Two out of three ain't bad, as the song says, even (or especially) if you're talking about efficacy endpoints in Phase III trials. But try telling some investors that.

Everything was looking good for Adolor Corp. until mid-January's Phase III failure - but if you ask the company, as well as some analysts, the picture is still bright.

Adolor had nailed down a major deal with GlaxoSmithKline plc in the spring of 2002 for its post-operative ileus drug Entereg (alvimopan), gaining $50 million up front, with a potential $220 million more in milestones.

Later came Phase III data from a pair of separate trials (numbered 302 and 313), both reaching statistical significance in their efficacy endpoints: recovery of bowel function.

But at the start of this year, less favorable efficacy news rumbled down the pike when Entereg failed to meet the primary efficacy endpoint - bowel function again - in the Phase III program's fourth and final Phase III study (308).

Wall Street reacted like a spoiled brat with a candy bar in each hand who still wanted more, slamming Adolor's stock down 37 percent on the first full day of trading after the news was disclosed. Shares ended at $13.73. By last week, they were priced in the $16 range - better, but still a far cry from the 52-week high of $22.34.

"The Street, I think, is attuned to selling stocks when Phase III studies are not successful," said Gregory Wade, analyst with Pacific Growth Equities, adding that sellers "may have overlooked" the other, more encouraging Phase III data gleaned from the program with Entereg, a mu opioid antagonist.

"Most biotechs and pharmaceuticals, the smaller companies, don't [typically] pursue a broad program," he noted.

The drug also performed well in trial 306, a study with safety as a primary endpoint.

Adolor's three-month stock performance chart may look like a profile of the Dover cliffs, but the company said it expects to file a new drug application with the FDA this summer.

Wade and colleague Thomas Dietz authored a research report on Adolor in which they said results from the 6-mg dose patients (it's also administered at 12 mg) in Study 302 and Study 313, which yielded data ahead of 308, "meet the regulatory requirement." The endpoint in 302 and 313 was time to recovery of upper- and lower-bowel function.

They also pointed out that, in comparing 12-mg patients in Study 308 and Study 313, the mean difference in time to first bowel movement compared to placebo was 17.2 and 17.4 hours, respectively - not much. And the mean difference in time to first solids (the other component of the primary endpoint), vs. placebo in the same group was 11 hours in Study 308, compared to 21.7 hours in Study 313 - a substantial gap. So the composite primary-endpoint difference in Study 308 could have been affected by the relative delay in feeding.

In any case, Adolor's president and CEO Bruce Peacock, at the Biotechnology Industry Organization's CEO & Investor Conference in New York last month, told a roomful of investors that "we certainly think we have a package of potential benefits [for the FDA] to look at."

Wade believes as much, too.

"There's some anticipation, now that the company has received fast-track status, that when they file in June, they might receive priority review," Wade told BioWorld Financial Watch. "They could get approved by the end of the year."

Wade owns Adolor stock. Pacific Growth makes a market in Adolor and has an investment banking relationship with the firm.

Wade pointed to three more opportunities for Adolor's lead drug. One is opioid bowel dysfunction. GSK has two Phase II trials ongoing, with 500 patients in each. GSK's target is to file the NDA for that indication in 2007. Another indication is chronic idiopathic constipation of unknown origin. GSK has suggested the drug has efficacy in that setting, and an Adolor abstract regarding the indication has been accepted by the Digestive Disease Week meeting in May in New Orleans. The third potential indication is irritable bowel syndrome, for which GSK has Entereg in Phase I studies.

There is no approved treatment for post-operative ileus (decreased or stopped bowel motility), a condition that is the subject of the Phase III trials and which can be the "rate-limiting factor" in the release of surgery patients from the hospital, leading to much higher costs of care, Peacock said.

"Typically a patient would have their surgery early Monday morning," he said. On the second day, the tubes ought to be removed and the patient should be thinking about leaving the hospital.

"They can't go home, the surgeon won't let them go home, [because] they can't eat solid food, they can't have a bowel movement," Peacock said. "They may wind up staying there Wednesday, Thursday, sometimes even longer than that."

Also possibly very lucrative is the label for chronic constipation.

"The hypothesis is that [the condition's cause] is an overexpression of an endogenous opioid-like compound that's triggering their shutdown" of the bowel, Peacock said, which means Entereg might be just the ticket.

Wade noted that a recent article in the Journal of the American Medical Association estimated 11 percent of the population in North America suffers to some degree from constipation.

Entereg has been passed around a bit, much like, among others, Macugen (pegaptanib sodium), Eyetech Pharmaceuticals Inc.'s aptamer designed to selectively bind to and neutralize vascular endothelial growth factor, which garnered a deal with $100 million up front from Pfizer Inc. The Adolor drug was in-licensed from Roberts Pharmaceutical Corp., which had in-licensed it from Eli Lilly and Co.

Adolor is not alone in pursuing the post-operative ileus indication, and its would-be competition is far along, as well. Most advanced is the subcutaneous formulation of Progenics Pharmaceuticals Inc.'s opioid antagonist methylnaltrexone, which is in Phase III trials.

"We think there's a role for this [injectable] drug, but more likely in the homecare setting" because of its fast onset, Wade said. "You don't want to be in between the patient and the toilet."

Adolor's oral drug, rather than quickly increasing gut motility, gradually alleviates the slowdown, he said. Progenics' early stage oral formulation could be "slightly more competitive, if it works," he added.

With 130 employees, Adolor also has a pain program that includes its sterile lidocaine patch for incision pain, which is in Phase II trials, but Entereg has been the focus of most investors, Peacock acknowledged.

Deservingly so, Wade said.

"We believe the data are very compelling for the broad use of the drug, considering there is no competitive therapy in the market," he said. What are the odds that Entereg will be for sale by year's end?

"We haven't made any projections, so I don't think it would be appropriate [to speculate]," he said, but the choice of Adolor/GSK to devote a full-fledged program to the drug rather than put all its chips on a single Phase III seems likely to pay off.

"Clearly, they made the right decision," Wade said.