POZEN Inc. And Chelsea Therapeutics Primed For Big Gains On The Road To PDUFA

Oct.23.13 | About: Pozen, Inc. (POZN)

In the speculative world of biotech investing, investors look to get in stocks early before positive, market moving company events happen. These events are usually connected to FDA decisions or product launches. It is not uncommon to see a biotech company rise over 200% within days after positive news provides a huge catalyst to increase the stock price.

Thankfully for risk tolerant investors, these speculative biotech opportunities come along very often if you are listening to the right catalyst clues and doing important due diligence. The challenge for investors is to pick the right investment opportunities that carry the most reward with less risk.


POZEN Inc. (NASDAQ:POZN) engages in the development of pharmaceutical products for the treatment of acute and chronic pain, and other pain-related conditions. The company has a collaboration agreement with GlaxoSmithKline for Treximet, which is used for the acute treatment of migraine attacks with or without aura in adults. It also has a collaboration and license agreement with AstraZeneca (NYSE:AZN) for VIMOVO, a proprietary fixed dose combination of the proton pump inhibitor esomeprazole magnesium with the naproxen in a single tablet for the management of pain and inflammation associated with conditions, such as osteoarthritis and rheumatoid arthritis in patients who are at risk for developing non-steroidal anti-inflammation drug-associated gastric ulcers.

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PA Product Portfolio

POZEN's active PA product portfolio is focused on designing cost-effective, integrated aspirin therapies that enable the full power of aspirin by reducing its potential gastrointestinal damage. The PA product portfolio has the potential to benefit the millions of Americans who use daily aspirin to treat cardiovascular disease, osteoarthritis and potentially other diseases.

The first candidates within the PA product portfolio are PA8140 and PA32540. They are coordinated-delivery tablets combining immediate-release omeprazole (40 mg), a proton pump inhibitor (PPI), layered around pH-sensitive enteric-coated aspirin (81 mg or 325 mg) core.

PA32540 is designed to be a GI-safer form of aspirin to be administered orally once a day, at a cost of 1 dollar per day. PA32540 prevents secondary cardiovascular disease in patients at risk for aspirin-associated gastric ulcers.

Aspirin's side effects as per Drugs.com:

Gastrointestinal side effects have included epigastric distress (in as many as 83% of patients treated with regular aspirin), abdominal discomfort or pain, endoscopically identifiable gastric mucosal lesions, nausea, and vomiting. More serious gastrointestinal effects include hemorrhage, peptic ulcers, perforation, small bowel enteropathy, and esophageal ulcerations.

In an article written by analyst Jason Napodano for Propthink, he writes:

Amazon.com (NASDAQ:AMZN) sells a 500 tablet bottle of 325 mg aspirin for $11.00, or 2.2 cents per day. One can also buy 42 20 mg tablets of OTC Prilosec (omeprazole) for $23.95, or around 57 cents per pill. To re-create Pozen's PA32540, a patient would spend approximately $1.16 per day (taking two Prilosec pills plus an aspirin).

Pozen's drug is clearly superior than taking aspirin and Prilosec separately. PA32540 would cost less at 1 dollar a day versus buying both drugs separately for $1.16.

License Agreement for PA with Sanofi

On September 4th, an agreement was announced:

Sanofi US (NYSE:SNY) and POZEN Inc. announced the signing of an exclusive license agreement for the commercialization of POZEN's proprietary, investigational, coordinated-delivery tablets combining immediate-release omeprazole, a proton pump inhibitor (PPI), and enteric-coated (EC) aspirin in a single tablet ("PA"), PA8140 and PA32540. Under the terms of the agreement, Sanofi will have exclusive rights to commercialize all PA combinations that contain 325 mg or less of enteric-coated aspirin in the United States. POZEN will receive an upfront payment of $15MM and will be eligible for pre-commercial milestone payments of up to $20MM and other future milestone payments and royalties on product sales.


The stock will run up until the Prescription Drug User Fee Act (PDUFA) on January 24/14 and will realize a more reasonable valuation. The company has $76 million in cash (as per last quarterly report), not to mention revenue from other drugs in their pipeline as seen above. Currently the market cap is around 180 million (30 million shares x $6.00 price per share) and deserves a much higher one. If you consider that PA32540 is taken once a day at $1.00/day. That would make it $365/year x 4 million users = $1.46 billion. 20% of royalties ($1.46 billion) would equal $292 million in revenue for POZN. Therefore, POZN merits a price per share of $10 to $12 based on the above findings.

POZN Institutional Ownership 58.49%

Institutional Ownership Type Value
Total Shares Out Standing (millions): 30
Market Capitalization ($ millions): $107
Institutional Ownership: 58.49%
Price (as of 09/30/2013) 5.98
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Chelsea Therapeutics (NASDAQ:CHTP)

The FDA granted Northera (Droxidopa) orphan drug status in 2007. In November 2011, the FDA granted Northera priority review. Priority review is reserved for drugs that offer a major advance in treatment, or provide treatment where no adequate therapy exists.

Northera is a drug for the treatment of symptomatic neurogenic hypotension (NOH) associated with Parkinson's disease. The company has had its issues getting Northera on the market. On February 23, 2012, Northera was given an up vote from the FDA Panel by a 7-4 vote. However, the FDA decided to issue a complete response letter (CRL) on March 28, 2012. The FDA wanted more data to support efficacy and demonstrate durability over a 2-3 month period. CHTP went back and received guidance from the FDA in 2012 and it was determined that its 306B trial would not be suitable or able to be modified. The company and investors believed a new trial to confirm efficacy would be needed before any chance of approval.

On February 20, 2013, CHTP was informed by the Director of the Office of New Drugs at the FDA stating that the Study 306B can serve as the basis for resubmission of Northera. The Director states:

The guidance suggests that "data strongly demonstrating a short-term clinical benefit (e.g., improvement in symptoms or ability to function) of droxidopa in patients with NOH would be adequate for approval, with a possible requirement to verify durable clinical benefit post-approval."

Northera Possible Indications:

Compound Indication Phase I Phase II Phase III NDA Submitted
Droxidopa (Northera™) Symptomatic Neurogenic Orthostatic Hypotension ----- ----- ------ ---------
Droxidopa Intradialytic Hypotension ----- ------
Droxidopa Fibromyalgia ----- -----
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In the above table, you can see that Northera is being reviewed for Neurogenic Orthostatic Hypotension (PDUFA February 14th). Also, Northera is also in Phase 2 studies for Intradialytic Hypotension and Fibromyalgia.


The drug was approved in Japan in 1989 for treating frozen gait and dizziness on standing associated with Parkinson's disease, as well as orthostatic hypotension. Japanese regulators expanded Droxidopa's marketing approval to include prevention of vertigo, dizziness and weakness associated with orthostatic hypotension in hemodialysis patients in 2000.

The current market capitalization is approximately 200 million, with 67 million shares at a current price per share of $2.93. The company projects revenue between $300-$375 million per year not including the potential revenue for the other indications for Fibromyalgia and Intradialytic Hypotension as listed above. The company has an AdCom on January 14/14 and a PDUFA on February 14/14

Therefore, CHTP deserves a PPS of $6 to $7 based on the high probability of approval and potential for other possible indications for Northera. Biotech guru Adam Feuerstein agrees that it is undervalued and is bullish on CHTP as he mentioned here on his very popular Biotech Stock Mailbag:

I believe there's a 75% chance FDA approves Northera on the second go-around with Chelsea. The stock's current market value of less than $200 million does not fully account for the drug's approval and commercial market opportunity.

For investors looking to invest in the next biotech company poised to produce significant short term returns due to upcoming catalysts, POZEN Inc. and Chelsea Therapeutics provide attractive speculative picks for potentially high returns.

Disclosure: I am long POZN, CHTP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.