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Executives

Stephanie Bonestell – Manager, Investor Relations and Public Relations

John R. Plachetka – Chairman, President and Chief Executive Officer

William L. Hodges – Senior Vice President Finance & Administration and Chief Financial Officer

Analysts

Jason Napodano – Zacks Investment Research

Bert Hazlett – Roth Capital Markets

Keay Nakae – Ascendiant Capital

Pozen, Inc. (POZN) Q2 2013 Earnings Conference Call August 6, 2013 11:00 AM ET

Operator

Greetings and welcome to the POZEN’s Second Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Stephanie Bonestell with Investor Relations. Thank you, Ms. Bonestell, you may begin.

Stephanie Bonestell

Thank you, Devon and good morning. On behalf of POZEN, I would like to welcome everyone to today’s second quarter results conference call. By now you should have received the copy of the Company’s press release, but if you have not, you can access it on the home page of our website at www.pozen.com, where you can also access a replay of this conference call.

Before we begin, I need to remind you that various remarks that we may make about future expectations, plans and prospects for the Company constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Such statements include any forecast or assumptions about potential size or market opportunity, any observations that we may make about the expected timing and amounts of royalty payments from AstraZeneca and other revenue expected from our collaboration partners, the timing of our NDA filing, the prospects for approval or timing of approval of any of our drug candidate or the way in which the FDA may consider our new drug application or any particular clinical trial results, the prospects of timing for any collaboration agreements including those relating to our PA product candidate, results relating from any pending litigation, future clinical trial plans and the likelihood of results of any future trials and our potential commercialization plans, including potential sales and revenue forecast for our product candidate.

The adequacy of financial resources to accomplish our goals for future revenues are based on our current expectations and are subject to a number of risks and uncertainties, including our inability to know what certainty, what standards the FDA will use to evaluate drug candidates and how that may change or evolve over time, how the FDA evaluates data, what the results of future trials may be whether those trials will cost much more than we had estimated that they will cost or than they have historically cost; how the FDA weighs risks of drugs, including risks of drugs that have been in use for many years; the decisions of our collaboration partners; our dependence on our collaboration partners for the sales and marketing of our products once approved, including our dependence on AstraZeneca for the sales and marketing of VIMOVO; and whether our resources will be depleted by events other than clinical trials and efforts to obtain regulatory approvals, such as the expenses relating to the lawsuits we have filed against generic companies seeking to market generic versions of the VIMOVO prior to the expiration of our patent.

Additional factors that affect our forward-looking statements are discussed in our most recent Quarterly Report on Form 10-Q. In addition, these forward-looking statements represent only the Company’s expectations as of today, August 6, 2013. While the Company may elect to update these forward-looking statements, we specifically disclaim any obligation to do so. Any forward-looking statements should not be relied upon as representing the Company’s estimates or views as of any date subsequent to today.

With us today from management we have, Dr. John Plachetka, Chairman, President and Chief Executive Officer; Bill Hodges, Senior Vice President and Chief Financial Officer; and Liz Cermak, Executive Vice President and Chief Commercial Officer.

I will now turn the call over to Dr. Plachetka.

John R. Plachetka

Thank you, Stephanie, and good morning to everybody. I’ll begin today with an update on our PA product candidate and are further in progress and then Bill will hit the financial highlights. Bill is also going to talk about the continued growth we’ve seen in the mobile sales, which the growth last quarter was driven by double-digit growth outside the United States.

So let me start by saying again that I’m very pleased that our team was able to submit our NDA for PA in late March, which was ahead of schedule. And then we’re able to include both the PA32540 and PA8140 doses. In May, we announced that the FDA had accepted the NDA for review with the user fee goal date of January 24, 2014 and has approved the inclusion of both doses provides for dosing flexibility and will allow PA to meet the needs of most of the potential patients who take daily aspirin for secondary prevention of cardiovascular events and who are risked for gastric ulcers. It also ensures that the patient who needs aspirin and gastric perfection can get the appropriate dose of aspirin, which was something that FDA indicated based on the strong rebound during our pre-NDA meeting.

So we got a few inquiries from the FDA regarding information that we submitted in the new drug application and we consider that a good sign of progress and we’ve been working to quickly answer that inquiries we’ve done so and we continue to work with the FDA should they have any additional questions for us during the review process.

Now with respect to partnering, those in the team continue to make progress in securing a U.S. partner for PA that meets our ideal partner profile and we believe we are still on track to close that partnership deal in 2013.

Let’s move on now here from Bill about the financial picture. Bill?

William L. Hodges

Thank you, John. In the second quarter of 2013, we recorded revenue of $1.7 million compared to $1.8 million in the second quarter of 2012. The 2013 revenue is comprised entirely of royalty from sales of VIMOVO whereas the prior year revenue included a $0.5 million licensing fee for MT 400 in addition to the $1.3 million of VIMOVO royalty.

Total second quarter net sales of VIMOVO as defined under our agreement with AstraZeneca were $23.3 million, which represents a 41% growth from the second quarter of 2012 and a 19% growth from the prior quarter. The U.S. sales were basically flat quarter-on-quarter but as we expected, the rest of world sales continue to grow.

As we understand it, AstraZeneca plans to continue the co-pay cards in sample program in the U.S., but has discontinued detailing with the contract sales force. And the majority of promotion has ceased in the European Union other than Spain and Portugal where there are existing contractual arrangements. And there are some ongoing evaluations of VIMOVO’s promotional effectiveness in other countries.

We will continue to monitor as implements changes to promotional support for VIMOVO over the next few quarters and we will better be able to assess the financial impact to POZEN. Having said all that, we’re certainly pleased with the growth in the second quarter.

The operating expenses of $5.7 million for the second quarter of 2013 decreased from $6.9 million in the same period in 2012. The decrease resulted primarily from lower pre-commercialization and development costs for PA.

Our net loss for the quarter was $4 million or $0.13 loss per share, compared to a net loss of $5.1 million or $0.17 loss per share for the second quarter of 2012. Our revenue for the first half of 2013 was $3.1 million, which is the same as the first half of 2012. Revenue in the first half of 2012 included $0.5 million licensing revenue for MT 400 in addition to $2.6 million of VIMOVO royalty whereas the entire $3.1 million in 2013 is for VIMOVO royalty.

Our operating expenses in the first half of 2013, totaled $12.9 million, which is down $3.8 million from the first half of 2012. And primary reason for the decline is lower PA development and pre-commercialization cost in the first half of 2013. The net loss for the first half of 2013 is $9.8 million or $0.32 loss per share, compared to a loss of $13.5 million or $0.45 loss per share in the first half of 2012.

At June 30, 2013 our balance sheet remains strong with $76.9 million in cash and cash equivalents. We continue to estimate that our net cash burn will be less than $22 million, excluding any cash received is upfront or other payments related to any PA deals.

So with that, that concludes our financial results for the second quarter of 2013 and our financial updates. So I will turn the call back over to Dr. Plachetka. John?

John R. Plachetka

Thanks, Bill. That’s the end of our prepared remarks. So operator, we can now open the line for any questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Jason Napodano with Zacks. Please proceed with your question.

Jason Napodano – Zacks Investment Research

Good morning, everyone.

John R. Plachetka

Hi, Jason.

William L. Hodges

Hi, Jason.

Jason Napodano – Zacks Investment Research

So the press release mentioned that you’ve demonstrated comparable BA and BE in the European Union to a reference product. I’m wondering what’s left with respect to studies prior to a European filing.

John R. Plachetka

Yeah, Jason thanks. Yeah, the first study went very, very well and as you said that we announced. We had (inaudible) to the reference product. The other study that was requested by the regulators in Europe was an acid reduction study with the intended doses.

Jason Napodano – Zacks Investment Research

Yeah.

John R. Plachetka

And that’s all would have to be done before we put the application together.

Jason Napodano – Zacks Investment Research

So that what you guys are planning here for the third quarter, I’m just trying to get a sense of that timing for a potential MAA filing?

John R. Plachetka

Yeah, I think some of that actually depends on the status of the negotiations with potential partners in the EU and where we go with that and the exact timing is more dependent on that. So probably I have more to say about that in the next quarter.

Jason Napodano – Zacks Investment Research

Okay. Well, I guess that leads me into my second question, with respect to the timing for a deal, you guys are guiding or suggesting that you’d like to have the deal before the end of the year. I’m wondering with the PDUFA date set for late January, do you kind of have a window of maybe the next month or two or you need to get a deal done before kind of you get into that November, December time period, where people come back and say, well, let’s shake on it, but let’s wait until one more month until the actual PDUFA date?

John R. Plachetka

Yeah, I’ve just not going to make any comments right now on where we are with the potential deal Jason.

Jason Napodano – Zacks Investment Research

Okay, all right guys. Thanks a lot.

John R. Plachetka

Thanks.

Operator

Thank you. (Operator Instructions) Our next question comes from Bert Hazlett with Roth Capital. Please proceed with your question.

Bert Hazlett – Roth Capital Markets

Thanks. Good morning, folks. And my apologies John if you commented on the second of the call a little bit late. In terms of the potential for partnering of this, you maybe made reference to it in your prior answer, but if this situation were you might consider different geographies, different partners with different geographies and again my apologies if you touched on this in your prepared remarks, John. And again just any thoughts on additional timing or how this may play out with regard to reimbursement in the EU as well would be helpful. Thanks.

John R. Plachetka

Yeah, I think a lot of what you put is background in your question are the factors that drive the selection of the choice, the reimbursement situation is very different in emerging markets as it is from the EU markets and especially Western European markets. There are some cash countries and we had magic wand into get a deal done where we had the best partner in all those territories that would be what we would do. So the likelihood is that each of these is individual circumstances and would therefore require special talent to meet in these territories.

Bert Hazlett – Roth Capital Markets

Okay. Thank you for the color.

Operator

Thank you. Our next question comes from the line of Keay Nakae with Ascendiant Capital. Please proceed with your question.

Keay Nakae – Ascendiant Capital

Yes, thanks. John, you’ve gone through FDA reviews before as it pertains to PA, how is this one going relative to others you’ve gone through in the past?

John R. Plachetka

Yeah, it’s a good question. And without being overly optimistic and having said that there are always the unknowns when you’re dealing with NDA reviews. Since really before the NDA was submitted, when we had our pre-NDA meeting, we filed at the FDA with respect to this particular application as they incredibly cooperative and helpful and communicative.

And I would say that in all the experiences we’ve had inside of POZEN and even beyond there it might be in other companies, this is a very, very collaborative relationship and we have good feeling about the types of questions and the types of reviews and the speed with which this was being handled out. That maybe our window into the agency at this point is limited in just one application.

That maybe what’s happening across the Board as the agency is now into the next generation of PDUFA, but we’re very happy. And we have no complaints and in fact we give high marks to all the entire team at the agency for not only their communication with us, but also their cooperative business.

Not to say they’re rolling over that’s not the case in any regards. They’re doing their job, but we like the way that they’re getting after how thorough it is and then how well we’re communicating once they meet with us.

Keay Nakae – Ascendiant Capital

And just thinking longer-term beyond the launch of PA, is anything else in the pipeline starting to gain more interest and something that you’re thinking about allocating some more resources towards?

John R. Plachetka

Yeah, we’re really focused on PA right now and majority of people are interested in having of course to move upon that with the partnerships. So that’s where our focus is, you can see our expense going down as we basically look at PA as something that we need to get the loop closed on.

We’ve said that when we have someone who is greatly interested in another products that we have in our pipeline as going to step forward and pay for further in development. They were going to able to move at least one other product, maybe several into full development. But we’re not going to spend any money until that interest is shown.

Keay Nakae – Ascendiant Capital

Okay, thanks.

Operator

Dr. Plachetka, there appear to be no further questions at this time. I’d like to turn the floor back over to you for closing comments.

John R. Plachetka

Well, thanks operator and thanks to all the listeners today, and Jason, Bert and Keay, thanks for your questions. And we will talk to you at the end of third quarter. Thanks, cheers.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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