Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Stephen Webster – SVP, Finance and CFO

Mike Dougherty – President and CEO

Eliseo Salinas – SVP, R&D and Chief Medical Officer

Analysts

Ling Wang – Brean Murray

Jeremiah Shepard – Wedbush

Adolor Corporation (ADLR) Q1 2010 Earnings Call Transcript April 28, 2010 8:45 AM ET

Operator

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, Stephen Webster, Senior Vice President of Finance and Chief Financial Officer at Adolor. Please go ahead.

Stephen Webster

Thank you, operator. Good morning everyone. Today, we will provide an update of our operations and review our financial results for the quarter-ended March 31st. 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 levels of our cash and investments, our operations and prospects, transactions, intellectual property, litigation, the development of 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 Adolor's actual performance to vary from our current expectations are available in our SEC filings. Investors with further questions should contact me at 484-595-1500. This conference call is being webcast via the Adolor home page and it will be archived for one week after the call. Now, I'll turn it over to Mike Dougherty, our President and Chief Executive Officer.

Mike Dougherty

Thanks, Steven. Good morning everyone and thank you for joining our call today. Before we review our financial results later in this call, we'll provide a review of our progress in this first quarter of 2010, up again with the brief overview of operating performance with ENTEREG and then we'll spend the majority of the call on our research and development pipeline with Eliseo Salinas, our senior VP of research and development and I reviewing important developments from both our delta and opioid bowel dysfunction function programs.

Beginning with ENTEREG, as reported early this morning, first quarter net sales at ENTEREG were $5.3 million, up from net shipments in the year ago quarter of $2 million and up just over 8% from $4.9 million in the fourth quarter of 2009. We saw increases in hospital registrations, formulary approvals and the number of reordering hospitals this past quarter as well.

We estimate that ENTEREG is now on formulary at nearly 575 of the key 1400 hospital accounts that perform 80% of bowel section surgeries in the United States, an increase of approximately 75 hospitals in the first quarter. We count 550 of these hospitals now as reordering hospitals, another important metric of us, representing an increase of 50 hospitals since December 31, 2009.

And finally, another 50 of these hospitals effective registration under our EASE program this quarter, brining total registrations to 925 or about two thirds of this key accounts. Most fundamentally, we continue to note repeated observations of the benefits that this first in class product provides. Both the patients in terms of decrease length of stay and the hospitals institution in terms of pharmacoeconomic benefits. With all of these, our expectations for continued growth in ENTEREG sales remain and we are reiterating the guidance first offered in late February for 2010 net sales of ENTEREG in the range of $30 to $35 million.

Turning to our development programs, the first quarter saw a continued progress in both our delta program and our opioid bowel dysfunction program. As you recall from our year end update, 2010 will be a very important time period with respect to each of these programs, the year end which we advance into proof-of-concept studies and OBD and under important Phase II proof-of-concept data in our delta program.

I'll now ask Eliseo to offer more detailed update on our progress in R&D in the first quarter. Eliseo?

Eliseo Salinas

Thanks, Mike. As Mike mentioned, 2010 will be an important year in terms of milestone regarding our development programs. In the delta receptor agonist program, Pfizer and we recently completed enrollment in the phase IIA study of both ADL5859 and 5747 in patience with osteoarthritis of the knee.

This is four-armed study, enrolled over 400 patients comparing each compound against placebo and oxycodone CR for two weeks. We were pleased with this period enrollment and the overall quality of execution of this study which is completing ahead of schedule.

We anticipate sharing the results of this important trial in June or July of this year. These are significant study in result of our program and we are very excited to be in because of data. These also osteoarthritis of the knee study represented the first time that ADL for example saving has been accessed in efficacy studies and the first time we’ve conducted an efficacy study with ADL at 5A59 with specific attention paid to potential food effects and with our reformulated compound.

Osteoarthritis remains an important area in need of noble approaches to pay management and an important franchise for our partner [ph], Pfizer. Positive result in this trial will represent a critical step forward for this program and importantly, a decision to move forward into phase IIB studies would result in a $15 million milestone payment from Pfizer.

We look forward to share our result review when available. Additionally also in our delta program, we began enrolling patients in January in a phase IIA proof-of-concept study evaluating ADL5747 in patients with post-herpetic neuralgia.

This is an 80-patient study designed to access the efficacy of ADL 5747 in controlling neuropathic pain. Enrollment is progressing on target and we expect the results from this study will be available in early 2011. I will now turn to our opoiod bowel dysfunction program.

Since, our year-end call, we have made substantial progress in the clinical development of both ADL 7445 and 5945, our highly peripheralized new opoiod receptor antagonist. As planned, we completed the single ascending dose study of 7445 and currently our accessing to safety and their availability in patients with OBD.

With 5945, our second OBD compound, we have completed a Phase I pharmacokinetic study in healthy volunteers and currently are accessing the compound in a safety study in patients with OBD. We are very pleased with the results we’ve said so far.

Both compounds demonstrated an excellent pharmacokinetic profile, very good systemic exposure, half-life compatible without once a day or a b.i.d dose in the target indication and very low-to-modest viability. Those drugs were very well tolerated in healthy volunteers and in patients with early signs of efficacy also served into patients treated to-date.

The current studies are expected to complete in Q3 with approximately 20 patients exposed to each drug providing safety through our ability and preliminary efficacy data. As you can see, we're making progress in the OBD program. Our experience in developing new opioid antagonist compound for this indication has enabled us to expedite development of both 7445 and 5954. This streamline development program calls for us to initiate proof-of-concept Phase II studies during the second half of the year on one or both of these compounds as appropriate.

I look forward to keeping you update in our progress in both of these important programs. I will now turn it over to Stephen Webster to review the first quarter financials, Stephen.

Stephen Webster

Thanks Eliseo. Total revenues for the first quarter of 2010 were $10.7 million consisting of 5.4 million from our collaboration with GSK and Pfizer and 5.3 million in ENTEREG net sales. Revenues in the first quarter of 2010 increased by 4 million from the first quarter of 2009 with the vast majority attributable to a 3.9 million increase in ENTEREG net sales.

ENTEREG sales increased from the year ago quarter from both an increase in the number of hospitals ordering as well as from increased penetration within ordering hospitals. Turning to expense, operating expenses were $20.3 million and $20.4 million for the quarters ended March 31, 2010 and 2009 respectively.

Cost to good sold was 0.6 million or 11% of net product sales for the quarter. Cost to good sold reflects royalties due to licensees and FDA licensor fees as well as the cost to product sold. R&D expenses were $10.5 million in the first quarter of 2010 versus 12.3 million in the first quarter of 2009.

The $1.8 million decrease was driven primarily by reductions in headcount associated with our June 2009 restructuring, as well as lower external expenses in early stage research, offset partially by higher cost of clinical trials incurred in the three months ended March 31st 2010 in our delta, an OBD programs.

SG&A expenses increased from $7.9 million in the first quarter of 2009 to $9.2 million in the first quarter of 2010. The increase was driven primarily by higher marketing expenses associated with ENTEREG, which was partially offset by lower general and administrative expenses year-over-year.

Our reported net loss for the first quarter of 2010 was $9.6 million or $0.21 per share, versus a net loss of $13.2 million, or $0.28 a share in the first quarter of 2009.

We closed the quarter with $72.6 million in net cash and short-term investments. During the quarter, we used cash of $10.6 million to fund operations. We had approximately 46.4 million shares outstanding at March 31st.

Mike?

Mike Dougherty

Thank you, Steven. My way of a closing comment, I will focus on our delta program where we and Pfzer have an important day soon ahead from our Phase 2a study in osteoarthritis. No question, there has been a good deal of focus off late in the medical community on the subject of opioid analgesis.

A discussion of the class diagrams. Efforts are underway to develop improve opioid, abuse-deterrent opioids. Different formulations have currently marketed opioids and all this for good reason. Mu opioid analgesis are relied upon everyday by millions of patients who suffer from chronic pain conditions. At the same time, the dependency and the abuse characteristics of these narcotics remain a major issue for the medical community. And well all appreciate the challenges that exist in formulating around these basic characteristics of mu-opioids.

Our vision for the delta program has from its inception been centered on this very dilemma. The vision of a new class of opioids, potentially bringing new opioids like analgesia but without some of this worrisome side effect concerns.

I believe our approach is distinguished from others that are very basic level, not a formulation approach but instead the development of fundamentally different class of opioid analgesis.

We believe our long standing involvement in opioid receptor research, as is well position to fully explore the opportunity in this area. We look ahead to providing further updates in our delta program and in our other programs in the months ahead.

And now, operator, Eliseo, Steven and I along with Michael Adelman, our head of marketing of sales would be pleased to take any questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Ling Wang of Brean Murray. Please proceed.

Ling Wang – Brean Murray

Good morning. Thank you for taking my question. So, a couple of question for the Phase 1 OBD program. Can you let us know when do you expect to report some of the preliminary data, and also can you remind us whether this trial has a placebo?

Mike Dougherty

Sure. Thanks Lean and good morning. Perhaps this is my – I'll start off and maybe Eliseo will add some comments. We are formulating our thinking with regard to release of data associated with this program. Our current assessment is that perhaps, with our second quarter call, as the program is in a place where we maybe at that point moving into proof-of-concept studies. At that time, we would be apprized to put out some data from our Phase 1 clinical program.

And we rather did clinical protocol I would say.

Eliseo Salinas

Good morning, Lean. We completed the healthy room tier part of this Phase 1 program, and we initiated the patient part, a few weeks ago already on 7445 and we’re recently on 5945. And so we are assessing safety to our ability and what we call preliminary efficacy, because – yes there are placebo patients in those groups but this are not powered to detect difference in efficacy, just to explore safety and durability but I (inaudible) efficacy that you start seeing bowel movements when you get to certain doses and that's good preliminary efficacy.

So, as Mike said we estimated by that our next call, we will have enough data that would enable us to communicate and as we said earlier, we would be initiating a proof-of-concept study that would be confirmatory in the second part of the year.

Ling Wang – Brean Murray

Okay. Thank you. And then my question is for Steve, so we see the first quarter R&D hiccup, somewhat from the fourth quarter last year. Can you give us some guidance about how we should think about the R&D expenses going forward?

Mike Dougherty

Yeah. I think we can look at it. Lean, we noted that the – in the quarter in the R&D external spend related to the delta and the OBN programs, went out certainly from the year ago quarter. And they are indicative of what Eliseo just went through as far as the OBD program, putting two compounds into Phase 1 trials but the anticipation that we will start proof-of-concepts studies later this year. So you will see that spend continue.

The delta program, the Q1 spend was indicative of fully enrolling the 08 trial, 400 patient trial. We will have to see what those data are. We also started the PHN study, which you'll see continue throughout the year. And stay tune for the '08 data. I think we are on the level of delta spent, henceforth.

Ling Wang – Brean Murray

Okay. Thank you.

Mike Dougherty

Okay. I understand there is one another question.

Operator

Your next question comes from the line of Jeremiah Shepard of Wedbush. Please proceed.

Jeremiah Shepard – Wedbush

Thank you. And congratulations on your, on ENTEREG sales this quarter. I just had a couple of question. Regard to the delta opioid receptor program, once, you have the data for Phase 2a studies and if it is positive what will be the next step?

Mike Dougherty

Well, thanks Jeremy. The next step is obviously to discuss the date set with our partner and what would be next will be a Phase 2b study. And some of those discussions as you might expect are underway, and we and Pfizer will formulate plans for continuing to programming to important Phase 2b studies.

Jeremiah Shepard – Wedbush

Do you have any idea? Can you say at this point about the sizes, the Phase 2 studies?

Eliseo Salinas

Yeah, hi. This is Eliseo Oreste Salinas. I mean what this proof-of-concept will trigger the initiation of the placebo trials. So anything that comes after that is intended for this patient [ph], would be done with the maximum possible speed. And the side intended to support the regulatory submission.

I can't give you the specific details about the study because we will be discussing that with Pfzer. But essentially would be assigned to provide people the proof of efficacy, but knowing that it's a dose ranging, exploring to several doses. And after that you would have the final Phase 3 that will be one or two of those doses, the most did, the once that had the best who benefited and will do the Phase 3.

So it's the initiation of the – people are part of this program.

Jeremiah Shepard – Wedbush

Any are other any indications that are interest for the delta opioid program?

Mike Dougherty

There are potentially other indications. Our current focus is obviously on pain indications. The delta receptor may be an interesting target for other indications down the road, but currently as I said, our focus is on analgesia.

Jeremiah Shepard – Wedbush

And regard to ENTEREG, our institutional sales database that we subscribe to – I suggest that there was some variability in the monthly sales. And if this is true can you speak with us, as to why this could be?

Mike Dougherty

I'm not exactly sure what you are referring there, Jeremy. But certainly, as we reflect back on the first quarter there were changes and there was some increases in sales at the months of the quarter, progress. I don't know that that's unusual. One tenth – with hospital products in particular, that the beginning of the year can be slow. And that that's perhaps what you are referring to.

Jeremiah Shepard – Wedbush

Yes. It is, Mike, I was a little bit slow on the beginning, but ended up nicely. Thank you for taking my questions.

Mike Dougherty

Thank you, Jeremy.

Stephen Webster

Operator, are there any other questions?

Operator

We have a follow-up question from the line of Ling Wang. Please proceed.

Ling Wang – Brean Murray

Thank you for taking my follow-up. Michael, you mentioned number of hospitals reorder and ENTEREG. I sorry I didn't quite get that number. What is that as of in a first quarter?

Mike Dougherty

It was up to 1400 hospitals. Ling, it was 550 of those hospitals are reordering hospitals. And what we mean by that is hospitals who would – had a minimum order at ENTEREG twice, so made an initial order, and then had least one follow-up order and that's an increase of another 50 hospitals, since year end and it's a metric that we pay a lot of attention to.

Ling Wang – Brean Murray

I'm sorry, 570.

Mike Dougherty

550.

Ling Wang – Brean Murray

550.

Mike Dougherty

Yeah, 5-5-0.

Ling Wang – Brean Murray

Okay. All right. Thank you.

Mike Dougherty

Okay. There don't appear any other questions. So we'll like to thank everyone for your attention and attendance today, and look forward to proving further updates down the road.

Operator

Ladies and gentleman that does conclude our conference for today. Thank you for participating.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Adolor Corporation Q1 2010 Earnings Call Transcript
This Transcript
All Transcripts