1 August 2003 Elements of a Profitable Biopharmacutical Company Roland E. Dolle September 24, 2003.

1August 2003

Elements of a Profitable Biopharmacutical Company

Roland E. Dolle

September 24, 2003

2August 2003

Outline

• Evolution of biotech business models

• Adolor Corporation

3August 2003

Business model evolution

• 1980s: Product-based

4August 2003



• R&D + Sales & Marketing

• Some big success stories - Amgen, Genentec

• More companies failed than succeeded

• Many unfulfilled promises

5August 2003


• Project risks

• Failure to optimize a lead into a clinical candidate

• Clinical candidate failure on safety, PK

• Failure of mechanism to treat disease

• Failure to differentiate over existing treatments

• Failure to make a return on investment if launched

6August 2003


• Attrition prior to Phase II

• Biggest problem as a percent

• >80% loss prior to NDA

• Attrition in Phase II and later

• Biggest problem in cost

• Target validation issue

7August 2003


• 1980s: Product-based companies

• 1990s: Technology-based companies

8August 2003


• 1990s: Technology-based

• Genomic platforms

• Combinatorial chemistry platforms

• Miscellaneous drug discovery services

• Investor rationale

• Product-based model seen as too risky

• Enabling technology will accelerate R

• Instant revenue stream ($$)

9August 2003


• Reality

• Genomic and combichem platforms did not live up to expectation (over sold)

• More targets - but not validated

• More compounds - but not drug-like

• Drugs to market have been declining while expenditures escalating

• Profit margins slim

• Tech-based companies can’t “hit the home-run”

• Little up-side potential for shareholders

10August 2003



• 1990s: Technology-based


11August 2003



• Pure technology service platforms - out of favor

• Technology companies transforming themselves into product-based companies

• Miscellaneous drug discovery services - moving outside of U.S.

12August 2003


• Example: Millennium Pharmaceuticals (Boston, MA)

• 1993: Genomic screening platform (target validation)

• 1997: ChemGenics acquired for library screening and lead optimization

• 1999: LeukoSite acquired for clinical development and product pipeline

• 2000: Cambridge Discovery acquired for chemistry/screening

• 2001: CorTherapeutics acquired for clinical product including sales and marketing infrastructure

• 2003: Restructuring initiative shuttered R&D in San Francisco, Cambridge, England

• 2004: Plans to cut staff by 26% to focus on drug development

and commercialization

13August 2003

Product-based Business Model of the 2000s

• Must build profitable business• Build the company in stages• Corporate alliances/partnerships

• Technology • Management expertise• Finance

Target IDValidation

DrugDiscovery

Development Sales &Marketing

14August 2003

Build a profitable pharmaceutical company

specializing in the discovery, licensing,

acquisition, development and commercialization

of prescription pain management products.

Build a profitable pharmaceutical company

specializing in the discovery, licensing,

acquisition, development and commercialization

of prescription pain management products.

Mission

15August 2003

Forward-Looking StatementsThis presentation and the questions and answers that follow contain forward-looking statements including but not limited to statements about the following:

Our forward-looking statements are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. Further information about these and other relevant risks and uncertainties may be found in Adolor’s filings with the SEC, available in its EDGAR database at http://www.sec.gov and from Adolor at www.adolor.com. Given the uncertainties affecting pharmaceutical 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. Adolor undertakes no obligation to publicly update or revise the statements made herein or the risk factors that may relate thereto.

• Our ability to submit, if positive confirming results are achieved in our other studies, our alvimopan clinical study 302 in an NDA • Our ability to achieve positive confirming results in the other alvimopan Phase 3 clinical studies• Our target dates for completing accrual and announcing results in our alvimopan clinical studies 308 and 313• Our target date to submit an NDA for alvimopan in the first half of 2004 • Our alvimopan clinical study 304 results and plans for further development of alvimopan in opioid bowel dysfunction• Our ability to complete a Phase 2 study for ADL 08-7223 in late 2004 • Our ability to submit an NDA for ADL 08-7223 in 2006• Our product development efforts, including results from clinical trials• Anticipated dates of clinical trial initiation, completion, and announcement of trial results• Anticipated trial results and regulatory filing dates for our product candidates• Analysis and interpretation of data by regulatory authorities; the status and anticipated timing of regulatory approval for our product

candidates• Anticipated operating losses and capital expenditures• Our intentions regarding the establishment of collaborations• Anticipated efforts of our collaborators, including initiation of clinical studies of alvimopan in opioid bowel dysfunction in 2003• Our intention to rely on third parties for manufacturing• Our plans to build a hospital-focused sales force• Estimates of the market opportunity and the commercialization plans for our product candidates, including our plans for the establishment of a

sales force

16August 2003

Profile

Capabilities

130 employees: from discovery and clinical research to business development, manufacturing and marketing

Alvimopan Peripheral mu opioid receptor antagonist developed to manage negative gastrointestinal (G.I.)

side effects of opioid pain products Positive results in late-stage clinical trials in two distinct indications Substantial potential market opportunities in both hospital and out-patient settings GlaxoSmithKline partner for collaborative development and commercialization

ADL 08-7223 Sterile lidocaine impregnated patch being developed for management of postoperative incisional

pain in North America Potential customer synergy with alvimopan

Discovery Research focus on cannabinoid, delta, kappa, mixed mu/kappa, peripheral mu and other receptor

targets

17August 2003

Importance of Pain Management/Treatment

• Pain costs approximately $100 Billion in treatment and lost productivity Most common symptom that causes people to seek medical care in the

U.S.• Recognition and Acceptance

Pain - “The Fifth Vital Sign” as defined by the American Pain Society The Joint Commission on Accreditation of Healthcare Organizations

(JCAHO) developed guidelines in 1999 that mandates hospitals recognize the rights of patients to appropriate assessment and management of pain

• Market Potential Total U.S. market for pain pharmaceuticals: $15 billion Opioids in U.S.: 190 million annual prescriptions; $4.6 billion in sales Increasing number of surgeries/aging population

18August 2003

Program R & D Phase 1 Phase 2 Phase 3

Postoperative Ileus

Chronic Opioid Induced Bowel Dysfunction

Acute Opioid Induced Bowel Dysfunction

Pain

Postoperative Incisional Pain

Post-surgical/Inflammatory/

Visceral Pain

Joint Pain

Neuropathic Pain

Irritable Bowel Syndrome

Post-surgical/Inflammatory Pain

Post-surgical/Inflammatory Pain

Alvimopan

Kappa

Peripheral Mu

Delta

R & D Pipeline

Mixed Mu/Kappa

Cannabinoid Agonist

ADL 08-7223

Combination Product(alvimopan + opioid)

19August 2003

Alvimopan SelectivelyAntagonizes GI Opioid Receptors

Opioid Bowel Dysfunction

Peripheral Mu Opioid Receptors in Bowel

Central Mu Opioid Receptor

Postoperative Ileus

Mu Opioid Narcotic Analgesics:

- morphine - codeine- oxycodone

Alvimopan Alvimopan MechanismMechanismOf ActionOf Action

20August 2003

Postoperative Ileus

• POI is a temporary impairment of gastrointestinal motility after abdominal or other surgeries

• Severity / duration is associated with type of intra-abdominal surgery

• Opioid analgesics used for postoperative pain delay G.I. recovery

• Patient recovery and recovery of G.I. function is often rate limiting in patient satisfaction and hospital discharge

• No FDA approved drugs for this indication; current treatments are not adequate

21August 2003

Alvimopan for the Management of Postoperative Ileus - Studies 302, 308, 313

Design

• Double-blind, placebo-controlled, multi-center

• Placebo, 6 mg, 12 mg, equal randomization

• First dose at least two hours prior to surgery, and then twice a day until hospital discharge or up to 7 days post-surgery

• Postoperative pain management with intravenous Patient Controlled Analgesia (PCA pump) with opioids

Subjects

• Limited simple hysterectomies 20% max in Study 302 and 308; none in Study 313

• Radical hysterectomy; large bowel resection

• Small bowel resection (Studies 308 and 313)

22August 2003

• Primary Efficacy Endpoint Time to recovery of gastrointestinal (G.I.) function (composite

endpoint is upper AND lower G.I. recovery)

• Time to upper G.I. recovery: tolerating solid foods

• Time to lower G.I. recovery: flatus or bowel movement

• Secondary Efficacy Endpoints Proportion of Responders Time to be Ready for Discharge based solely on Recovery of

Gastrointestinal Function Time to First Solid Food Time to Hospital Discharge Order Written Time to First Flatus Time to First Bowel Movement

Alvimopan for the Management of Postoperative Ileus - Studies 302, 308, 313

23August 2003

Alvimopan for the Management of Postoperative Ileus – Study 302

Pre-specified primary analysis method

• Cox proportional hazard model

6 mg dose vs. placebo

• Cox hazard ratio = 1.47

• P <0.01• 5 of 6 secondary endpoints statistically significant (P = 0.033

for other)

12 mg dose vs. placebo

• Positive Trend Cox hazard ratio = 1.23 P = 0.11

• Statistically significant P <0.01 in proportion of responders (first order secondary endpoint)

Statistical Analysis

24August 2003

Specified Primary Endpoint Analysis: Time to Recovery of GI Function - Alvimopan Study 302

6 mg vs. placebo: hazard ratio = 1.47, P<0.01

(Cox Proportional Hazard Model)

6 mg Placebo

• 16 hour faster average recovery of G.I. function

• 14 hour earlier average time of hospital discharge order written

25August 2003

Number of Subjects Who Had Hospital Discharge Order Written- Alvimopan Study 302

05

1015202530354045

1 2 3 4 5 6 7 8 9 10

Post Operative Day

Placebo

6 mg

698

632

66

Hospital Days:

26August 2003

Most frequent adverse events were:

Placebo 6 mg 12 mg

n = 153 n = 150 n = 146

Nausea 67.3% 64.0% 56.8%

Vomiting 32.0% 25.3% 15.1%

Hypotension 15.0% 12.0% 11.6%

Discontinuations for adverse events:

14.4% 6.7% 17.8%

Alvimopan for the Management of Postoperative Ileus - Study 302

27August 2003

Alvimopan for the Management of Postoperative Ileus - Development Targets

Studies Accrual Completion Targets Subjects

302 Complete 451

306 Complete 500

308 Q3 – Q4 Enrolling

313 Complete 510

» NDA submission will depend on achieving confirmatory clinical trial results; timing of any submission is dependent on timing of accrual completion and other factors.

NDA Submission TargetFirst half 2004

28August 2003

• Approximately 50 million Americans suffer from chronic pain Back Pain - 27 million Osteoarthritis - 20 million Other pain syndromes - 3 million

• 190 million prescriptions for opioids written in the U.S. each year

Approximately 30 million of those prescriptions are for 14 or more days’ medication

• 40% of patients on long term opioid therapy meet the clinical definition of constipation (< 3 bm / per week)

Chronic Pain Market U.S.

29August 2003

Alvimopan for the Management of Chronic Opioid Bowel Dysfunction (OBD) - Study 304

• Double-blind, randomized, placebo control

• Inclusion Criteria On chronic opioid therapy for at least one month Have opioid-induced bowel dysfunction

• N = 168 in chronic pain or methadone maintenance

• Alvimopan 0.5 or 1.0 mg or placebo

• 3 weeks (21 days) consecutive daily dosing

• Primary Efficacy Endpoint Average proportion of patients having bowel movement within

8 hours following oral medication, measured each day during the 21- day study

30August 2003

Average proportion of patients with

bowel movement < 8 hours of dose

measured each day during the

21-day study

0%

10%

20%

30%

40%

50%

60%

Placebo 0.5 mg 1.0 mg

29%

43%

55%

P < 0.001 P < 0.001

Alvimopan for the Management of Chronic Opioid Bowel Dysfunction (OBD) - Study 304

31August 2003

Alvimopan for the Management of Chronic Opioid Bowel Dysfunction (OBD)

• Long-term preclinical toxicity studies initiated

• Two clinical studies in OBD targeted for initiation in 2003

Will test dosing regimen and extended duration dosing in:

- malignant pain patients

- chronic pain patients

• GlaxoSmithKline is primarily responsible for the completion of the OBD development program

32August 2003

Acute Care Hospital Products

POI, Acute OBDAdditional Products(Adolor Products)

Chronic Care Outpatient Products

Chronic OBD, Additional Products

(G.I. Products)

ROW

GSK Develops & Sells

GSK Develops & Sells

Royalty to Adolor

Royalty to Adolor

U.S.

Co-Development/Co-Promotion

Profit Split

Co-Development/Co-Promotion

Profit Split

Adolor/GlaxoSmithKline - Alvimopan Collaboration

• $50 million upfront

• $220 million in milestones

• Development expense sharing for POI, Acute & Chronic OBD indications in U.S.

• Adolor supplies API

33August 2003

Adolor R & D Strategy

• Utilize proprietary position in opioid receptors and expertise in combinatorial chemistry to develop novel small-molecule therapeutics

• Collaborate at appropriate value points with established partners for: Chronic care in the U.S. Opportunities outside the U.S.

• Complement internal development efforts with in-licensing and M & A

34August 2003

Discovery and Outsourcing

• Established relationship with CiVentiChem in 2002

• Expanded relationship in 2003

• Supplied critical intermediates for discovery operations

• Viewed as an extension of internal research group

35August 2003

Summary

• Product platform in pain management

• Alvimopan: A potential first-in-class product candidate with substantial potential

market opportunities ADL 08-7223:

• Multi-target, pain-focused discovery research program

Target IDValidation

DrugDiscovery

Development Sales &Marketing

1 August 2003 Elements of a Profitable Biopharmacutical Company Roland E. Dolle September 24, 2003.

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