Pathway or gene set analysis has become an increasingly popular approach for analyzing high-throughput biological experiments such as microarray gene expression studies. The purpose of pathway analysis is to identify differentially expressed pathways associated with outcomes. Important challenges in pathway analysis are selecting a subset of genes contributing most to association with clinical phenotypes and conducting statistical tests of association for the pathways efficiently. We propose a two-stage analysis strategy: (1) extract latent variables representing activities within each pathway using a dimension reduction approach based on adaptive elastic-net sparse principal component analysis; (2) integrate the latent variables with the regression modeling framework to analyze studies with different types of outcomes such as binary, continuous or survival outcomes. Our proposed approach is computationally efficient. For each pathway, because the latent variables are estimated in an unsupervised fashion without using disease outcome information, in the sample label permutation testing procedure, the latent variables only need to be calculated once rather than for each permutation resample. Using both simulated and real datasets, we show our approach performed favorably when compared with five other currently available pathway testing methods.