Pozen Inc. Reports Operating Results (10-Q)
Pozen Inc. is pharmaceutical development company committed to building a portfolio of products with significant commercial potential in select therapeutic areas. Its initial area of focus is migraine where the company have built a portfolio of four product candidates through a combination of innovation and in-licensing. Its lead product candidate is MT 100 which the company is developing as an oral first-line therapy for the treatment of migraine. Pozen Inc. has a market cap of $168.51 million; its shares were traded at around $5.65 with and P/S ratio of 2.55. Highlight of Business Operations: There follows a brief discussion of the status of the development of our product candidates, as well as the costs relating to our development activities. Our direct research and development expenses were $11.8 million for the nine months ended September 30, 2009, and $40.9 million for the nine months ended September 30, 2008. Our research and development expenses that are not direct development costs consist of personnel and other research and development departmental costs and are not allocated by product candidate. We generally do not maintain records that allocate our employees time by the projects on which they work and, therefore, are unable to identify costs related to the time that employees spend on research and development by product candidate. Total compensation and benefit costs for our personnel involved in research and development were $4.9 million for the nine months ended September 30, 2009, and $5.6 million for the nine months ended September 30, 2008. Total compensation for the nine months ended September 30, 2009 including a $1.3 million charge for non-cash compensation for stock option expense and a $1.6 million charge for non-cash compensation for stock option expense for the nine months ended September 30, 2008. Other research and development department costs were $0.2 million for the nine months ended September 30, 2009, and $0.2 million for the nine months ended September 30, 2008.
We incurred direct development costs associated with the development of MT 400 of $0.2 million for the nine months ended September 30, 2009. We recorded in the nine months ended September 30, 2009, $3.2 million of Treximet royalty revenue, of which, $1.2 million is in accounts receivable at September 30, 2009. Our direct development costs do not include the cost of research and development personnel or any allocation of our overhead expenses.
We incurred direct development costs associated with the development of our PN program of $7.3 million for the nine months ended September 30, 2009, $5.5 million of which was funded by development revenue from AstraZeneca. Our direct development costs do not include the cost of research and development personnel or any allocation of our overhead expenses.
In June 2003, we signed an agreement with GSK for the development and commercialization of proprietary combinations of a triptan (5-HT1B/1D agonist) and a long-acting NSAID. The combinations covered by the agreement are among the combinations of MT 400. Under the terms of the agreement, GSK has exclusive rights in the U.S. to commercialize all combinations which combine GSKs triptans, including Imitrex® (sumatriptan succinate) or Amerge® (naratriptan hydrochloride), with a long-acting NSAID. We were responsible for development of the first combination product, while GSK provided formulation development and manufacturing. Pursuant to the terms of the agreement, we received $25.0 million in initial payments from GSK following termination of the waiting period under the Hart-Scott-Rodino notification program and the issuance of a specified patent. In May 2004, we received a $15.0 million milestone payment as a result of our commencement of Phase 3 clinical trial activities. In October 2005, we received a $20.0 million milestone payment upon the FDAs acceptance for review of the NDA for Treximet, the trade name for the product. On April
26, 2008 the Company received, from GSK, $20.0 million in milestone payments which were associated with the approval of, and GSKs intent to commercialize, Treximet. In addition, GSK will pay us two sales performance milestones totaling $80.0 million if certain sales thresholds are achieved. Up to an additional $10.0 million per product is payable upon achievement of milestones relating to other products. On September 30, 2009, the Company accrued $1.2 million of Treximet royalty revenue and GSK will also pay us royalties on all net sales of marketed products until at least the expiration of the last to expire issued applicable patent (August 14, 2017) based upon the scheduled expiration of currently issued patents. GSK may reduce, but not eliminate, the royalty payable to us if generic competitors attain a pre-determined share of the market for the combination product, or if GSK owes a royalty to one or more third parties for rights it licenses from such third parties to commercialize the product. The agreement terminates on the date of expiration of all royalty obligations unless earlier terminated by either party for a material breach or by GSK at any time upon ninety (90) days written notice to us for any reason or no reason. Among the contract breaches that would entitle us to terminate the agreement is GSKs determination not to further develop or to launch the combination product under certain circumstances. GSK has the right, but not the obligation, to bring, at its own expense, an action for infringement of certain patents by third parties. If GSK does not bring any such action within a certain time frame, we have the right, at our own expense, to bring the appropriate action. With regard to certain other patent infringements, we have the sole right to bring an action against the infringing third party. Each party generally has the duty to indemnify the other for damages arising from breaches of each partys representations, warranties and obligations under the agreement, as well as for gross negligence or intentional misconduct. We also have a duty to indemnify GSK for damages arising from our development and manufacture of MT 400 prior to the effective date of the agreement, and each party must indemnify the other for damages arising from the development and manufacture of any combination product after the effective date.
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