Pozen Inc.

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Pozen Inc.

1414 Raleigh Road
Suite 400
Chapel Hill, North Carolina 27517
U.S.A.
Telephone: (919) 913-1030
Fax: (919) 913-1039
Web site: http://www.pozen.com

Public Company
Incorporated: 1996
Employees: 38
Sales: $28.6 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: POZN
NAIC: 325412 Pharmaceutical Preparation Manufacturing

POZEN Inc. (Pozen) is a small, Chapel Hill, North Carolina-based pharmaceutical company that seeks to develop drugs it can license to larger partners to commercialize. The company has been targeting the acute migraine market, which numbers as many as 30 million people in the United States alone, developing pain-treatment drugs using triptans with different delivery technologies. Its primary drug candidate, developed in collaboration with GlaxoSmithKline, is Trexima, which combines a triptan with a nonsteroidal anti-inflammatory drug (NSAID) in an effort to alleviate the pain of migraines while avoiding the gastrointestinal side effects caused by other drugs. In addition to Trexima, Pozen is developing a migraine drug using lornoxicam, another NSAID. Pozen is also interested in moving beyond the migraine field to develop other drugs where it believes there are unmet needs and opportunity. Pozen is a public company listed on the NASDAQ.

COMPANY FOUNDED IN 1996

Pozen was founded and incorporated in 1996 by Dr. John R. Plachetka, Dr. Peter J. Wise, and Joseph J. Ruvane, Jr. The idea for the company came from Plachetka. After earning an undergraduate degree in Pharmacy from the University of Illinois College of Pharmacy and a Doctor of Pharmacy from the University of Missouri-Kansas City, he spent a decade working at Glaxo Inc. He then became chief executive of a clinical research organization, Clinical Research Foundation-America, from 1990 to 1992, and spent two years as vice-president of development at Texas Biotechnology Corporation before starting Pozen. During his time at Glaxo, Plachetka served as director of cardiovascular clinical research, involved in the development of several drugs, including Imitrex. Introduced in 1991, Imitrex was the first drug in half a century to be formulated to relieve migraine pain. It proved such a bestseller that it engendered a host of competing drugs, all relying on 5HT1 receptor antagonists.

Plachetka wanted to pursue a drug development approach different from what was practiced at large pharmaceutical firms. "We don't say, 'Here's a great molecule. What do we do with it?'" Plachetka told Raleigh, North Carolina's the News & Observer. "We look at the marketplace and say, 'There is a hole here. What can we do that makes sense and fill that gap?'" The immediate gap in the marketplace Plachetka recognized was related to migraines. The 5HT1 drugs targeted only severe headaches, leaving an opportunity to develop a treatment for the millions of people who suffered from milder headaches and could not take 5HT1 drugs.

To help launch Pozen, Plachetka recruited Wise, a former colleague at Glaxo, where he worked from 1979 to 1993 and ultimately became senior vice-president of Medical Operations and chief medical officer. After leaving Glaxo and before joining Plachetka, he served as president and chief operating officer at North Carolina-based Pharmaceutical Product Development, Inc., a major contract research firm. Wise would become Pozen's senior medical affairs adviser and lend a measure of credibility to the start-up company.

Providing even greater legitimacy to Pozen was its third cofounder, 71-year-old Ruvane, a giant in the pharmaceutical industry. He served as chairman and CEO of Glaxo from 1981 to 1989, and during his tenure there pioneered the first co-promotion agreement between two U.S. drug makers. The Glaxo alliance with Hoffmann LaRoche to co-promote a new anti-ulcer drug, Zantac, dramatically increased Glaxo's ability to compete with the much larger SmithKline Beckman. As a result, Zantac became the most successful new drug launch in the United States to that point. After leaving Glaxo, Ruvane became the chairman of Durham, North Carolina-based Sphinx Pharmaceuticals, which in 1994 he sold to Eli Lilly & Co. With Ruvane on board, fledgling Pozen had no difficulty in raising funds. One biotechnology industry expert interviewed by the News & Observer commented, "All Joe Ruvane has to do is call his friends and he'll be well financed." In a matter of 90 days the company raised $6.7 million from individual investors. A second round of venture capital financing later raised another $6.8 million.

Part of Plachetka's vision for Pozen was to essentially create a virtual company, one that focused on drug development and farmed out a lot of the work, and could reduce the costs involved and the time it took to get a product to the market. In a 2000 letter to shareholders, Plachetka explained how Pozen benefited from the lessons he and his colleagues had learned over the years: "We concentrate only on the development phase of a drug's life, thus avoiding the high risk and high costs of both discovery research and building a sales and marketing organization." Pozen hoped to commercialize products through partners and make money from upfront and milestone payments, and once the products were in the marketplace it would receive royalties. In addition, Pozen planned to pursue what Plachetka called a license-back model, essentially finding new uses for old drugs. Pozen would acquire the products, finance the development of them through Phase 3 of the Food and Drug Administration (FDA) process, and then give the discovering company a chance to reacquire the reformulated product, with a fresh patent lifespan, and market it.

In the beginning Plachetka identified three drugs, all non-5HT1 drugs without patent protection, that he and his colleagues believed could be used to develop an alternate migraine pain reliever. Although this was Pozen's initial focus, because of its founders' backgrounds and success with other drugs, the company expected to pursue opportunities in five therapeutic areas: antibiotics, cardiovascular, central nervous system, gastrointestinal, and respiratory.

COMPANY PERSPECTIVES

POZEN is a pharmaceutical company committed to developing therapeutic advancements for diseases with unmet medical needs where it can improve efficacy, safety, and/or patient convenience.

COMMENCEMENT OF FIRST CLINICAL TRIALS IN 1997

In addition to raising money and incorporating, Pozen filed its first patents in 1996. Then in 1997 Plachetka set up operations in an office park in Chapel Hill, North Carolina, and began hiring employees. Also in that first full year of operation, Pozen took initial steps in gaining FDA approval on a drug. In order to do that, it needed to conduct clinical trials to ensure the efficacy and safety of the drug. FDA trials are divided into phases. Phase 1 trials use a small sample of healthy volunteers to determine dosage, document how a drug is metabolized and excreted by the body, and uncover adverse side effects. Additional safety information and preliminary evidence that a drug offers beneficial effects is gathered in Phase 2 trials. If both the benefits and the risks war-rant it, the FDA allows Phase 3 trials, in which the drug is tested with much larger samples of subjects over an extended period of time. Both Phase 2 and Phase 3 studies usually involve a "control" group of subjects given an inactive placebo. Only when the FDA is satisfied with the results from the clinical trials does it grant approval and the drug can be sold to the public. In 1997 Pozen completed a Phase 1 study on MT 100, a combination of naproxen sodium and metoclopramide hydrochloride in a sequential release formulation that was intended as a first-line therapy. It then filed an Investigational New Drug (IND) application with the FDA to further the approval process.

In 1998 the MT 100 Phase 2 study was completed, and Pozen made progress on its two other migraine drugs. MT 300, a highly purified formulation of dihy-droergotamine mesylate (DHE) in an injectable form for severe migraine attacks for use at home, finished its Phase 2 trials, and a pilot study was conducted for MT 400, a first-line migraine therapy that combined a trip-tan with a NSAID in a single tablet. Pozen began Phase 3 trials on MT 100 in 1999, and in that same year the company reached a license-back agreement with Roche Bioscience on a migraine preventative treatment, MT 500, a 5-HT2B that Roche had already shepherded through Phase 1 trials. Also of note in 1999, Ruvane stepped down as chairman in December, replaced by Plachetka. His health failing, Ruvane died of cancer several months later.

IPO IN 2000

In March 2000 Pozen raised another $18 million in venture capital, and in that same month a new chief financial officer was hired, Matthew E. Czajkowski, an experienced investment banker. Two months later Pozen filed with the Securities and Exchange Commission (SEC) to make an initial public offering (IPO) of stock, and Czajkowski became the point person for that effort. With U.S. Bancorp Jaffray acting as lead underwriter, and participation from Prudential Vector Healthcare and Pacific Growth Equities, Pozen completed its offer in October 2000, netting around $68 million before fees. The money was earmarked for drug development, the acquisition of products, and general corporate purposes.

Pozen was making solid progress on gaining FDA approval, resulting in a strong IPO, but in 2001 its plans to submit MT 100 for approval by the end of the year after the completion of Phase 3 trials were short-circuited when the FDA requested further carcinogenicity studies, which forced a delay on the filing. With plenty of cash on hand and conservative management, Pozen could afford to be patient and it initiated the requested studies on MT 100 in the hope of making a New Drug Application (NDA) submission in the first half of 2003. On other fronts, MT 300 began Phase 3 trials, and the company hoped an NDA submission could be submitted by the end of 2002. MT 400 also began Phase 2 trials in 2001.

MT 100 received good news in 2002 when preliminary results in mice showed it was not carcinogenic. In addition, the MT 300 submission was filed in 2002 as hoped. Pozen received a major boost in June 2003 when it reached an agreement with GlaxoSmithKline on marketing rights to the MT 400 formulation. Pozen received $25 million upfront and was in line for another $55 million in milestone payments, as well as royalties on sales if the drug made the market. Later in the year Pozen struck a deal with Xcel Pharmaceuticals, Inc., to market MT 300. The terms called for a $2 million up-front fee, a further $8 million in milestone payments, and a royalty on sales. During 2003 Pozen filed an NDA for MT 100. In October the FDA sent a not-approvable letter regarding MT 300 on a previously filed NDA, citing that MT 300 failed to achieve statistical significance versus a placebo. Thus Pozen had to return to clinical trials in an effort to prove to the FDA's satisfaction that MT 300 was indeed as effective as the company believed it was.

Czajkowski resigned as CFO in early 2004 for what were described as personal and family reasons. The company continued to seek approval for its first drug in 2004. Early on in the year it submitted the rat study to complete the NDA on MT 100, resulting in a sharp rise in the price of Pozen's stock. That enthusiasm waned by June when the FDA rejected the application, leading to a steep decline in the price of Pozen's stock to less than $5 per share.

KEY DATES

1996:: The company is founded.
1999:: Chairman Joseph J. Ruvane retires.
2000:: The company is taken public.
2003:: A marketing agreement is struck with GlaxoSmithKline.

In November 2005 Pozen received regulatory approval in the United Kingdom for MT 100, the company's first success with a drug application, and it began seeking out a marketing partner to sell the migraine treatment in the United Kingdom. After experiencing problems with MT 100 and Mt 300 in the United States, Pozen pinned greater hopes on MT 400, which became known by the brand name Trexima. Partner GlaxoSmithKline thought so highly of the drug that it listed it as one the firm's top five key product launches and filings. The NDA for Trexima was filed in August 2005 and there was every expectation that it would gain FDA approval in the second quarter of 2006. Unfortunately for Pozen, in June 2006 it received an approvable letter from the FDA indicating that while Trexima was an effective treatment for migraine headaches, the agency still had safety concerns that needed to be addressed, perhaps requiring new studies. Pozen and GlaxoSmithKline hoped to alleviate these concerns as soon as possible, but after a decade of effort the frustrations of getting a product onto the market continued to mount. Nevertheless, the company had cash on hand, major partners, and a number of other drugs in the pipeline, including some that did not treat migraines. There was still reason to believe that the Pozen model for a new kind of drug development company could ultimately work.