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| ADLR > SEC Filings for ADLR > Form 10-Q on 6-Aug-2008 | All Recent SEC Filings |
6-Aug-2008
Quarterly Report
Various statements made in this Quarterly Report on Form 10-Q are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those which express plan, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. We have based these forward-looking statements on our current expectations and projections about future events and they are subject to risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements. These forward-looking statements include statements about the following:
the status and anticipated timing of regulatory review and approval for our product candidates;
our product development efforts, including results from clinical trials;
the Risk Evaluation and Mitigation Strategy (REMS) for Entereg in POI;
estimates of the market opportunity and the commercialization plans for alvimopan and our product candidates;
the safety and efficacy of our products and product candidates;
anticipated dates of clinical trial initiation, completion and announcement of trial results by us and our collaborators;
anticipated trial results and regulatory submission dates for our product candidates by us and our collaborators;
analysis and interpretation of data by regulatory authorities;
anticipated operating losses and capital expenditures;
our intentions regarding the establishment of collaborations;
anticipated efforts of our collaborators;
our intention to rely on third parties for manufacturing;
the scope and duration of intellectual property protection for our products;
the scope of third-party patent rights;
our ability to raise additional capital; and
our ability to acquire or in-license products or product candidates.
In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "target," "goal," "continue" or the negative of such terms or other similar expressions. Factors that might cause or contribute to differences include, but are not limited to, those discussed in Part II, Item 1A., Risk Factors of this Quarterly Report and discussed in our other Securities and Exchange Commission (SEC) filings.
We urge you to carefully review and consider the disclosures found in these filings, all of which are available in the SEC EDGAR database at www.sec.gov. Given the uncertainties affecting biopharmaceutical companies in the development stage, you are cautioned not to place undue reliance on any such forward-looking statements, any of which may turn out to be wrong due to inaccurate assumptions, unknown risks, uncertainties or other factors. We undertake no obligation to (and expressly disclaim any such obligation to) publicly update or revise the statements made herein or the risk factors that may relate thereto whether as a result of new information, future events or otherwise.
The following discussions should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report and the Risk Factors in Part II, Item 1A., of this Quarterly Report.
Company Overview
We are a development-stage biopharmaceutical corporation that was formed in 1993. Since inception, we have specialized in the discovery and development of prescription pain management products and plan to commercialize products that are successfully developed. We have one U. S. Food and Drug Administration (FDA)-approved product, Enteregฎ (alvimopan), which was approved on May 20, 2008, for the management of postoperative ileus (POI). Entereg is specifically indicated to accelerate the time to upper and lower gastrointestinal recovery following partial large or small bowel resection surgery with primary anastomosis. In collaboration with Glaxo Group Limited (Glaxo), we launched Entereg in the United States in June 2008.
We also have a number of product candidates in various stages of development, ranging from preclinical studies to advanced-stage clinical trials. We have been collaborating with Glaxo for the development of Entereg for opioid bowel dysfunction (OBD), a condition which often results in chronic use of opioid analgesics to treat persistent pain conditions. We
recently reported that Glaxo is evaluating all options relating to the Entereg OBD program, including whether to proceed with its involvement with the program. The Company also is developing a product that combines alvimopan with an opioid analgesic. We also are developing delta opioid agonists in collaboration with Pfizer Inc. (Pfizer). One of the delta opioid agonist candidates is in Phase 2a clinical testing and one candidate is in Phase 1 clinical testing. We have additional product candidates in preclinical development for the treatment of moderate-to-severe pain conditions.
Entereg
Opioid analgesics provide pain relief by stimulating opioid receptors located in the central nervous system. There are, however, opioid receptors throughout the body, including in the gastrointestinal (GI) tract. By binding to the opioid receptors in the GI tract, opioid analgesics can slow gut motility and disrupt normal GI function that allows for the passage, absorption and excretion of ingested solid materials. This disruption can cause patients to experience significant discomfort and abdominal pain and may result in their reducing or eliminating their pain medication.
Entereg is a small molecule, peripherally-acting mu-opioid receptor antagonist intended to block the adverse side effects of opioid analgesics on the GI tract without affecting analgesia. Entereg has been under development for both acute and chronic conditions. The acute indication, which was recently approved by the FDA, is for the management of POI, a GI condition characterized by the slow return of gut function that can result from GI or other surgeries. The chronic indication is for the treatment of opioid bowel dysfunction (OBD), which is a condition characterized by a number of GI symptoms, including constipation, that often results from chronic use of opioid analgesics to treat persistent pain conditions.
In April 2002, we entered into a collaboration agreement with Glaxo for the exclusive worldwide development and commercialization of Entereg for certain indications. We are responsible for the development of acute indications, such as POI, and Glaxo is responsible for the development of chronic indications, such as OBD. In the United States, Glaxo and we are co-developing Entereg and intend to share profits or losses that result from the sale of the product. For commercial sales of Entereg for POI in the United States, we will receive 45% and Glaxo will receive 55% of the net sales less certain agreed upon costs, subject to certain adjustments. After the first three years, each party's share will become 50%. For commercial sales of Entereg for OBD in the United States, we would receive 35% and Glaxo would receive 65% of the net sales less certain agreed upon costs, subject to certain adjustments. Under the collaboration agreement, we have the right to convert our right to receive a profit share for OBD in the United States to a royalty on net sales of 20%. Outside the United States, Glaxo is responsible for the development and commercialization of Entereg, and we would receive royalties on net sales.
We are currently commercializing Entereg for POI with Glaxo. With regard to the OBD program, we announced in July 2008 that Glaxo is evaluating all options, including whether to proceed with its involvement with the program.
Entereg for POI
Regulatory Approval
Our New Drug Application (NDA) for Entereg was approved by the FDA on May 20, 2008 for the management of POI and is specifically indicated to accelerate the time to upper and lower gastrointestinal recovery following partial large or small bowel resection surgery with primary anastomosis. The Entereg FDA approval is subject to a Risk Evaluation and Mitigation Strategy (REMS) under which Entereg is available only to hospitals that perform bowel resections and are enrolled in the Entereg Access Support and Education (E.A.S.E.) Program. Our initial launch efforts have been focused on registering hospitals in the E.A.S.E. Program. As of July 31, 2008, over 600 hospitals have been registered under the program.
Regulatory History
We originally filed an NDA for Entereg 12 mg capsules for the management of POI in June 2004, which included four Phase 3 clinical studies (Study 302, 308, 313 and 306). An additional Phase 3 clinical study conducted in Europe, Australia and New Zealand by Glaxo evaluating Entereg in POI (Study 001) was submitted to the FDA in April 2005. In July 2005, we received our first approvable letter from the FDA for this pending NDA. In May 2006, we submitted a complete response to the July 2005 approvable letter which included results from an additional clinical study in POI, Study 314. Following review of this complete response, the FDA issued a second approvable letter in November 2006. In August 2007, we submitted a complete response to the November 2006 approvable letter, which included data from a long-term (12-month) safety study conducted in patients with OBD, Study 014, and a risk management plan.
Study 014 was a Phase 3 long-term safety study of Entereg (alvimopan) in patients taking opioids for chronic non-cancer pain and experiencing OBD. Results from Study 014 showed numerically more myocardial infarctions and other cardiovascular serious adverse events reported by patients treated with Entereg compared to placebo. The results of Study 014 also showed an increase in the incidence of benign neoplasms, malignant neoplasms, skin cancers and unspecified
neoplasms, including polyps, and the incidence of fractures reported in patients receiving Entereg, compared to placebo. At that time, Glaxo put the OBD development program on hold and withdrew the protocol for an additional Phase 3 safety and efficacy study in patients with OBD (Study 015). In addition, Glaxo stopped Study 101684, an extension of Study 008 in a cancer pain population, and we stopped Study 228, a study of our product candidate that combines alvimopan and an opioid analgesic. In June 2007, the FDA placed the alvimopan Investigational New Drug Applications (INDs) on clinical hold pending submission and analysis of additional information and notification by the FDA that clinical studies with alvimopan may resume.
On January 23, 2008, the FDA's Gastrointestinal Drug Advisory Committee (GIDAC) met to review Entereg for the proposed indication in POI. The GIDAC voted 9-6 that the overall benefits of treatment with Entereg outweighed potential risks for our proposed indication for short-term, in-hospital use. The GIDAC voted 13-0 with two abstentions that the efficacy results from the submitted studies in POI were clinically meaningful. The GIDAC voted 8-6 with one abstention that, based on the currently available cardiovascular events data observed in the long-term (12 month) safety study in patients with OBD (Study 014), there were concerns for the use of alvimopan 12 mg capsules in the short-term proposed indication.
Entereg for OBD
In addition to Study 014 described above, Glaxo has conducted several other clinical studies of Entereg for the treatment of OBD in patients taking opioid analgesics for persistent pain conditions. In September 2006, Glaxo and we announced the top-line results from two Phase 3 registration studies, Studies SB-767905/012 (Study 012) and SB-767905/013 (Study 013) of alvimopan for the treatment of OBD in patients with chronic non-cancer pain. Study 012 enrolled 518 patients with chronic non-cancer pain who had experienced symptoms of OBD. This study achieved statistical significance for the primary endpoint, the proportion of patients who had a weekly average of three or more spontaneous bowel movements (SBMs) and an increase from baseline of one or more SBMs a week over the 12-week treatment period in patients treated with alvimopan 0.5 mg twice daily. Study 013 enrolled 485 patients with chronic non-cancer pain and had the same primary endpoint as Study 012. The Study 013 results were not statistically significant.
Following the release of Study 014 results, the Entereg OBD development program was placed on clinical hold, which was lifted by the FDA in July 2008. Adolor announced, in July 2008, that Glaxo is evaluating all options relating to the OBD program, including whether to proceed with its involvement with the program.
Combination Program
We have been developing an analgesic product candidate that combines alvimopan and an opioid analgesic. This combination is intended to produce the pain relief of an opioid while reducing constipating side effects. During the second quarter of 2006, we commenced Study 228, a Phase 2 dose ranging study in which alvimopan was co-administered with hydrocodone/APAP. Based on the data from Study 014, we suspended enrollment in Study 228 in rotator cuff surgery patients and later discontinued Study 228.
We also filed an IND for a co-formulated hydrocodone/APAP and alvimopan product and have completed a Phase 1 pharmacokinetic study which showed comparable drug levels in the co-formulated product and co-administered products.
We are not currently conducting clinical studies in this program.
Delta Agonists
The delta receptor is one of three opioid receptors that modulate pain; the other receptors being the mu and kappa receptors. Today, all marketed opioid drugs interact with the mureceptors, primarily in the brain and spinal cord. We have identified a series of novel, orally active delta agonists that selectively stimulate the delta opioid receptor. Our goal in the program is to develop medications that produce pain relief similar to traditional mu opioids, while reducing or eliminating some typical narcotic side effects.
On December 4, 2007, we entered into an exclusive, worldwide license and collaboration with Pfizer to develop and commercialize ADL5859 and ADL5747, proprietary delta opioid receptor agonist compounds for the treatment of pain. Additional delta compounds and additional indications for those compounds may be added to the collaboration on terms specified in the agreement. The collaboration agreement provides for the establishment of a joint steering committee to guide the development and commercialization of the products. The collaboration agreement also provides that we will be responsible for IND filings and Phase 1 and Phase 2a clinical studies and Pfizer will be responsible for subsequent worldwide development, for securing regulatory approvals and for commercialization of the products. The companies will share external development expenses in support of regulatory filings in the United States with 60% paid by Pfizer and 40% paid by us. Expenses for development activities required for regulatory filings outside the United States are the responsibility of Pfizer.
Upon commercialization of products, we will share in the net profits/net losses, as defined in the agreement, in the United States at the rate of 60% to Pfizer and 40% to us. We will be entitled to receive royalty payments for net sales (as defined in the agreement) of products outside of the United States. We retain an option to co-promote the products in the United States.
ADL5859 Clinical Development Program
One of the delta compounds we are developing in collaboration with Pfizer is ADL5859. We have conducted Phase 1 clinical testing of ADL5859 in single-dose and multi-dose administration in healthy volunteers to investigate its safety, tolerability and pharmacokinetics. We are now in Phase 2a clinical testing of ADL5859 in studies designed to explore its analgesic efficacy in several pain indications.
Study 33CL230. Study 33CL230 was a randomized, double-blind, single-dose, active and placebo controlled parallel group study of ADL5859 for the treatment of acute pain after surgical removal of impacted third molars. The active control in Study 33CL230 was ibuprofen. The study enrolled 201 subjects. The primary endpoint for the study was a measure of pain relief. Results from Study 33CL230 indicated that ADL5859 was generally well tolerated, but that ADL5859 showed no efficacy signal in this model.
Study 33CL232. Study 33CL232 is a randomized, placebo and active controlled study being conducted to explore the analgesic efficacy of ADL5859 in subjects with pain associated with rheumatoid arthritis. Study 33CL232, which is expected to enroll approximately 42 subjects, is scheduled to complete a single-dose phase and a repeat-dose phase. The active control is naproxen. In the single-dose phase of the study, the primary outcome is the average difference between baseline and post-dose lower extremity pain intensity over six hours after repeated treadmill walking. In the repeat-dose phase, the primary outcome is mean daily lower extremity pain intensity score over two weeks.
Study 33CL231. Study 33CL231 is a randomized, double-blind active and placebo controlled parallel group study of ADL5859 being conducted to explore the analgesic efficacy of ADL5859 in treating pain associated with diabetic peripheral neuropathy. Study 33CL231 is expected to enroll approximately 210 subjects. Under the protocol, following a seven-day baseline period, subjects are to be randomized to receive a four-week treatment of either placebo, ADL5859 or an active control, duloxetine. The primary measure of efficacy for the study is the change in mean pain intensity score.
ADL5747 Clinical Development Program
We also are developing ADL5747 in collaboration with Pfizer. We are conducting Phase 1 clinical testing of ADL5747 in healthy volunteers to investigate its safety, tolerability and pharmacokinetics.
Discovery / In-licensing
Our pain research efforts initially focused on designing small molecules to target peripheral opioid receptors as a means of avoiding the centrally mediated side effects of currently available opioid analgesics. While work continues on the selective targeting of peripheral opioid receptors, new research is using advancements in molecular biology and medicinal chemistry to design molecules to avoid prototypical opioid receptor-induced side effects. In addition, our discovery research team is actively assessing other, non-opioid, pain targets. We believe there are opportunities to expand our product portfolio through the acquisition or in-licensing of products and/or product development candidates and intend to continue to explore and evaluate such opportunities.
Competitive Environment
We operate in a highly regulated and competitive environment. Our competitors include fully-integrated pharmaceutical companies and biotechnology companies, universities and public and private research institutions. Many of the organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, greater experience in drug development and in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do.
Commercialization
We are commercializing Entereg in POI with Glaxo. Currently, Glaxo is principally conducting the detailing effort for Entereg in the hospital marketplace and, through a 17 person contract sales force, we are co-promoting Entereg in certain hospitals. Glaxo also performs certain distribution and contracting services for Entereg on our behalf for a fee.
We maintain a strategic marketing group to support our commercial activities and research and development efforts. We have a small manufacturing organization to manage our relationships with third parties for the manufacture and supply of products for commercial and development purposes. We maintain commercial supply agreements with certain of these third-party manufacturers. We presently do not maintain our own manufacturing facilities.
As we develop additional product candidates, we may enter into strategic marketing or co-promotion agreements with, and grant additional licenses to, pharmaceutical companies to gain access to additional markets both domestically and internationally.
Collaboration and Other Agreements with Glaxo
In April 2002, we entered into a collaboration agreement with Glaxo for the exclusive worldwide development and commercialization of Entereg for certain indications. Under the terms of the collaboration agreement, Glaxo paid us a non-refundable and non-creditable signing fee of $50.0 million during the quarter ended June 30, 2002. Additionally, in the third quarter of 2004, we received and recognized $10.0 million as revenue under this agreement relating to achieving the milestone of acceptance for review of our NDA by the FDA. In the second quarter of 2008, we received and recognized $20.0 million as revenue under this agreement relating to achieving FDA approval of Entereg in POI.
We may receive additional milestone payments under the collaboration agreement upon the successful achievement, if any, of certain clinical and regulatory objectives, including up to $20.0 million related to the POI indication and $25.0 million related to the OBD indication. The milestone payments relate to substantive achievements in the development lifecycle and it is anticipated that these will be recognized as revenue if and when the milestones are achieved.
The collaboration agreement provides for development of a number of acute and chronic indications involving the use of Entereg in in-patient and out-patient settings. In the United States, Glaxo and we are co-developing Entereg and intend to share profits or losses that result from the sale of product. For commercial sales of Entereg for POI in the United States, we will receive 45% and Glaxo will receive 55% of the net sales, less certain agreed upon costs, subject to certain adjustments. After the first three years, each party's share will become 50%. For commercial sales of Entereg for OBD in the United States, we would receive 35% and Glaxo would receive 65% of the net sales, less certain agreed upon costs, subject to certain adjustments. Under the collaboration agreement, we have the right to convert our right to receive a profit share for OBD in the United States into a royalty on net sales of 20%. We have overall responsibility for development activities for acute care indications such as POI, and Glaxo has overall responsibility for development activities for chronic care indications such as OBD. Outside the United States, Glaxo is responsible for the development and commercialization of Entereg for all indications, and we would receive royalties on net sales.
External expenses for research and development and marketing activities incurred in the United States by each company are reimbursed by the other party pursuant to contractually agreed percentages. Contract reimbursement amounts owed to us by Glaxo are recorded gross in our statements of operations as contract revenue. Amounts reimbursable to Glaxo by us are recorded as research and development or marketing expense, as appropriate, on our statements of operations.
The term of the collaboration agreement varies depending on the indication and the territory. The term of the collaboration agreement for the POI indication in the United States is ten years from the first commercial sale of Entereg in that indication. Generally, the term for the OBD indication in the United States is fifteen years from the first commercial sale of Entereg in that indication, if any. In the rest of the world, the term is generally fifteen years from the first commercial sale of Entereg, if any, on a country-by-country and indication-by-indication basis.
Glaxo has certain rights to terminate the collaboration agreement. Glaxo also has the right to terminate its rights and obligations with respect to the acute-care indications, or its rights and obligations for the chronic-care indications. Glaxo has the right to terminate the collaboration agreement for breach of the agreement by us or for safety related reasons as defined in the collaboration agreement. The Company recently reported that Glaxo is evaluating all options relating to the Entereg OBD program, including whether to proceed with its involvement in the program.
In June 2004, we entered into a distribution agreement with Glaxo under which Glaxo will perform certain distribution and contracting services for Entereg on our behalf for a fee. Outside the United States, we intend to rely on Glaxo for sales and marketing of Entereg, and expect to supply Glaxo with bulk capsules for commercial sale of POI under a supply agreement that we entered into with Glaxo in September 2004.
License and Collaboration Agreement with Pfizer
On December 4, 2007, we entered into an exclusive worldwide license and collaboration agreement with Pfizer to develop and commercialize ADL5859 and ADL5747, proprietary delta opioid receptor agonist compounds for the treatment of pain. Additional delta compounds and additional indications for those compounds may be added to the collaboration on terms specified in the agreement. The collaboration agreement provides for the establishment of a joint steering committee to
guide the development and commercialization of the product candidates. The collaboration agreement also provides that we will be responsible for IND filings and Phase 1 and Phase 2a clinical studies and Pfizer will be responsible for subsequent worldwide development, for securing regulatory approvals and for commercialization of the products.
We received an up-front payment of $30.0 million from Pfizer and reimbursement of $1.9 million for Phase 2 development costs for the compounds that we had incurred prior to entering into the collaboration agreement. The agreement also provides that we may receive milestone payments of up to $155.0 million for the first compound and $77.5 million for a second compound. The milestone payments would become payable upon achievement of certain clinical, regulatory and commercial milestones defined in the agreement. The first milestone event defined is commencement of Phase 2b clinical testing. For development expenses in support of regulatory filings in the United States, the companies share external development expenses with 60% paid by Pfizer and 40% paid by us. Expenses for development activities required for regulatory filings outside the United States are the responsibility of Pfizer. Upon any commercialization of products, we will share in the net profits/net losses, as defined in the agreement, in the United States at the rate of 60% to Pfizer and 40% to us. We will be entitled to receive royalty payments for net sales (as defined in the agreement) of products outside of the United States. We retain an option to co-promote the products in the United States.
The agreement expires on a country-by-country basis upon expiration of the royalty term in each country, which term is a minimum of ten years following first commercial sale of a licensed product. Pfizer and we each have the right to terminate the agreement upon a material default of the other party. Pfizer has the right to terminate the agreement for certain clinical study results as set forth in the agreement. Following completion of Phase 2b studies for ADL5859 . . .
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