Pharmaceutical firm Pozen cut its losses by more than 50 percent in the second quarter thanks to drug development payments from AstraZeneca.

Pozen (NASDAQ: POZN) lost $3.8 million, or 13 cents per share, in the quarter compared to an $8.4 million, 29-cent per share loss a year ago.

AstraZeneca has paid Pozen $40 million last September as part of a deal to combine AstraZenca’s popular heartburn drug Nexium (also called the Purple Pill) with the painkiller Naproxen for the treatment of people with chronic pain such as that caused by arthritis.

The payment is being amortized by Pozen.

Expenses did increase for Pozen, jumping to $16.5 million from $9.7 million, in the quarter due to costs associated with the AstraZeneca project.

A study has shown that the combined drug did show what Pozen called “significant acid inhibition.” Whether development continues with Phase III trials is a decision that will be made by AstraZeneca, Pozen said. A Phase III trial could begin as early as the first quarter of 2008, the company added.

Pozen also is waiting to hear whether the U.S. Food and Drug Administration will approve a migraine drug it has co-developed along with GlaxoSmithKline.