Via Facsimile and U.S. Mail
Mail Stop 6010
June 8, 2005
Walter E. Riehemann
Vice President & General Counsel
Adams Laboratories, Inc.
425 Main Street
Chester, New Jersey 07930
Re: Adams Laboratories, Inc.
Amendment #1 to Registration Statement on Form S-1
Filed May 13, 2005
File Number 333-123585
Dear Mr. Riehemann:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM S-1
General
1. We note your response to comment 12 and have the following
additional comments:
* The support you have provided for many statements included in
your
document, including statements about the number of prescriptions
dispensed, the size of the market based on U.S. dollars, the
percentage of the market that was historically filled with generic
drugs, etc. consist of spreadsheets that appear to be internally
prepared. Please revise to provide us with the source data from
which these spreadsheets were prepared.
* A number of the statements about the size of your market are
attributed to Informational Resources, Inc. However, the support
for
these statements is from CPGNetwork Insite. What is CPGNetwork
Insite and what is their relationship to Informational Resources.
* With regard to your statement that 2.8 million prescriptions for
Humibid were written during 2003, please tell us if this
information
was published by IMS. If not, what is the source that Sarah Smith
used to compile the data sent to you via email on February 1,
2005.
Graphics
2. We note your response to comment 6. The term "BID" may be
appropriate for a medical trade journal. However, the term may
not
be commonly understood by many potential investors. Please revise
to
eliminate its use from your prospectus.
3. We note your response to comment 7. We understand there are
competing guaifenesin products prescribed twice a day by
physicians.
Therefore, please explain why yours is the only product that
increases patient compliance.
Use of Proceeds, page 24
4. We note your response to comment 32 and your revised
disclosure.
The revised disclosure indicates an intention to provide the
percentage of the proceeds you will allocate to each use. Please
revise to provide the dollar amounts you intend to allocate to
each
purpose.
Management`s Discussion and Analysis of Financial Conditions and
Results of Operations
Critical Accounting Policies and Estimates
Sales Returns and Allowances, page 32
5. We have read your response to comment 34 and we have the
following
additional comments:
a. Please explain to us why you do not disclose a range of
reasonably
likely amounts or other types of sensitivity analysis for the
revenue
dilution items other than the non market pharmaceuticals. In
addition please clarify in the filing if there have been any
material
changes to your estimates in the periods presented.
b. Please disclose the type of information you receive from IRI
and
IMS and the periods this information covers.
c. To better understand your sale return policy please tell us
your
expiration date policy for returns.
d. Please tell us why you believe providing a roll forward is not
necessary in your filing.
Cardinal Health Profit Share, page 33
6. We have read your response to comment 37 where you state that
you
have disclosed the amount of profit share earned by Cardinal
Health.
If this refers to the receivable you have recorded please clarify
that in the filing and also explain to us how that represents the
profit share earned by Cardinal Health.
7. In addition, if an estimate is recorded as of a balance sheet
date
included in this filing please revise the filing to include the
disclosures requested in comment 37.
Liquidity and Capital Resources, page 39
8. We refer to your disclosure related to the Cardinal Health
profit
sharing arrangement on page 33. It would appear based on that
disclosure and your response to comment 35 that the mark-up allows
Cardinal Health to receive an amount of cash that is higher than
what
they ultimately should and that receivable from Cardinal Health
gets
settled at a later date. Please revise your liquidity discussion
to
highlight this fact and also clarify how often you and Cardinal
settle and/or is required to settle the receivable or payable
caused
by the mark-up.
9. Please clarify in Note 1 - Cardinal Health Profit Share
Arrangement that the actual amount payable to Cardinal Health is
calculated at the end of each calendar quarter under a profit
sharing
formula.
Manufacturing, page 59
10. We note your response to comment 44 and the referenced
revisions.
However, the comment is reissued, please revise to disclose the
amounts of the profit sharing payments made to Cardinal Health.
Principal and Selling Stockholders, page 75
11. We note your response to comment 50 and reissue the comment in
part. Please provide the full name(s) of the natural persons
having
voting, dispositive or investment powers over the shares held by
EGI
and Perseus-Soros BioPharmaceutical Fund, LP. We note your
supplemental response as it relates to the EGI Fund. Please
identify
all of the directors that make up the seven-person board.
Participation in Reserved Share Program, page 79
12. We note your response to comment 54. Based on your response
and
the description of the directed share program, this information
will
not be available for the preliminary prospectus that will be
circulated. Please revise to delete this section. The discussion
of
the directed share program that is included in the "Underwriting"
section is sufficient.
Financial Statements
Noted to Financial Statements
1. Nature of Operations and Summary of Significant Accounting
Policies
Accounts Receivable, page F-9
13. We have read your response to comment 61. Please tell us why
you
believe your accounting policy for reserving for uncollectible
accounts receivable at the time of collection becomes improbable
and
not prior to that point complies with US GAAP.
Product Development, page F-14
14. Please refer to your response to comment 63. You state that
you
have removed reference to product development including
investments
in prosecution of patents, but we note that the statement is still
included in the amendment. Please revise to delete the statement
and
confirm to us that these costs are not included in product
development.
Accretion of Preferred Stock, page F-14
15. We have read your response to comment 64. It would appear
that
the increase in the carrying amount (i.e. fair value) of the
redeemable preferred stock should be treated as dividends on non-
redeemable stock and shall be effected by charges against retained
earnings not additional paid-in capital. Please revise your
financial statements accordingly or tell us why you believe your
accounting policy is consistent with EITF Topic D-98 and paragraph
24
of SFAS 150.
5. Stockholders` Equity (Deficit), page F-20
16. We have read your response to comment 66. Please revise your
filing to include the disclosures requested in comment 66.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please file
your cover letter on EDGAR under the form type label CORRESP.
Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Joseph Roesler at (202) 551-3628 or Mary
Mast
at (202) 551-3613 if you have questions regarding comments on the
financial statements and related matters. Please contact Albert
Lee
at (202) 551-3654 or me at (202) 551-3715 with any other
questions.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: J. Vaughan Curtis
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
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Walter E. Riehemann
Adams Laboratories, Inc.
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