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.