Pozen: An Undervalued Investment And Catalyst Trade Opportunity
Scott Matusow | Feb 11, 2013 05:31AM ET
It's not too often I come across a small cap biopharma that I think might make a nice longer term investment. Most small cap biopharmas burn a ton of cash on development treatments for such ailments as cancers, Hepatitis, and rare diseases. In this article, I would like to talk about the company Pozen (POZN), which I feel is a good longer term speculative investment, and a good trade with near term catalysts coming up.
Pozen reminds me of another company I came across in 2011, Antares Pharma (NASDAQ: ATRS) which I made a substantial investment in, but have since sold for an 80% gain in 14 months.
Antares is not a typical biotech that develops drugs to treat rare diseases such as the ones mentioned above. Rather, the company aims to take existing treatments and make them better via subcutaneous self-injections. When I first bought Antares, the price was around $2.20 a share. Within one year, the stock nearly tripled, hitting a 52 week high of $5.58, before settling back to where it trades today, in the high $3 range. Antares looks to have a bright future ahead of it.
Like Antares, Pozen takes existing drugs and seeks to make them safer and better - more tolerable. Today, I will look at the management, pipeline, upcoming catalysts, partnership potential, and noteworthy financial items for Pozen.
- Management
One reason Pozen reminds me of Antares is because of the strong management with strong backgrounds.
announced a partnership with Royalty Pharma. Royalty Pharma agreed to pay Sunesis $25 million if the company is successful developing its lead product candidate Vosaroxin, which is an anticancer quinolone derivative class of compounds that have never used to attempt to treat cancer. In the time since, Sunesis has seen a stock price increase of well over 100% from $2.87 to $6.18.
Pozen is already partnered with such pharma giants as GlaxoSmithKline, Johnson & Johnson (JNJ), and AstraZeneca, which shows Pozen's management has experience with gaining partnership deals with large pharmas.
- Pipeline
The graphic below shows the rest of Pozen's marketed and pipelined solutions. It is worth noting that the company has other solutions that will also see NDA filings within the next year.
- Financials
Pozen was profitable for the first two quarters of 2012, before showing a loss in the last two quarters of the same year. This was in part due to less than expected sales from Vimovo, which is partnered with AstraZeneca. AstraZenca may have priced Vimovo too high at $4 a day, causing the drug to lose market acceptance. However as Jason Napodano reported in his article, AstraZenca may become more aggressive in its price point for the drug. Furthermore, AstraZeneca has filed Vimovo in 80 countries, receiving approval in 60 countries, and is currently launched in 40 countries. This leaves about 40 countries left for approval and roll out of the drug, which will equate to more revenue for Pozen moving forward.
The stock price and volume have been increasing steadily over the last two weeks or so. With nearly 6.4% of the float held short, Pozen makes for a decent short squeeze candidate. Institutional ownership is high, especially for a stock selling in the high $5 range like Pozen.
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With a market cap of $173.06M, I believe that Pozen is undervalued by about $100M when considering the market opportunity for its PA platform, 40 more countries to roll out Vimovo, and the likeliness of a partnership for PAPA32540 which as already mentioned, should net at least a $30M upfront payment.
From the chart above, the stock looks to be finally reversing the extended down trend it has been in since May of last year. It appears to me that catalyst traders and investors are accumulating the stock. With the NDA filing for PA32540 expected in April, and the likeliness of the company gaining a significant partnership with the drug before then, a short term price appreciation to the $6.50 range looks to be in short order.
Price target opinions: $6.50 to $6.75 in the short term as a catalyst trade, and a one year target price of $10. Pozen just might be a very good stock to buy and hold for the long term, which is a rare thing for small cap biopharmas.
Disclosure: I am long POZN.
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