Pozen: Finally Some Good News

This morning, Pozen Inc. (POZN - Analyst Report) announced it had received notification from the U.S. FDA that the agency had completed its internal discussions regarding the acceptability of using endoscopic gastric ulcers as a primary endpoint in clinical studies.

The discussion relates to Pozen's PN-400 product, a fixed dose combination of enteric-coated naproxen and immediate release esomeprazole for the treatment of signs and symptoms of osteoarthritis and rheumatoid arthritis who are at risk of developing NSAID-associated gastric ulcers. The decision also has bearing on Pozen's aspirin / omeprazole product, PA-325/40.

In mid-October 2008, the U.S. FDA informed Pozen that, as part of its on-going review of both the Special Protocol Assessment (SPA) for PA-325/40 and the Statistical Analysis Plan (SAP) for PN-400, it would be conducting an internal review on the acceptability of the primary endpoints used in the trials. Pozen has recently completed phase III studies on PN-400 and was waiting for the conclusion from the FDA's meeting before they moved forward with filing the new drug application (NDA).

Both phase III studies on PN-400 met the primary endpoint of reduction in gastric ulcers. In earlier-stage clinical work, Pozen proved that PN-400 was bioequivalent to enteric-coated naproxen. The NDA filing should take place mid-2009. Pozen is developing PN-400 with AstraZeneca  (AZN - Analyst Report).

Pozen now also plans to finalize the SPA agreement for PA-325/40 and into phase III studies later this year.

This is clearly very good news for Pozen. With the primary endpoint confirmed as acceptable, and bioequivalency previously confirmed, we see little left to hold up the approval of PN-400 in 2010. Given the enormous size of the osteoarthritis market, estimated at 20-30 million people in the U.S., as well as use in rheumatoid arthritis and other instances of pain, we see PN-400 as a blockbuster product.

Cox-II pain drugs such as Merck's  (MRK - Analyst Report) Vioxx and Pfizer's  (PFE - Analyst Report) Celebrex, designed to provide safer gastrointestinal profiles, peaked sales at over $7 billion worldwide in 2004 before the Vioxx cardiovascular issues. The PN-400 "safer naproxen" product looks to have efficacy on par with Vioxx and Celebrex, with low-risk GI damage thanks to the esomeprazole component.

Data also shows the cardiovascular risk profile is no greater than placebo. We remind investors that drugs such as AstraZeneca's Prilosec (omeprazole) and Nexium (esomeprazole) are already approved for daily use with naproxen. The combination into one pill will greatly improve patient compliance and ease of use.

We believe there is significant unmet prescription need caused by the removal of the Cox-II drugs and that the eventually approval of PN-400 will fill a significant void in the daily pain management treatment paradigm.

We continue to be positive on Pozen. We rate the shares a 'Buy' with a $12 price target.

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