10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-36332

ALDEYRA THERAPEUTICS, INC.

(Exact name of Registrant as specified in its charter)

(State or other jurisdictionof incorporation) (IRS EmployerIdentification No.)

131 Hartwell Avenue, Suite 320

Lexington, MA02421

(Address of principal executive offices)

(781) 761-4904

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.001 par value per share ALDX The Nasdaq Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company or an emerging growth company. See the definitions of the “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐ Accelerated Filer ☐

Non-Accelerated Filer ☒ Smaller reporting company ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2021, the last business day of the registrant’s last completed second quarter, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $648,685,384, based on the closing price of the registrant’s Common Stock, as reported by The Nasdaq Capital Market. Shares of Common Stock held by each executive officer, director and stockholders known by the registrant to be affiliated with such individuals based on public filings and other information known to the registrant have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 15, 2022 there were 58,098,965 shares of the registrant’s Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s proxy statement with respect to the registrant’s 2022 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2021, are incorporated by reference into Part III of this Annual Report on Form 10-K.

Aldeyra Therapeutics, Inc.

Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2021

Table of Contents

Page

Part I

Special Note Regarding Forward-Looking Statements; Industry and Market Data 3

Item 1. Business 5

Item 1A. Risk Factors 33

Item 1B. Unresolved Staff Comments 83

Item 2. Properties 83

Item 3. Legal Proceedings 83

Item 4. Mine Safety Disclosures 83

Part II

Item 6. [Reserved] 84

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 95

Item 8. Financial Statements and Supplementary Data 96

Item 9A. Controls and Procedures 96

Item 9B. Other Information 97

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 97

Part III

Item 10. Directors, Executive Officers and Corporate Governance 98

Item 11. Executive Compensation 98

Item 14. Principal Accounting Fees and Services 99

Part IV

Item 15. Exhibits, Financial Statements Schedules 100

Index to Financial Statements 105

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements throughout this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based on information currently available to our management. Words such as, but not limited to, “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “contemplates,” “predict,” “project,” “target,” “likely,” “potential,” “continue,” “ongoing,” “design,” “might,” “objective,” “will,” “would,” “should,” “could,” or the negative of these terms and similar expressions or words, identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking statements. Meaningful factors which could cause actual results to differ include, but are not limited to:

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the timing of enrollment, commencement, and completion of our clinical trials;

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the timing and success of preclinical studies and clinical trials conducted by us and our development partners;

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delay in or failure to obtain regulatory approval of our product candidates, including as a result of the U.S. Food and Drug Administration (FDA) not accepting our regulatory filings or requiring additional clinical trials or data prior to review or approval of such filings;

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the ability to maintain regulatory approval of our product candidates, and the labeling for any approved products;

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the risk that prior results, such as signals of safety, activity or durability of effect, observed from preclinical or clinical trials, will not be replicated or will not continue in ongoing or future studies or trials involving our product candidates;

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the scope, progress, expansion, and costs of developing and commercializing our product candidates;

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the current and potential future impact of the COVID-19 pandemic on our business, results of operations and financial position;

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uncertainty as to our ability to commercialize (alone or with others) and obtain reimbursement for our product candidates following regulatory approval, if any;

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the size and growth of the potential markets and pricing for our product candidates and the ability to serve those markets;

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our expectations regarding our expenses and revenue, the sufficiency or use of our cash resources and needs for additional financing;

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the rate and degree of market acceptance of any of our product candidates;

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our expectations regarding competition;

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our anticipated growth strategies;

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our ability to attract or retain key personnel;

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our limited sales and marketing infrastructure;

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our ability to establish and maintain development partnerships;

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our ability to successfully integrate acquisitions into our business;

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our expectations regarding federal, state and foreign regulatory requirements;

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political, economic, legal, social and health risks, including the recent COVID-19 pandemic and subsequent public health measures, and war or other military actions, that may affect our business or the global economy

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regulatory developments in the United States and foreign countries;

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our ability to obtain and maintain intellectual property protection for our product candidates; and

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the anticipated trends and challenges in our business and the market in which we operate.

All written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf. We undertake no obligation, and specifically decline any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (SEC).

We encourage you to read the discussion and analysis of our financial condition and our financial statements contained in this annual report on Form 10-K. We also encourage you to read Item 1A of Part 1 of this annual report on Form 10-K, entitled “Risk Factors,” which contains a more complete discussion of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of this report, other unknown or unpredictable factors also could affect our results. Therefore, the information in this report should be read together with other reports and documents that we file with the SEC from time to time, including Forms 10-Q, 8-K and 10-K, which may supplement, modify, supersede or update those risk factors. There can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that our results will lead to the expected consequences to, or effects on, us. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

As used in this annual report on Form 10-K, the terms “Aldeyra,” “Registrant,” “the Company,” “we,” “us,” and “our” mean Aldeyra Therapeutics, Inc., together with its wholly-owned subsidiaries, unless the context indicates otherwise.

INDUSTRY AND MARKET DATA

We obtained the industry, market and certain other data used throughout this annual report on Form 10-K from our own internal estimates and research, as well as from industry and general publications, surveys and studies conducted by third parties. Internal estimates are derived from publicly-available information released by industry analysts and third-party sources, our internal research, and our industry experience, and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In addition, while we believe the industry, market, and other data included in this annual report on Form 10-K are reliable and based on reasonable assumptions, such data involves risks and uncertainties and are subject to change based on various factors, including those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”. These and other factors could cause results to differ materially from those expressed in the estimates made by independent parties and by us.

ITEM 1.BUSINESS

Overview

We are a biotechnology company devoted to discovering and developing innovative therapies designed to treat immune-mediated diseases. Our lead product candidate, reproxalap, is a first-in-class treatment in late-stage development for dry eye disease (DED) and allergic conjunctivitis (AC). We have additional product candidates in development for autoimmune diseases and other immune-mediated disease, as well as for proliferative vitreoretinopathy (PVR) and other retinal diseases. We currently intend to commercialize our products directly or through collaborations. None of our product candidates have been approved for sale in the United States or elsewhere.

Immune-mediated diseases are conditions that result from an imbalance of inhibitory and stimulatory factors that regulate the immune system. Immunological dysregulation can lead to a broad array of conditions that include autoimmune disease, allergy, immunoproliferative disease, and cancer. Many ocular, cardiovascular, metabolic, neurological, and musculoskeletal diseases, affecting tens of millions of patients in the United States and hundreds of millions of patients worldwide, are at least partially immune-mediated. An estimated 7% of western society suffers from some form of immune-mediated disease, and incidence has been increasing. Given the complexity of immune dysregulation, which involves many mediators and signaling pathways, rarely is any single therapeutic approach effective, and today most immune-mediated diseases are generally considered to be inadequately treated. As such, we believe immune-mediated diseases represent considerable unmet medical need, and that demand for novel immune-modulating therapies is high. Consistent with large patient populations and high therapeutic demand, the current market for the treatment of immune-mediated diseases is considerable, representing an excess of $40 billion worldwide.

Our clinical product development pipeline is focused on immune-mediated ocular diseases and select systemic diseases, and encompasses two distinct biological mechanisms of action: reactive aldehyde species (RASP) modulation and dihydrofolate reductase inhibition. The immunological activity of our product candidates generally leads to diminished levels of pathological inflammation via down-regulation of immune cell activation or proliferation.

Our lead product candidate reproxalap is a RASP modulator that has been shown to diminish ocular inflammation, and has demonstrated statistically significant and clinically relevant improvements across a number of Phase 2 and Phase 3 clinical trials in DED and AC when administered topically to the eye as an ophthalmic solution. Additionally, in a Phase 1 clinical trial, ADX-629, a first-in-class orally available RASP modulator, was well-tolerated and no treatment-related adverse events were observed. Relative to subjects treated with placebo, reduction in the commonly described pro-inflammatory RASP malondialdehyde was observed in ADX-629 treated subjects. A growing body of clinical evidence supports the potential and relevance of RASP modulation as a new and differentiated mechanism of action. We have discovered and are developing additional RASP modulators. The RASP modulator platform represents a unique and novel pharmacologic approach that, unlike almost all drugs in use today, are designed to not directly inhibit or activate a particular protein but instead targets a family of small molecules that in turn affect the activity and structure of many proteins at once. RASP modulation, therefore, has the

potential to down-regulate pro-inflammatory systems or groups of proteins, and may lead to multiple beneficial clinical effects while avoiding toxicity associated with single-target inhibition or activation.

As we continue to execute on our strategy of expanding our product candidate pipeline, we may license or acquire new immune-modulating approaches with novel therapeutic potential. In January 2019, we acquired Helio Vision, Inc. and thereby obtained rights to ADX-2191, a vitreous-compatible methotrexate formulation for intraocular injection, for the prevention of PVR, a serious sight-threatening retinal disease with no approved treatment, and primary vitreoretinal lymphoma (PVRL), a rare cancer with no approved treatment. In addition, in December 2016, we in-licensed the clinical-stage product candidate ADX-1612 (investigated in oncology under the name ganetespib), which inhibits the protein chaperome, a mechanistically differentiated approach for the potential treatment of inflammatory diseases.

Our active clinical programs include three unique product candidates, representing two distinct mechanisms of action across a number of different potential indications. All of our development plans and timelines are subject to adjustment depending on recruitment rate, regulatory review, preclinical and clinical results, funding, and other factors that could delay the initiation, completion, or reporting of clinical trials. As a result of the COVID-19 pandemic, clinical site availability, staffing, patient recruitment, and patient retention have been negatively affected and the timelines to complete our clinical trials may be delayed. Our pipeline, as of the date of filing this annual report on Form 10-K is illustrated below.

Product Candidate Development Pipeline

1Timing depends, in part, on restrictions related to the COVID-19 pandemic, the availability of clinical research facilities and staffing, the ability to recruit patients, and regulatory feedback.

2New Drug Application, or NDA submission requirements depend, in part, on clinical results and regulatory feedback.

We have no products approved for sale. We will not receive any revenue from any product candidates that we develop until we obtain regulatory approval and commercialize such products or until we potentially enter into agreements with third parties for the development and commercialization of product candidates. If our development efforts for any of our product candidates result in regulatory approval or we enter into collaboration agreements with third parties, we may generate revenue from product sales or from such third parties. We have primarily funded our operations through the sale of our common stock, convertible preferred stock, convertible promissory notes, warrants, and borrowings under debt facilities.

We will need to raise additional capital in the form of debt or equity or through partnerships to fund additional development of our product candidates, and we may in-license, acquire, or invest in complementary businesses or products. In addition, contingent on capital resources, we may augment, diminish, or otherwise modify the clinical development plan described herein.

Since our incorporation, we have devoted substantially all of our resources to the preclinical and clinical development of our product candidates. Our ability to generate revenues, if any, largely depends upon our ability, alone or with others, to complete development of and obtain regulatory approvals for our product candidates, and to successfully manufacture, market, and sell our product candidates. The results of our operations will vary significantly from year-to-year and quarter-to-quarter, and depend on a number of factors, including risks related to our business and industry, risks relating to intellectual property and other legal matters, risks related to our common stock, and other risks that are detailed in the section of this annual report on Form 10-K entitled “Risk Factors".

The Markets for Our Product Candidates

Dry Eye Disease and Allergic Conjunctivitis – Two Prevalent Diseases with Significant Comorbidity

The symptoms of DED - ocular pain, dryness, gritty sensation - and AC - ocular itching and tearing- are chronic and persistently disturbing, impacting quality of life and leading to loss of work and substantial economic burden. DED and AC are two of the most common diseases treated by ophthalmologists and optometrists, and physicians and patients regard therapy as inadequate in a substantial number of cases.

There are approximately 18 million DED patients diagnosed in the United States, but only three topical ocular drugs are approved for DED treatment, cyclosporine (0.05% as Restasis®, 0.05% generic cyclosporine, or 0.09% as CequaTM), lifitegrast (5% as Xiidra®), and loteprednol (0.25% as Eysuvis®). The activity of cyclosporine and lifitegrast has been observed to be minimal or lacking in the majority of patients, and weeks or months of treatment may be required to achieve even modest clinical benefit with over 60% of patients discontinuing treatment within 12 months of initiation. Loteprednol, a generically available corticosteroid, is indicated only for short-term treatment (up to two weeks) due to corticosteroid-associated toxicity, which includes increases in intraocular pressure that may lead to glaucoma, the development of cataracts, ocular infection, and other ocular morbidities.

There are approximately 100 million patients in the United States with AC, and we estimate that up to 30 million of such AC patients do not respond adequately to, or are dissatisfied with, topical antihistamines, the current standard of care. A primary reason for dissatisfaction with antihistamines appears to be lack of durable activity, which may be due to the fact that histamine is only one of the biological mediators of the disease, and the fact that increased histamine levels persist for only 10 to 20 minutes following allergen exposure.

Many patients manifest symptoms of both DED and AC, and differential diagnosis can be challenging for physicians. Approximately half of dry eye patients complain of itching, which is generally considered the result of allergy, and approximately half of AC patients complain of dryness, which is generally considered the result of DED. There are currently no United States Food and Drug Administration (FDA)-approved products that are indicated to treat both DED and AC. Neither cyclosporine nor lifitegrast have been approved for use in patients with AC, and antihistamines are known to exacerbate ocular dryness. Thus, we believe that no currently available drug for DED or AC is likely to be effective for the chronic treatment of the substantial number of patients who experience symptoms of both diseases.

By modulating RASP, which are elevated in a variety of inflammatory diseases, reproxalap represents a novel mechanism for diminishing ocular inflammation in DED and AC. In a number of Phase 2 and Phase 3 clinical trials in DED and AC reproxalap demonstrated consistent statistically significant and clinically relevant activity. We believe that reproxalap may have a commercially differentiated product profile versus currently approved drugs for each indication, having shown the potential for early and broad activity in DED, and durable activity in AC.

Based on the late-stage clinical trial results to date, discussed below, we believe reproxalap could offer differentiated efficacy relative to existing DED medications, particularly with regard to early onset of action and breadth of activity. Thus, our current expectation is that reproxalap could be priced similarly to, or at a premium to, currently marketed drugs for DED, which are generally priced in the range of $480 to $650 per month. The potential

size of the DED market is substantial. We estimate there to be 39 million patients with DED in the United States, of which approximately 18 million are diagnosed. Assuming approximately one-half of diagnosed patients are candidates for prescription medication, and assuming approximately four months of therapy per year, the potential total addressable market for reproxalap therapy in DED is greater than $23 billion in the United States.

Contingent on the results of current and planned clinical trials in DED and AC, in addition to regulatory authority approval, we intend to commercialize reproxalap ophthalmic solution directly or through marketing partnerships.

Proliferative Vitreoretinopathy, Primary Vitreoretinal Lymphoma, and Other Retinal Diseases

PVR is a rare inflammatory disorder of the retina that leads to severe retinal scarring and blindness, and is the leading cause of failure of retinal reattachment surgery. Over 50% of PVR cases result in severe uncorrectable vision loss (visual acuity of 20/320 or worse), and 76% of PVR patients suffer from at least moderate uncorrectable vision loss. PVR occurs after up to 10% of surgeries for retinal detachment and 50% or more of surgeries for open globe injury. Based on the prevalence of primary retinal detachment, in addition to retinal detachment that occurs as a result of trauma, we estimate that there are, in aggregate, approximately 20,000 treatable cases of PVR in the United States, Europe, and Japan. By inhibiting cell growth and thereby diminishing scar formation, ADX-2191 has the potential to be the first FDA-approved drug for prevention of PVR. In April 2018, ADX-2191 received orphan drug designation from the FDA for the prevention of PVR and, in June 2020, ADX-2191 was designated an orphan medicinal product by the European Commission for the treatment of retinal detachment. In September 2019, ADX-2191 received fast track designation from the FDA for the prevention of PVR.

Primary vitreoretinal lymphoma (PVRL) is a rare, aggressive, high-grade cancer that arises in the vitreous and retina. An estimated 2,900 people in the United States suffer from PVRL, and approximately 600 new cases of PVRL are diagnosed in the United States per year. The median survival for newly diagnosed patients is less than five years. In January 2021, we received from the FDA preliminary written comments in preparation for a Pre-IND ("Investigational New Drug”) Type B meeting regarding ADX-2191 for the treatment of PVRL. We believe the comments indicated that submission of a New Drug Application (NDA) for ADX-2191 for the treatment of PVRL may be possible without performing clinical trials. In the first quarter of 2021, we held a teleconference with the FDA to discuss the preliminary written comments and clarify the ADX-2191 NDA submission requirements for the treatment of PVRL. In July 2021, ADX-2191 received orphan drug designation from the FDA for the treatment of PVRL. ADX-2191 has the potential to be the first drug approved to treat PVRL.

In addition to PVR and PVRL, the retina is susceptible to a variety of immune-mediated diseases, many of which are mediated by RASP. Inflammatory retinal disorders that involve RASP include both posterior and pan-uveitis, uveitis-associated macular edema, diabetic macular edema, and diabetic retinopathy. Separately, RASP and RASP-adducts accumulate in dry age-related macular degeneration, Stargardt Disease (juvenile dry age-related macular degeneration-like disease), and Sjögren-Larsson Syndrome-associated maculopathy. We believe that the number of patients affected by immune-mediated retinal disorders is considerable. In particular, during 2019 and 2020, the National Eye Institute estimated that diabetic retinopathy and age-related macular degeneration affected approximately 10 million people in the United States, and was projected to double to 20 million individuals by 2050. The global ophthalmic therapeutics market was approximately $21 billion in 2021 with therapies for retinal disorders (age-related, macular degeneration and diabetic macular edema) exceeding $11 billion. Therefore, we believe that the total market potential of RASP modulators for the treatment of retinal disease is substantial.

Immune-Mediated Systemic Diseases

Immune-mediated systemic diseases, such as autoimmune disease, are generally chronic conditions characterized by excessive and misdirected inflammatory responses. In aggregate, autoimmune diseases and related systemic inflammatory disorders represent in excess of 23 million individuals in the United States and collectively, prescription drug sales are expected to exceed $74 billion by 2022. In 2021, the three top selling drugs for these autoimmune conditions accounted for approximately $28 billion in sales.

Given the complex pathophysiology of systemic immune-mediated disorders, many of which are caused by a variety of pro-inflammatory mediators, therapy often requires combinations of drugs with distinct mechanisms of action. As such, we believe novel product candidates for immune-mediated diseases are in high demand.

Our RASP modulator platform represents a potential novel therapeutic approach for a variety of common systemic immune-mediated conditions. Because RASP appear to be involved in the generation and potentiation of inflammation in general, we believe the potential therapeutic applicability of RASP modulators is broad. We are not aware of any other company actively developing therapeutics that target RASP. In 2020, we announced the initiation of Phase 2 clinical trials of ADX-629, a first-in-class orally administered RASP modulator, for the treatment of COVID-19, atopic asthma, and psoriasis as part of a systematic strategy to assess activity across different types of immunological diseases. The Phase 2 clinical trials follow a successful Phase 1 clinical trial of ADX-629, in which ADX-629 was well-tolerated, no treatment-related adverse events were observed, and target engagement was evidenced by statistically lower RASP levels in drug-treated subjects relative to controls.

The Competitive Landscape of Our Product Candidates

The pharmaceutical industry is characterized by intense competition and rapid innovation. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical companies, academic institutions, government agencies, and research institutions. We believe that the key competitive factors that will affect the development and potential commercial success of our product candidates are efficacy, safety, tolerability, and the ability to reduce the dependence on, or the dose of, other drug products.

Many of our potential competitors have substantially greater financial, technical, and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining regulatory approval for products and achieving widespread market acceptance. Our competitors’ products may be more effective, or more effectively marketed and sold, than any product that we may commercialize, and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates. Further, competitors with numerous approved products may be able to negotiatepricing and reimbursement that is more favorable than that which we may be able to achieve. We anticipate that we will face intense and increasing competition as new products enter the market and advanced technologies become available. In addition, the development of new treatment methods for the diseases we are targeting could render our products non-competitive or obsolete.

While our product candidates may manifest efficacy, tolerability, or safety advantages, many marketed therapies are generic or may be priced considerably lower than the pricing we anticipate for our product candidates. Pricing, in addition to healthcare plan coverage, prior authorization requirements, step edits, co-pay amounts, and related factors, may discourage the initial or prolonged use of our product candidates. Further, the recent growth of Pharmacy Benefit Managers has diminished the profitability of drug commercialization for smaller companies, and may hamper our ability to support our operations or compete effectively in the marketplace following regulatory approval, if any.

RASP Modulator Platform

A number of academic groups have published on the concept of reducing RASP levels, primarily by using compounds with amines (certain nitrogen-containing molecules) that react with RASP through a chemical process known as the Schiff base reaction. Various RASP-binding amines have been described, particularly carnosine (a naturally occurring dipeptide), which has other potential mechanisms of action unrelated to RASP. At least one group has published on the use of certain nitrogen-containing marketed products to temporarily bind retinaldehyde (a RASP) as a potential therapy for retinal disease. Schiff base reactions have also been mentioned as possible explanations for a portion of the activity of aminoguanidine, pyridoxamine, and possibly other non-proprietary amine-containing compounds that have been tested in clinical trials for diabetic nephropathy. However, the Schiff base reaction is reversible, and generally the substrates (precursors) and products of the reaction exist in equilibrium such that, at any point in time, the RASP substrate may be bound or unbound. In this way, Schiff base reactions alone represent temporary RASP binding, and likely lead to the relocation of RASP rather than the elimination or long-term modulation of RASP. We believe that reproxalap and chemically related product candidates that we have discovered are differentiated from the above approaches in that the chemical structures of our product candidates are novel, and the reaction with RASP has been observed to be essentially irreversible in vivo, which, we believe, may result in a more effective means of modulating RASP levels.

Other Immune-Modulating Pharmacotherapies

A myriad of new treatments have been or are being developed to treat inflammatory diseases, and have been used, or in theory could be used, for the treatment of the diseases that our product candidates are intended to target. Immune-modulating products include cytokine inhibitors, immune cell receptor inhibitors, complement inhibitors, phosphodiesterase inhibitors, and Janus kinase inhibitors. Companies that currently market such therapies include Abbvie, Inc., Johnson & Johnson, UCB Inc. and UCB S.A., Amgen, Inc., Bristol-Myers Squibb Co., Eli Lilly and Company, Novartis AG, Regeneron Pharmaceuticals, Inc., Roche, Sanofi, Takeda, AstraZeneca, GlaxoSmithKline, Merck, and Pfizer, Inc. Currently marketed products may manifest efficacy and safety advantages over our product candidates, and may be used to treat the diseases for which we are developing our product candidates.

Methotrexate, the active drug substance of ADX-2191, is generically available and has been used as a chemotherapeutic and immune modulating agent, and other formulations or application methods of methotrexate could be developed for the treatment of retinal diseases. Though not approved by the FDA for the treatment of retinal disease, such as PVRL and PVR, intraocular injection of intravenous methotrexate formulations is the de facto standard of care, and “off-label” methotrexate is now commonly administered for the treatment of PVRL. The off-label intraocular injection of intravenous methotrexate for retinal diseases is an example of a practice known as compounding. The disadvantages of compounding are significant, and include a risk of microbial contamination that can lead to severe ocular infection resulting in vision loss. Unlike compounded intravenous formulations, ADX-2191 is specifically formulated for intraocular injection such that drug concentration, density, pH, and tonicity have been designed to be compatible with the vitreous humor, the fluid in the back of the eye.

Competitive Product Candidates by Indication

We believe the primary competitors by indication with respect to our current programs in late stage-clinical testing are as follows:

Competitive Pharmaceuticals by Indication

Indication Competitive Products

We believe that there is significant unmet medical need for the diseases that we intend to target. If proven to be safe and effective, we believe that our product candidates could be used in place of, or in addition to, current therapies. Currently available therapies for the treatment of DED are generally considered by physicians and patients to be inadequate, may require weeks or months of treatment to achieve even moderate clinical benefit, and have not demonstrated clinical activity in AC, a common comorbidity. There is no approved therapy for PVR or PVRL.

Many drugs are in development for AC and DED. In addition, generic versions of Restasis® became available in the U.S. in March 2022. We believe that there are currently no drugs in development for both DED and AC; PVR; or PVRL. For the diseases we intend to study, there may be other developmental therapies of which we are not aware.

Our ability to compete successfully will depend in part on our ability to utilize our drug development expertise to identify, develop, secure rights to, and obtain regulatory approvals for promising pharmaceutical products before others are able to develop competitive products. Our ability to compete successfully will also depend on our ability to attract and retain skilled and experienced personnel. Additionally, our ability to compete may be diminished by insurers and other third-party payors, which often encourage the use of cheaper, non-innovative, or generic products.

Clinical Trial Results and Development Plans

Prior to applying for marketing approval, our product candidates must satisfy regulatory authority requirements for safety and efficacy, including pivotal Phase 3 clinical assessment. Our active clinical programs with reproxalap have consistently demonstrated statistically and clinically significant efficacy, and have advanced to late-stage clinical testing. In addition, reproxalap has been observed to be well-tolerated and reported adverse events were generally mild in our clinical trials to date. Our material clinical results have been previously disclosed elsewhere in detail, and we encourage review of all of our clinical trial disclosures. All of our development plans and timelines are subject to adjustment depending on recruitment rate, regulatory review, preclinical and clinical results, funding, and other factors that could delay the initiation, completion, or reporting of clinical trials. As a result of the COVID-19 pandemic, clinical site availability, staffing, patient recruitment, and patient retention have been negatively affected and the timelines to complete our clinical trials may be delayed.

Dry Eye Disease

In September 2017, we announced that the results of a randomized, parallel-group, double-masked Phase 2a clinical trial of 0.1% and 0.5% topical ocular reproxalap demonstrated statistically and clinically relevant improvement from baseline in multiple signs and symptoms associated with dry eye disease in as soon as one week. In September 2018, we announced that the results of a randomized, vehicle-controlled, parallel-group, multi-center, double-masked Phase 2b clinical trial of 0.1% and 0.25% topical ocular reproxalap demonstrated statistically significant improvement over vehicle in ocular signs and symptoms associated with DED (Figure 1). Relative to patients treated with vehicle, patients treated with the 0.25% concentration of reproxalap demonstrated statistically significant and clinically relevant reductions in the Four-Symptom Ocular Dryness Score and the Overall Ocular Discomfort Symptom Score. For drug-treated patients, improvement greater than that of vehicle was consistently observed across all symptoms, and activity versus vehicle was evident as early as two weeks, the first assessment following initiation of therapy. The early onset of symptomatic improvement is consistent with the Phase 2a clinical trial of topical ocular reproxalap in DED, and is supportive of a differentiated product profile relative to standard of care. Patients treated with the 0.25% concentration of reproxalap also demonstrated reductions in ocular fluorescein staining score that were statistically superior to those of patients treated with vehicle.

Figure 1: Phase 2b Dry Eye Disease Clinical Trial Results for 0.25% Reproxalap

In April 2019, we initiated the RENEW Trial, an adaptive, two-part, multi-center, randomized, vehicle-controlled, double-masked, parallel-group Phase 3 trial of 0.25% topical ocular reproxalap compared to vehicle in patients with moderate to severe DED. The primary objective of RENEW Part 1 was to confirm dosing regimen, endpoints, and sample size for RENEW Part 2. In Part 1 of RENEW, 422 patients were randomized equally to receive either four-times-daily reproxalap or vehicle for twelve weeks (the constant dosing group) or four-times-daily reproxalap or vehicle for four weeks, followed by twice-daily reproxalap or vehicle for eight weeks (the induction-maintenance dosing group). In December 2019, we announced that, in the induction-maintenance dosing group, the RENEW co-primary endpoint of patient-reported visual analog scale (VAS) ocular dryness from Weeks 2 to 12 was achieved (p=0.0004) (Figure 2), and that activity was observed as early as one week after initiation of therapy (p=0.001) and was maintained until the end of the trial.

Figure 2: RENEW Part 1 Results – Co-Primary Symptom Endpoint for the Induction Maintenance Dosing Regimen

SEM = standard error of the mean; MMRM = mixed model repeated measures

In the induction-maintenance dosing group from Weeks 2 to 12, reproxalap was statistically superior to vehicle in VAS ocular endpoints for itching (p=0.03), foreign body sensation (p=0.004), discomfort (p=0.003), photophobia (p=0.004), and pain (p=0.03) (Figure 3). In the induction-maintenance dosing group from Weeks 2 to 12, reproxalap was also statistically superior to vehicle in Ocular Discomfort & 4-Symptom Questionnaire ocular endpoints for dryness (p=0.01), discomfort (p=0.03), burning (p=0.03), grittiness (p=0.003), and stinging (p=0.02). Although the improvement effect size of the co-primary endpoint of fluorescein nasal region ocular staining did not reach statistical significance, reproxalap was statistically superior to vehicle in reduction from baseline in the induction-maintenance dosing group from Weeks 1 to 4 of treatment (p=0.03), and statistical separation from vehicle was observed at Week 2 (p=0.04). Given that the co-primary symptom endpoint was achieved in RENEW Part 1, the RENEW Trial was concluded and RENEW Part 2 was not performed.

Figure 3: RENEW Part 1 Results – Symptom Treatment Differences Over Weeks 2 to 12 for the Induction Maintenance Dosing Regimen

In February of 2020, we announced that the results of a randomized, vehicle-controlled, parallel-group, multi-center, double-masked Phase 2 clinical trial of a novel formulation of 0.25% topical ocular reproxalap demonstrated statistically significant improvement over vehicle for the primary endpoint of VAS ocular dryness score (p=0.03). Consistent with the RENEW Trial, the drug was administered via the induction maintenance regimen. The novel formulation is substantially similar to the formulations used in the Phase 2b clinical trial and the RENEW Trial, differing only in the amount of a single excipient.

In January 2021, we announced positive top-line symptom, redness, and Schirmer test results from the run-in cohort of the Phase 3 TRANQUILITY clinical trial of 0.25% topical ocular reproxalap in patients with DED. Patients were treated with four doses of reproxalap or vehicle for one day. On the following day, patients were administered a single dose before entry, and a dose 45 minutes after entry, to a dry eye chamber with minimal humidity, high airflow, and forced visual tasking. The run-in cohort, performed at a single center, was double-masked, and randomized 12 patients to receive reproxalap and 11 patients to receive vehicle. Over all time points in aggregate in the dry eye chamber, reproxalap demonstrated statistically significant improvement over vehicle (p=0.03) in ocular redness, an objective sign of dry eye disease.

In November 2021, we announced achievement of the primary endpoint of ocular redness in a randomized, double-masked, vehicle-controlled Phase 2 clinical trial of 0.25% topical ocular reproxalap in DED patients. The protocol of the trial was substantially similar to that of the TRANQUILITY run-in cohort. The primary endpoint of the trial was achieved: ocular redness scores in the reproxalap group during the dry eye chamber were observed to be statistically lower than those of vehicle (p = 0.016, Figure 4). Additionally, Schirmer test scores assessed after the first dose were directionally in favor of reproxalap over vehicle and approached statistical significance (p = 0.068).

Figure 4: Phase 2 Dry Eye Chamber Trial Results– Ocular Redness

In December 2021, we announced top-line results from the randomized, double-masked, vehicle-controlled Phase 3 TRANQUILITY Trial of 0.25% topical ocular reproxalap in DED. Although the primary endpoint of ocular redness was not met, statistical significance (p=0.0001, Figure 5) was achieved for the DED sign of Schirmer test, a secondary endpoint, in favor of reproxalap over vehicle. Statistical significance (p<0.0001) in favor of reproxalap over vehicle was also achieved for the post-hoc clinical relevance assessment of proportion of Schirmer test responders that improved from baseline scores (0 to 30 mm) by at least 10 mm.

Figure 5: Phase 3 TRANQUILITY Trial Results– Schirmer Test

SEM = standard error of the mean; MMRM = mixed model repeated measures

In addition to the TRANQUILITY Trial, we have initiated the TRANQULITY-2 Trial, the protocol of which is substantially similar to that of TRANQUILITY. Using an alpha sharing technique, the primary endpoint of the TRANQUILITY-2 Trial will be met if either Schirmer test or ocular redness is statistically significant in favor of reproxalap over vehicle. Top-line results from TRANQUILITY-2 are expected mid-2022.

Per draft FDA guidance, to be considered for regulatory approval in the United States, a product candidate for the treatment of DED must demonstrate efficacy in a subjective symptom (a patient-reported subjective measure of disease severity) in at least two adequate and well-controlled clinical trials, and efficacy in an objective sign (an independently assessed objective measure of disease severity) in at least two adequate and well-controlled clinical trials. We intend to submit the RENEW Part 1 and Phase 2 novel formulation trials to satisfy the symptom efficacy NDA requirements. Because either ocular redness or Schirmer test qualifies as a sign of DED, subject to a

discussion with the FDA, we intend to submit a combination of the Phase 2, TRANQUILITY, and TRANQUILITY-2 chamber trials to satisfy the NDA sign requirements, depending on whether ocular redness or Schirmer test is achieved in TRANQUILITY-2 or in subsequent clinical trials. If ocular redness and Schirmer test is statistically significant in TRANQUILITY-2, then we may elect to submit the NDA with two sign trials in addition to the symptom trials. Pending results from TRANQUILITY-2, a dry eye disease safety trial, and regulatory input, we believe that an NDA filing for reproxalap for the treatment of DED could occur mid-2022.

In all reproxalap DED clinical trials completed to date, no clinically significant safety findings were observed, and reproxalap was well tolerated. Transient and generally mild instillation site discomfort is the most commonly reported adverse event.

Allergic Conjunctivitis

In February 2016, we announced that the results of a randomized, parallel-group, double-masked, vehicle-controlled conjunctival challenge (allergen administered directly to the eye following a single dose of test article) Phase 2a clinical trial of 0.5% topical ocular reproxalap in patients with AC demonstrated statistically and clinically significant activity of reproxalap over vehicle in reducing patient-reported ocular itching score (scale 0 to 4), a clinical endpoint that has served as the basis for prior AC FDA approvals. In June 2017, we announced that the results of a randomized, parallel-group, double-masked, vehicle-controlled, multi-center conjunctival challenge Phase 2b clinical trial of 0.1% and 0.5% topical ocular reproxalap in patients with AC demonstrated statistically and clinically significant activity of reproxalap over vehicle in reducing ocular itching.

In March 2019, we announced that the randomized, double-masked, vehicle-controlled conjunctival challenge Phase 3 ALLEVIATE clinical trial of 0.25% and 0.5% topical ocular reproxalap in patients with AC met the primary endpoint (patient-reported ocular itching score area under the curve from 10 to 60 minutes after allergen challenge, p<0.0001) and the key secondary endpoint (proportion of patients that improved by two or more points on the four-point itching score, p=0.0005) for 0.25% reproxalap (Figure 6).

Figure 6: Phase 3 ALLEVIATE Trial Results for 0.25% Reproxalap

In October 2019, we announcedthat our randomized, double-masked, vehicle-controlled allergen chamber (aerosolized pollen over 3.5 hours with test article dosing just before and 90 minutes after chamber entry) clinical methods trial of topical ocular reproxalap in patients with AC demonstrated that, relative to patients treated with vehicle, patients treated with 0.25% or 0.5% topical ocular reproxalap demonstrated statistically significant reduction in patient-reported ocular itching (p<0.0001), investigator-assessed ocular redness (p<0.0001), and patient-reported tearing score (p<0.0001). In April 2021, we announced that the randomized, double-masked, vehicle-controlled allergen chamber Phase 3 INVIGORATE clinical trial of 0.25% reproxalap in patients with AC

(Figure 7) achieved the primary endpoint (patient-reported ocular itching score after the second dose of test article) and all secondary endpoints (investigator-assessed ocular redness score and patient-reported ocular tearing score).

Figure 7: Phase 3 INVIGORATE Trial Results for 0.25% Reproxalap) - Ocular Itching

In 2022, we initiated the randomized, double-masked, vehicle-controlled allergen chamber Phase 3 INVIGORATE-2 Trial of 0.25% topical ocular reproxalap in patients with AC. Pending positive results from INVIGORATE-2, an allergic conjunctivitis safety trial, and regulatory input, we believe that we will have met NDA requirements for AC, although we expect that the NDA submission for AC would occur after the NDA submission for DED. In all reproxalap allergic conjunctivitis clinical trials completed to date, no clinically significant safety findings were observed, and reproxalap was well tolerated. Transient and generally mild instillation site discomfort is the most commonly reported adverse event.

Proliferative Vitreoretinopathy

Standard of care treatment for PVR results in subsequent retinal detachment surgical rates that approach 40%. In a single-arm, open-label, investigator-sponsored Phase 1b clinical trial performed at the Massachusetts Eye and Ear Infirmary, only approximately 20% of patients with PVR treated with multiple injections of ADX-2191 required subsequent surgery for retinal detachment (Figure 8). Thus, relative to standard of care, ADX-2191 may reduce incidence of retinal detachment following the development of PVR, thereby increasing the probability of preservation of visual function.

Figure 8: Phase 1b ADX-2191 Investigator-Sponsored Clinical Trial

In December 2019, we initiated the Phase 3 GUARD trial, a two-part, multi-center, randomized, controlled, adaptive Phase 3 clinical trial evaluating the efficacy of intravitreal injections of ADX-2191 versus standard-of-care for the prevention of PVR. The primary endpoint of GUARD Part 1 is retinal detachment rate over six months following initiation of therapy relative to historical detachment rates. In January 2022, we announced completion of enrollment in Part 1 of GUARD, and we expect to announce results in the second half of 2022.

Systemic RASP Modulation for the Treatment of Immune-Mediated Diseases

In April 2020, we announced the results of a Phase 1 clinical trial of ADX-629, a first-in-class orally administered RASP modulator. No treatment-related adverse events were observed at any dose tested, and target engagement was evidenced by statistically lower RASP levels in drug-treated subjects relative to controls (Figure 10). Additionally, following ingestion of a controlled high-fat meal, free fatty acids were statistically lower and HDL statistically higher in drug-treated subjects relative to placebo-treated subjects. In December 2020, we announced the initiation of three Phase 2 proof-of-concept clinical trials of ADX-629 in patients with atopic asthma, psoriasis, or COVID-19 infection as part of a systematic strategy to assess activity across different types of immunological diseases. Following completion of the Phase 2 clinical trials, subsequent clinical indications may be selected, depending on safety and tolerability, clinical signals, cytokine profiles, and RASP levels.

Figure 9: Phase 1 Clinical Trial of ADX-629

MDA = malondialdehyde; SEM = standard error of the mean; MMRM = mixed model repeated measures; HDL= high-density lipoprotein; LDL = low-density lipoprotein; FFA = free fatty acids

The Science Supporting Our Product Candidates

Reactive Aldehyde Species

In response to infection, injury, endogenous and exogenous chemical triggers, heat, and other stimuli, pro-inflammatory RASP are generated through a variety of metabolic processes, including alcohol oxidation, enzymatic and non-enzymatic lipid oxidation, and polyamine and sphingosine metabolism. RASP appear to effect inflammation signaling via covalent binding to thiol (sulfur-containing) and amine (nitrogen-containing) residues on proteins, including receptors and enzymes. RASP-protein adducts directly influence the function of proteins, leading to activation of intracellular inflammatory factors, including NF-κB, an important mediator in the inflammatory response, and inflammasomes. In addition, RASP adducts bind to Scavenger Receptor A, which also initiates pro-inflammatory signaling and leads to the formation of antibodies against the adducted protein, at least in part explaining the presence of host-directed antibodies in autoimmune diseases such as rheumatoid arthritis. Levels of RASP are generally observed to be elevated in ocular and systemic inflammatory disease, and thus represent therapeutic targets for immune modulation.

Because of the inherent toxicity of RASP, most, if not all, living organisms contain enzymes, such as aldehyde reductases and aldehyde dehydrogenases, that convert RASP into non-toxic molecules. Genetic mutations in the RASP-metabolizing enzymes cause disease. In Sjögren-Larsson Syndrome, for example, mutations in fatty aldehyde dehydrogenase are responsible for skin, neurological, and retinal disease.

Aside from the stimulation of inflammation, there is no generally accepted biological role of high levels of RASP. Some physiologic molecules have RASP forms, including retinaldehyde (a form of Vitamin A) and pyridoxal and pyridoxal phosphate (forms of Vitamin B6), but the activity of physiological RASP is highly restricted by chaperone and other proteins that prevent reaction with other molecules, including our RASP modulators. Thus, pharmacotherapeutic RASP modulation is expectednot to adversely affect normal physiologic processes. Consistent with the lack of accessibility of physiologic RASP, our most advanced RASP modulator, reproxalap, which has been administered to approximately 1,500 patients across a number of completed clinical trials, has been observed to be generally well tolerated and has not resulted in any serious adverse events.

The RASP Modulator Platform

The RASP modulator platform represents a unique and novel pharmacologic approach that, unlike almost all drugs in use today, is not designed to directly inhibit or activate a particular protein but instead targets a family of small molecules that in turn affect the activity and structure of many proteins at once. RASP modulation, therefore, has the potential to down-regulate pro-inflammatory systems or groups of proteins, and may lead to multiple beneficial clinical effects while avoiding toxicity associated with single-target inhibition or activation.

We are currently developing reproxalap, a new chemical entity, and other novel RASP modulators for the treatment of immune-mediated disease. Reproxalap is a small molecule designed specifically to bind, and thereby allow for the degradation of, RASP. In in vitro and animal studies, reproxalap does not appear to affect most cellular components, including most receptors, enzymes, ion channels, or other proteins. Reproxalap has been shown to outcompete cellular constituents to covalently bind and trap RASP. Reproxalap-RASP adducts appear to be rapidly degraded in cellular environments, after which neither reproxalap nor RASP are detectable. Outside of biological systems, reproxalap-RASP adducts have shown to be remarkably non-reactive and stable, suggesting that reproxalap-RASP binding may be effectively irreversible. By forming covalent drug-RASP adducts that are then degraded, reproxalap and other RASP modulators have the potential to substantially lower RASP levels.

We believe we have been the first to demonstrate the beneficial effects of RASP modulation in a variety of animal models relating to immune-mediated disease, suggesting that reproxalap and analogs may have potent anti-inflammatory effects that persist hours after administration at a variety of different doses relevant to clinical testing.

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In mouse models of ocular inflammation and post-surgical healing, topically applied reproxalap ophthalmic solution reduced ocular redness and inflammatory cytokines comparable to corticosteroid therapy and slowed the development of corneal haze (fibrosis). (Data presented at the Association for Research in Vision and Ophthalmology 2015 Annual Meeting)

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In mice injected with a pro-inflammatory agent known as endotoxin, intraperitoneally administered reproxalap statistically reduced a variety of inflammatory cytokines (protein inflammatory mediators), including IL-5, Il-1ß, IL-17, and TNF-α, while up-regulating the primary anti-inflammatory cytokine, IL-10. Additionally, in models of mouse contact dermatitis (induced by phorbol myristate acetate) and allergic contact dermatitis (induced by sensitivity to oxazolone), reproxalap statistically reduced inflammation as measured by edema (swelling). (Data presented at the American Academy of Asthma Allergy and Immunology 2015 Annual Meeting)

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In a model of radiation mucositis (oral inflammation) in hamsters, chronic subcutaneous administration of reproxalap reduced healing time and decreased fibrosis (scarring). (Data presented at the Multinational Association of Supportive Care in Cancer – International Society of Oral Oncology 2015 Annual Meeting)

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In two different mouse models of inflammatory pain, intraperitoneally administered reproxalap dose-dependently reduced nociceptive behavior, suggesting that reproxalap down-regulates pain signaling in inflammation. (Data presented at the 2016 International Conference on Pain Research and Management)

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In rat cardiomyocyte culture, reproxalap prevented fibrotic transformation, and inhibited NF-κB activation and IL-1ß release. (Data presented at the 2016 American Society for Cell Biology Annual Meeting)

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In a mouse model of lung inflammation, intraperitoneal administration of reproxalap reduced infiltration of inflammatory cells and levels of pro-inflammatory cytokines in the lung. (Data presented at the 2017 World Congress on Inflammation Annual Meeting)

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In a rat model of intraocular inflammation, a single intravitreal injection of ADX-103 reduced the development of retinal pathology. (Data presented at the Association for Research in Vision and Ophthalmology 2018 Annual Meeting)

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In a rat model of diabetic macular edema, intravitreal injection of ADX-103 reduced retinal inflammatory cell infiltration. (Data presented at the Association for Research in Vision and Ophthalmology 2018 Annual Meeting)

Thus, we believe that the immune-modulating mechanism of action of RASP modulation is potentially multifactorial – lowering inflammation, reducing healing time, diminishing scarring, and mitigating inflammatory pain – and may ameliorate inflammatory disease and deter disease progression in different ways simultaneously.

In addition to the development of reproxalap, we intend to continue the discovery and development of other novel RASP modulators, and we intend to continue to develop intellectual property around such molecules. We have identified, synthesized, and tested numerous molecules that may be more potent than reproxalap in binding to RASP. We are currently screening novel product candidates to address diseases where topical and systemic administration may reduce RASP-mediated pathology. Clinical development of ADX-629 for the treatment of autoimmune and other inflammatory diseases began in late 2019.

The Potential of ADX- 2191 to Prevent Proliferative Vitreoretinopathy and Treat Primary Vitreoretinal Lymphoma

PVR is characterized by excessive replication and pro-inflammatory activity of retinal cells, at least a portion of which synthesize collagen, the principal component of scar tissue. Retinal scarring can lead to impairment of vision, including blindness, as well as increased probability of further retinal detachments. Methotrexate, the active component of ADX-2191, is a dihydrofolate reductase inhibitor that has been used to treat cancer and autoimmune disease. The anti-proliferative and anti-inflammatory properties of dihydrofolate reductase inhibition are well described. In preclinical studies of primary cell cultures from PVR patients, dihydrofolate reductase inhibition reduced pathological cell proliferation and scar-like collagen deposition. Thus, the observed clinical activity of ADX-2191 in PVR is believed to be the result of down-regulation of aberrant retinal cell proliferation and activity, thereby leading to reduced retinal scarring. Initially as an intravenous medication and subsequently as an intraocular injection, methotrexate has also been used for decades as an anti-proliferative medication to treat PVRL. The goal of methotrextate therapy in PVRL is to prevent metastasis to the central nervous system.

Intellectual Property and Proprietary Rights

Overview

In the United States and abroad, we are building an intellectual property portfolio for reproxalap and other RASP modulators and for therapeutic methods of use of methotrexate for the treatment of retinal disease. We currently seek, and intend to continue to seek, patent protection in the United States and internationally for our product candidates, methods of use, and processes for manufacture, and for other technologies, where appropriate. Our current policy is to actively seek to protect our proprietary position by, among other things, filing patent applications in the United States and abroad relating to proprietary technologies that are important to the development of our business. We also rely on, and will continue to rely on, trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.

Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for the technologies that we consider important to our business, our ability to defend our patents, and our ability to preserve the confidentiality of our trade secrets and operate our business without infringing the patents and proprietary rights of third parties.

Patent Portfolio

Our patent portfolio currently includes patents and patent applications covering the composition, formulation, and uses of reproxalap, ADX-103, ADX-629, ADX-1612, and other novel compounds. As of December 31, 2021, we owned fifteen United States patents and twelve pending United States non-provisional patent applications, as well as numerous foreign counterparts to these patents and patent applications, relating to reproxalap and other RASP modulators. Additionally, we have in-licensed certain patents and patent applications relating to ADX-1612, and retain an exclusive license to certain patents related to the use of ADX-2191 for the prevention or treatment of a number of retinal indications including, proliferative vitreoretinal disease and primary vitreoretinal lymphoma.

We expect the issued reproxalap composition of matter patent in the United States, if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2028. It is possible that the term of the composition of matter patent in the United States may be extended up to five additional years under the provisions of the Hatch-Waxman Act. We expect the foreign reproxalap composition of matter patents, if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2026. We expect other patent applications in the portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire from 2026 to 2034. Reproxalap composition of matter patents have been issued in Australia, Canada, China, Europe (validated in approximately 14 member countries), Hong Kong, India, Japan, Mexico, Russia and South Korea. Reproxalap composition of matter patent claims are pending in Brazil.

Licenses and Agreements

Madrigal Agreement

We are developing ADX-1612 pursuant to a License Agreement with Madrigal Pharmaceuticals, Inc. (Madrigal), entered into on December 26, 2016 (Madrigal Agreement). Pursuant to the Madrigal Agreement, we obtained an exclusive, worldwide license from Madrigal under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize CHP inhibitors, including ADX-1612 and other molecules (Madrigal Agreement Products). We have agreed to use our commercially reasonable efforts to develop Madrigal Agreement Products.

In consideration for the rights licensed under the Madrigal Agreement, we paid Madrigal an upfront license fee of $250,000 and are obligated to make future regulatory and development and sales-dependent milestone payments to Madrigal of less than $340 million in the aggregate (over 80% of such amount being tied to our achievement of increasingly greater annual worldwide net sales milestones), as well as royalty payments to Madrigal at a rate which, as a percentage of net sales, is in the high single digits for products containing ADX-1612 and mid-single digits for any other CHP inhibitor product. We are also obligated under the Madrigal Agreement to pay Madrigal a percentage of certain sublicense revenue that we receive in connection with entering into any sublicensing arrangements with any third parties, at a percentage rate which tiers downward from the mid-twenties to low-single digits based on the development stage of the product at the time of the sublicense.

The Madrigal Agreement will remain in effect until all payment obligations under the Madrigal Agreement expire. We may terminate the Madrigal Agreement in its entirety or on a Madrigal Agreement Product-by-Madrigal Agreement Product basis with timely notice to Madrigal. Either party may terminate the Madrigal Agreement for uncured material breach by the other party or upon certain insolvency or bankruptcy proceedings involving the other party, both with timely notice to the other party. In addition, Madrigal has the right to terminate the Madrigal Agreement if we, our affiliates, or sublicensees interfere with, challenge the validity or enforceability of, oppose the extension of, or grant of a supplementary protection certificate with respect to any of our licensed patents under the Madrigal Agreement. In the event of an early termination of the Madrigal Agreement, all rights licensed and developed by us under the Madrigal Agreement may revert back to Madrigal. Each party has agreed to indemnify the other party for certain third party claims arising under the Madrigal Agreement.

MEEI Agreement

We are developing ADX-2191 pursuant to an Exclusive License Agreement with Massachusetts Eye and Ear Infirmary (MEEI) originally entered into in July 2016 between MEEI and Helio Vision, Inc., as amended, (MEEI Agreement). We assumed the MEEI Agreement in connection with our 2019 acquisition of Helio Vision.

Pursuant and subject to the MEEI Agreement, we obtained an exclusive, worldwide license from MEEI to develop and commercialize ADX-2191 under certain patents and patent applications, and other licenses to intellectual property (MEEI Patent Rights). We have agreed to use our commercially reasonable efforts to develop ADX-2191 and to meet certain specified effort and achievement benchmarks by certain dates.

In consideration for the rights licensed under the MEEI Agreement, Helio Vision issued MEEI a number of shares of its preferred stock and Helio Vision agreed to pay non-creditable non-refundable license maintenance fees to MEEI of $15,000 on each of the second and third anniversary of the MEEI Agreement, $25,000 on each of the fourth and fifth anniversary of the MEEI Agreement and $35,000 on the sixth and each subsequent anniversary of the MEEI Agreement during the term of such agreement. In addition, Helio Vision was obligated to make future sales-dependent milestone payments to MEEI of up to the low seven figures in the aggregate, as well as royalty payments to MEEI at a rate which, as a percentage of net sales, is in the low single digits for products that incorporate or use the MEEI Patent Rights in the United States and as a percentage in the low single digits for products that incorporate or use the MEEI Patent Rights outside the United States. We are also obligated under the MEEI Agreement to pay MEEI a percentage of certain sublicense revenue that we receive in connection with entering into any sublicensing arrangements with any third parties, at a percentage rate which tiers downward from low-double digits to mid-single digits based on the date of the sublicense. Following our acquisition of Helio Vision, we became obligated to make any future payments owed under the MEEI Agreement. There is no additional equity consideration issuable under the MEEI Agreement.

The MEEI Agreement will remain in effect until the expiration date of the last to expire patent licensed under the MEEI Agreement. We may terminate the MEEI Agreement with timely written notice to MEEI. MEEI has the right to terminate the MEEI Agreement if we, subject to certain specified cure periods, cease all business operations with respect to licensed products, fail to pay amounts due under the MEEI Agreement, fail to comply with certain due diligence obligations, default in our obligation to maintain insurance, one of our officers is convicted of a felony relating to the manufacture, use, sale or importation of licensed products, we materially breach any provisions of the MEEI Agreement or in the event of our insolvency or bankruptcy.

In the event of an early termination of the MEEI Agreement, all rights licensed and developed by us under the MEEI Agreement may revert back to MEEI. We have agreed to indemnify MEEI for certain claims that may arise under the MEEI Agreement.

Other Intellectual Property Rights

Our marks ALDEYRA THERAPEUTICS and our logo are registered with the United States Patent and Trademark Office.

Confidential Information and Inventions Assignment Agreements

We currently require and will continue to require each of our employees and consultants to execute confidentiality agreements upon the commencement of such individual’s employment, consulting or collaborative relationships with us. These agreements provide that all confidential information developed or made known during the course of the relationship with us be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions resulting from such individual’s work performed for us, utilizing our property or relating to our business and conceived or completed by the individual during employment shall be our exclusive property to the extent permitted by applicable law. Our consulting agreements also provide for assignment to us of any intellectual property resulting from services performed by a consultant for us.

Manufacturing

We do not own or operate manufacturing facilities for the production of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently depend on third-party contract manufacturers for all of our required raw materials, drug substance and finished drug product for our preclinical research and clinical trials. We have no immediate plans to purchase, erect, or otherwise create any manufacturing facilities to be owned by us for any of these purposes, and intend to continue to depend on third-party contract manufacturers for the foreseeable future. We do not have any current contractual relationships for the manufacture of commercial supplies of our product candidates. If our product candidates are approved by any regulatory agency, we intend to enter into agreements with third-party contract manufacturers for the commercial production at such time. We may utilize third-party consultants to manage our manufacturing contractors. We believe that the active pharmaceutical ingredient and other materials needed for the formulation of our product candidates are relatively easy to manufacture, and that multiple suppliers and formulators could be employed for this purpose. Further, we believe the raw materials needed for manufacture of our product candidates, as well as other components of our formulations, are generally readily available currently from multiple sources.

Employees

As of December 31, 2021, we had 12 full-time employees and had engaged a number of consultants. We expect that a number of consultants previously engaged in development of our product candidates will participate in ongoing clinical and manufacturing activities. None of our employees is represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Human Capital

We recognize that attracting, motivating and retaining talent at all levels is vital to our continued success. Our employees are a significant asset and we aim to create an equitable, inclusive and empowering environment in which our employees can grow and advance their careers, with the overall goal of developing, expanding and retaining our workforce to support our current pipeline and future business goals. By focusing on employee retention and engagement, we also improve our ability to support our clinical trials, our pipeline, our platform technologies, business and operations, and also protect the long-term interests of our stockholders. Our success also depends on our ability to attract, engage and retain a diverse group of employees. Our efforts to recruit and retain a diverse and passionate workforce include providing competitive compensation and benefits packages and ensuring we listen to our employees.

We value innovation, passion, data-driven decision making, persistence and honesty, and are building a diverse environment where we believe that our employees thrive and are inspired to contribute to the development of novel therapies.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, motivating, and integrating our existing and future employees. The principal purpose of our incentive plans is to increase shareholder value by attracting, retaining, and motivating employees, consultants, and directors through grants of stock-based compensation awards and payments of cash-based performance bonus awards. We are committed to providing a competitive and comprehensive benefits package to our employees. Our benefits package is designed to meet the individual health and wellness needs of our employees. We plan to continue to refine our efforts related to optimizing our use of human capital as we grow, including improvements in the way we hire, develop, motivate, and retain employees.

Government Regulation

FDA Approval Process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Food Drug and Cosmetic Act (FDCA) and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable FDA or other requirements may subject a company to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, a clinical hold, warning letters, recall or seizure of products, partial or total suspension of production, withdrawal of the product from the market, injunctions, fines, civil penalties or criminal prosecution.

FDA approval is required before any new drug, new dosage form, new therapeutic use, or new route of administration of a previously approved product, can be marketed in the United States. The process required by the FDA before a new drug product may be marketed in the United States generally involves:

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completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s good laboratory practice (GLP) regulation;

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submission to the FDA of an Investigational New Drug application (IND) for human clinical testing which must become effective before human clinical trials may begin in the United States;

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approval by an independent institutional review board (IRB) at each site where a clinical trial will be performed before the trial may be initiated at that site;

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performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices (cGCP) to establish the safety and efficacy of the proposed product candidate for each intended use;

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submission to the FDA of a new drug application (NDA) which must be accepted for filing by the FDA;

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satisfactory completion of an FDA pre-approval inspection(s) of our office and the facility or facilities at which the product is manufactured to assess compliance with the FDA’s current Good Manufacturing Practices (cGMP) regulations;

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satisfactory completion of an FDA advisory committee review, if applicable;

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payment of user fees, if applicable; and

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FDA review and approval of the NDA.

The preclinical and clinical testing and approval process requires substantial time, effort, and financial resources. Preclinical tests include laboratory evaluation of product chemistry, formulation, manufacturing and control procedures, and stability, as well as animal studies to assess the toxicity and other safety characteristics of the product. The results of preclinical tests, together with manufacturing information, analytical data, and a proposed clinical trial protocol and other information, are submitted as part of an IND to the FDA. Preclinical testing may

continue even after the IND is submitted. The IND becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions and places the clinical trial on a partial or complete clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, our submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development. Even if the IND becomes effective and the trial proceeds without initial FDA objection, the FDA may stop the trial at a later time if, among other reasons, the potential for unacceptable safety risks arises.

Further, an independent IRB, covering each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and informed consent information for subjects before the trial commences at that site and it must monitor the study until completed. The FDA, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk or for failure to comply with the FDA’s or IRB’s requirements. Other conditions may also be imposed.

Clinical trials involve the administration of the investigational new product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide informed consent in writing for participation in the clinical trial. Sponsors of clinical trials generally must register and report, at the NIH-maintained website ClinicalTrials.gov, key parameters and results of certain clinical trials. For purposes of an NDA submission and approval, human clinical trials are typically conducted in the following sequential phases, which may overlap or be combined:

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Phase 1: The investigational drug product is initially introduced into healthy human subjects or patients and tested for safety, dose tolerance, absorption, metabolism, distribution, and excretion.

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Phase 2: The investigational drug product is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted indications, and to determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more extensive clinical trials.

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Phase 3: When Phase 2 evaluations suggest that certain dosing regimens may be efficacious and may have an acceptable safety profile, Phase 3 trials may be undertaken in larger patient populations to further evaluate dosage and to obtain evidence of potential clinical efficacy and safety. Phase 3 trials may include multiple, geographically-dispersed clinical trial sites. Data generated from these studies may be used to establish the overall risk-benefit profile of the investigational drug product and to provide adequate information for the labeling of the product, if approved.

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Phase 4: In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s commitment to conduct additional clinical trials to further assess the product’s safety and/or effectiveness after NDA approval. Such post-approval trials are typically referred to as Phase 4 trials.

The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA. NDAs must also contain extensive information relating to the product’s pharmacology, chemistry, manufacturing and controls, and proposed labeling, among other things.

For some products, the FDA may require a risk evaluation and mitigation strategy (REMS) which could include measures imposed by the FDA such as prescribing restrictions, requirements for post-marketing studies, and reporting or certain restrictions on distribution and use. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, and the manufacturer and/or sponsor under an approved NDA are also subject to prescription drug program fees. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information and is subject to payment of additional user fees. The resubmitted application is also subject to review before the FDA accepts it for filing.

Once the submission has been accepted for filing, the FDA begins an in-depth substantive review. Under the Prescription Drug User Fee Act (PDUFA), the FDA agrees to specific performance goals for NDA review time through a two-tiered classification system, Standard Review and Priority Review. Standard Review NDAs have a goal of being completed within a ten-month timeframe after acceptance of filing. A Priority Review designation is given to products that offer major advances in treatment or provide a treatment where no adequate therapy exists. The goal for completing a Priority Review is six months after acceptance of filing.

It is likely that our product candidates will be granted a Standard Review. The review process may be extended by the FDA for three additional months to consider certain information or obtain clarification regarding information already provided in the submission. The FDA may refer applications for novel products or products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation, and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations carefully when making decisions. In addition, for combination products, the FDA’s review may include the participation of both the FDA’s Center for Drug Evaluation and Research, the Center for Biologics Evaluation and Research, and the FDA’s Center for Devices and Radiological Health. The participation of multiple distinct groups within the FDA has the potential to complicate or prolong review of the application. If the product is deemed a combination product, additional supporting studies may be required, and may delay an NDA submission.

Before approving an NDA, the FDA may inspect our offices and the facility or facilities where the drug substance or drug product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP. FDA may also inspect sponsor facilities to determine if nonclinical and clinical studies were conducted in compliance with applicable regulations and guidelines.

After the FDA evaluates the NDA and, in some cases, the related manufacturing facilities, it may issue an approval letter or a Complete Response Letter (CRL) to indicate that the review cycle for an application is complete and that the application is not ready for approval. CRLs generally outline the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when the deficiencies have been addressed to the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.

Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if potential adverse safety findings are identified after the product reaches the market. In addition, the FDA may require post-approval testing, including Phase 4 studies, and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Products may be promoted only for the approved labeled indications and in accordance with the provisions of the approved label, and, even if the FDA approves a product, it may limit the approved indications for use for the product or impose other conditions, including labeling or distribution restrictions or other risk-management mechanisms, such as a Black Box Warning, which highlights a specific warning. Further, if there are any modifications to the product, including changes in indications, labeling, or manufacturing processes or facilities, a company would be required to submit and obtain FDA approval of a new or supplemental NDA, which may require the company to develop additional data or conduct additional preclinical studies and clinical trials.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to product/facility listing, recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic

unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and may require prior FDA approval before being implemented. FDA regulations may also require investigation and correction of any deviations from cGMP and may impose reporting and documentation requirements upon us and any third-party manufacturers. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated seriousness, severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

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fines, warning letters or holds on post-approval clinical trials;

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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

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product seizure or detention, or refusal to permit the import or export of products; or

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injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. The FDA does not regulate the practice of medicine. Physicians may prescribe for off-label uses; manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significant liability, both at the federal and state levels.

The Food and Drug Administration Amendments Act of 2007 gave the FDA the authority to require a Risk Evaluation and Mitigation Strategy, or REMS, from manufacturers to ensure that the benefits of a drug or biological product outweigh its risks. In determining whether a REMS is necessary, FDA must consider the size of the population likely to use the drug, the seriousness of the disease or condition to be treated, the expected benefit of the drug, the duration of treatment, the seriousness of known or potential adverse events, and whether the drug is a new molecular entity. If the FDA determines a REMS is necessary, the drug sponsor must agree to the REMS plan at the time of approval. A REMS may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate health care providers of the drug’s risks, limitations on who may prescribe or dispense the drug, or other measures that the FDA deems necessary to assure the safe use of the drug. In addition, the REMS must include a timetable to assess the strategy at 18 months, three years, and seven years after the strategy’s approval. The FDA may also impose a REMS requirement on a drug already on the market if the FDA determines, based on new safety information, that a REMS is necessary to ensure that the drug’s benefits outweigh its risks.

Orphan Drug Designation

The FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is defined as a disease or condition that affects fewer than 200,000 individuals in the United States or more than 200,000 individuals where there is no reasonable expectation that the product development cost will be recovered from product sales in the United States. Orphan drug designation must be requested before submitting an NDA and does not convey any advantage in, or shorten the duration of, the regulatory review or approval process. ADX-2191 has received orphan designation for the prevention of PVR, and for the treatment of PVRL and for the treatment of retinitis pigmentosa.

If an orphan drug-designated product subsequently receives the first FDA approval for the disease specified in the orphan drug designation, the sponsor will be entitled to seven years of product marketing exclusivity, which

means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited and rare circumstances, for seven years. If a competitor obtains approval of the same drug, as defined by the Orphan Drug Act, before we do or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease, the competitor’s exclusivity could block the approval of our product candidate in the designated orphan indication for seven years, unless superior safety or efficacy of our drug is demonstrated.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration, and specifics of FDA approval of the use of our drug candidates, some of our United States patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for extension must be made prior to expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond the current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.

Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application (ANDA) or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for a 505(b)(1) NDA, 505(b)(2) NDA, or supplement to an approved NDA if new clinical investigations other than bioavailability studies (e.g., investigations that support new indications, dosages, or strengths of an existing drug) were conducted or sponsored by the applicant and are deemed by the FDA to be essential to the approval of the application. The three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full 505(b)(1) NDA.

Manufacturing Requirements

We and our third-party manufacturers must comply with applicable FDA regulations relating to FDA’s cGMP regulations and, if applicable, quality system regulation requirements for medical devices. The cGMP regulations include requirements relating to, among other things, organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP requirements to the satisfaction of the FDA and may be subject to a pre-approval inspection before we can use them to manufacture our products. We and our third-party manufacturers are also subject to periodic unannounced inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including, among other things, warning letters, voluntary corrective action, the seizure of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations and civil and criminal penalties.

Other Regulatory Requirements

We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have an adverse effect on our ability to operate our business and generate revenues. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, operating results and financial condition. There are evolving legal requirements and other statutory and regulatory regimes that will continue to affect our business.

Research and Development Expenses

Substantially all of our research and development expenses incurred to date have been related to the development of reproxalap and our other product candidates. Our research and development expenses totaled $44.9 million for the year ended December 31, 2021 and $24.7 million for the year ended December 31, 2020.

We anticipate that we will incur additional research and development expenses in the future as we evaluate and possibly pursue the development of our product candidates for additional indications, or develop additional product candidates.

We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:

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salaries and related expenses for personnel;

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fees paid to consultants and contract research organizations in conjunction with independently monitoring clinical trials and acquiring and evaluating data in conjunction with clinical trials, including all related fees such as investigator grants, patient screening, lab work and data compilation and statistical analysis;

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costs incurred with third parties related to the establishment of a commercially viable manufacturing process for our product candidates;

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costs related to production of clinical materials, including fees paid to contract manufacturers;

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costs related to upfront, milestone payments under in-licensing agreements as well as costs for unapproved inventory for which there is no future alternative use;

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costs related to compliance with FDA regulatory requirements;

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consulting fees paid to third-parties involved in research and development activities; and

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costs related to stock options or other stock-based compensation granted to personnel in development functions.

We expense both internal and external development costs as they are incurred.

We expect that a large percentage of our research and development expenses in the future will be incurred in support of our current and future non-clinical, preclinical and clinical development programs. These expenditures are subject to numerous uncertainties in terms of both their timing and total cost to completion. We expect to continue to develop stable formulations of our product candidates, test such formulations in preclinical studies for toxicology, safety and efficacy and to conduct clinical trials for each product candidate. We anticipate funding clinical trials for our product candidates ourselves, but we may engage collaboration partners at certain stages of clinical development. As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for certain product candidates or programs in order to focus our resources on more promising product candidates or programs. Completion of clinical trials by us or our future collaborators may take several years or more, the length of time generally varying with the type, complexity, novelty and intended use of a product candidate. The costs of clinical trials may vary significantly over the life of a project owing to but not limited to the following:

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the number of sites included in the trials;

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the length of time required to enroll eligible patients;

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the number of patients that participate in the trials;

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the number of doses that patients receive;

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the drop-out or discontinuation rates of patients;

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the duration of patient follow-up;

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the phase of development the product candidate is in; and

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the efficacy and safety profile of the product candidate.

Our expenses related to clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts depend on factors such as the successful enrollment of patients or the completion of clinical trial milestones. Expenses related to clinical trials generally are accrued based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.

None of our product candidates have received FDA or foreign regulatory marketing approval. In order to grant marketing approval, a health authority such as the FDA or foreign regulatory agencies must conclude that clinical and preclinical data establish the safety and efficacy of our product candidates with an appropriate benefit to risk profile relevant to a particular indication, and that the product can be manufactured under cGMP in a reproducible manner to deliver the product’s intended performance in terms of its stability, quality, purity and potency. Until our submission is reviewed by a health authority, there is no way to predict the outcome of their review. Even if the clinical studies meet their predetermined primary endpoints, and a registration dossier is accepted for filing, a health authority could still determine that an appropriate benefit to risk relationship does not exist for the indication that we are seeking.

We cannot forecast with any degree of certainty which of our product candidates will be subject to future collaborations or how such arrangements would affect our development plan or capital requirements.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will receive cash inflows from the commercialization and sale of an approved product candidate.

Corporate Information

We were incorporated in the state of Delaware on August 13, 2004 as Neuron Systems, Inc. On December 20, 2012, we changed our name to Aldexa Therapeutics, Inc. and on March 17, 2014, we changed our name to Aldeyra

Therapeutics, Inc. Our principal executive offices are located at 131 Hartwell Avenue, Suite 320, Lexington, Massachusetts 02421. Our telephone number is (781) 761-4904. Our website address is www.aldeyra.com. Information contained on our website is not incorporated by reference into this annual report on Form 10-K, and you should not consider information contained on our website to be part of this annual report on Form 10-K or in deciding whether to purchase shares of our common stock. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the Investors portion of our website at http://ir.aldeyra.com/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

ITEM 1A.RISK FACTORS

Our business is subject to numerous risks. You should carefully consider the risks described below together with the other information set forth in this annual report on Form 10-K, which could materially affect our business, financial condition, and future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, prospects, financial condition, and operating results.

Summary of Risks Related to our Business

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information in this annual report on Form 10-K and our other filings with the Securities and Exchange Commission before making investment decisions regarding our common stock.

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Our business is dependent in large part on the successful development and commercialization of a single product candidate, reproxalap, for which we are researching multiple indications. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, reproxalap.

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To generate revenue, we will depend on FDA approval and successful commercialization of our lead product candidate, reproxalap, for the treatment of dry eye disease. If we are unable to successfully conduct the TRANQUILITY-2 trial, prepare and timely submit the planned NDA, and obtain FDA approval, our ability to generate revenue will be significantly delayed.

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We have incurred significant operating losses since inception and we expect to incur significant losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.

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We will require substantial additional financing, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our product development, other operations or commercialization efforts.

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Reproxalap and our other product candidates are subject to extensive regulation, compliance with which is costly and time consuming, and such regulation may cause unanticipated delays, or prevent the receipt of the required approvals to commercialize our product candidates.

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If our competitors develop treatments for the target indications of our product candidates that are approved more quickly than ours, marketed to physicians and patients more effectively or comprehensively, contracted with payors more successfully, or demonstrated to be safer or more effective than our product candidates, our commercial opportunity will be reduced or eliminated.

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If we fail to develop and commercialize our product candidates, we may be unable to grow our business.

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We rely on third parties to conduct our clinical trials. If any third party does not meet our deadlines or otherwise conduct the trials as required and in accordance with regulations, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates when expected, or at all.

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Public health emergencies, epidemics or pandemics, such as the ongoing COVID-19 pandemic, may impact our business.

Risks Related to our Business

Our product candidates, including reproxalap, will require additional preclinical studies, substantial clinical development and testing, and regulatory approval prior to commercialization. We have not yet completed development of any product candidate. We have only one product candidate that has been the focus of significant

clinical development: reproxalap, a novel small molecule chemical entity that is believed to inhibit RASP, a toxic chemical species suspected to cause and exacerbate numerous diseases in humans and animals. We are dependent in large part on successful continued development and ultimate regulatory approval and successful commercialization of reproxalap for our future business success. Any negative results or perceived negative results in clinical trials for one indication may have an adverse effect on our ability to develop and potentially commercialize reproxalap for the treatment of another indication. We have invested, and will continue to invest, a significant portion of our time and financial resources in the development of reproxalap and, if successful, the commercialization of reproxalap. We will need to raise sufficient funds for, and successfully enroll and complete, our current and planned clinical trials of reproxalap and our other product candidates. The future regulatory and commercial success of our product candidates is subject to a number of risks, including the following:

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we may not have sufficient financial and other resources to pursue our business plans, complete necessary clinical trials, and create a commercial infrastructure;

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we may not be able to provide sufficient evidence of safety and efficacy to continue a development program or obtain regulatory approval;

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the results of our clinical trials may not meet the endpoints, or level of statistical or clinical significance required by the FDA, or comparable foreign regulatory bodies, for marketing approval;

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the safety and efficacy results of our later phase or larger clinical trials may not confirm the results of our earlier trials;

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patients in our clinical trials may demonstrate greater response rates or improvements from vehicle or in the non-treatment arm then was expected when designing and powering our clinical trials;

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there may be variability in patients, adjustments to clinical trial procedures, and inclusion of additional clinical trial sites;

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the initial parts of adaptive clinical trials are not designed to be pivotal or definitive, and as such we may not satisfy the designated endpoints and also may need to revise the design or endpoints to achieve success in later parts of the trial or potentially abandon the trial;

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we may not be able to timely or adequately finalize the design or formulation of any product candidate or demonstrate that a formulation of our product candidate will be stable for commercially reasonable time periods;

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the FDA, or comparable foreign regulatory bodies, may implement new standards, or change the interpretation of existing standards or requirements for the regulatory approval, in general or with respect to the indications our product candidates are being developed to treat;

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the FDA, or comparable foreign bodies, may require clinical data in addition to the clinical trial programs we expect or may require changes to the designs and endpoints of the subsequent clinical trials;

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patients in clinical trials for our product candidates may suffer adverse effects or die for reasons that may or may not be related to our product candidates;

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if approved for certain diseases, our product candidates will compete with well-established and other products or therapeutic options already approved for marketing by the FDA, or comparable foreign regulatory bodies;

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competitive products may be more effectively or comprehensively marketed to physicians or patients, or contracted with payors more successfully;

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we may be adversely affected by legislative or regulatory reform of the health care system in the United States or other jurisdictions in which we may do business; and

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we may not be able to obtain, maintain, or enforce our patents and other intellectual property rights.

Of the large number of drugs in development in the pharmaceutical industry, only a small percentage result in the submission of an NDA to the FDA, and even fewer are approved for commercialization. We are currently

planning to submit an NDA to the FDA for reproxalap in DED in mid-2022, pending results from TRANQUILITY-2, a dry eye disease safety trial, and regulatory input. Even if our trials are successful, we can provide no assurances that the FDA will accept our NDA for review. Moreover, even if the FDA does accept our NDA for review, there can be no assurance that the FDA will agree with our interpretation of the data, that the FDA will not require us to conduct additional clinical trials or provide additional data, or that the FDA will approve our NDA in a timely fashion, or at all.

Furthermore, even if we do receive regulatory approval to market reproxalap and our other product candidates, any such approval may be subject to limitations on the indicated uses for which we may market the product. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we cannot assure that reproxalap and our other product candidates will be successfully developed or commercialized. If we or any of our future development partners are unable to develop, or obtain regulatory approval for or, if approved, successfully commercialize, reproxalap and our other product candidates, we may not be able to generate sufficient revenue to continue our business.

Our ability to generate revenue will depend on the successful development, regulatory approval and commercialization of reproxalap. Based on our discussions with and our interpretation of feedback from the FDA, as well as data from our previously completed clinical trials in dry eye disease and the TRANQUILITY-2 trial, we currently plan to submit an NDA to the FDA for reproxalap for the potential treatment of dry eye disease in mid-2022, subject to positive clinical trial results, including results from a dry eye disease safety trial. There can be no assurance that we can prepare and submit an NDA in a timely manner or at all. We have limited experience in preparing, filing, and pursuing applications necessary to gain regulatory approvals. The preparation of an NDA requires a great deal of effort and expertise, and if we do not secure the necessary resources and hire and retain personnel having the requisite expertise to prepare and submit the NDA, the filing of the NDA would be delayed. Further, if an NDA is submitted by the company, there can be no assurance that it will be accepted for filing by the FDA. If the FDA determines after an initial review of the NDA that the data included in the application is insufficient and not ready for formal consideration, we could receive a “refuse to file” notice. The FDA has substantial discretion in the approval process and may disagree with our interpretation of or the sufficiency of the data from our clinical trials. The FDA could also require that we conduct additional studies and submit the results of those studies before the application will be reconsidered, which would require us to expend more resources than we planned or that are available to us, and could substantially delay any approval of our application. It is also possible that additional studies may not suffice to make our application approvable. Even if the NDA is accepted for filing by the FDA, there can be no assurance that it would be approved in a timely manner or at all.

Issues with product quality could have a material adverse effect upon our business, subject us to regulatory actions and cause a loss of customer confidence in us or our products.

Our success depends upon the quality of our products. Quality controls, assurance, and management plays an essential role in meeting customer requirements, preventing defects, improving our product candidates and services, and assuring the safety and efficacy of our product candidates. Our future success depends on our ability to maintain and continuously improve our quality management program. A quality or safety issue may result in adverse inspection reports, warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations, or withdrawal of existing approvals and licenses. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our future products, which may result in difficulty in successfully launching product candidates and the loss of sales, which could have a material adverse effect on our business, financial condition, and results of operations.

In order to commercialize our product candidates, we will need to substantially grow the size of our organization. We may encounter difficulties in managing our growth and expanding our operations successfully.

Because, as of December 31, 2021, we only had 12 full-time employees, we will need to grow our organization to continue development and pursue the potential commercialization of reproxalap and our other product candidates, as well as function as a public company. As we seek to advance reproxalap and other product candidates towards potential commercialization, increase the number of ongoing product development programs, and advance our future product candidates through preclinical studies and clinical trials, we will need to expand our financial, development, regulatory, manufacturing, marketing, and sales capabilities, or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers, and other third parties. Future growth will impose significant added responsibilities on members of management and require us to retain additional internal capabilities. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train, and integrate additional management, clinical and regulatory, financial, administrative and sales, and marketing personnel. We may not be able to accomplish these tasks, and our failure to so accomplish could prevent us from successfully growing our company.

We are highly dependent on the services of our senior management team and certain key consultants.

As a company with a limited number of personnel, we are highly dependent on the development, regulatory, commercial, and financial expertise of our senior management team comprised of three individuals: Todd C. Brady, M.D., Ph.D., our President and Chief Executive Officer; Joshua Reed, M.B.A., our Chief Financial Officer; and Stephen G. Machatha, Ph.D., our Chief Development Officer, as well as certain other employees. In addition, we rely on the services of a number of key consultants, including IP, pharmacokinetic, chemistry, toxicology, drug development, and commercialization consultants. The loss of such individuals or the services of future members of our management team could delay or prevent the further development and commercialization of our product candidates and, if we are not successful in finding suitable replacements, could harm our business.

If we fail to attract and retain senior management and key commercial personnel, we may be unable to successfully develop or commercialize our product candidates.

We will need to expand and effectively manage our managerial, operational, financial, and other resources in order to successfully pursue our clinical development and commercialization efforts. Our success also depends on our continued ability to attract, retain, and motivate highly qualified management and scientific personnel, and we may not be able to do so in the future due to intense competition among biotechnology and pharmaceutical companies, universities, and research organizations for qualified personnel. If we are unable to attract and retain the necessary personnel, we may experience significant impediments to our ability to implement our business strategy.

We expect to expand our management team. Our future performance will depend, in part, on our ability to successfully integrate newly hired executive officers into our management team and our ability to develop an effective working relationship among senior management. Our failure to integrate these individuals and create effective working relationships among them and other members of management could result in inefficiencies in the development and commercialization of our product candidates, adversely affecting future regulatory approvals, sales of our product candidates, and results of our operations.

Our employees, independent contractors, vendors, principal investigators, CROs, and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards, regulatory requirements, and insider trading.

We are exposed to the risk that our employees, independent contractors, vendors, principal investigators, CROs and consultants may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include:

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intentional, reckless, or negligent conduct or disclosure to us of unauthorized activities that violate the regulations of the FDA or similar foreign regulatory authorities;

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healthcare fraud and abuse in violation of U.S. and foreign laws and regulations;

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violations of U.S. federal securities laws relating to trading in our common stock; and

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failures to report financial information or data accurately.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations govern a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. While we have adopted a code of conduct and implemented other internal controls applicable to all our employees, it is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective. Additionally, we are subject to the risk that a person could allege fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business or cause reputational harm, including the imposition of civil, criminal and administrative penalties, and damages; possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs; and diminished profits and future earnings.

In addition, during the course of our operations, our directors, executives, employees, consultants, and other third parties may have access to material nonpublic information regarding our business, our results of operations, or potential transactions we are considering. We may not be able to prevent trading in our common stock on the basis of, or while having access to, material nonpublic information. If any such person was to be investigated or an action were to be brought against them for insider trading, it could have a negative impact on our reputation and our stock price. Such a claim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.

Our business is subject to political, economic, legal, and social risks, which could adversely affect our business.

There are significant regulatory, economic and legal barriers in markets in the United States and outside the United States that we must overcome. We may be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business customs, and legal systems. Any sales and operations would be subject to political, economic, and social uncertainties including, among others:

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changes and limits in import and export controls;

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increases in custom duties and tariffs;

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changes in currency exchange rates;

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economic and political instability;

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the impact on employees, suppliers, customers, and the global economy related to public health epidemics or pandemics, such as the COVID-19 pandemic, and actions taken in response to such events;

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changes in government regulations and laws;

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absence in some jurisdictions of effective laws to protect our intellectual property rights; and

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currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to the United States.

Changes in United States social, political, regulatory, and economic conditions or in laws and policies governing foreign trade, manufacturing, development, and investment, and any negative sentiments towards the United States as a result of such changes, could adversely affect our business.

Any changes related to these and other factors could adversely affect any business operations that we conduct outside the United States.

If we engage in an acquisition, reorganization, or business combination, we will incur a variety of risks that could adversely affect our business operations or our stockholders.

From time to time, we have entered into, and we will continue to consider in the future, strategic business initiatives intended to further the development of our business. These initiatives may include acquiring businesses, technologies, or products, or entering into a business combination with another company. For example, in January 2019 we acquired Helio Vision, Inc. and obtained the rights to ADX-2191, a vitreous-compatible methotrexate formulation for intraocular injection, for the prevention of PVR. Any acquisitions we undertake or have recently completed will likely be accompanied by business risks which may include, among other things:

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the effect of the acquisition on our financial and strategic position and reputation;

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the failure of an acquisition to result in expected benefits, which may include benefits relating to new product candidates, human resources, costs savings, operating efficiencies, goodwill, and other synergies;

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the difficulty, cost, and management effort required to integrate the acquired businesses, including costs and delays in implementing common systems and procedures, and costs and delays caused by communication difficulties;

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the assumption of certain known or unknown liabilities of the acquired business, including litigation-related liabilities;

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the reduction of our cash available for operations and other uses, the increase in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities, or the incurrence of debt;

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the possibility that we will pay more than the value we derive from the acquisition;

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the impairment of relationships with our partners, consultants, or suppliers, or those of the acquired business; and

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the potential loss of key employees of the acquired business.

These factors could harm our business, results of operations, or financial condition.

In addition to the risks commonly encountered in the acquisition of a business or assets as described above, we may also experience risks relating to the challenges and costs of closing a transaction. The risks described above may be exacerbated as a result of managing multiple acquisitions at once.

Security breaches, loss of data, and other disruptions to us or our third-party service providers could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we and our third-party service providers collect and store sensitive data, including legally protected health information, personally identifiable information about patients, intellectual property, and our proprietary business and financial information. We manage and maintain data utilizing a combination of on-site systems, managed data center systems, and cloud-based data center systems. We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, inappropriate disclosure and inappropriate access, as well as risks associated with our ability to identify and audit such events.

The secure processing, storage, maintenance and transmission of critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or otherwise breached due to employee error,

malfeasance, or other activities. These risks may be heightened during the ongoing COVID-19 pandemic, should any of our employees voluntarily choose to work remotely. While we are not aware of any such attack or breach, if such event would occur and cause interruptions in our operations, our networks would be compromised and the information we store on those networks could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under federal, state, and international laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1966, or HIPAA, and regulatory penalties. In addition, we may be subject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, which is a broader class of information than the health information protected by HIPAA. Unauthorized access, loss, or dissemination of critical information could also disrupt our ability to conduct research and development activities; collect, process, and prepare company financial information; provide information about our product candidates and other patient and physician education or outreach efforts through our website; manage the administrative aspects of our business; or prevent damage to our reputation, any of which could adversely affect our business.

We generally seek to comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection to the extent possible. However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with applicable privacy and data security laws and regulations, our privacy policies, or our privacy-related obligations to third parties, or any compromise of security that results in the unauthorized release or transfer of personal information or other sensitive data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others and could cause a loss of trust in us, which would have an adverse effect on our reputation and business.

In addition, the interpretation and application of consumer, health-related and data protection laws in the United States, Europe, and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition, we are subject to various state laws, including the California Consumer Privacy Act, or CCPA, which, among other things, requires covered companies to provide disclosures to California consumers concerning the collection and sale of personal information, and gives such consumers the right to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for security breaches that may increase the likelihood of, and the risks associated with, security breach litigation. Additionally, in November 2020, California passed the California Privacy Rights Act, or CPRA, which expands the CCPA significantly, including by expanding consumers’ rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. Many of the CPRA’s provisions will become effective on January 1, 2023. Further, Virginia enacted the Virginia Consumer Data Protection Act, or CDPA, and, most recently, Colorado passed the Colorado Privacy Act, or CPA, both comprehensive state privacy laws with an effective date of July 1, 2023. The CCPA, CPRA, CDPA, and CPA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, our financial condition, and the results of our operations. The CCPA has also prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business.

Recent developments in Europe have created compliance uncertainty regarding the processing of personal data from Europe. For example, the General Data Protection Regulation, or GDPR, which became effective in the European Union (EU) on May 25, 2018, applies to our activities conducted from an establishment in the EU or related EU data subject. The GDPR creates new compliance obligations applicable to our business, which could cause us to change our business practices, and increases financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million, whichever is higher, for the most serious infringements). Further, as of January 1, 2021, and the expiry of transitional arrangements agreed to between the United Kingdom (UK) and EU, data processing in the United Kingdom is governed by a United Kingdom version of the GDPR (combining the GDPR and the Data Protection Act 2018), exposing us to two

parallel sets of regulations, each of which potentially authorizes similar fines and other potentially divergent enforcement actions for certain violations. The GDPR and UK GDPR require, among other things, that personal information only be transferred outside of the European Economic Area, or the EEA, or the UK, respectively, to jurisdictions that have not been deemed adequate by the European Commission or by the UK data protection regulator, respectively, including the United States, if certain safeguards are taken to legitimize those data transfers. Recent legal developments in the EU have created complexity and uncertainty regarding such transfers. These recent developments require us to review and amend our uses of Standard Contractual Clauses involving the transfer of data covered by the GDPR or UK GDPR outside of the EU or UK, which could increase our compliance costs and adversely affect our business. As a result, we may need to modify the way we treat such information.

In addition to the EU and UK, a growing number of other global jurisdictions are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of our business. Some of these laws, such as the General Data Protection Law in Brazil, or the Act on the Protection of Personal Information in Japan, impose similar obligations as those under the GDPR. Others, such as those in Russia, India, and China, could potentially impose more stringent obligations, including data localization requirements. If we are unable to meet these evolving legal requirements or if we violate or are perceived to violate any laws, regulations, or other obligations relating to privacy, data protection, or information security, we may harm to our reputation and become subject to investigations, claims, and other remedies, which would expose us to significant fines, penalties, and other damages, all of which would harm our business.

Our internal computer systems, or those of our development partners, third-party clinical research organizations, or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Despite the implementation of security measures, our internal computer systems and those of our current and any future Contract Research Organizations (CROs) and other contractors, consultants, and collaborators are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war or other military conflict, including an escalation of the conflict between Russia and Ukraine, and telecommunication and electrical failures. While to our knowledge we have not experienced any such material system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties to manufacture our product candidates and conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidate could be delayed.

We rely on email and other messaging services in connection with our operations. We may be targeted by parties using fraudulent spoofing and phishing emails to misappropriate passwords, payment information, or other personal information, or to introduce viruses through Trojan horse programs or otherwise through our networks, computers, smartphones, tablets, or other devices. Despite our efforts to mitigate the effectiveness of such malicious email campaigns through a variety of control and non-electronic checks, spoofing and phishing may damage our business and increase our costs. These risks may be heightened during the ongoing COVID-19 pandemic, should any of our employees voluntarily choose to work remotely. In addition, due to the political uncertainty involving Russia and Ukraine, there is an increased likelihood that escalation of tensions could result in cyberattacks that could either directly or indirectly impact our operations. Any of these events or circumstances could materially adversely affect our business, financial condition, and operating results.

Risks Related to our Financial Position and Capital Requirements

We have incurred significant operating losses since we were founded in 2004 and expect to incur significant losses for the next several years as we continue our clinical trial, development programs, and commercial activities for reproxalap and our other product candidates. Net loss for the year ended December 31, 2021 and 2020 was approximately $57.8 million and $37.6 million, respectively. As of December 31, 2021, we had total stockholders’ equity of $205.7 million and an accumulated deficit of $294.7 million. Losses have resulted principally from costs incurred in our clinical trials, research and development programs and from general and administrative expenses. In the future, we intend to continue to conduct research and development, clinical testing, regulatory compliance activities, pre-commercial activities, and, if reproxalap or any of our other product candidates is approved, commercialization efforts, including sales and marketing activities, that, together with anticipated general and administrative expenses, will likely result in our incurring further significant losses for the next several years.

We currently generate no revenue from sales, and we may never be able to commercialize reproxalap or our other product candidates. We do not currently have the required approvals to market any of our product candidates and we may never receive them. We may not be profitable even if we or any of our future development partners succeed in obtaining regulatory approval and commercialize any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

We will require substantial additional financing, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts.

The development and commercialization of biopharmaceutical products is capital intensive. We are advancing reproxalap and our other product candidates through preclinical and clinical development, including multiple ongoing and planned clinical trials for our product candidates. We expect our expenses to increase in connection with our ongoing activities as we continue the research and development of, and, if successful, seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to manufacturing, product sales, marketing, and distribution. We may also need to raise additional funds sooner if we choose to pursue additional indications for our product candidates or otherwise expand more rapidly than we presently anticipate. Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed on attractive terms, if at all, we will be forced to delay, reduce, or eliminate certain of our clinical development plans, research and development programs or future commercialization efforts. In addition, there can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all. The development process for our product candidates is highly uncertain, and we cannot estimate with certainty the actual amounts necessary to successfully complete the development, regulatory approval, and commercialization of our product candidates. Our operating plans may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than expected, through public or private equity, debt financings, or other sources. The amount and timing of any expenditure needed to implement our development and commercialization programs will depend on numerous factors, including:

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the type, number, scope, progress, expansion costs, results, and timing of our clinical trials of reproxalap or any our other product candidates that we are pursuing or may choose to pursue in the future;

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the need for, and the progress, costs, and results of, any additional clinical trials of reproxalap and our other product candidates we may initiate based on the results of our planned clinical trials or discussions

with the FDA, including any additional trials the FDA or other regulatory agencies may require evaluating the safety or efficacy of reproxalap and our other product candidates;

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the costs of obtaining, maintaining, and enforcing our patents and other intellectual property rights;

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the costs and timing of obtaining or maintaining manufacturing for reproxalap and our other product candidates, including commercial manufacturing, if any product candidate is approved;

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the costs and timing of establishing sales and marketing capabilities and enhanced internal controls over financial reporting;

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the terms and timing of establishing collaborations, license agreements, and other partnerships on terms favorable to us;

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costs associated with any other product candidates that we may develop, in-license, or acquire, including potential milestone or royalty payments;

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the effect of competing technological and market developments;

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our ability to establish and maintain partnering arrangements for development; and

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ALDX US Equity

ALDX · 10-K · period ended 2021-12-31

ITEM 1.BUSINESS

ITEM 1A.RISK FACTORS

ALDX US Equity☆

ALDX · 10-K · period ended 2021-12-31

ITEM 1.BUSINESS

ITEM 1A.RISK FACTORS

ALDX US Equity