Pozen will go solo on next new drug

Oct 30, 2009 (The News and Observer - McClatchy-Tribune Information Services via COMTEX) -- POZN | Quote | Chart | News | PowerRating -- Pozen CEO John Plachetka built a successful business based on finding larger partners such as GlaxoSmithKline to make and market his company's medicines.

But after 13 years, he's had a change of heart.

Such partnerships reduce risks and cost less in the short term but require Pozen to hand over millions of dollars when drugs are successful. Plachetka thinks they also weigh down Pozen's value on Wall Street.

So Plachetka will abandon the model he's stuck with since he founded the small Chapel Hill drugmaker in 1996.

Instead, Pozen will keep the rights to a new drug it's developing and do its own marketing. That will allow the company to earn more money if the drug wins regulatory approval in a few years and help unlock Pozen's true value, Plachetka said.

"We think the greatest thing we can do is control our own destiny," he said.

Plachetka is driven partly by frustration that Pozen is undervalued by Wall Street. The company made money in the third quarter, has a migraine drug approved for patients and an arthritis treatment with regulatory approval pending.

But its stock is down more than 50 percent from the $15 at which its shares began trading publicly nine years ago. Pozen shares rose 24 cents Thursday to $5.91.

It will take some time to prove to investors that the new strategy is smart, Plachetka says.

He points to another local drug company, Salix Pharmaceuticals, which uses its own sales team to market medicines. Wall Street puts a value on Salix that is two to three times what Pozen is worth, Plachetka said.

"What seems to really drive the valuation of some companies is owning their own assets," he said. "There are investors out there that want what we're going to be."

The strategy probably will pay off for Pozen, which can use cash generated from its other products to commercialize new medicines, said Jonathan Aschoff, who follows the company's stock for Brean Murray, Carret & Co. in New York.

"It's always riskier when you're not getting guaranteed money upfront, but it's a higher payoff," he added.

Pozen earns only a small percentage from the money GlaxoSmithKline gets selling the company's migraine drug Treximet. This year, Pozen has received $3.2 million in Treximet royalties, out of $63.4 million in total sales. And Pozen has little say about how the drug is marketed to patients and doctors.

Pozen's arrangement with another partner, AstraZeneca, will give the company a bigger cut if an experimental arthritis drug wins approval next year as expected. But the drug's fate will ultimately lie with AstraZeneca's salespeople, who also market lots of other products.

Changing Pozen's strategy won't happen overnight. And Plachetka will stick with the partnership model for its first two drugs.

But he recently hired Elizabeth Cermak as Pozen's chief commercial officer to orchestrate the new effort. Eventually, the former Johnson & Johnson executive will begin to hire sales and marketing employees, but probably not until Pozen's latest product is closer to winning approval. For now, Plachetka expects to keep Pozen's work force steady at about 35 employees.

The new product, known as PA32540, combines aspirin with a version of Prilosec into a single pill to reduce the stomach acid and ulcers that taking aspirin alone can cause, especially in elderly patients.

That could make the pill a good tool in preventing heart disease, strokes and colon cancer. And that would give Pozen its own blockbuster drug, Plachetka said.

alan.wolf@newsobserver.com or 919-829-4572

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