Phase II of Adolor's ADL 5945 Trial Produces Excellent Results

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On a first quick review of the press release of the data from the phase II trial of Adolor's (ADLR) ADL 5945 in chronic, non-cancer pain patients suffering from opioid-induced constipation, it looks like the efficacy and safety profile are excellent. This paves the way for the drug to enter a phase III trial and should enable Adolor to find a partner to fund much of the development. This adds an important and positive new component to the valuation assessment of the stock. Biotechnology investors have come to dread the release of important binary trial data and with good reason as the failure rates are high and the stocks can be penalized severely if trials fail. I was willing to take the risk with Adolor on its phase II trial of ADL 5945 because it is my feeling that the value of the company based on Entereg alone could be $4.50 in 2013 without taking into account the potential for ADL 5945. See my report of August 2.

I am in the process of going through the data in detail, but I thought that I would just put out a quick take. The dose for phase III is likely to be a 0.25 mg dose taken twice per day. In the trial, this dose achieved statistical significance at p=0.0003 on the primary endpoint of change in spontaneous bowel movements (SBM) as compared to baseline. For this 0.25 mg dose, the change was 3.4 SBMs. The patient population in this study was chronic opioid users who had chronic constipation as a result of their opioid usage. This is generally defined as less than three SBMs per week. ADL 5945 was able to produce four or more SBMs in each individual week of the four-week trial while placebo never reached three. Adolor beleives there is a major benefit in quality of life for patients when they can achieve three-plus SBMs per week.

The safety profile seems excellent with the drug appearing to have placebo-like side effects. ADL 5945 seems to be particularly safe in gastrointestinal side effects, which is the most troubling side effect concern for drugs used in this condition. It appears that the favorable GI side effect profile may meaningfully differentiate ADL 5945 from other drugs under development for this condition.

The company is planning for an end of phase II meeting with the FDA and is preparing for a phase III trial, which should begin in early 2012. The cost of the trial could be on the order of $60 million and Adolor will seek a partner. Obtaining a partner will be the next significant event to watch for. A meaningful front end payment of $20 million or so could obviate the need for any additional financing to complete the takeover of Entereg from Glaxo (NYSE:GSK) and the funding of the phase III trial.

I will be taking a closer look at the data in the near future. While I am impressed by the data, I am like most biotechnology analysts conditioned to look for problems. It is sometimes the case that topline data becomes less favorable as additional data is released. While I do not expect that will be the case, I will still be looking for it.

Disclosure: I am long ADLR.

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