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POZEN Inc. (NASDAQ:POZN)

Update Conference

August 24, 2012 9:00 am ET

Executives

Stephanie Bonestell – Manager, Investor Relations & Public Relations

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

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

Elizabeth A. Cermak – Executive Vice President, Chief Commercial Officer

Analysts

Robert Hazlett – Roth Capital Partners LLC

Ken Trbovich – C. K. Cooper & Company

Operator

Greetings and welcome to the POZEN’s Update 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, Rob, and good morning. On behalf of POZEN, I would like to welcome everyone to today's update conference call. By now, you should have received a copy of the company's press release. If you do not have it, 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 forecasts 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 prospects for approval or timing of approval of any of our drug candidates or the way in which the FDA may consider our new drug applications or any particular clinical trial results; results relating to any pending litigation, future clinical trial plans and the likelihood of results of future trials and our potential commercialization plans, including potential sales and revenue forecasts for our product candidates or our ability to license our PA product candidate on terms and timing acceptable to us.

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 with 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 approval, such as the expenses relating to the lawsuits we have filed against generic companies seeking to market generic versions of Treximet and/or 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 24, 2012. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statement 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, Chief Financial Officer, Senior Vice President of Finance and Administration; and Liz Cermak, Executive Vice President and Chief Commercial Officer.

At this point, I would like to turn the call over to Dr. Plachetka.

John R. Plachetka

Thanks Stephanie, good morning and thanks for listening in today. Let me start by talking about this brief statement and we’ll open the call up for questions. I hope you had a chance to read our press release on the outcome of the Type A meeting we had with the FDA this week. And although you can probably tell from the press release that this is a positive outcome, we wanted to provide you an opportunity to get some of your more specific questions answered.

But first, let me just reiterate how pleased I am that we now feel we have a path forward to include both doses in the NDA, giving clinicians and patients a choice of a low and a high-dose version of PA. We’ve been asked many times over the years of this development program, why did we just make the 32540 when it seems that most patients take a lower dose, in fact they do. Well, now we have the best answer, and that is that we’re developing both strengths.

Our clinical and market research data suggests that two-thirds of the aspirin used for cardioprotection is at the lower dose, and about one-third is at the 325 milligram dose. So being able to include both doses in the NDA, not only will be able to offer patients a choice if both products are approved, but PA could be used by all aspirin patients who might be at risk for gastric ulcers instead of just the one-third of the patients who use 325. So that’s a nice impact on the market opportunity.

Now, some folks may have focused on the change in the NDA submission date. And our best guess as of today is that we’ll make the submission during the first half of 2013, which is the few months later than we had previously talked about. But we believe the benefits far outweigh the few months delay.

In fact, the possibility of providing this lower dose that will potentially add millions of new patients in the United States who could get PA to prevent gastric ulcers if approved and for only a small incremental cost, both in terms of money and time, and no risk or cost associated with the Phase III program is a very good outcome, and in our opinion certainly we’re at the short time delay. So you can probably tell, we’re excited about outcome of the meeting and especially the prospect of offering both of these doses to clinicians and patients. And we plan to talk with potential partners about these developments as soon as we can.

So that’s it from the prepared remarks I had. We can open up the line for questions, operator.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from the line of Bert Hazlett of Roth Capital Partners. Please proceed with your question.

Robert Hazlett – Roth Capital Partners LLC

Thanks very much. Well, congratulations to the team on the progress. I’m glad that cooler heads prevailed at FDA, and well done for you for doing all the good hard work to be able to get to that point. I have two questions for you. John, could you remind us of the additional work that might need to be conducted on the 81 milligrams? And then secondly and maybe more importantly, could you discuss what you think the potential impact of these discussions and the outcome today might have on discussions surrounding partners or other collaborators? Thanks very much, and again congratulations.

John R. Plachetka

Thanks, Bert. Yeah, I think relative to partnering, as you guys are probably aware, if you have an opportunity here to expand the number of patients that could take the product that should be a very positive feature. And as I said earlier, we were often asked why we didn’t we have an 81 milligram dose. And so we think both of these developments are going to be pretty positively received. One never knows, of course, how this will be. But the reality is every patient who is at risk of a gastric ulcer that takes aspirin for secondary prevention is now going to have a dose of PA that would fit them. So we think that’s a pretty significant improvement, both in terms of the clinical profile, but we think also in terms of the commercial profile. And all other things being equal, we think that certainly would be beneficial. At least, that’s our view.

And then secondly, the simplest way to talk about the lower dose is that it’s going to mirror the lower dose strategy we had with VIMOVO, which is a pretty rational, straightforward approach, I’ll remind people, when we got VIMOVO approved, we had a bio study, we had CMC, and basically that was the program. And that was approved in the United States without question and it was approved – now I think we’re up to probably 50 countries approved around the world. So this is a pretty good program.

And I think what most people think in terms of combinations like this is if the ulcerogenic properties at the highest offending dose are prevented by the delivery system that we have; it’s certainly going to work at the lowest dose.

If there was any question, well, how much need is there at the lower dose? And the literature clearly indicates that people have ulcers and bleed at the 81 milligram dose. So, I think this is really good news, as you said before, it’s a rational decision. And we look forward to getting this in. And the ability to do this with just a few months of delay is pretty significant.

I was asked yesterday, what it would have caused if we actually had to do a Phase III program. And we’re probably looking at over two years and probably north of $40 million. So, this is a very, very significant impact on the opportunity for POZEN to get this without having to spend either the time or the money to do it in a traditional program.

Robert Hazlett – Roth Capital Partners LLC

Again congratulations, nice work. Thanks.

John R. Plachetka

Thanks, Bert.

Operator

Our next question is from the line of Ken Trbovich with C.K. Cooper. Please proceed with your question.

Ken Trbovich – C. K. Cooper & Company

Hey John, I apologize, but I’m not sure if you caught the second part of Bert’s question. It was such a good question, I’m going to go ahead and ask it again. Could you give us a sense? I know obviously, you talked about the bioequivalence study that would be needed for 81 milligram dose. But could you give us a sense for other things? Obviously, there are some other discussion points that you’re having with the agency. Is this just platelet aggregation data? What are the other things that the agency is looking for beyond that bioequivalence for the 81 milligram?

John R. Plachetka

Well, these are things related more to the submission strategy and the quantity of the data, really related more to the CMC than anything else. So I’m going to leave it at that. There are some issues that we’re going to work out. But as we said, we’re pretty – right now, we’re estimating, we’re going to make the NDA in the first half of 2013. So, you shouldn’t read into this that these are major outstanding issues.

Ken Trbovich – C. K. Cooper & Company

Okay. And the CMC is something you guys have been talking about since the original request for the second dose if I recall correctly. Can you give us a sense for how the preparation of those batches from the standpoint of working with contract manufacturers? How that might compare to what you’ve already done for the 32540?

John R. Plachetka

Well, we have planned the NDA submission in the second half of this year for the 32540 and typically you have 12 months real-time data. So, you can imagine how far ahead we are with the 32540 relative to a late request to manufacture the lowest strength. So that’s really where the issue is relative to CMC is how much stability data we have and we will have at the time of submission and how we go about actually updating that as the review progresses. So, these are more process issues.

We’re very confident in our stability data by the way. The formulation is an excellent formulation. It’s rock solid. We have no issues that we see relative to this. And it is essentially the same formulation technology that we use for VIMOVO. And as you know, because of its approval, it’s obviously very robust.

But we’re not in a position today, because we’re just at the early stages of the lower strength manufacturing and initiating stability to say, yeah, we have 12 months real-time data, we just don’t have that right now. And so, we’re working through that and how best to put this in the NDA as well as update it in the course of the review.

Ken Trbovich – C. K. Cooper & Company

Okay. And then as it relates to the bioequivalence, is the expectation, then, that the salicylic acid comparison is really the only study that's necessary? Is there anything you learn from the first time around with 32540 that will help you as you prepare for that?

John R. Plachetka

Yeah. We learned a lot in the process, and we are not commenting on the design nor the components of this study. I'll just refer you back to what we said in our release on that.

Ken Trbovich – C. K. Cooper & Company

Okay. And then last question, just from the standpoint of the European application process, I know the agencies are not related. But in the process of your understanding of what the US FDA is asking, does it give you thoughts or maybe views on how much of this you might also run in parallel with the doses for European applications? Or is that something that you just put on a completely separate path and deal with separately at a later date?

John R. Plachetka

Actually, it’s a great question because it allows us to think things up here. The European authorities have been extremely helpful working for us. I believe we have issued update on the European guidelines for what they would require for the reference date. Didn't we do that, Bill? So let me just reiterate that, in order to obtain approval for both the low and the high dose in Europe, we are not expecting to do anything other than what we are doing here in the United States, other than specific on the dose formulation.

So in Europe, we are going to go – very likely go with the 100-milligram. But it's essentially a bioequivalence study or bioavailability study depending on how the term is used. And no Phase III, they like what summarized here. But in their assessment, because VIMOVO was approved and the technology was already demonstrated to be effective clinically, they believe when we – I have shown them the acid inhibition data as well as the results from our U.S. phase III program, the technology is – as it applies to the aspirin – works quite well and they are very happy. And so we haven’t given a timeline on this, because we have to obviously prioritize United States program.

But I wouldn’t look for this to be much behind in terms of submission, the U.S. program. But again it really relates to having a chance to sort this out. We actually just had a call with them this week. And so I haven't talked to our manufacturing people to actually figure out their timeline, but we will update that certainly at the end of this quarter call.

Ken Trbovich – C. K. Cooper & Company

Okay. Thank you.

Operator

(Operator Instructions) Thank you. Dr. Plachetka, there are no further questions at this time. I would like to turn the floor back over to you for closing comments.

John R. Plachetka

Yes. Thanks very much. I appreciate that operator. Thanks for asking the questions today and thanks for joining us. Let me remind everybody as I usually do, there are still risks associated with the PA program, as well as other risks associated with owning POZEN stock, as well as any stock, and I refer you to our latest information about these risks in our most recent quarterly report and the risks we outlined at the beginning of this call and at the bottom of our press release yesterday.

Having said that, let me say how proud I am of the team here at POZEN who has been quietly doing the right things to get us in the position we are in today. As a business enterprise, our fundamentals remain solid. We operate efficiently. We are goal-oriented, hard-working people. We have over two years cash on the balance sheet and we continue to control our spending. So let me wrap up by letting you know that we will be at the Stifel Nicolaus Healthcare Conference at the Four Seasons in Boston September 6 and happy birthday to one of my daughters on that day, and thanks today for everybody for joining us. Have a nice day and nice weekend.

Operator

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

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