Adolor Corp. Q3 2009 Earnings Conference Call

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Adolor Corp. (ADLR) Q3 2009 Earnings Call October 29, 2009 8:45 AM ET


Steven Webster - SVP, Finance and CFO

Mike Dougherty - President and CEO

Eliseo Salinas - SVP, R&D and CMO




Welcome to the Adolor conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being taped at the request of Adolor.

At this time, I would like to introduce your host for today's call Mr. Steven Webster, Senior Vice President, Finance and Chief Financial Officer at Adolor. Please proceed.

Steven Webster

Today we will review our third quarter 2009 progress and financial results. Before we begin, let me remind you that certain statements on this call may be forward-looking and are subject to risks and uncertainties associated with our business. These statements may concern, among other things, guidance as to future revenue from ENTEREG or anticipated of our cash and investments, our operations and prospects, transactions, intellectual property, litigation, the development of our pharmaceutical products, clinical trials and any potential approval of our product candidates.

Additional information and risk factors affecting the company's business and financial prospects and other factors that could cause our actual performance to vary from our current expectations, are available in our SEC filings. Investors with further questions should contact me at area code 484-595-1500. This conference call is being webcast via the Adolor homepage and it will be archived for one week after the call.

Now, I'll turn things over to Mike Dougherty, Adolor's President and Chief Executive Officer.

Mike Dougherty

Let me begin by reviewing our agenda for this morning. We'll start with the review of ENTEREG, covering our sales results and offering some insights into other performance metrics as we've done in prior quarters. Eliseo Salinas will then provide you an overview of our clinical development pipeline and we'll spend some time here on today's call as this is a very exciting period for our R&D group at Adolor with a near-term resumption of clinical evaluation in both our delta agonist program and our opioid bowel dysfunction function program, in each case, with two different proprietary compounds.

For much of the past year, we've been focused on rebuilding our clinical development pipeline at Adolor and are very pleased to be in a position to overview this for you today. Following Eliseo comments, Stephen Webster will provide a review of third quarter financial results. And then finally, Eliseo, Stephen, Michael (inaudible) who now runs Marketing and Sales at Adolor and I, will then be happy to take your questions.

So, I'll begin with ENTEREG. We saw continued growth in shipments and product sales during the third quarter. Net shipments were $4 million in the quarter, up $1.1 million or 38% from $2.9 million in the second quarter. Net product sales recognized were $3.34 million up nearly $1 million or 40% from $2.38 million in the second quarter.

We estimate that ENTEREG was added to about 125 formularies during the third quarter, bringing the total to approximately 725 as of September 30. A majority of these additions were in our primary targeted customers. The 1,400 hospitals which performed 80% of the bowel section surgeries in the United States. There are now approximately 435 of these hospitals where ENTEREG is included on formulary.

As of September 30, we had 625 reordering customers, a healthy increase from the 450 we reported at the end of the second quarter. We're pleased to see both the number of repeat customers and first time purchasers increase in this past period. We continue to receive encouraging feedback from physicians who are using ENTEREG in the market place as well. We are beginning to see two presentations and publications of independent outcome studies, sometimes referred to as medication use evaluations or MUEs, presented to the medical community by surgeons detailing their own experiences with ENTEREG.

In August, Dr. Timothy Beard a surgeon at the Bend Memorial Clinic at St. Charles Medical Center in Oregon presented the results of one such study at the Northwest Society of Colon and Rectal Surgeons.

In October, a poster offered by Dr. Abby Pitsenberger of the Mercy Medical Center, north Iowa was presented at the American College of Clinical Pharmacy. Like Dr. Beard's data, we believe that Dr. Pitsenberger's data independently confirms the benefit of ENTEREG for patients in hospitals.

Looking ahead, a number of independently conducted MUEs and case studies will be presented in December at the meeting of the American Society of Health System Pharmacists. We expect more will follow in 2010. This is the very kind of information that we believe hospitals and physicians value. Studies conducted by their colleagues independent of pharmaceutical companies showing comparative results in real world hospital settings.

We believe the presentation of these studies will add to the weight of evidence demonstrating the benefit that ENTEREG provides the bowel resection, patients and then hospital institutions and look forward to additional studies of this nature being conducted by and made available to the medical community.

I'll now turn the call over to Eliseo for a brief review of our clinical programs. Eliseo.

Eliseo Salinas

Thanks Mike. As Mike mentioned, it is indeed a exciting period of time for all of us in R&D at Adolor. I will start with our delta program.

And first offer you some background on this program. As many of you know, all currently available opioid analgesics for example Morphine and oxycodone our new receptor agonists.

The delta receptor another opioid receptor in contrast has been an illusive target for pharmaceutical development. Both Adolor and our partner Pfizer share a common vision for this program. The vision of the development of a new class of opioids the delta which bring new opioids like analgesia without some of the complicating side effect of traditional opioids including the tendons, sedation, respiratory depression and abuse potential.

Certainly, there is a good deal of activity in the opioid arena today, given the enormous numbers of scripts written every year for new opioids. FDA is in the process of defining arranged program for currently available extended release opioid analgesics in an effort to reduce the misuse. Efforts are ongoing to develop tamper resistant and abuse resistant variations of opioids.

Our delta program speaks to this same issues and concerns, but we believe at a much more fundamental level.

Turning to our current status with the delta program, I am pleased to report that we recently enrolled our first patients in our Phase 3 trial which is evaluating both AVL5859 and AVL5747 in osteoarthritis. These [forearm] proof-of-concept study will enroll 400 patients and compare each compound against placebo and oxycodone CR as the active competitor. The study period is two weeks. We have spent a good deal of time with our colleagues at Pfizer preparing for the study, and we are very pleased to have begun enrollment. We anticipate having the result of this study in the second half of next year

We also are preparing for the initiation of an additional Phase 2a study of ADL5747. This will be an [AD] studying patient with postherpetic neuralgia to assess its efficacy in controlling neuropathic pain. We intend to begin enrolment in this study in January.

Turning now to OBD. I am certain I do not need to remind investors of our substantial history in the opioid bowel dysfunction area. We emerged from our experience with ENTEREG with a continued commitment to this area and the millions of patients who suffer from this condition and with some hard earned expertise that we intend to put to use in advancing our current development candidates.

Our OBD program took two significant steps forward over the past several months. First, we filed the IND for ADL7445 last month and we are now in position to initiate clinical testing with healthy volunteers. We are actively preparing for this trial and expect to start dosing in the next few weeks. This single ascending dose trial will be followed by a multiple ascending dose trial in OBD patients in early 2010.

Second, in September, we announced that we had in-license ADL5945, a clinical stage compound from Eli Lilly. Prior to our position of these rights, Lilly has been developing this compound in a different indication and completed both Phase 1 single, ascending dose, placebo-controlled safety study and a Phase 1 multiple ascending dose, placebo-controlled safety study in healthy volunteers. We are well positioned in this product candidate into OBD and it offers us a tremendous opportunity to conduct much of the early development in tandem with ADL7445, providing not only economies, but importantly, a more diversified portfolio in OBD.

And now, multiple opportunities for success. Like ADL7445 and ENTEREG ADL5945 is an opioid antagonist, but with a different chemical structure and different PK which we know can be important in this indication. In early 2010, we will initiate an additional Phase 1 trial of this compound in OBD patients. I look forward to sharing our clinical data on both the delta and the OBD programs with you as they become available.

I will now, turn it over to Steven Webster to review the third quarter financials. Steven?

Steven Webster

Thanks Eliseo. Total revenues for the third quarter of 2009 were $8.7 million consisting of $5.3 million from our collaborations with GSK and Pfizer and $3.3 million in net ENTEREG sales. Revenues in the period increased by $0.8 million over the same period last year, with growth in ENTEREG product sales of $3.2 million, more than offsetting a $2.4 million decline in contract revenues. Net shipments of ENTEREG in the third quarter were $4 million, up from $2.9 million in the second quarter.

Net sales of ENTEREG differ from net shipments as currently, we recognize product sales revenue only on reorders from existing registered hospital customers. As of September 30, 625 hospitals had reordered ENTEREG, up nearly 40% from 450 at the end of the second quarter. Total revenues for the nine months ended September 30, 2009 were $24.4 million consisting of $17.2 million from our collaborations and $7.2 million of product sales. Net shipment of ENTEREG for the first nine months of 2009 aggregated $8.9 million.

Turning to expenses, operating expenses were $20 million and $22 million for the quarters ended September 30, 2009 and 2008 respectively. R&D expenses for the third quarter decreased by $3 million to $11.1 million in 2009 due to decreased internal R&D expenditures and lower external R&D spend on delta and other programs offset somewhat by higher spending in 2009 on ENTEREG and the OBD program.

SG&A expenses in the third quarter increased by $0.8 million over 2008 levels to $8.7 million, primarily related to costs associated with the commercial efforts on ENTEREG.

Our reported net loss for this third quarter of 2009, decreased to $11.1 million or $0.24 a share, from a net loss of $13.3 million or $0.29 a share in the year-ago quarter. For the nine months ended September 30, 2009, our net loss was $40.9 million or $0.88 a share up from a net loss of $14.8 million or $0.32 a share in 2008.

The 2008 results were favorably impacted by $20 million milestone payment from GSK in the second quarter upon the approval of ENTEREG. Net cash and short term investments used in the quarter was $14.2 million, which does include the $2 million payment to Lilly for the license of ADL5945. We closed the quarter with $94.4 million in cash, cash equivalents and short term investments. And we had approximately 46.3 million shares outstanding at September 30. Mike?

Mike Dougherty

Thank you Steven. Enclosing, we are pleased with the progress in our business this past quarter, not only with ENTEREG, but also and in particular on the clinical development front in our delta and OBD programs. We believe both delta and OBD represent high end clinical development programs, addressing significant areas of medical need, with innovative and proprietary compounds.

We look forward to reporting continuing progress in future periods. And with that we are delighted to now open the call to any questions. Operator.

Question-and-Answer Session


At this time we will take questions that you may have. (Operator Instructions). First question comes from Charles (Inaudible) of Prime Investments. Please proceed.

Unidentified Analyst

Thank you very much great job on the numbers out there gentlemen great job, looks great. Just a quick question on the ADL5945 the one you just picked up from your new liability. When do you guys think you are going to start actually putting that into clinical and what kind of a timeframe you are looking at to get it into stage one? Or through stage 1?

Mike Dougherty

Yeah this is Mike, thanks for that question and may be I'll start and ask Eliseo to make any supplemental comments as you may know really actually prior to our in license had done some work on this compound and the different indication and with that had done some Phase 1 work. So our expectation is to very quickly and soon do some additional Phase 1 work, but more importantly to them introduce this compound into some very early efficacy. Clinical evaluation and the unique opportunity here is to do that in parallel with our ADL7445 compound. So, we expect to have that Lilly compound in the clinic in 2010.

Eliseo Salinas

As Mike said, there are two interesting aspects of this program. One is that, to make it coincide with 7445 and run the same studies essentially with the two molecules. The second is that, as you know Adolor had an extensive experience in the area of OBD which is not easy. It's a very challenging area. You're talking about receptors that have been exposed to chronic opioid stimulation and you are given an antagonist which poses a number of pharmacology and clinical programs. Because of that experience, we think that we can accelerate this and be in a measure to get into the next phase by the end of 2010, including efficacy risk in both compounds.

Unidentified analyst

And just a quick follow up, question as far as the financials go. I know publicly you said you're going to end the year with right around $85 million something like that, plus or minus. Does that number still stand or did this throw it off a little bit as far as picking up this drug?

Eliseo Salinas

I think from an operating standpoint, the number is still good. That did not contemplate the $2 million payment to Lilly. So we do need to factor that into our earlier numbers that we did in conjunction with the restructuring.


(Operator instructions).

Steven Webster

Okay, operator I understand that there is not any other questions. So, I would like to thank everyone for their attendance and attention this morning and for anyone who is listening to this on a delayed basis, certainly myself and the management team are available to take any questions that might be forthcoming. Thank you everyone and have a good day.


Ladies and gentlemen, that does conclude your conference for today. Thank you for participating.

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