Pozen Poised for Profits

Earlier this month, Pozen (NASDAQ:POZN) reported first-quarter results. But investors should look to buy shares of this company because of how its results may look later this year.

A collaboration begun in 2003 with GlaxoSmithKline (NYSE:GSK) for the development and commercialization of Trexima (a combination of pain and anti-inflammatory drug naproxen with Glaxo's migraine drug Imitrex) is nearing a crucial milestone. The Food and Drug Administration is expected to finally approve the drug by Aug. 1. 

Last month, results from two pivotal studies were published in the Journal of the American Medical Association, showing that Trexima provided superior headache relief at two hours and four hours compared with a placebo, and sustained pain-free results from two through 24 hours versus Imitrex or naproxen given by itself. Last month, Citigroup started coverage of Pozen with a buy rating and a $28 price target, predicting an 80% likelihood of FDA approval for Trexima. In addition, Citigroup believes that Pozen could trade as high as $35 in a year if it captures significant market share in the $2 billion migraine drug market.

Pozen's pipeline also includes a group of drugs that combine a non-steroidal anti-inflammatory drug with a proton pump inhibitor, offering the benefits of pain relief with fewer gastrointestinal side effects. Pozen and AstraZeneca (NYSE:AZN) are holding discussions on the timing and scope of marketing studies to support the commercialization of PN 400, and at the end of the second quarter, the company will update investors about these plans. Pozen has a related platform that combines aspirin with a proton pump inhibitor drug for reduced gastrointestinal side effects for individuals taking aspirin daily.

The AstraZeneca collaboration is worth up to $375 million in upfront and milestone payments, and focuses on combining naproxen (which appears to be the safest non-steroidal anti-inflammatory drug  from a cardiovascular standpoint) with a top-selling proton pump inhibitor as an immediate-release shell that provides gastrointestinal protection. The company has also in-licensed lornoxicam, a non-steroidal anti-inflammatory drug with unique characteristics, which has been in clinical use outside of the U.S. for the past 10 years. Thus far, Pozen has completed one study that showed the effectiveness of single oral doses of the drug to alleviate the pain that occurs after a tooth has been extracted.

Pozen reported a first-quarter loss of $2.1 million on revenue of $7.7 million, with $58.2 million in cash and investments. It has a market cap of just $445 million, but the milestone payments and royalties it would receive from Glaxo if Trexima is approved could be quite substantial. The AstraZeneca collaboration provides additional upside, given the magnitude of potential milestone payments. I think Pozen could double in value over the next year or so if Trexima can capture a significant share of the $2 billion migraine market.

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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. Mike does not have a position in any company mentioned in this article. GlaxoSmithKline is an Income Investor recommendation. The Fool has a disclosure policy.