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POZN
A Holiday Cash-Back Bonus

On November 21, 2013, Pozen, Inc. (POZN) announced it would issue a special cash distribution of $1.75 per share to all stockholders of record as of the close of business on December 11, 2013, with an expected payment date of December 30, 2013. This distribution represents a surplus of corporate cash and is expected to be treated as a return of capital to stockholders. In the simplest terms, shareholders on December 11, 2013 will see a reduced costs basis of $1.75 per share and receive the $1.75 per share in cash on the 30th. Pozen issued the payment as a special return of capital and not a dividend so that the payment is tax free to shareholders. We expect Pozen's stock drop by roughly $1.75 per share on the record date. The payout is analogous to a stock split, only instead of getting more shares at a lower price, investors will keep their Pozen stock with a new lower costs basis and receive $1.75 per share in cash.

Based on 30.5 million shares outstanding as of October 24, 2013 (Form-10Q), the special cash distribution equates to roughly $53.4 million being returned to shareholders. As of September 30, 2013, Pozen held cash and equivalents of $89.7 million. If we forecast an operating burn in the fourth quarter of around $3.0 million, the company will still exit 2013 with approximately $31.5 million in cash. We remind investors that Pozen is entitled to $20 million in pre-commercialization milestones on PA from Sanofi-Aventis (SNY). Therefore, following PA approval - should it come in January 2014 - Pozen could be back sitting with nearly $50 million on the books by the middle of 2014. And as Pozen reduces operating burn post PA approval, we believe the company can reach cash flow positive operations based on the royalties from Vimovo and PA alone. In fact, assuming PA approval in 2014, total operating burn at Pozen, the $20 million pre-commercialization payments from Sanofi notwithstanding, should only total around $6 million. Therefore, we think Pozen can potentially look to distribute more cash to shareholders at the end of 2014.
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