Bullish on Pozen - Analyst Blog

Pozen (POZN) remains one of our top picks in the small-to-mid cap biotechnology industry.  We view the company as financially sound, exiting 2009 with over $46 million in cash on hand and another potential $20 million coming in April 2010 from AstraZeneca (AZN) for the U.S. approval of Vimovo.

The company is also well diversified, with one product on the market in Treximet, one product nearing FDA approval in Vimovo, and one product in phase III trials in PA-325. All three products offer significant catalysts in the near-term.

Sales of Treximet in the fourth quarter 2009 totaled $22.7 million at GlaxoSmithKline (GSK). This resulted in a royalty payment from Glaxo to Pozen of approximately $1.1 million. Treximet sales have been tracking below our expectations since the launch almost two years ago.

Sales in 2008 were hampered by the lack of approved marketing material. Sales in 2009 were hampered by significant sampling and widespread misconception that the product had poor reimbursement or offered no real advantages over generic sumatriptan. The truth is that over 90% of managed care plans list Treximet on their formulary, with over 50% in tier-2 status.

And the clinical data on Treximet is fantastic. The data show Treximet to be more effective to both Imitrex and naproxen alone, or both products taken together separately.

The goal for Glaxo is promotion in 2010. The company held a strategy sales meeting in January 2010 on how to position the product and change misconceptions about the reimbursement of the efficacy. We believe the sales force is now properly armed with the information necessary to drive Treximet sales significantly higher in 2010.

Plus, the royalty rate to Pozen is now 18% on U.S. sales, up from 5% in 2009. We think Treximet will become a more important driver of outperformance at Pozen in the next several quarters.

On June 30, 2009, Pozen announced the submission of the NDA to the FDA seeking marketing approval for Vimovo, a combination of 500mg enteric coated naproxen and 20mg immediate release esomeprazole. The U.S. FDA PDUFA action date has been set for April 30, 2009. U.S. approval will earn Pozen a $20 million milestone payment from AstraZeneca. In addition, AstraZeneca has filed for approval of Vimovo outside the U.S., where approval will earn Pozen another $25 million milestone.

We see Vimovo as a potential $500+ million product. Cox-II drugs such as Vioxx and Celebrex, designed to provide safer gastrointestinal profile for the treatment of pain, peaked sales at over $7 billion worldwide in 2004 before Vioxx was pulled from the market for cardiovascular risk.

In the U.S., there are an estimated 16,500 deaths each year due to NSAID-induced GI complications (primarily from GI hemorrhage). Given the lack of treatment options and the withdrawal of Vioxx and Bextra, only about 25% of these patients are co-prescribed a gastro-protectant. The Vimovo “safer naproxen" product looks to have efficacy on par with Vioxx and Celebrex, with low-risk GI damage thanks to the esomeprazole component, and a cardiovascular risk profile determined to be no greater than placebo.

Reasons why we believe Vimovo will be approved on April 30, 2010:

1. Esomeprazole (approved in a delayed release form as Nexium) is already approved for combination use with naproxen (an approved OTC drug at lower doses).

2. Phase III program met primary endpoint and was conducted under a special protocol assessment (SPA).

3. Significant unmet medical need for patients given the withdrawal of Vioxx and Bextra.

4. ACC & ACG both recommend gastro-protectant for patients taking daily NSAIDs.

5. FDA compared benchmark NSAID safety to naproxen back during the Cox-II issues in 2005. Vioxx was removed from the market and many on the FDA felt as though naproxen + PPI was a safer alternative.

On December 8, 2009, Pozen held an analyst and investor meeting in New York highlighting the potential for the company’s phase III candidate, PA-325/40. The meeting featured prominent medical experts touting the potential benefits of aspirin therapy for the treatment of cardiovascular disease and colon cancer, while outlining the challenges that the PA product overcomes with respect to gastrointestinal safety. We think this is easily a $500+ million product in the U.S. alone.

Pozen has designed the PA-325/40 product to be a “safer aspirin" for daily use. PA-325/40 is 325mg of aspirin surrounded by a film coating of a 40mg immediate-release omeprazole. The PPI omeprazole provides gastrointestinal (GI) protection from the potential harmful effects of high-dose aspirin, including GI bleeding and ulcers.

Pozen began a phase III program under U.S. FDA Special Protocol Assessment (SPA) in October 2009. Two phase III trials will enroll around 500 patients each, with the primary endpoint being cumulative incidence of gastric ulcers over a six-month treatment period. Bioequivalence will also be confirmed.

There will also be a long-term safety program that plans to enroll roughly 400 patients that will study patients on PA-324/40 for a period of 12 months. We expect Pozen will have all the necessary data from the phase III PA trials in hand by the third quarter of 2011 and look to file the new drug application (NDA) late 2011 or early 2012.

No market in the pharmaceutical industry is larger than cardiovascular disease (CVD) prevention. CVD is the leading cause of death worldwide, with over 50% mortality. It is truly an enormous market for which the pharmaceutical industry has spent hundreds of billions of dollars on over the past twenty years.

Aspirin has been used to prevent recurrent myocardial infarction (MI) since the 1940’s when the drugs anti-platelet activation properties where first discovered. In 1988, the U.S. FDA approved the use of aspirin for the prevention of recurrent MI.

Since that time, data reported in The Lancet from the ISIS-2 (2nd International Study of Infract Survival of MI) demonstrates that daily use of 162.5mg aspirin reduces the potential for vascular mortality by 23% (p<0.00001) vs. placebo in the first five weeks following a myocardial infarction. Long-term follow-up data suggest the benefit of daily aspirin use persists in the prevention of recurrent MI as long as 10 years post event.

Besides the potential for high-dose daily aspirin in cardiovascular disease prevention, Pozen and key opinion leaders in oncology believe that significant potential exists in colorectal cancer prevention. There are an estimated 150k cases of colon or rectal cancer in the U.S each year, with 50k deaths.

Data from a prospective analysis of nearly 83k people from 1980 to 2000 published in JAMA in 2005 shows a significant risk reduction of colon cancer development when on daily aspirin 325mg. Unfortunately, most people cannot tolerate 325mg daily aspirin due to the risk of potential harmful gastrointestinal side effects.

This is why we think Pozen’s PA-325/40 product has significant sales potential. It is aspirin without the harmful side effects.

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