study that you're talking about there, is that an FDA requirement? Is this going to be one of those supplements after you file? Just curious who's calling that.

Todd Brady, CEO

Thanks as always for the excellent question. And so on retinitis pigmentosa, a program about which we're very excited. I think as you can tell from our prepared comments this morning. The genesis of retinitis pigmentosa as it relates to methotrexate is a paper that was published out of Case Western and the University of Pittsburgh that's highlighted in our corporate deck that was updated and posted this morning. You can see the data in the deck, which suggest that methotrexate is particularly important in rhodopsin misfolding; rhodopsin is a protein that's critical in the light sensation cascade in the retina. Methotrexate seems to be able to prevent the misfolding in certain genotypes of retinitis pigmentosa. So the answer to the second part of your question is that patients in the upcoming clinical trial will be screened genetically not only to identify retinitis pigmentosa, but this particular subtype, this genetic subtype of retinitis pigmentosa that seems to respond well to methotrexate. Regarding your question about the Phase II trial in dry disease that we mentioned this morning in the prepared comments, this is not an FDA requirement. But as you know, we're particularly interested in assessing RASP levels in tears. RASP is the target of our drug. If we can successfully demonstrate changes in RASP following drug administration, then I believe we will be the first company ever to demonstrate that a topical drug can affect the target of that drug in the tears of patients. We're also interested potentially in highlighting the changes in RASP in the pharmacology section of our potential drug label, if commercialized. So we're taking the assessment of RASP very seriously. Hence, this Phase II trial, which, as we mentioned, is designed to optimize tear collection, obviously, a pivotal process in the assessment of RASP.

Operator, Operator

And your next question comes from the line of Yigal Nochomovitz with Citigroup.

Yigal Nochomovitz, Analyst

I just wanted to follow up on the Phase II trial that you're running, the new one that you've just announced. You're saying the purpose is to optimize the tear collection process to measure RASP. Could you just help us understand a little bit better why this wasn't possible within the context of the 2 TRANQUILITY Phase IIIs?

Todd Brady, CEO

Thank you for the question. I'm glad to clarify the Phase II RASP trial. The TRANQUILITY trials are similar and based on the successful run-in cohort from January. As part of TRANQUILITY, we've identified ocular redness as the primary endpoint. Ocular redness has many advantages, as we've shown activity in ocular redness with reproxalap not only in dry eye disease but also in ocular allergy. Additionally, ocular redness is the key sign of dry eye disease that matters to patients. Patients are not concerned with Schirmer's test or ocular screening; hence, our choice of ocular redness. However, as I mentioned earlier, we are still keen on evaluating RASP and sharing RASP data with the Street, and we may include it in our product label. This is the reason we've initiated this study. Tear collection presents challenges since dry eye patients often have very few tears. It is tough to measure RASP because we need about 3 microliters of tears to generate a RASP signal from one subject. Surprisingly, around 25% of the subjects in the running cohort for TRANQUILITY were unable to produce 3 microliters or more of tears. This is why we are working on optimizing the tear collection process, which is the aim of this trial. However, I want to emphasize that ocular redness remains the primary endpoint in this Phase II trial.

Yigal Nochomovitz, Analyst

Got it. And I just had a few housekeeping questions on your plan to process for disclosing TRANQUILITY. Firstly, will both trials be reported at the same time? Second, will you be conducting any type of pooled analysis of these 2 trials? And then finally, what should we expect with respect to the top line release beyond ocular redness? Are we also going to see the Tear RASP level data, the Schirmer's test data, and the dry eye symptoms in the top line release?

Todd Brady, CEO

Yes, I do think that we will disclose the TRANQUILITY trial serially. They are run in a staggered fashion. I do not expect that we will announce the results of both trials together, just given timing issues. We're big fans of pooling, as you know, and pooling is part of the NDA submission process. I do expect you'll see pooled data at some point, though it may not be at the data releases for obvious reasons. Ocular redness is the primary endpoint. We are also interested in Schirmer tests and tear RASP levels, as we've discussed. Schirmer tests and tear RASP levels will be secondary endpoints and represent 2 other FDA-designated signs of dry disease; we're also assessing dry disease symptoms. So, in terms of secondary endpoints, you'll see a couple of different signs as well as dry disease symptoms within the chamber.

Operator, Operator

And your next question comes from the line of Edwin Zhang with H.C. Wainwright.

Edwin Zhang, Analyst

For retinitis pigmentosa, have you done any in-house work before you decide to go after this genetic disease? Do you need to do any preclinical or clinical tests before you start the Phase II trial? My second question is a quick one. For allergic conjunctivitis, have you learned any feedback from the FDA? What's the regulatory pathway possibly going forward in AC?

Todd Brady, CEO

Thank you, Edwin, for your questions. The retinitis pigmentosa paper mentioned in our corporate presentation is an impressive scientific study. The researchers screened thousands of compounds against specific genetic subtypes of retinitis pigmentosa, and methotrexate emerged as a leading candidate for preventing rhodopsin misfolding. They have provided a range of preclinical data, including results from animal injections and both single and multiple doses. Overall, the findings from this paper are very compelling, which is why we plan to initiate a clinical trial for retinitis pigmentosa. To answer your question, we have confirmed the effectiveness of methotrexate in vitro using human cell lines that have been genetically modified in two separate labs. We usually aim to replicate existing scientific studies before embarking on a clinical trial. I can assure you that the investigators for the upcoming trials are very enthusiastic about the potential for a new treatment for retinitis pigmentosa. As I mentioned, there are no approved therapies for this condition. It is challenging to treat and often leads to blindness. Therefore, all parties involved—the patients, investigators, and our team—are eager to start this trial and move this promising preclinical research into clinical testing. Regarding allergic conjunctivitis, we are still in discussions with the FDA and anticipate those conversations will continue this year. We will provide updates as soon as we have more clarity on the outcomes of those discussions.

Operator, Operator

And your next question comes from the line of Tom Shrader with BTIG.

Tom Shrader, Analyst

A couple of questions on 629 as we get close to data. For the psoriasis readout, do you expect there's enough data there to make a reasonable comparison with psoriasis standard of care? And for atopic asthma, who are the patients here? Are these patients well-controlled on current medications or quite impaired patients? Just a sense of how noisy that data set is going to be.

Todd Brady, CEO

Thank you for the questions, Tom. The purpose of the three Phase II trials for ADX-629 is to better understand how the drug functions, especially regarding the cytokine and RASP profiles. We want to identify which cytokines are increased or decreased and how quickly these biomarker signals change. While some relevant clinical data may be derived from these studies, they are not designed to detect statistical changes in clinical endpoints, as that is not the main focus of the trial. With ADX-629, we've intentionally and systematically chosen diseases that may respond well to the drug, specifically psoriasis and asthma, which represent different ends of the inflammatory spectrum. Psoriasis is more of a TH1 autoimmune condition, while atopic asthma is an allergic TH2 hypersensitivity disorder. We are all eager to observe the drug's behavior, particularly regarding biomarkers in these two different types of inflammation. COVID-19 encompasses various inflammatory responses, and we are interested in understanding how the drug performs across the board, especially since some patients experience cytokine response syndrome or cytokine storms. In our corporate presentations, we previously shared cytokine data for reproxalap, which is structurally similar to ADX-629. The results showed remarkable activity; the inflammatory cytokines we tested from both TH1 and TH2 pathways appeared reduced after treatment, while the anti-inflammatory cytokine IL-10 was upregulated. This is why we consider RASP to be key mediators of inflammation prior to cytokine responses. If we can inhibit RASP with reproxalap, ADX-629, or other molecules from our platform, our aim is to shift the inflammatory state from pro-inflammatory to anti-inflammatory. This rationale guides our selection of diseases. Interestingly, dry eye disease and allergic conjunctivitis, which we tested reproxalap on, also fit this inflammatory spectrum, with dry eye being TH1-type autoimmune and allergic conjunctivitis representing a TH2 hypersensitivity type. We've seen positive results in both conditions, so we believe ADX-629 may also show activity across a range of responses, at least in terms of biomarkers. Regarding clinical readouts, we plan to evaluate PASI scores and pulmonary function tests, as is standard for these indications, but I do not anticipate a large dataset for clinical endpoints. For the atopic asthma patient population, these patients are usually triggered by allergens, reflecting the hypersensitivity nature of the TH2 profile. Consequently, we require patients to demonstrate an allergic response through pulmonary function testing and will challenge them accordingly. This will be a crossover trial, where each participant will receive both the drug and placebo at different times, and their response to these challenges will be crucial for our biomarker and clinical evaluations.

Operator, Operator

Your next question comes from Prakhar Agrawal of Jones Trading.

Prakhar Agrawal, Analyst

For ADX-2191 in retinitis pigmentosa, what endpoints could you study in Phase II? And any clarity on what regulatory pathway could look like? And secondly, any clarity on the planned NDA submission for allergic conjunctivitis, updates on the timelines there? That would be super helpful.

Todd Brady, CEO

For sure, Prakhar, and thanks for the question. It is early to comment on the regulatory pathway for retinitis pigmentosa. I can tell you that other sponsors have explored clinical challenges as primary endpoints for later-stage trials, such as walking through a maze in the dark. There are a variety of creative clinical outcomes that can be tested in later-stage trials. The point of the current trial that we disclosed this morning is not that; the point is to assess the activity of ADX-2191 in terms of biomarker assessments and OCT, other types of radiographic and morphological assessments that are typically used to gauge the activity of a drug in retinitis pigmentosa. One positive aspect about testing rare retinal disease is that the retina can be observed directly. In fact, it's the only aspect of the central nervous system that can be observed directly with fundoscopic exams. That will be the focus of the upcoming Phase II trial. We will disclose more about that trial subsequently in terms of design and endpoints and so forth. As I mentioned, we're very excited about testing the compound because retinitis pigmentosa remains a clinical challenge with no approved therapy and thus derives a great deal of optimism and excitement from patients and physicians. In terms of allergic conjunctivitis, as I mentioned in my prepared comments, we remain in discussions with the FDA. I would expect it will have clarity on the regulatory path at some time this year. Obviously, we'll keep updated on next steps.

Operator, Operator

And your next question comes from the line of Justin Kim with Oppenheimer.

Unidentified Analyst, Analyst

This is Isabel on for Justin. Just as you think about a potential filing timeline, do you anticipate the safety experience of TRANQUILITY-1 and 2 to be sufficient based on current enrollment progress?

Todd Brady, CEO

Isabel, thanks for the question. The gating factor for the NDA filing for reproxalap, as I have mentioned on prior calls, is not TRANQUILITY; it is the safety trial as you pointed out. The FDA for most NDA submissions requires a detailed and dedicated safety trial usually longer than the typical efficacy trial. In our case, our chronic efficacy trials were 12 weeks long for symptom assessment. In the case of the safety study, that trial is 12 months long. The idea is to estimate NDA filing based on the last patient, last visit in that safety trial. We do believe that we'll be able to file or submit the NDA based on 6 months of patient safety data. We continue to reiterate prior guidance that the NDA for reproxalap will go in late this year or early next year. But the exact timing, as I mentioned, depends on the nature of enrollment and the timing of enrollment in the safety trial. Regarding your point about the safety database, which is different from the safety trial, we think we're well within the normal safety database bounds for numbers of patients just based on the number of Phase II and Phase III trials that we have performed in dry disease. We don't anticipate any issues in terms of the size of the patient safety database.

Operator, Operator

And your next question comes from the line of Kelly Shi with Jefferies.

Unidentified Analyst, Analyst

This is Hao calling in for Kelly Shi. My question is about the Phase II retro trial in dry eye disease. Will the trial design be the same as the TRANQUILITY trials with a focus on optimizing the tear RASP collection? Additionally, I have a question regarding the commercialization of reproxalap and AC. What are your thoughts on the potential for launching it yourself or through collaborations?

Todd Brady, CEO

Thank you for your question about the Phase II RASP trial in dry eye. I didn’t discuss the trial design in my prepared remarks. To answer your question, yes, the trial design is quite similar to TRANQUILITY-1 and TRANQUILITY-2. The Phase II trial lasts for two days. On day one, participants receive four doses of the drug, and on day two, there is one dose of the drug before a 90-minute dry eye disease chamber assessment. Midway through this chamber assessment, around the 45-minute mark, a second dose of the drug is administered. What has changed in the Phase II RASP trial protocol is the way we're collecting tears on day one, utilizing a different collection schedule. There are various methods for collecting tears, with the two most common being the use of a capillary tube and the Schirmer Test strip. With the capillary method, a small glass tube is placed just above the lower eyelid allowing tears to gather by capillary action over 5 to 10 minutes. In contrast, Schirmer Test strips are placed in the eye's tear lake to absorb tears, which can then be analyzed after freezing and processing. In the Phase II trial, we are optimizing the timing of these two extraction methods, especially for RASP assessment. I don’t anticipate that these protocol adjustments will impact the day two chamber data, particularly regarding symptom and redness evaluations. The primary focus of the Phase II trial on day one is on tear collection to enhance the RASP signal compared to the TRANQUILITY trial. Regarding Yigal’s earlier inquiry about secondary endpoints, during the run-in trial, we reported Schirmer test results, symptoms, and ocular redness soon after trial completion. RASP data takes longer to analyze because tears must be sent to a third-party laboratory for a qualified and validated analysis process. This adds complexity and time compared to standard assessments of dry eye disease. At this point, we don’t have a clear timeline for when the RASP data will be available in relation to other data from the Phase II and Phase III trials, but we will keep investors updated as we approach those data release dates. For details on the commercialization strategies for reproxalap, I’ll hand it over to Joshua for further insights.

Joshua Reed, CFO

Sure. Thanks for the question. From a commercialization standpoint, we are committed to following the path that is in the best long-term interest of Aldeyra and our shareholders. On the business development front, our discussions are robust. The early onset of activity and broad symptom improvement profile of reproxalap continue to generate significant interest from potential strategic partners. So that addresses sort of the BD side of the equation. With respect to going it alone, we have approximately $250 million in cash, which is sufficient to begin initial commercialization efforts for reproxalap. So we have a number of different options that we're exploring here, and we believe that we're well positioned to capitalize on the opportunity.

Unidentified Analyst, Analyst

And congrats on getting the additional orphan designation for 2191.

Todd Brady, CEO

Yes. Thanks, Hao. We're thrilled.

Operator, Operator

And your next question comes from the line of Esther Hong with Berenberg.

Esther Hong, Analyst

So on ADX-2191, can you give us an update on the ongoing Phase III study in PVR? And then also with multiple ongoing programs, which could possibly advance the quickest? And then I just got a quick follow-up.

Todd Brady, CEO

Thanks, Esther, and good to hear your voice. I'm glad you asked about ADX-2191. This is a program that I think has been largely ignored by investors, yet, as I said in my prepared comments, 2191 is a near-term high-value commercial opportunity, and not only in 1 clinical indication but in 3 clinical indications. The PVR program is going well. We have, as of this morning, reiterated our guidance that we will complete enrollment in the GUARD Phase III program this year. I'll point out that 1 thing we've observed with the GUARD trial is that many retinal surgeons are already treating PVR with methotrexate off-label, if you will. It seems like the de facto standard of care treatment of PVR is already methotrexate. We're really thrilled to be able to present to the retinal community control data along these lines, eagerly anticipating the results of the GUARD trial because I do think that the results have the potential to validate what is sort of done in a standard of care basis today in terms of treatment of the disease. We look forward to announcing those results sometime next year. There are multiple programs, as you point out, and with 2191, I really do believe that 2191 represents a platform approach. As you know, methotrexate has been used in many, many different indications. It is a known and potent anti-inflammatory and antifibrotic drug with hundreds of thousands of patients' worth of clinical experience. As you know, it turns out that methotrexate is injected into the eye, for my prior comments regarding proliferative vitreoretinopathy and now ocular lymphoma. In terms of which indication will make it to the market first, we don't yet know. We're optimistic about all of them. I would say that retinitis pigmentosa is the newest of the indications that we're testing. I would probably place that in terms of timing behind PVR and ocular lymphoma. But we're excited to update on timelines and regulatory process and so forth, if not later this year, earlier next year. And as I mentioned in the beginning of my response to your question, we're just so thrilled about 2191 and the potential for our company and for patients and physicians; all of these indications that we're pursuing have no approved therapies.

Esther Hong, Analyst

Super helpful. And then just safety data to date on 2191?

Todd Brady, CEO

One advantage of 2191 is the extensive patient exposure data we have from ocular injections. Some of this information is included in our corporate presentation about the study on PVR. The safety of intraocular injection of methotrexate is well documented in scientific literature, which gives this compound a significant edge over newer treatments. I do not anticipate safety being a concern for any of the described indications since the doses and injection schedules we are using are well established and commonly used in practice for treating these rare diseases.

Operator, Operator

Your next question comes from the line of Matt Cross with Alliance Global.

Matt Cross, Analyst

I have two quick questions. First, regarding the Phase II TRANQUILITY trial, I'm curious about the potential impact upon study completion. I know there have been discussions about how this might affect labeling, but are there any insights you could gain from this Phase II that would influence your work on TRANQUILITY? Will this only apply to post-marketing studies, or could there be some changes? As you noted, TRANQUILITY-1 and TRANQUILITY-2 will finish sequentially with a short gap in between, so I'm unsure if this timing might affect what you do for TRANQUILITY-2. My second question relates to enrollment for both TRANQUILITY studies, especially since TRANQUILITY-2 will be starting soon. Given your commitment to having both datasets in the fourth quarter, are you pre-identifying patients for TRANQUILITY-2 while enrolling patients in TRANQUILITY-1, even though the second trial has not yet opened?

Todd Brady, CEO

Thank you, Matt, for your question. I appreciate you joining our call during this busy earnings season. You raised excellent points regarding the Phase II trial and its implications not only for TRANQUILITY but also for our regulatory package. The main goal of the Phase II RASP trial in dry eye disease is to enhance the pharmacology section of the product label. I wouldn't categorize the Phase II as critical for the NDA submission or approval process. However, as I mentioned earlier, obtaining RASP data for the pharmacology section could provide a competitive edge. To our knowledge, no other topical eyedrop has demonstrated improved target engagement. Understanding how reproxalap functions and potentially showing that mechanism of action in the tears of trial patients is noteworthy and should set reproxalap apart from other treatments in the dry eye market. The primary endpoint for the Phase II is ocular redness. We have consistently shown improvement in redness among patients with allergy and dry eye issues, which makes us optimistic about the significance of ocular redness in the market. Patients tend to care about their appearance rather than clinical scores or tests, so we are pleased to have demonstrated ocular redness activity in previous trials, making it a logical primary endpoint for the Phase II. If we see improvements in ocular redness in the Phase II, that would be a positive sign. I should note, however, that this trial will have about 75 patients per arm, totaling around 150 patients, which is approximately half the size of the TRANQUILITY trial, and therefore, the statistical power isn't as strong as in Phase III. Nonetheless, we are conducting the Phase II primarily for RASP, not just for redness. Regarding TRANQUILITY-1 and TRANQUILITY-2, we are conducting these trials sequentially, enrolling the same patient population under identical criteria. Our approach is to focus on the quality of enrollment for TRANQUILITY-1 first; once that trial is fully completed, we will transition to TRANQUILITY-2. The convenience of the 2-day trials is an attractive feature for participants. They could screen one weekend, qualify, and complete the trial the following weekend with rapid day one and day two evaluations. Thus far, enrollment in TRANQUILITY-1 and the Phase II trial has been strong, and we do not anticipate problems with TRANQUILITY-2. Up until now, COVID-19 has not significantly affected our enrollment for the TRANQUILITY trial, which may be partly due to the short duration that appeals to participants.

Matt Cross, Analyst

Perfect. That's super helpful extra detail, Todd. I appreciate it. And yes, hope to see that RASP data in the label and kind of prove out what you're already showing, I think, between the correlation between RASP and redness. So much appreciate it.

Operator, Operator

And at this time, there are no further audio questions. We'll now turn the conference back to Dr. Brady for closing remarks.

Todd Brady, CEO

Well, thank you for joining us this morning. As always, we look forward to keeping you updated on our progress.

Operator, Operator

And thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.