Great Expectations

"That was a memorable day to me, for it made great changes in me. But, it is the same with any life. Imagine one selected day struck out of it, and think how different its course would have been. Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation of the first link on one memorable day."

I have great expectations for the company in 2012. But, I don't know when the gap between intrinsic and extrinsic value narrows, let along closes.

Markets can remain irrational a lot longer than you and I can remain solvent." A. Gary Shilling, Forbes (1993)

As we close out 2011 and enter 2012, I will share this prognostication: In my view, the transaction that results in the full monetization of the company (i.e., a sale) will close or be materially on its way to closing by the end of 2012. I have been of this viewpoint for quite some time (probably since the end of 2010 or early 2011).

I base this on two things: First, management's strategy, and how it has and will play out in terms of milestones, achievements and accomplishments. Second, the expiry of the so-called Bush tax cuts, where capital gains rates will increase to 25% from 15% starting in 2013.

By The Numbers (update)

An update to my original post.

I forgot to include several other milestones/achievements in 2011 (i.e., the immuno-studies, director and adviser additions). Revising my scorecard for this year, we have:

• Liver: Orphan drug status (3 pts); enrollment (0.5), treatment (0.5) and study (1) completed;
• Psoriasis: Enrollment (0.5) and treatment (0.5) completed;
• Immunology: Study initiated (0.5) and completed (0.5); and,
• Corporate governance: Director (Smith) and adviser (Eagle) added (0.5).

2011: Score equals 7.5. As a graph, below:

We'll only appreciate the work carried out by management in 2011 as 2012 unfolds. Until then, we wait for the smoke from the fireworks to clear!

First In Class

PV-10 is novel. It is unique.

It doesn't fall into any existing class of agent.

As a result, management classified it as a chemoablative immunotherapeutic, a descriptor they coined. A long name? Sure. Maybe their working on a shorter version.

Are there any other agents in this class called chemoablative immunotherapeutics class? No as far as they know. Perhaps, over time, more compounds or active ingredients will be classified in a similar light.

More importantly, to the discussion of intellectual property, where this is all going, is the chemoablative immunotherapeutic class new? Yes.

Did You Learn Something New?

In Dr. Ross' HemOnc Today presentation earlier this year, he asked three questions as a preface to his presentation, and then asked the audience to answer them again following the presentation. It took me a while to get this information.

As a preface to this post, allow me to blog the following:

• Craig will routinely and publicly say, as the CEO of a publicly traded biotechnology company, that his primary customers are the FDA and big pharma;
• He will talk about the importance of shareholders;
• Ultimately, during quiet moments, he will share his emotional views about patients, who the team earnestly and genuinely believe are the primary focus of their efforts; and,
• The medical and scientific communities to which much of the communications efforts of the company is targeted, to inform, to educate, and eventually to build a groundswell within the medical community (particularly the medical oncs, as the surgical oncs already have bought in) about the utility of PV-10.

With the above as context, it was striking to see the responses of the audience members to Dr. Ross' questions, pre- and post-presentation:

I would make the argument that OncoVex "won" question 2 simply because there has been much more publicity of the drug within the medical community, including the fact that BioVex (Amgen) already had enrolled patients in its Phase 3 trial at the time of Dr. Ross' presentation. Also, focus on the sentiment or message of the polls. I'm sure the number of responders and the accordant statistics (margin of error, etc.) can provide some basis for arguing with the voracity of the outcomes.

Pretty interesting results, eh? The reaction of doctors looking at intralesional therapy for local and distant disease, to their reaction of PV-10 itself.

While Dr. Ross appears to have been unbiased in his presentation, counting the number of slides related to PV-10 and the time he spoke about it would suggest he clearly is focusing on the intralesional therapy agent with the most potential (i.e., PV-10).

I thought I'd close this post with Dr. Ross' disclosure (apologies for not being able to take the screen shot as the presentation moved along, and avoid the play button in the middle of it).

A Chemoablative Immunotherapeutic

Rose bengal resides in a unique class of agent called chemoablative immunotherapeutics. In contrast, for example, ipi and tremi are anti-CTLA4 agents.

chemoablative immunotherapeutic -> chemoablation & immunotherapy

Chemoablation is the process where cells undergo a form of cell death mimicking necrosis and apoptosis.

Immunotherapy is the approach where the body’s immune system is harnessed to fight disease.

The Year In Review

While the share price closed 2011 at 81 cents, down from December 31, 2010's close of 94 cents, there is much more to 2011's story about the company than a 14% decline. Much more.

Management has been working on several programs (an apt name describing their work in a particular category or on a particular effort):

• Melanoma (value driver);
• Dermatology (value driver);
• Liver (value driver);
• Other solid tumors, through the melanoma and liver trials, the compassionate care program, and animal work/R&D (value driver); and,
• Immunology (value enhancer).

Now take a look at the illustration below, and keep it in mind as we progress together through the rest of this blog post:

The company achieved major breakthroughs in every program. Yes, the price at the end of the year is materially lower than the beginning of it. That's relevant to traders. It is not relevant to me. It should not be relevant to investors.

I could go on for pages and pages, but I want (need) to convey my comments as simply as possible (in keeping with Paulson's simplicity of presentation of and conveyance of his investment thesis, cogently explaining a very complex story).

Clinical data: Robust clinical data across the board. Reproducible. In the case of immunology, by a third party (Moffitt). Some data, of course, was generated before (melanoma, spin-offs), some in 2011 (liver, immunology).

Regulatory path: To create value, management must create clarity. To lower risk, management must create certainty. The essence of their work on the SPA has been and is to provide clarity of destination and certainty of journey for big pharma. TGA MM "pre-approval," FDA MM Phase 3 trial design, FDA liver Phase 2/Phase 3 trial design, psoriasis Phase 3 trial design, etc. They have done that, but several decisions remain to be made or announced.

Peer reviews/Publications: Need-to-haves early on, but, generally speaking, nice-to-haves. In my opinion not need-to-haves. In process, but not announced.

License/Sale/Launch: The essence of monetization. Deals turned down or contemplated (melanoma, liver). Term sheets awaited (dermatology). S-1s to be filed (spin-offs).

Many of the yellow boxes should turn green in 2012, based on decisions made or announced, and other pronouncements.

For 2012, the illustration below sums up my view of value certainty (the numbers relate to valuation ranges):

com·bi·na·tion

Dr. Ross concluded his presentation with a slide on combining intralesional therapies. For example, BMS/ipilimumab and Roche/vemurafenib (PLX4032) are being combined.

While more of a longer-term item, in a future post, I will blog about some diligence I did that leads me to believe a potentially major issue will surface as it relates to PV-10 combination therapies.

Get Shorty

Ray "Bones" Barboni: I want us to be friends, Faye. And we all know that friends don't hit each other... unless they have to. 

Short interest in 2011:

Short interest is useful to know, as long investors typically like to know if there is a large short interest (or negative investor sentiment) lined up against them. Shorting also includes folks who are doing pair trades (long ABC, short XYZ) or hedging (e.g., Provectus investors long the preferred might short the common), for example.

Bear raids are a more violent example of shorting, but Provectus need not worry about that for the time being. Short interest as a percent of float is less than 0.5%. To compare, the same figure for DNDN is nearly 20%, more than 10% for VICL, 0.8% for PFE, 28% for OPTR, and more than 18% for DCTH, to name a few.

We should keep an eye on Provectus' short interest as the stock price rises, as daily traded volume increases, as more folks (institutional investors, hedge funds) get into the stock, and as awareness of the company grows.

Stay tuned.

By The Numbers

There has been some interest in understanding how compensation is awarded at Provectus. The most recent year's 14A filing notes, for bonuses, that "[O]ur Board of Directors has adopted a longevity bonus policy to recognize service on our behalf when we reach significant milestones and to award year end bonuses at the discretion of our CEO. In 2010 and 2009, we awarded bonuses for services rendered culminating with continued clinical trial development progress, especially due to the progression of the oncology and dermatology drug product candidates and other development in the clinic."

I asked management about their approach to compensation, and was pointed to such comments as are available in the annual proxy.

So, for both fun (you can't even begin to imagine what I think is fun...) and seriousness, I thought I would take a formulaic approach to compensation and model that of Provectus.

Step 1: Determine milestones. Take this table, for example, from the most recent year's 10-K filing (which of course we can add to for what also has occurred thus far in 2011).

Step 2: Create a scoring system. Try the table below, which I threw together. Of course, it's just my take, and remember that since we've already seen historical compensation, my modeling (and the tweaks to the scoring system) may be influenced by having seen the comp figures. Still, it's an attempt.

Step 3: Score. I've also added the end-of-year share price (or thereabouts). Founder Comp equals the total dollar compensation (salary, bonus, option awards, other comp) of a founder (i.e., Craig, Tim or Eric).

Step 4: Graph! When in doubt, create a pretty picture or two.

The first graph: Total dollar compensation v. Annual score.

Did I succeed in identifying (or generating) a relationship between management compensation? Perhaps. It looks "directionally" correct. I hate being qualitative in life. Too squishy. My EQ is kind of low. Numbers, numbers, numbers. And, oh yeah, formulas, algorithms, etc.

# Nevertheless, I could argue that comp appears to be deserved based on achievement/accomplishment.

The second graph: Annual score v. End-of-year share price.

This is just a painful graph. In my view, and the view of many others, the company has achieved and accomplished many things over these many, many years. All of this achievement/accomplishment seems to be coming to a head. A tipping point, perhaps!?! I try not to read too much into charts. My hope is that the observation or conclusion one might make or draw simply jumps out at you. In this case, the rise in score together with the share price in 2007 is interesting. It's like the market (Mr. or Ms., whatever you prefer) is skeptical of the company in the years that follow.

Of course, the year-to-year share price undermines the statement above (see #). Although, in my view, what matters is the end-game price.

For those of you playing at home: What's your score for 2011 and into 2012? Hints:

• Liver: Orphan drug status (3 pts); enrollment (0.5), treatment (0.5) and study (1) complete.
• Psoriasis: Enrollment (0.5) and treatment (0.5) complete. Study (1) complete in 2012?
• MM: SPA in 2012 (6 pts?).
• Dermatology: Term sheet in 2012 (6 pts?).

Remember, this is just a quantitative mental exercise one might use together with other diligence results and analyses.

2011: 6.0?

2012: >13? Kaboom!

Unus pro omnibus, omnes pro uno

You'll note from previous posts of mine that I support management and do not have questions about their compensation. I do track such information so that I may be knowledgeable of such, but in the end, for this specific situation (i.e., Provectus), my money will be made because a committed, intelligent, industrious, ethical management team knocked the cover off the ball, which also left the stadium and landed in Lake Michigan.

A few dollars here or there, which go to them via compensation, is not going to make a difference to me when I consider how much I expect to make on this investment, assuming management continues to conduct themselves in a committed, intelligent, industrious, ethical manner. It's hard enough to build a successful company. It's much harder to build a crazy successful company.

I'm not sweating this issue. You may. I am not.

I posted a summary of their compensation from 2002 to 2010 here.

One of the complaints investors typically have of pre-revenue, growth stage companies publicly traded companies, like biotechnology companies that often must raise copious amounts of money to fund development, is dilution. Dilution occurs, of course, through raising money to pay for management compensation, clinical development, etc. It is useful to understand how much dilution is borne by executives, and, to compare, how much dilution is incurred by shareholders in and over time.

The graph below, again take from the company's 14A filings, shows the growth in (a) the ownership of shares by the three founders, (b) the total number of shares issued and outstanding, (c) dilution incurred by the founders (or concentration, as the case may be) and (d) dilution incurred by shareholders; both (c) and (d) as a result of an increase in issued and outstanding shares due to the issuance of stock options to management, board directors and consultants and the issuance of common and preferred shares and warrants to investors from fund raising activities.

The table below is the data that underlies the above graph. Apologies; I neglected to label the sixth column. The figures in this column represent the founders' beneficial ownership as a percent of the total number of shares issued & outstanding (or thereabouts).

Un Pour Tous, Tous Pour Un

In this post, I'll present a fact and make an observation.

Facts: Below is a table of founder compensation (i.e., Craig, Tim, Eric) for 2002 to 2010, drawn from the company's 14A filings (DEF 14A on the SEC website).

The observation is the equality of compensation between the three founders. It appears the differences in total compensation (see the specifics that total this number) in 2004 and 2005 relate to the fact that Drs. Dees, Scott and Wachter served without salary from April 23, 2002 until November 16, 2002. During 2004 the company paid the founders a portion of their accrued compensation relating to this period. During 2005 Provectus paid Tim Scott the remaining portion of his accrued compensation. And during 2005, the company paid them accrued compensation for unused vacation time.

2005 was the only year in which base salary were different between the three men. Before and since, salary, bonus and option awards have been in lock step.

Good Humor

Two questions: Where do you think we are in the chart below? When will you sell?

Institutionalization

As I have previously noted, I read the chat boards for Provectus at Silicon Investor and Yahoo Finance from time to time in large part to glean what information I can for further due diligence and analysis. For example, I learned of the Mauldin piece from an SI poster (see here).

Lurkey Turkey recently wrote about institutional holdings of Provectus shares on the SI board (see here), noting that such holdings were a very small portion of the total number of outstanding shares. Several blog readers asked for my comments on this topic.

I do not believe the amount of institutional holding is one-quarter of one percent (of outstanding shares).

Lurkey's inherent comment or question in the post was a good one: the lack of visible institutional investors in Provectus stock. I'll come back to this topic in a later post.

Using the website to which Lurkey linked provides a partial picture picture of institutional ownership, because the site only draws information from 13F filers. For your information, per the SEC website (among other places for information on this topic):

• "Institutional investment managers that use the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and exercise investment discretion over $100 million or more in Section 13(f) securities."
• "Institutional investment managers can include investment advisers, banks, insurance companies, broker-dealers, pension funds, and corporations." In the industry, institutional investment, asset or money managers means professional managers, whose money may come from other institutions (like pension funds) and high net worth individuals.

Using this broader definition of institutional investor -- not the SEC definition, which also has a geographic filter and an asset under management threshold -- there are many such folks who own Provectus shares. A simple definition from Wikipedia, for example, suggests "types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds."

Small hedge funds, investors in Europe, family offices or private investment firms, mutual funds, etc. would fall under the institutional investor category in a broad manner of speaking. Their holdings, however, would not necessarily be picked up by tracing 13F filings.

In addition to tracking 13F filings, you also should track N-Q filings (where you'll see Provectus holdings for Advanced Series Trust and AQR Funds reported as of 9/30/11) and 13D/G filings (where you'll see holdings for Osmium/Revelation Capital Management as of this February; Revelation may have sold some, all or none of its shares since then).

For example, from N-Q filings, AST and AQR (as of 9/30/11) hold 81,290 and 706,665 shares, respectively. Neither of these figures include un-exercised Series A and C warrants.

13D/G filings for Revelation Capital Management (formerly Osmium) are sparse, and the latest information one has for Revelation of 2.15MM shares, which is quite dated (February 2011). We also can't prove the negative of this firm having sold shares (we can prove the positive of increasing their holdings should they file a revised 13G). This figure does not include un-converted preferred shares and un-exercised warrants.

As a result of the NOBO-OBO rules adopted by the SEC in the mid-1980s, an issuer (like Provectus) "may obtain a list of its “street name” shareholders who have not objected to such disclosure. These shareholders are “non-objecting beneficial owners,” or “NOBOs,” while "OBOs" are shareholders who have objected to the disclosure of their identities and share positions. A shareholder is a NOBO by default, unless he or she has taken affirmative steps to object. Street name” holders are those shareholders who hold their shares through a broker or bank custodian. Under this form of ownership, the shares are technically “owned” by the broker, bank or other intermediary, so that only the broker or bank knows the identity of its client, the true beneficial holder. The other type of shareholder is a “registered” shareholder, who holds shares directly on the books of the issuer or its transfer agent. In the case of “registered” holders, the issuer either has a list or can obtain one from its transfer agent." See here.

So, typically, an issuer like Provectus has a very good sense of retail investor ownership. Tracking institutional ownership not reported in 13F (or G or D), N-Q and other public SEC-based filings is very difficult.

Based primarily on my historical discussions with management (and, secondarily, my own experience and knowledge), institutional investors could number in the several dozens, if not more. Their cumulative ownership could in the 20 to 30 percent range.

Lurkey's post also raises a good follow-up item: As institutional investor interest in the stock grows, particularly under the narrower SEC definition, look to Turkey's website link, among others to track what big and small whales are buying company shares.

Yes, Virginia, there is a Santa Claus.

He exists as certainly as love and generosity and devotion exist, and you know that they abound and give to your life its highest beauty and joy. (See here.)

I currently am preparing several posts on a variety of topics, but with Christmas nearly upon us, I may be slow in blogging these analyses. If I do not post them over the weekend, look for them early next week.

But I heard him exclaim, ere he drove out of sight,
"Happy Christmas to all, and to all a good-night."

But Not Yet.

Joba: Now we are free. I will see you again. But not yet. Not yet.

I use Gregory Zuckerman's "The Greatest Trade Ever" as an allegory or vehicle to tell two stories, one much more important than the other.

Paulson's journey, the crux (in my view) of Zuckerman's book, is analyzed nicely in these portions of two reviews (here and here):

• "Beyond the interesting outsider-type characters working at Paulson, Zuckerman's book offers many lessons for small and large investors. One is the risk, but potential reward, that comes from breaking away from the herd mentality that surrounds Wall Street. Nobody on Wall Street gave these guys a chance, when they started betting against housing. In fact, Paulson was routinely laughed at. Because the banking infrastructure was making so much money off of housing in 2004 - 2006, there was no reason for so many people to imagine it would end. Even among hedge funds -- who are paid handsomely to anticipate and invest in where the puck is going, not where it's been -- precious few made this bearish trade. At the time, wise managers saw only the obstacles to the trade working out (like the federal government bailing out sub-prime borrowers and "containing" the problem from other parts of housing) and they clung to a misplaced blind trust in "their models" which showed housing couldn't decrease in value. Even after he makes the bet, Zuckerman points out how there are so many times that people tell Paulson to take the bet off or cash in his profits too early. His own investors complained. Complaints also came from brokers from Bear Stearns and others who helped sell him the credit default swaps on the toxic tranches of mortgage bonds, as well as the most troubled sub-prime lenders and banks holding the troubled securities. Even his own staff complained that he wasn't taking money off the table. They told him to sell when he was down in his trade and they told him to sell when he was up on the trade after New Century reported its first blown quarter in early 2007. Through it all, Paulson stuck to his guns because he foresaw even bigger profits ahead - and he was proved right. As a fund manager, I often ponder the challenge of balancing between (1) trusting yourself and your investment thesis completely even when no one else does and (2) being aware enough to know when you're being too stubborn and "not seeing the facts" or when the trade is going against you. In Paulson's case, every new bit of data which came to light and possibly contradicted his investment thesis was always scrutinized by him and his team to see if they had "missed something." He always stuck with the trade because he felt confident in the depth of research they had invested in understanding the problem/investment opportunity."

• "The remarkable thing about this story is the fact that Paulson's idea can be summed up by one simple chart: a plot of how much real estate prices had diverged from their historical norm. That chart, crafted by then Paulson & Co analyst Paolo Pellegrini, would serve as the glistening prize in their collective trophy case. What this book shows you though is just how complex of a journey it was to arrive at that simple piece of paper. While Zuckerman's work rightly showcases Paulson as the protagonist, it also details the journeys of other individuals pursuing the same historic trade. It details the investment timelines of Jeffrey Greene (an investor who knicked Paulson's idea and tried it on his own), Michael Burry (an investor who made the right call but was early to the play), and Andrew Lahde (the hedge fund manager who pursued his conviction in the play and later penned the infamous 'F*ck you' goodbye letter to Wall Street)."

The first story is about Craig, Tim, Eric and, later, Peter, and their journey starting in the 1990s when they began searching for new photo-activated compounds for clinical use. In spite of an industry telling them otherwise, they find themselves, after years and years of intelligent and hard work, on the cusp of success: for patients around the world, for shareholders, and for themselves.

The second story is just about me, and a journey to validate my career in and passion for investment management and corporate development; validation through the manifestation of a "too large for my own good" investment in Provectus. The greatest trade ever? Not yet.

Texas Toast

For the week ending December 18, management found themselves:

• In Austin, TX for meetings with key opinion leaders.

Strategery (clarification)

"Unfortunately for patients, shareholders and management, the long history of safety of rose bengal, the stunning efficacy of PV-10 in the Phase 1 trial, and the reproducibility of results [from an interim look-back] in the Phase 2 trial, together with a change in regulatory perspective, were insufficient to sway the FDA to give PV-10 accelerated approval. With the benefit of hindsight and a suitable arms-length partner like Moffitt, the results of the two completed immuno-studies would have tipped the scale in management's favor. The cost? Likely 12 to 18 months.


The company now finds itself following its secondary path, which already was planned but now must be traversed."

A recent comment from a reader suggests I should have been more clear in my Strategery post. Thank you reader! The Strategery post was not meant to suggest a 12 to 18 month delay from the 3rd EOP2 meeting. I merely was commenting on the delay management suffered in trying to be smart, efficient and rapid in their pursuit of Accelerated Approval.

The secondary path always had been to pursue a Phase 3 trial suitable for an SPA. Like you, I believe they are on the cusp of agreeing with the FDA on an SPA at the 4th EOP2 meeting, which could occur as early as mid- to late-January, but more likely will occur around or before mid-February.

And in this corner...

Dr. Ross' presentation essentially centered around promising new intralesional therapies. He discussed Vical's Allovectin, BioVex's OncoVEX and Provectus' PV-10. In my opinion, he spoke much more about PV-10, but perhaps I'm just biased.

Comparing the slides of the three compounds, we see the following:

The difference (even though the performance figures I show are from PV-10's Phase 1 trial; the Phase 2 data is in Dr. Ross' presentation, but it is difficult to read them on the white background in his slides) is stark. Remember that BioVex was acquired by Amgen for nearly $1B. Vical continues to push development of Allovectin as independently as it can (I don't believe it has fully partnered for Allovectin). As you know from listening to his presentation, Dr. Ross was not particularly impressed by OncoVEX's Phase 3 trial's comparator.

Tipping Point?

Leave no stone unturned. Euripides, Heraclidae, circa 428 B.C.


Much thanks to Max Fletcher's post at PVCT's Silicon Investor chat room/board for this piece of information. Diligence, like money, never sleeps. I sent the full piece to management for them to share with others via Provectus News.

Malcolm Gladwell defines a tipping point as "the moment of critical mass, the threshold, the boiling point."

In the moment, I would argue, we rarely see an event or a situation or an outcome definitively as a/the tipping point. With the benefit of hindsight, it is much easier to identify such.

Provectus was mentioned in John Mauldin's December 20th edition of Catastrophic Success (see below).

Mauldin has a very large following (I, for one, enjoy reading his missives). Perhaps this piece by him is the tipping point for the greater awareness we all hope for the company to enjoy.

Last Action Hero

One of the [very] interesting aspects of Dr. Ross' presentation was his very brief comments regarding the immunology studies (vis a vis PV-10's mechanism of action).

My sense is that most folks were of the understanding that the company's work with Moffitt was focused on PV-10's mechanism of action. PV-10's MOA, of targeting and how it kills cancerous cells, is well established.

We know of PV-10's great success in treating tumors at the local level. What is of course very intriguing, and what Dr. Ross highlighted, both in general and specifically about PV-10, is the compound's bystander effect and systemic benefit.

So, Moffitt isn't working just on PV-10's MOA. Rather, their work is on the mechanism of immunologic response ("MOIR"), which goes to the systemic benefit of PV-10. MOA, in the context of Provectus, is a multi-step process, with the chemoablation of the cancer cells followed by the immunotherapeutic effects of the ablation, which is the bystander response or immune-mediated response.

Think of it this way: Lots of companies work on studies and put of communications regarding the MOA of their respective compounds. Management has checked this box at the local level. Together with Moffitt -- and recall that two immuno-studies already have been completed, with another in process, and more planned for next year -- the curiosity about PV-10 and subsequent demand for information is about the MOA at the remote or distant level.

Calling Dr. Ross (update)

Management circulated Dr. Ross' presentation.

Calling Dr. Ross

I now have Dr. Ross' Hem-Onc presentation in NYC earlier this year. Having obtained the information in the public domain, I asked management to circulate it to subscribers of Provectus News.

You can view the presentation here.

You'll see a nice amount of his presentation, perhaps disproportionately, is dedicated to PV-10 (and the combination therapy of PV-10 and radiotherapy). This presentation nicely ties in to several pieces of diligence/analysis I will post later.

Strategery

What is management's strategy? There are several layers to this, both strategic and tactical. Let's explore these.

The primary business strategy has been, from the start, to show proof of concept for as many oncology indications as possible before partnering PV-10 in the endgame scenario:

• Metastatic melanoma: Phase 2 completed (safety, dosage and efficacy well documented). Waiting on the approval of the Phase 3 design.
• Breast cancer: Phase 1 completed (safety achieved. dosage understood. efficacy noted).
• Liver cancer: Phase 1 completed (safety achieved. dosage understood. efficacy documented). Currently completing Phase 2/Phase 3 design.
• Pancreatic cancer: Contemplating a Phase 1 trial.
• Other solid tumors: Colorectal (liver Phase 1) Squamous cell carcinoma (Compassionate care program), Scalp sarcomas (CC)

The communications strategy has been, from the start, to demonstrate a broad spectrum effect to doctors and big pharma.

The lead clinical trial has been for metastatic melanoma. At ASCO 2011, despite the fanfare for  ipilimumab and vemurafenib, BRAF inhibitors and CTLA-4 antibodies still only are very marginal improvements in treating very late stage melanoma. In addition, the patient populations represented by these studies highlighted the lack of attention paid to patients most obviously appropriate for PV-10. In October's PR related to the 3rd EOP2 meeting with the FDA, "...melanoma, which is a rapidly evolving therapeutic area" means the FDA recognizes that the approvals of ipilimumab and vemurafenib address only part of the melanoma patient population and that other areas (i.e., the bulk of recurrent melanoma) still are unmet needs.

The mostly has been treating patients in Stage IIIb, IIIc and IV M1a, but also some IV M1b and IV M1c.  Tactically, the company can successfully treat all of these disease stages. Most metastatic melanoma, however, is in Stage IIIb-IV M1a. Very late stage IV M1b and IV M1c is visceral metastatic disease. Strategically, Provectus' target label for approval is Stage IIIb-IV M1a because this is non-visceral metastatic disease.

Management is deliberately and methodically proceeding towards a non-visceral disease claim with the FDA in order to get it approved as quickly and as inexpensively (balance sheet item: accumulated deficit) as possible.

The primary regulatory approval path had been to seek accelerated approval through a combination of the MM Phase 1 data and data from the first cohort of 40 patients from the MM Phase 2 trial. The secondary path was a well laid out RCT Phase 3 trial. See the illustration below.

Unfortunately for patients, shareholders and management, the long history of safety of rose bengal, the stunning efficacy of PV-10 in the Phase 1 trial, and the reproducibility of results [from an interim look-back] in the Phase 2 trial, together with a change in regulatory perspective, were insufficient to sway the FDA to give PV-10 accelerated approval. With the benefit of hindsight and a suitable arms-length partner like Moffitt, the results of the two completed immuno-studies would have tipped the scale in management's favor. The cost? Likely 12 to 18 months.

The company now finds itself following its secondary path, which already was planned but now must be traversed.

Linkin Park

So give me reason to prove me wrong, to wash this memory clean
Let the floods cross the distance in your eyes
Give me reason to fill this hole, connect the space between
Let it be enough to reach the truth that lies across this new divide

Transformers 2 is one of my favorite movies, together with and among others, in no particular order and that come to mid, Gladiator, Chronicles of Riddick, and Lord of the Rings: The Two Towers. Favorite simply means I can watch and likely have watched the movie at least 20 times or more, such as when I watched Transformers 2 20 times to and from China. But I digress…

There have been some questions regarding the Lincoln Park Capital (LPC) financing deal the company consummated in December 2010. As a refresher:

• LPC purchased 1MM shares of stock ($1MM purchase) at a 9.8% premium to the then share price, and were issued 500K warrants ($1.50 exercise price);
• Provectus could draw down on what amounted to an equity line of credit of $30MM*; and
• In consideration of the transaction, Provectus issued 300,000 shares to LPC (these amount to free but restricted shares)**.

LPC has done many such deals.

There was some initial concern about whether the LPC was a death spiral. From Wikipedia, “Death spiral financing is a process where convertible financing used to fund primarily small cap companies can be used against it in the marketplace to cause the company’s stock to fall dramatically and can lead to the company’s ultimate downfall.

Many small companies rely on selling convertible debt to large private investors (see Private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock.

Under the typical “death spiral” scenario the holder of the convertible debt initially shorts the issuer’s common stock which often causes the stock price to decline at which time the debt holder converts some of the convertible debt to common shares with which he then covers his short position. The debt holder continues to sell short and cover with converted stock which along with selling by other shareholders alarmed by the falling price continually weakens the share price making the shares unattractive to new investors and can severely limit the company’s ability to obtain new financing if the need arises.”

A cursory Web search may reveal information about the LPC principals’ history and the topic; however, the Provectus deal appears to be benign in that respect.

Obtaining financing is tough these days, particularly at less than onerous terms and dilution. The question in front of management, at the time, likely was: How can we obtain sufficient financing to demonstrate to big pharma that we can fully complete an MM Phase 3 trial if we wish, while mitigating dilution for shareholders and ourselves?

That’s a somewhat of a tall order. Get access to funding to pay for a Phase 3 trial if they need to do a trial, but try not to wait until needing the funding to raise it. Huh?

Management's current balance sheet's cash balance is suitably robust enough to provide a sufficiently long enough operating runway (i.e., through next year and into 2013) to enable what we all expect to be announce to be announced on several fronts: dermatology, immunology, melanoma and liver.

If and when the company might draw down LPC’s line, the activity on these strategic fronts of dermatology, immunology, melanoma and liver should raise the stock price by the time the line is required to be drawn, after the current cash on the balance sheet is depleted. It’s all about timing.

The LPC line likely will be used, cosmetically, to demonstrate funding access to conduct the MM P3 (SPA, or no SPA), as part of the negotiations with big pharma to get the right valuation. Right in this case means $4-5 billion, as opposed to $1-2 billion. I would be surprised, even shocked, if management actually draws down on the LPC line.

So, the dilution of 300,000 shares seems be a very inexpensive price to pay for access to funding (more, if you include the $1.50 warrants). Think of it as insurance.

* In addition to the foregoing investment, under the Purchase Agreement, the Company may, in the Company's sole discretion, direct Lincoln Park to purchase up to an additional $30,000,000 of the Company's common stock over the 30-month term of the Purchase Agreement. On each business day during the term of the Purchase Agreement, the Company may, in its sole discretion direct Lincoln Park to purchase up to 100,000 shares of the Company’s common stock at a per share purchase price equal to the lesser of (i) the lowest sale price of the Company's common stock reported on the OTCBB on the purchase date and (ii) the arithmetic average of the three lowest closing sale prices for the Company's common stock during the 12 consecutive business days prior preceding the purchase date.  The Company may, under certain circumstances, at its discretion, increase the amount of common stock that it sells to Lincoln Park on each business day.  There is no upper limit on the price per share that Lincoln Park must pay for the Company's common stock, and in no event may Lincoln Park purchase shares of the Company's common stock for less than $0.75 per share.

** In consideration of Lincoln Park entering into the Purchase Agreement and making the commitment to purchase up to $30,000,000 of the Company's common stock, the Company will issue 300,000 shares of the Company's common stock to Lincoln Park and may issue up to an additional 1,500,000 shares of the Company's common stock on a pro rata basis as and only to the extent that Lincoln Park funds the $30,000,000.  The foregoing commitment shares may not be sold by Lincoln Park until the Purchase Agreement expires or is terminated.

Target-rich Environment

What is the addressable market in melanoma for PV-10? Remember, addressable, not target.

Target, as I would envision the use of the word, would be that part of the population for which PV-10 is being claimed to be suitable or used as it relates to the FDA and the design of the Phase 3 trial.

The target market is 7%.

The addressable market, however, is 50%.

Here’s how I come up with these two very different numbers:

• Of the people afflicted by melanoma (the "total population"),
• 50% are Stage I
• 30% are Stage II; and, 
• 20% are metastatic (Stage IIIa, IIIb, IIIc, IV M1a, IV M1b, IV M1c).
• Of the people suffering from metastatic melanoma (the "MM population"):
• 80% is cutaneous or sub-cutaneous; and,
• 20% is visceral.
• So, overall:
• cu/sub-cu MM is 16% of the population (0.2 x 0.8); and, 
• visceral MM is 4% of the population (0.2 x 0.2)

One of the company's PIs, Sanjiv Argawala stated, conservatively in my view, that PV-10 might be applicable for one-third of the MM population, or 7% of the total population (0.33 x 0.2).

I've obviously been liberal in my sectioning of the populations above, but for purposes of this blog, my hope is to be illustrative and accurate, rather than precise.

The target population, supported by the Phase 2 results, might range from 7% (based on Dr. Argawala's conservative assessment) to 16% of the population (and perhaps, arguably, as much as 20%).

Management believes the addressable market is at least half of the entire melanoma market. They assert that PV-10 is applicable to and helpful for at least half of the entire population of folks suffering from melanoma, from Stage II to very late in Stage IV (M1c) by:

• Utilizing the immuno-studies as the basis for the study looking to treat Stage II patients with PV-10 before removing the lesions surgically, after the immune system had been primed by PV-10 to fight back as nature had intended it to do; and,
• Combining PV-10 and another treatment for those very late stage folks where PV-10 might prime the immune system, followed by other treatments that would reduce the patients' tumor burden.

Acknowledging more study is necessary and more work is required, but it is this kind of assertion that underscores management's belief in PV-10 (and PH-10). It is this kind of assertion that makes Provectus a gem on an investment opportunity, and one in which the upside is dramatically more commensurate than the risk an investor is taking on.

MM is estimated to affect 40,000 patients each year in the U.S. and 60,000 in the rest of the world (source). At $30,000 per course of therapy (using the methodology of the source's author), this makes for a target market for MM of $1.2 to $1.8 billion. If MM is about 20% of the total population, and the addressable market is 50% of the total population, this makes for $3 to $4.5 billion.

The Mod Squad

What did Dr. Jen meant by “modified PFS” when he wrote this in his equity research note of last month.

Recall his comments: Topics discussed included the applicable patient population and primary endpoints. Metastatic melanoma patients eligible for the PV-10 trial will likely be those with Stage IIIb, Stage IV M1a, and possibly some with Stage IV M1b. We believe that PV-10 would be more valuable in treating patients with local-regional disease and cutaneous, but not visceral, metastases. A modified PFS, instead of time to progression (TTP), could potentially be the primary endpoint since it is appropriate for demonstrating treatment efficacy. This proposed randomized study could possibly enroll 300 patients with dacarbazine (DTIC) or temozolomide (TMZ) as the comparator group.

PFS, of course, is “progression free survival.” So, it is a time to event endpoint, like overall survival (“OS”). PFS also could be referred to as disease free survival. The “modified” descriptor means the trial only is concerned with the spread of the disease beyond the local area – the local area of the injection site; that is, the local area of the lesion [that has been injected withPV-10]. If the patient had systemic or visceral disease by definition, the endpoint would be PFS or, most likely, OS. Since the patients that are contemplated for treatment in the Phase 3 trial would have local disease, the trial only measures the spread or, mostly in the case of PV-10, the lack of spread of the disease. Therefore, the disease of this patient population is, by definition, not systemic; thus, PFS is modified in the sense that it applies only to the local disease.

If you want a friend, get a dog.

As you know, Merrick Ross is a surgical oncologist at MD Anderson. In a previous post, I noted that Dr. Ross made effusive comments at the HemOnc Today Conference in New York City earlier this year. He said PV-10 should be a first-line treatment [after surgery has failed] and should already be approved for use.

A tweet by @natesadeghi from @adam feuerstein's Twitter feed, below:

Dinner at Eight

I recently hosted Dr. Dees for a dinner to which I invited several non-investors. Our party included a radiation oncologist, an intellectual property attorney, a technology entrepreneur and a commercial banker. Spending time with Craig is always entertaining and informative. Having dinner with him takes entertainment and information to another level. I feel fortunate to have these opportunities.

As we broke bread together, the group learned several things from Craig, such as:

• How PV-10 works. He simplified the mechanism of action to the audience (e.g., why does rose bengal do what it does near and in the cell). The specificity of these comments built upon my previous understanding and strengthened my overall knowledge;
• The company's strategy of demonstrating broad application of PV-10 through the flagship indication of MM, surrounded by Phase 1/Phase 2 work on multiple indications, like breast, liver, pancreas, etc.;
• His view on why combination therapies (e.g., PV-10 + radiotherapy, PV-10 + ipilimumab, PV-10 + dacarbazine) seem to work dramatically better, particularly on late stage patients with severe affliction, because of the addition of PV-10 and his hypothesis of its impact on the immune system in order to more effectively leverage the other therapy;
• Moffitt’s excitement over their immunology work. They confirmed the bystander effect using a mouse lung metastasis model much harsher than the real disease. Moffitt's results were very robust and beyond what they have ever observed from other treatments using this model. PV-10 nearly cleared the lungs of all tumors; and
• Dr. Ross’ effusive comments at the HemOnc Today Conference in New York City earlier this year. He said PV-10 should be a first-line treatment [after surgery has failed to stop the spread of the disease] and should already be approved for use.

After the other guests left, we had the opportunity to spend some more time with Craig, and chatted with him about several other topics and items.

Where in the World Is Carmen Sandiego?

And where, for that matter, in the world are Craig, Eric, Tim and Peter?

It's helpful to track management's movements to gain more insight into and information about their strategies and tactics.

For the week ending December 11, management found themselves:

• In Australia for clinical development progress;
• In Europe for meetings with existing shareholders and prospective investors as well as key opinion leaders; and,
• In the Pacific time zone for shareholder and investor meetings.

Hold The Line!

Hold the line! Stay with me! If you find yourself alone, riding in the green fields with the sun on your face, do not be troubled. For you are in Elysium, and you're already dead! 

Is PV-10 a first-line treatment for melanoma? Can it be a first-line treatment? Is it a second-line treatment for melanoma? What's the difference between first- and second-line? Or is PV-10 just another treatment for metastatic melanoma? Or is it just one tool in an oncologist's tool kit?

I'll discuss the addressable or target melanoma market for PV-10 in a subsequent blog post.

The first-line treatment for most skin cancers, especially melanoma, is surgery. So, when considering non-surgery or drug treatments, first-line treatment in this case is the first treatment after surgery has failed to stop the spread of the disease. Second-line treatment is the next treatment used when the first treatment [after surgery] has failed.

The contemplated MM Phase 3 trial is designed to include using PV-10 both as first- and second-line treatments (i.e., treatments after surgery). The comparator arm, whether DTIC or TMZ, would be the first-line treatment. After a couple or three months passess and the comparator arm fails, patients in this arm would then be treated with PV-10 (i.e., second-line). In the PV-10 arm, patients receive rose bengal out of the gate (i.e., first-line).

As you may recall from the MM Phase 2 study, PV-10 also was used as first- and second-line treatments. Surgery had failed. In some cases, patients first received PV-10 (i.e., first-line). In other cases, patients received PV-10 after, first, surgery, and second, another drug treatment (to some surprising and positive results!).

What about local/regional treatment versus systemic treatment. PV-10 is not a first-line systemic treatment. It is a second-line systemic treatment, which means PV-10 is used when systemic treatments have failed (but that is not the focus of the Phase 3 trial).

While there is clear evidence, through clinical trials and immunology studies of the remote bystander effect (i.e., systemic effects), management's primary focus with and claim to the FDA is using PV-10 as first- and second-line [after surgery] treatments for all local/regional and distant cutaneous/subcutaneous metastases of the disease.

PV-10's use, one might argue, based on the plethora of clinical results from the Phase 1 and 2 trials as well as the compassionate care program, could treat at least half of the melanoma market (not just the metastatic melanoma market) by itself or in combination with other drugs, as a first-line treatment in lieu of surgery and as a first-line treatment after surgery.

Wow! That's a claim!

Every Rose Has Its Thorn

Every rose has its thorn
Just like every night has it's dawn
Just like every cowboy sings his sad, sad song
Every rose has its thorn

I have long been concerned about a tender offer for the company by an investor or investor group or big pharma for some, most or all of the company. Of course, the presumption on my part is that such a transaction would occur if there remained a dramatic gap between extrinsic and intrinsic values.

Management teams and companies can implement a shareholder rights plan, or poison pill, to combat unwanted tender offers.

In my diligence, I asked management if a poison pill indeed was in place at Provectus. There are two:

• The first pill relates to limiting voting rights; and
• The second relates to how management’s voting rights can be increased, if necessary.

Why are there two? Simply redundancy. "Leave nothing to chance."

re·pet·i·tive

Dr. Wachter exercised more options this week: here. That makes $997K paid by him in 2011 to the company to exercise his options, and nearly $3 million over the last 7 years.

Increased Investment Risk?

A cogent couple of paragraphs on biotechnology risk from [who I believe is] a business school student at Tuck.

"In the past, the biggest risk of investing in a mid-stage biotech company was the clinical risk: could the drug be proven safe and effective? If so, FDA approval was likely as the regulatory body had reasonably predictable standards for approval. However, as a result of a number of highly publicized and embarrassing recalls of drugs already approved by the FDA (Vioxx and Baycol being two of the most notorious) the FDA has further increased its scrutiny of new drugs up for approval. The two major consequences of this increased scrutiny are: one, acquiring enough safety and efficacy data to satisfy the FDA has increased the cost of development and two, there is an increased level of uncertainty as to whether the clinical data that is generated will be enough to satisfy the FDA. This increase in both development costs and regulatory risk has placed an even higher hurdle to new drug approval.

In addition to the regulatory risk posed by the FDA, concerns about high drug prices have led to an increase in reimbursement risk. Even if a drug is approved by the FDA and found to be safe and effective once on the market, third-party payors such Medicare/Medicaid and the private insurers are now demanding increasingly steep discounts and even refusing to reimburse for certain products that they believe provide an unsatisfactory cost to benefit ratio. Although this risk can often be mitigated through careful research and consultation with third-party payors before investing, the risk still remains that a future product may drastically change the reimbursement levels previously agreed to and severely impact revenues and subsequent return on investment."

Source: Trends in Mid-Stage Biotech Financing, Michael D. Hamilton, Tuck School of Business at Dartmouth, Winter 2011

My diligence suggests Provectus has acquired enough safety and efficacy data to satisfy the FDA. It is too early to address reimbursement risk; however, the flexibility management has in setting the price for PV-10 (e.g., ingredient costs, manufacturing costs, etc.) completely eliminates this risk.

Peer Pressure

It is commonplace that pharmaceutical and biotechnology companies enter into partnerships to license developmental drugs. These collaborations provide the former with access to promising compounds while offering the latter reduced risk when undertaking clinical trials (and, later, manufacturing and marketing the drugs).

In fact, biotech licensing deals with big pharma are a means to an end, rather than the end goal itself. Most industry analysts and insiders would have you believe the licensing deal is a necessary validation point for a biotechnology company itself.

But, as I have previously blogged, there is a risk-reward aspect to a biotechnology company licensing a drug to  or being acquired by big pharma. For example, this risk-reward relationship is illustrated below:

All too often, a biotechnology management team licenses a drug too early, as a means to an end, rather than the end goal itself. As a result, shareholders are ill-served. Provectus has not yet licensed PV-10 for some indication. Is management unable to do so: Are they incompetent? Are the results unimpressive? Is big pharma uninterested? Hardly.

I believe the company has turned down a big pharma licensing deal for metastatic melanoma. I also believe such a deal likely was valued in the low- to mid-hundreds of millions of dollars. Why? Management instinctively felt the price was low, in a vacuum and in concert with the efficacy found in other indications. My diligence suggests they have turned down other deals because, again, the prices were low.

The end goal is to license one or more or all of the indications to big pharma at the right price. Management knows this. It is part of their strategy. Shareholders ultimately will be well-served by management's approach.

Questions

I have blogged a good amount of my due diligence and analysis, and there will be more to come; however, my pace will slow. In the interim, if you have any questions, please e-mail me at i.am.a.pvct.investor@gmail.com. I will turn your questions and my responses into posts for everyone to read.

Yet Again

Dr. Wachter exercised more options last week: here. That makes it $922K paid by him this year to the company to exercise the options, and $2.9 million over the last 7 years.

Trial Design: Primary Endpoint

Dr. Jen noted a modified PFS, instead of time to progression, could potentially be the primary endpoint since it is appropriate for demonstrating treatment efficacy.

Remember, from the previous blog post, I believe Dr. Jen's equity research note essentially telegraphs the trial design for the MM RCT Phase 3 SPA trial.

Recall the PFS results by disease stage from the MM Phase 2 trial:

DTIC: 1.6 months (BRIM 3 trial), 2.6 months (ipi trial)
PLX4032-a: 6.7 months (BRIM2 trial; 60% of subjects were Stage IV M1c)
PLX4032-b: 5.3 months (BRIM3 trial; 65% were Stage IV M1c, with 5% Stage III, and most of the
remainder being Stage IV M1b)
ipi+DTIC: 2.8 months (BRIM3 trial; 65% were Stage IV M1c and 25% Stage IV M1b, with only 3% Stage III)

Same questions:

• Do you see PV-10's PFS above for the target population of the Phase 2 trial?
• What would you hazard the likely PFS to be for the Phase 3 trial?
• Do you think the study will be stopped early due to the clear superiority of the PV-10 arm?
• How will the likely dramatic difference in PFS influence valuation?
• What is the likelihood of clinical and regulatory milestones payments being made?

Again, the hallmark of modern science is reproducibility. I know what my answers are to these questions. What are yours?

Note: All lesions would be treated for Provectus' Phase 3 study. In the Phase 2 trial, 1-10 target lesions and up to 1-10 non-target lesions were treated. How would that affect the eventual PFS?

Trial Design: Patient Population

Before you read further, please understand the basis upon which I write the following blog posts on trial design. I believe Dr. Jen's equity research note essentially telegraphs the trial design for the MM RCT Phase 3 SPA trial. If you disagree, well...

Dr. Jen noted patients eligible for the trial likely would be those with Stage IIIb, Stage IV M1a, and possibly some with Stage IV M1b. Recall I previously posted that he also should have included Stage IIIc together with Stage IIIb and Stage IV M1a, as the company's principal investigators had done in their presentations.

Is past performance indicative of future results? In the investment world, the phrase "past performance is not necessarily indicative of future results" is an often-made statement when presenting historical investment performance. If you believe this, you won't buy Provectus shares! You might even sell your existing shares!

I believe past performance is indicative of future results when applied to the company's clinical results to date and, thus, going forward. It is not a matter of faith, but rather facts. Let us explore those facts in the context of this.

What do I fear? I fear past results can't/won't be repeated, within some acceptable range.

Why do I fear this? If future clinical results aren't as good, the company misses clinical and regulatory milestone payments from the end-game acquirer. Huh? As I've previously blogged, management is reducing the risk for the acquirer by firming up the regulatory path for melanoma and liver. Agreeing on an SPA with the FDA is a box to check. But rose bengal still has to produce! The eventual valuation of the company when the acquisition is negotiated will undoubtedly have milestone payments related to clinical and regulatory events or triggers. Recall from the sub-title of this blog, I'm expecting Provectus to be the greatest trade ever. Wouldn't I look and feel dumb if the MM RCT Phase 3 trial fell flat on its face.

What might we expect to see in terms of clinical results for the Phase 3 trial? Who knows? The following may be heresy to some (yes, I understand patient populations for Yervoy, for example, had more severe patients, etc.), but this analysis is how I form, at a minimum, a boundary or a framework for my expectations. Beyond this, the trial either meets, exceeds or falls below expectations in some way.

Recall the response results by disease stage from the MM Phase 2 trial:

The patient population of the Phase 3 trial might (will) comprise Stage IIIb-Stage IV M1a and possibly some Stage IV M1b patients:

• 53% CR+PR? Wow! (I haven't weighted the percentages based on patients per response)
• 77% CR+PR+SD? Double wow! (Ibid)
• 55% OR for Stages III-IV (M1a)

How did OncoVex and Yervoy stack up? You know who makes Yervoy, and recall that BioVex, OncoVex's producer was acquired for approximately $1 billion:

OncoVex: 37.5-40% CR+PR for Stage III-IV M1a
ipilimumab/Yervoy: 8-15% CR+PR for Stage III-IV M1a

Dig deeper:

OncoVex: 20% CR
DTIC: 2-3% CR
PLX4032-a: 5% CR (BRIM2 trial; yes, 60% of subjects were Stage IV M1c)
PLX4032-b: 0.9% CR (BRIM3 trial; yes, 65% were Stage IV M1c, with 5% Stage III, and most of the
remainder being Stage IV M1b)
ipi+DTIC: 1.6% CR (BRIM3 trial; yes, 65% were Stage IV M1c and 25% Stage IV M1b, with only 3% Stage III)

Questions:

• Do you see PV-10's CR above for the target population of the Phase 2 trial?
• What would you hazard the likely response rates to be for the Phase 3 trial?
• Do you think the study will be stopped early due to the clear superiority of the PV-10 arm?
• How will the likely dramatic difference in response influence valuation?
• What is the likelihood of clinical and regulatory milestones payments being made?

The hallmark of modern science is reproducibility. I know what my answers are to these questions. What are yours?

Note: All lesions would be treated for Provectus' Phase 3 study. In the Phase 2 trial, 1-10 target lesions and up to 1-10 non-target lesions were treated. How would that affect the eventual CR+PR?

Throwing In The Towel

It was another ugly day for the share price today, with an intraday low of 71 cents.

Comparable lows include

• 68 cents intraday on October 16, 2009;
• 65 cents intraday on July 2 and 21, 2008; and,
• When the stock was at these level last in July 2005.

Painful, for sure. Frustrating -- to you, to me -- no doubt. Where's the sense in this? We're hitting lows not seen for a while, yet, objectively, Provectus is so much more valuable as an enterprise than it was 1, 3, 5 or n years ago.

What should I do? What should you do? I can't tell you what should you do.

It's clear some retail investors have been selling, and taking losses along the way, because they have to or are fatigued as we near year-end. There is interest from institutional investors to buy, but not at levels yet to support the bid in light of retail investors throwing in the towel.

I would not be surprised to see a further drift downwards in share price before year-end. In fact, I am expecting it, unless news related to the top-line results for the psoriasis Phase 2 trial and/or the immuno-studies is released (with this week's PR on the 3rd EOP2M, I do not expect any news related to the SPA until next year).

Does management care about the share price? Some say no. I say yes. But, their eyes are on the prize. The vagaries and volatility of the share price in the interim -- between now and the end-game -- are just that, vagaries and volatility and, ultimately, noise. This is perhaps hard to read, but true nevertheless.

As I have previously blogged, if the warm embrace of big pharma lay at the end of a well lit path, would you not focus yourself and spend your energy on traversing the path?

pre·dict·a·ble

How likely are the trial design features noted by Dr. Jen in Maxim Group's update (below) to be the final design features?

What do you think?

• Patient population: Those with Stage IIIb, IIIc*, Stage IV M1a, and possibly some with Stage IV M1b;
• Primary endpoint: A modified PFS;
• Comparator: DTIC or TMZ; and,
• Patient number: 300

In November 2010 (after the 1st meeting with the FDA in April), during a presentation by one of the company's principal investigator, Dr. Agarwala, we saw this:

In June 2011 (after the 2nd meeting with the FDA in March), during another presentation by Dr. Agarwala, we saw this:

Together with the FDA, management appears to have successfully achieved the trial design they have desired from the very beginning.

* Dr. Jen should have mentioned Stage IIIc as well. The range in the company's investigator's presentations, such as Dr. Agarwala's above note Stage IIIb-Stage IV M1a, which would include IIIc.