Pozen Brings Good Data & Earnings

• By Jason Napodano, CFA
• On 8:53 am EDT, Wednesday October 28, 2009

Vimovo Demonstrates Benefit Over Naproxen

Yesterday, at the American College of Gastroenterology meeting in San Diego, Pozen (NasdaqGM: POZN - News) released data from two phase III trials comparing Vimovo (formerly PN400) to enteric-coasted naproxen (ECN) in patients with osteoarthritis (OA), rheumatoid arthritis (RA) and ankylosing spondylitis (AS) who are at risk of developing NSAID-associated gastric ulcers.

The data demonstrated that patients taking Vimovo experienced significantly greater reduction in severity of dyspepsia (SODA) and overall treatment evaluation for dyspepsia (OTE-DP) compared to patients taking ECN. The OTE-DP results showed 43-46% of the patients on Vimovo reporting positive change at month six vs. only 28-34% on ECN.

The results were highly statistically significant. Plus, patients taking Vimovo also had discontinuation rates far below ECN, at 3-5% vs. 11-12%, respectively. The safety of Vimovo was also superior to ECN, with only 2% of the patients experiencing erosive duodenitis as compared to 10-14% for ECN. Rates of erosive gastritis were also far lower in the Vimovo group at 18-21% vs. 38-39% for ECN.

Early in October, at the American College of Rheumatology meeting, Pozen presented data showing a significant reduction in the risk of gastric ulcers (GU), the primary endpoint of the phase III program, vs. ECN at a rate of 4-7% for Vimovo vs. 23-24% for ECN.

Vimovo is a fixed-dose combination of enteric-coated naproxen with an immediate release esomeprazole. Given the high risk for gastrointestinal side-effects for patients with OA and RA that take naproxen, roughly 60%, and the lingering concern on the cardiovascular safety of Cox-II inhibitors such as Celebrex post the withdrawal of Vioxx and Bextra, we believe that Vimovo has significant sales potential. Our financial model assumes Vimovo peaks at over $500 million worldwide.  Pozen has partnered with AstraZeneca (NYSE: AZN - News) for the commercialization of Vimovo.

Vimovo is currently under U.S. FDA review with an action date set for late April 2010.  In mid-October, AstraZeneca filed for approval in the European Union via the decentralized procedure. Approval in the U.S. entitles Pozen to a $20 million milestone payment from AstraZeneca. The first approval outside the U.S. entitles Pozen to another $25 million.

The strong clinical data on Vimovo give us confidence in the phase III program for Pozen’s second pipeline candidate, PA-325/20, a fixed-dose combination of enteric-coated aspirin and immediate-release omeprazole. Similar to Vimovo, patients taking daily aspirin for cardiovascular protection or the potential reduction in the development of colorectal adenomas, are at risk for significant gastrointestinal side-effects. Phase II data on PA-325/20 demonstrated a significant reduction in gastric ulcers, 0% vs. 20%, after a 28-day concept study.

Third Quarter Performance

This morning, Pozen released financial results for the third quarter 2009. Total revenues for the quarter were $14.3 million, and consisted of $13.1 million in licensing and development revenues and $1.2 million in royalties on U.S. sales of Treximet at GlaxoSmithKline (NYSE: GSK - News).

During the third quarter Pozen received a $10 million milestone for the filing of the U.S. NDA for Vimovo. The company earned $6.7 million, or $0.22 during the third quarter, 5 cents above our forecast. Pozen also has $51.3 million in cash and investments. We continue to be very positive on the stock and recommend purchase at this level -- Pozen currently has a Zacks Recommendation of Outperform.

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