Pozen's Success Will Depend on Execution of Unique Marketing Strategies

| About: Pozen, Inc. (POZN)
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Pozen (NASDAQ:POZN) is a small, unconventional drug developer with two approved drugs and another expected to soon follow. The company specializes in devising novel formulations of existing drugs, allowing for an easier path to regulatory approval and lower cost of development. Its migraine drug, Treximet, is a combination of sumatriptan (Imitrex) and naproxen, and arthritis drug Vimovo is comprised of naproxen and the proton-pump inhibitor (PPI), esomeprazole (Nexium). Both have been out-licensed.
Now, Pozen wants to retain more of the financial upside for its future drugs. It is working on what the company calls a “better aspirin”. Using a technology similar to that in Vimovo, it has made a single pill combination of a quick release PPI and aspirin. The first candidate is PA32540 for the prevention of secondary cardiovascular events. By keeping costs down and funding development with cash flows from Treximate royalties, Pozen has been able to keep all commercial rights to its entire PA franchise of compounds.
A little bit about the compound: PA32540 is the company's effort to take advantage of the many benefits of aspirin while minimizing its side effects. Aspirin is taken by millions of Americans for cardiovascular protection and pain management. Oftentimes, treatment is discontinued due to aspirin-induced gastric ulcers. The PPI component in PA32540 suppresses stomach acid production, inhibiting ulcer formation.
Results from clinical trials have shown PA32540 to perform exactly as it was designed; using a formulation of 325mg enteric coated aspirin and 40mg omeprazole (Prilosec), the study showed patients taking PA32540 had lower rates of Lanza score 3-4 level GI damage compared to 325mg EC aspirin alone (2.5% vs. 27.5%). Even with a small sample size of only 40 patients, this highly significant improvement gives confidence in the ongoing Phase III trials, which will use endoscopically-documented gastric/duodenal ulcers as the primary endpoint. An NDA filing is anticipated in 2012 with a launch possible at the end of 2013.
Pozen is eschewing a sales force for its planned launch of PA32540; instead, it has decided to go virtual. Led by Liz Cermak, executive vice president and chief commercial officer, the company plans to focus its sales effort using social media tactics. Theoretically, this will allow each marketing dollar to stretch farther. In a presentation at the Cowen & Co Healthcare Conference March 7, management suggested their commercialization model would allow an almost nine fold increase in physicians contacted compared to a typical sales rep model for the same amount spent on promotional activities.
One of the main targets of Pozen’s social media campaign is a relatively new crop of physician-only social networks. There are a slew of them, including Sermo, Ozmosis, Medscape, Doc2Doc, relaxdoc, and doctorshangout. Of these, the largest are Sermo and Medscape. With little time on their hands, doctors have low participation rates on sites such as Facebook and Twitter, but they find exclusive networks like Sermo and Medscape offer a way to connect, share ideas, seek information, and solve problems.
It is difficult to predict how the physician social network scene will play out in the next couple of years prior to Pozen’s drug launch, but in all likelihood, there will be a shakeout of the smaller players leaving a couple large sites able to provide more connections and greater benefits. Pozen’s strategy is to target the major sites.
The second leg of Pozen’s commercialization strategy is a strong focus on mobile communications. According to a 2009 survey by Hall & Partners, 71% of physicians consider a smartphone essential to their practice and 94% of physicians are using smartphones to communicate, manage personal and business workflows, and access medical information.
This is an interesting way to go for a small company with limited resources, but carries significant risks. Although pharmaceutical companies have used Sermo and other physician only networks to communicate and influence decision making, none has used them exclusively; companies have been slowly embracing the medium. Several major issues may impact the company’s sales and force it to alter its sales model.
Perhaps most important is physician acceptance of their sales tactics. Sermo is already monetizing its user base by selling anonymous information on topics of interest. Pharmaceutical company-paid doctors (badged) enter the site to communicate with users. There may be a point when physicians feel their privacy has been overly compromised and leave the site.
Moreover, a large proportion of physicians are not ready to get all their information online. In a presentation by Deloitte in December 2010, Social networks in the life sciences, a survey of Sermo users showed only about one-third of average users would be “likely” or “very likely” to replace sales rep visits or direct company contacts with Sermo live events. Even fewer were willing to give up dinner meetings or KOL (key opinion leader) meetings, 29% and 25% respectively.
Social media marketing may well be the new wave in pharmaceutical marketing; the ability to instantly calculate a return on investment gives it a leg up over older sales models. It is, however, untrodden territory, and as such, many uncertainties remain and costs of acquiring sales may be higher than anticipated.
Pozen’s stock has been trending down since the approval of Vimovo in May 2010. A weak launch compounded by uncertainty from lack of resolution of a paragraph IV filing for Treximet drove the share price to a 52-week low on March 10. Much of the company’s pipeline development plans hinges on a positive outcome of the Treximet trial. In the long run, Pozen’s success will depend on its ability to execute on its marketing strategies for PA32540.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.