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Pozen, Inc. Message Board

  • eu9mec eu9mec Aug 18, 2011 10:24 PM Flag

    How Low Can It Go?

    Even with the market tanking, it's amazing to see POZN going below $3. I keep buying at these levels. I, and others, have shown how the value of this stock would be $5 if the company shut down tomorrow with it's cash and royalties. But this doesn't answer the question about how low it can go in the long-run because the company isn't going to close it's doors tomorrow. They are moving forward with development of PA.

    In order to figure out the worst case value (meaning, PA is developed and no revenue comes from it), we need to add up the following: the Treximet royalties (call it $96M), the Vimovo royalties (call that at least $20M), and the cash ($50M), and then subtract the development of PA. At about $11M expense per quarter for the next 7 quarters, that's -$77M. So, if everything goes badly, the company is worth $96 + $20 + $50 - $77 = 89M or $2.98. Basically, we're at worst case scenario and I mentioned above, below "book" value (if you include royalties in the books).

    The one thing that I'm unhappy with the company is the SG&A line. There's no way they should be spending $5M/qtr. This should be something around $2M. 35 employees at an average of $250k/year. Something is not right. If they're spending a bunch of money on consultants for the marketing of PA, it's way to early for that. They should wait until they submit to the FDA next year. Any ideas?

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    • If Pozen was trading at $.50, wouldn't you be in favor of the company buying back shares? What I'm saying is that at these levels, the company is way undervalued, and the best investment it can make is purchasing its own share (basically the market has valued PA at less than $0). Regarding the credit line, they can easily get a credit line because of the royalties it's receiving. I'm not even even saying to draw against it. I'm saying use some existing cash to buy shares and use the credit line if it's needed down the road. Besides, the company is wasting $2M/qtr on marketing a drug which isn't even within a year of approval. Look at SG&A expenses.

    • They should be buying shares at this level (and getting a large line of credit, if they're worried about having enough funds to bring PA to market ???

      This doesn't even make sense. If a company is simultaneously buying back stock while worried about cash and getting a line of credit at the same time sounds a lot like buying your own stock on credit (which means leveraging debt. Thats a game for a casino not chemical research.

    • Every shareholder should call or send an email to management. The company is trading well below book+royalty value. They should be buying shares at this level (and getting a large line of credit, if they're worried about having enough funds to bring PA to market; though, as I've mentioned before, they are burning a lot of money on marketing efforts for a drug that won't be approved until 2013).

    • To answer Tran's question about my basis, looks like you and I are right in the same ballpark, basis-wise and # of shares sacrificed on the altar of the biotech gods....

      Been having some discussions on and off line with a couple of fellow bio speculators/investors and we're all coming to the same conclusion - they're not "investments" at all, they're just trades, and moves should be made to keep them that way.

      Buy low during P2 or P3 trials, and sell into the PDUFA or FDA decision date runups. Do NOT keep the stocks after approvals! Especially not during the first few quarters after a drug finally goes on the market - see POZN, AVNR, and DNDN for perfect examples of struggling sales killing the stocks. If we'd sold back in the pre-approval excitement we'd have made a ton of cash, now we're all sitting on crap! Luckily, I avoided the DNDN debacle.....never bought any.....the first two, OTOH, have cost me plenty.

    • Same here, down over 10k on this sucker. Holding since 8+...

    • Tran,

      I had the same basis when i invest in POZN:
      I believe positive court ruling is very likely(which i purchase below 5) plus also the Postive Phase 3 results.POZN shouldn;t stay at below 3.

      However, with the overall market trending down. Biotech stock is the first to be hit. Speculative funds will be the first one to retreat.

      Hope the market re-correct soon.

    • If there is a ray of short term hope, the safety results of PA should be announced soon. Since they just hired a VP of Customer Development, I'm guessing the results are favorable.

      But I'm with you on your frustration level. I'd like to see management do a stock buyback at these levels versus burning $2M/qtr on PA pre-commercialization efforts, which can wait until next year.

    • Your calculation is incorrect. ($96*0.18) + ($20*0.1) + $50 - $77 = -$7.72 That means, they will have to dilute. However, dilution at this price level is problematic. Even 10% could bring only $10 mln. Vimovo sales are still the key, but so far, it's been a huge disappointment.

      • 1 Reply to bgubbor
      • Treximet= $89M x 18% x 6 years
        Vimovo = $35M/yr x 10% x 6 years

        This doesn't even account for a longer horizon or the high likelihood that Vimovo will do better than a $35M average over the next 6 years.

        The only place I'm cheating here is the time value of money. However, given the high likelihood of hitting these modest numbers, discount rate should be fairly low. If I were evaluating PA, then I would use a higher discount rate on that piece of the business (and I would introduce taxes). But because, this is worst case scenario of an FDA rejected PA, and sufficient tax losses, I can keep this simple.

    • Agreed with your valuation. 3 is really undervalued.

      However, i believe most of the valuation still depends on VIMOVO sales. If Vimovo sales ramp up to 10-15 million in this quarter, then everything will be fine.

      For the hiring part, this seem positive to me as the management are so confidence about that their trial result and didn't even bother about the approval issue. Or may be they need to start the marketing campaign way before the product approved. Just my opinion.

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