Pozen Lands Drug Deal Potentially Worth $375M With AstraZeneca

has signed a deal with international giant AstraZeneca to co-develop a drug targeting pain and inflammation associated with arthritis.

Pozen technology will be used in combination with Astra Zeneca's heartburn drug Nexium, also called the Purple Pill.

The deal, which was announced early Wednesday morning, includes a $40 million upfront fee for the Chapel Hill-based company. Milestone payments of $160 million and another $175 million if sales performance milestones are met push the value of the deal to at least $375 million plus royalties.

If the drug is approved, Pozen (Nasdaq: POZN) said royalties would range from "mid-single digits to mid-teens".

News of the deal sent Pozen's stock price up 35 percent, or $2.62, to $10.11 by noon.

AstraZeneca products include Arimidex, Crestor, Nexium, Seroquel and Symbicort. The company's headquarters are in London.

Partnerships with major drug manufacturers are not new for Pozen. The firm is currently working with GlaxoSmithKline to seek Food and Drug Administration approval for a migraine drug. The FDA rejected it initially, citing safety concerns. Pozen announced Monday that it was filing new information with the FDA in the fourth quarter in an attempt to win approval.

Pozen stock crashed on the news of the FDA rejection, dropping $8.59 in one day to $5.52. The news earlier this week triggered a big rally in the stock, which closed at $7.49 on Tuesday.

The goal of the project with AstraZeneca is to develop a combination of the non-steroidal anti-inflammatory drug naproxen and Nexium, a so-called proton pump inhibitor, in a single tablet. The drug would target arthritis patients who are at risk of developing ulcers related to use of non-steroidal drugs.

Pozen will be responsible for drug approval efforts in the U.S. AstraZeneca will be responsible for international development plus manufacturing, marketing, sales and distribution.

Pozen is already developing two drugs designed to limit gastric injury, including one that is in Phase 3 clinical trial.