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Research Report Update

Market Opportunity For Pozen's PA Under-Appreciated

01/31/2012
By Jason Napodano, CFA

Pozen (POZN, $4.27/share) is currently in 2 phase 3 trials for PA, a “safer aspirin” product that combines 325mg of enteric coated aspirin with the PPI 40mg omeprazole (sold as branded Prilosec). It’s a novel formulation and a simple idea that builds off the already approved pathway defined by Vimovo. We expect that once approved Pozen’s “safer aspirin” will find its way into daily aspirin therapy for cardiovascular disease. The potential label will be for secondary prevention of cardiovascular or cerebrovascular events in patients at risk for gastric or esophageal ulcers. This is an enormous market. Cardiovascular disease is the leading cause of death in the U.S., with over 50% mortality. An American has a heart attack roughly every 26 seconds!

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.

Over 50 million American’s use daily aspirin therapy. Unfortunately, of the 50+ million Americans that take daily aspirin therapy, as many as 50% are at risk for major complications due to gastric bleeding. Roughly 25% of the people that start a daily aspirin therapy will discontinue or reduce frequency or dose due to serious gastrointestinal side-effects. Market research shows a significant opportunity for Pozen’s product. Data published from the CAPRIE (Clopidogrel versus Aspirin in Patients at Risk of Ischemic Events) study in 1996 shows that Plavix (clopidogrel) offers only a modest 8.7% efficacy improvement over aspirin, and Plavix posted sales over $7 billion worldwide at its peak. Aspirin use is limited by gastrointestinal intolerance and bleeding. 


The AHA and ACC recommend daily aspirin use at 75mg to 162mg per day. The European Society of Cardiology recommends 75mg to 150mg per day. These guidelines were put into place to reduce the potential for GI-related bleeding events. Data published in the American Journal of Cardiology shows a 2-fold reduction in major bleeding events and a 3-fold reduction in total bleeding events on daily aspirin use <100mg when compared to use >200mg. Pozen’s “safer aspirin” product, a drug that is designed to provide a full 325 mg dose of aspirin while greatly reducing the risk for GI-bleeding and ulcers, could find significant use among the 50+ million American’s at risk for recurrent MI and GI-related side-effects.

Management has conducted market research yielding encouraging statistics. At about $1/day, roughly 30% of physicians would prescribe PA-325/40 to their patients in need of secondary prevention aspirin therapy. We see this as a $250 million opportunity in the U.S.

…Phase 2 Data Gives Us Confidence…

Pozen’s phase 2 trial with PA-325/40 showed a 90% reduction in endoscopic diagnosed Lanza 3 & 4 GI-related damage compared to 325 mg of aspirin alone, and a 50% reduce when compare to 81 mg (baby) aspirin. The current phase 3 program, being conducted under a U.S. FDA Special Protocol Assessment (SPA), is essentially a larger version of the successful phase 2 trial. Management expects enrollment to complete shortly, with data expected in the second quarter 2012.

As a reminder, the primary endpoint of the trials is, “Cumulative incidence of gastric ulcers following administration of either PA32540 or 325 mg enteric-coated aspirin in subjects at risk for developing aspirin-associated ulcers.” Based on previous data (below), and data from the Vimovo pivotal programs, we think hitting statistical significance is a slam dunk.


We expect the U.S. NDA filing to take place in the third quarter 2012. The 12-month safety study with PA-325/40 to evaluate the long-term safety of the drug in patients who are at risk for developing aspirin-associated gastric ulcers has been completed. Pozen is reviewing the data and we expect a presentation shortly. Management noted the initial analysis is consistent with what was expected. The full data will give excellent insight into the outcome of the phase 3 programs discussed above

…Co-Rx Study Show Potential…

In March 2011, Pozen announced positive top-line results from a phase 1 study of PA-325/40 used in conjunction with clopidogrel (sold as branded Plavix). The data from the Co-Rx Study suggest that PA-325/40 given in conjunction with clopidogrel, dosed at least 10 hours apart, resulted in an approximate 20% improvement inhibition of ADP-induced platelet aggregation (anti-clotting) when compared to a current standard of care (81 mg of EC aspirin, EC omeprazole 40 mg and clopidogrel).

This suggests that the dosing combination of Plavix and PA-325/40 could offer a promising new option for the secondary prevention of heart attacks and strokes in cardiovascular patients who require aspirin therapy, but are at risk for gastric ulcers. We expect to see additional data from this study at an upcoming scientific meeting later in the year.

As a reminder, The Co-Rx study was a phase 1, randomized, open-label, two-arm crossover study in which 30 healthy subjects were treated with one of the following:
  1. PA-325/40 in the morning plus 300mg clopidogrel over 10 hours later on day 1, and PA-325/40 in the morning plus 75mg clopidogrel 10 hours later on days 2-7
  2. 81mg enteric-coated aspirin plus 300mg clopidogrel plus 40mg enteric-coated omeprazole (Prilosec) all in the morning on day 1 followed by 81mg enteric-coated aspirin plus 75mg clopidogrel plus 40mg enteric-coated omeprazole all in the morning on days 2-7 
Subjects were first randomized to treatment A or treatment B and then crossed over to the alternate treatment. Each treatment was separated by a 14 day washout period. The primary objective of the study was to assess the effects of PA-325/40 and enteric-coated omeprazole on clopidogrel activity as measured by ex-vivo platelet aggregation using 20 uM adenosine diphosphate (ADP), a commonly used platelet assay of clopidogrel effect. The primary endpoint was the percent inhibition of platelet aggregation (IPA) after morning dosing on day seven of each period. In the study, PA-325/40 in the morning, plus clopidogrel 10 hours later, resulted in a significantly greater IPA than 81 mg enteric-coated aspirin plus 40mg enteric-coated omeprazole plus clopidogrel all dosed in the morning.

…Commercialization Plans…

On October 3, 2011, Pozen retained Keelin Reeds LLC to assist in the strategic partner search for PA-325/40. Keelin Reeds is a global expert in helping life science companies value assets, develop business development strategies and execute partnership transactions. Pozen believes it has added substantial value to the asset by executing the critical NDA development and pre-commercialization phases around PA-325/40. Management intends to secure a relationship with one or more strategic partners in order to maximize the sales potential of the drug in both the U.S. and globally. The ideal strategic partner for Pozen is one who embraces the company’s philosophy of affordable pricing and shares management’s vision for the brand.

We sat down with management at Pozen (CEO John Plachetka & CFO Bill Hodges) on January 9, 2012. Mr. Plachetka reiterated his goal on signing a commercialization partnership for PA-325/40 this year. We think the deal will be superior to the Vimovo transaction with AstraZeneca that provided $40 million upfront, $45 million in approval milestones, and potentially $290 million in sales milestones plus roughly 10% royalties on sales.

That being said, we think Pozen would like to remain active in the positioning and commercial strategy planning for PA-325/40. In September 2009, Pozen hired Elizabeth A. Cermak as Chief Commercial Officer. Ms. Cermak will be responsible for the development and implementation of Pozen’s commercialization efforts. Ms. Cermak was employed for twenty-five years at Johnson & Johnson, where she held positions of increasing responsibility at Ortho-McNeil Pharmaceuticals, McNeil Consumer and Specialty Pharmaceuticals and other J&J subsidiaries.

In July 2011, Pozen hired Tomas S. Bocanegra, M.D. as Executive VP of Development. Dr. Bocanegra is responsible for driving all product development activities at Pozen, starting with lead pipeline candidate, PA-325/40. In August 2011, Pozen hired Clint Burrus as VP of Customer Development. In this role, Mr. Burrus will be responsible for developing and executing managed markets, trade and reimbursement strategies for PA-325/40. The company is clearly pushing forward on its plans with PA, putting the necessary piece in place ahead of the planned NDA filing in the third quarter 2012.

Pozen plans to conduct an Internet-centric / direct-marketing strategy around PA-325/40. Given the planned cost of the drug at around $1/day, the traditional model that employs large primary-care sales force, heavy physician detailing, direct-to-consumer television and print advertising, and couponing and patient access cards to reduce the high out-of-pocket expense indicative of Tier-3 formulary coverage will not work. Instead, Pozen plans to use the Internet and social media to educate and promote PA in a more efficient manner.

In September 2011, Pozen assembled an esteemed group of digital thought-leaders both in and outside of healthcare to help progress the company's vision for revolutionizing the traditional pharmaceutical commercial model. The Digital Advisory Board (DAB) will work alongside management as it prepares to assist in the launch and market PA-325/40. The DAB comprised of leaders in technology, social media and digital marketing, bringing expertise and insights from a wide range of industries to Pozen.

…A Simple Concept…

PA is such a simple product concept. Fifty million American’s use daily aspirin therapy, with 50% of those patients at risk of developing major complications due to gastric bleeding. Roughly 25% of the people that start a daily aspirin therapy will discontinue or reduce frequency or dose due to serious gastrointestinal side-effects. We believe that PA, at $1/day, is about a $250 million product, and that's with only 5% penetration. We think this is easily achievable.
  • 50 Million Americans on Aspirin x 25% At risk for GI bleeds x 5% Convert to PA x $1 per day x 365 days => $230 Million.

Below is a cartoon that first appeared in the New Yorker magazine we believe sums up the PA story nicely.


…Valuation…

We expect that Pozen will sign a commercialization agreement on PA in 2012. Our financial model assumes a $15 million upfront payment in 2012, along with the potential for over $100 million in backend milestones, including $20 million for approval in 2013. We expect that Pozen will capture 20-25% of the PA net sales as a royalty. Our sales forecasts and royalty payment schedule is below.



We see the PA franchise at Pozen (NPV of royalties and milestone payments), including operating costs and corporate overhead, worth approximately $50 to $60 million ($1.75 to $2.00 per share). The current Pozen market capitalization is $127 million. Given that Pozen exited 2011 with $111 million in cash and investments (thanks to the recent Treximet royalty sale) and collects roughly 10% royalties and milestones on worldwide sales of Vimovo at AstraZeneca, we do not believe the PA story is fairly represented in the stock today. Our rating is 'Outperform'.