Annual Cancer Symposium of the Society of Surgical Oncology

The Moffitt abstract at the SSO conference is now available. Recall what I previously posted.

Takeaway (Results): "Three out of five mice treated with PV-10 had [3] or less lung metastases; all control mice treated with [phosphate buffered saline] had over 250 lung metastases."

Takeaway (Conclusion): "These studies confirm that PV-10 therapy results in both a direct effect on treated melanoma lesions as well as a systemic response that leads to regression of synchronous lung metastases or synchronous subcutaneous melanoma."

"The tumors were all induced at the same time. The main effect was seen with a metastatic model whereas the number of metastatic pulmonary lesions observed were significantly lower when the subcutaneous tumor was treated. The b/l subcutaneous tumor model did not reach significance for the bystander lesion, but the treated lesions do regress either completely or partially. The amount of regression for the treated lesion appears to be temporally and likely dose related to the PV-10 injections." The untreated or bystander lesions did not grow as expected because the treated lesions either completely or partially regressed resulting in a systemic benefit for the untreated lesions due to PV-10's immunologic response.

Cost to You; Cost to Them

Management, from the beginning, had a very good idea of how much it would take to bring PV-10 to market. And while how much the acquiring big pharma ultimately charges for the drug is outside of management's control, they also have a very good idea of how much it takes to manufacture PV-10 treatments.

Cost to you (as a patient). Make some general or rough assumptions. Use as the "cost" to bring either Provenge or PV-10 to market as Accumulated deficit. Obtain or assume a treatment cost. Assume the headline number of treatment cost is all revenue to the respective company, and that "break-even" simply is calculated as accumulated deficit divided by the cost of the treatment. 17,000 treatments would be necessary for Dendreon to recoup its Provenge development costs (very roughly speaking), while Provectus would need (for costs to date) 5,000 (I think the analysts assumed a $20,000 to $30,000 treatment cost; the higher end of the range drops the break-even number close to 3,000). While this is a very simplistic analysis, it gives you a sense of the nearly order of magnitude difference between the two companies.

Cost to them (to make). Did you notice the difference in product gross margin, too?

It's one thing to change a paradigm of a science (or an industry). It's another to do the same to the science's (or industry's) cost structure, too.

Follow-up

Following up on my Dermatology Risk-Reward post, safety and efficacy dimensions could be expanded to include a cost (to patients) dimension, as I diagrammed below. Green represents PH-10, and the orange cylinders are illustrative of competing compounds with different dimensional features: e.g., comparable efficacy but lower safety and higher cost, higher efficacy but lower safety and higher cost, etc. PH-10 has a very low manufacturing cost, which provides Provectus/the eventual derm pharma licensee with significant (enormous) pricing flexibility to facilitate market entry and, over time, to grab market share.

PH-10 targets abnormal tissue for dermatological afflictions like atopic dermatitis and psoriasis (much like PV-10's targeting for oncology indications). There is selective epithelial uptake, and it is activated by ambient visible light within minutes. There is minimal toxicity in normal tissue, and no systemic uptake. PH-10's topical administration (it is a a topical aqueous hydrogel of rose bengal disodium) maximizes local potency, and minimizes the potential for systemic adverse effects. It photobleaches (fades) to an inactive state.

Are We There Yet?

Why is it taking so long to lock and thus release the MM Phase 2 and psoriasis Phase 2c data?

For the psoriasis trial, patient accrual ended in May 2011 (with 4 and 8 week measurement periods for primary and secondary outcome measures). Some, but not all, data of the MM Phase 2 trial was released in November 2010. While I think this data will be locked in March, relegating further worry as unproductive, I wondered what took so long. Was there something wrong with the data? Was management slow?

It recently dawned on me to examine a hypothesis: Management took what time was necessary to get it right? -- What is "it"? What does "right" mean?

It: Provectus' clinical value proposition: In the near-term, a robust safety profile and, initially, a very focused label indication of loco-regional application. Over the long-term, a much broader "label" of systemic application. Set aside safety, but recall the magic, statistically-oriented number of 300, which was important in the company's discussions with the TGA in gaining marketing approval: interim data from the Phase 3 trial (how many patients need to be enrolled, treated and evaluated?) + data from prior trials and programs (n = 20 from MM P1, n = 80 from MM P2, n = 6 from breast P1, n = 6 from HCC P1, n = 60-70 from CC program).

Right: Showing statistically significant clinical reproducibility and repeatability in and across indications, and [very, very carefully, but yet at the same time "statistically significantly"] contrast and compare efficacy. Again, set aside safety (recall that Rose Bengal has already been approved by the FDA and has a large safety dossier already on file with the agency to which Provectus has been adding to over time for both oncology and dermatology).

I contend management, given their focus on repeatability and reproducibility, is pursuing statistical significance with a narrow standard deviation on a smaller but the statistically required number of patients (an intelligent and capital efficient manner of conducting trials), rather than big pharma's capital insensitive approach of large numbers of trials of large numbers of patients. As a result, there is much more heightened sense of focus by management (Eric, in particular, as the lead among them for the clinical trials) on accumulating, tabulating, analyzing and presenting the data, and thus getting it right.

Dermatology Risk-Reward

"Anonymous" asked (paraphrasing), if the psoriasis Phase 2c efficacy results were average to good, why was there not as much of a chance or likelihood of no deal as much as my post suggested [to him or her] the chance or likelihood of a deal.

My daughter, in her Grade 4 English class, is learning about analogies. Try this: Risk (volatility of returns) is to reward (returns) [in investing or trading] as safety is to efficacy [in biopharmaceuticals]. Please also read my Dermapalooza post, which I linked to in the same recent post that confused Anonymous.

In investing or trading, the risk-return or risk-reward tradeoff is the principle that potential return rises with an increase in risk (source here). Low levels of risk (i.e., low levels of the volatility of returns, like the volatility of holding a government bond) are associated with low potential returns (i.e., low interest rates or yield on the bond), whereas high levels of risk are associated with high potential returns (i.e., like holding a stock). In investing or trading, we seek (through style and strategy) to decrease risk and increase return in conflict with this so-called principle. In choosing between investment A and investment B, assuming the same level of risk for each investment, you would choose the investment with the higher level of return. The flip side of this: Assuming the same level of return, you would choose the investment with the lower level of risk.

Now, consider safety as risk and efficacy as return.

Big (derm) pharma understands this: (a) efficacy should (will) go up as design constraints of PH-10's previous Phase 2c trial are relaxed and (b) PH-10's safety profile is unlikely to (will not) negatively change. Doing a deal with a large derm pharma company is as much about what management has demonstrated in prior clinical trials, together with showing a well-protected IP portfolio, a plethora of (recent) safety tests, and ease of manufacturing, among other things, as it is about what the pivotal Phase 3 trial is likely to produce by way of efficacy results.

Mixing my analogies, PH-10 has a very high Sharpe ratio (management is generating lots of alpha).

Tools In A Toolkit

I recently spoke to a hematologist-oncologist (a hem-onc) who specializes in melanoma and is very familiar with PV-10, Yervoy (ipilimumab) and Zelboraf (Vemurafenib) clinicals trials, and [obviously] the approvals of the Yervoy and Zelboraf. Let's call him a Key Opinion Leader, whose perspectives appears to be objective or reasonably objective (or, perhaps, not too subjective).

A snippet of my conversation with him: Given his intimacy with these treatments, I wanted to know how clinicians (at large, and not just him) would choose from a myriad of therapies to treat a cancer-ridden patient (any kind of cancer, not just MM). He characterized cancer in two groups, MM, which is very rare, and other cancers like breast, prostate, etc., which are relatively more common. He felt that, with only 8,000 cases of Stage 4 MM a year, that these (and many or most, if not all, Stage III) patients very likely would be referred to a melanoma specialist like him (as opposed to other more common forms of cancer, where patients would remain with their "regular" oncologists).

He said while there were guidelines as how to treat people, the treatment ultimately strategy and decision remained with the treating physician. He used the example of a patient with MM and the BRAF gene. A patient might come in, and he might determine he or she had said gene. His approach could be that even though he knew that they had this gene, and based on their personal situation (e.g., at this time, such a patient might have regional disease that was amenable to injection), he might first use PV-10, knowing that if it failed or was not as effective, he could always reach back into his toolkit for Zelboraf.

Psoriasis Phase 2c Trial Results

I expect the long-awaited top-line results for Provectus' psoriasis Phase 2c trial will be made available to the market via PR in March (see my change in expectations here). Potential derm licensee partners should have access to the much larger dataset at or around the same time.

After reviewing the prospective PR, one might (a) conclude PH-10 displayed "middle-of-the-road" (average to good) efficacy, (b) observe there was no benefit from the vehicle, and (c) recall the excellent safety profile of PH-10 (and, for that matter, PV-10 and rose bengal). The pivotal Phase 3 trial, with constraints in the Phase 2c trial lifted, is where I expect to see robust efficacy based on that trial's design parameters. For more on this topic, see my Dermapalooza post here.

More importantly, the PR serves as a timer or stopwatch of sorts, clocking the time needed or required by management to produce a derm licensure deal. As I mentioned above, data would (should) be shared with potential partners. One or more of them may (should) extend a term sheet or two. The financial adviser, then, would (should) be formally announced, via PR, to begin an auction process to license off (sell) the derm business, using the term sheet(s) as the starting point for this deal making process. I will revisit this in subsequent posts as we approach this action.

February

The rest of February should be quiet (i.e., work going on at the company, but no significant clinical- or regulatory-related news event or PR) aside from, potentially, one non-clinical- or non-transaction-related item. Although this is a change in my expectations (i.e., a quiet remainder of the month primarily for clinical-related events), the change does not concerns me.

This blog can boast nearly 200 unique regular visitors from about 150 cities in the U.S. and Europe. When I first started writing posts, there was much in my proverbial notepad from which to share and upon which to expound and expand. My goals were and still are to share due diligence, conduct analysis and provide opinions on the company. Going forward, I will not blog as frequently (I'm not a journalist or writer, so if there's nothing to say or write, I won't). When I do, the posts are likely to come in bunches and should be driven primarily by news or PR.

There was speculation among a few shareholders that Provectus would announce their submission of the final protocol to the FDA for the pivotal MM Phase 3 trial, thereby establishing expectations about when the company could receive the SPA and, consequently, placing a timer on the situation. This hazarding a guess likely grew from management's contemplation of holding an investor conference call shortly after the January 18 PR to explain FDA guidance on trial design and agency meetings (and potentially changing their behavior and protocols to disseminating information).

I was asked about my view on holding such a conference call. I told management this could be good idea if they were prepared to answer all proffered questions on the SPA topic as well as on other topics. It would be a bad idea if they weren't prepared to answer all questions. Attendees were likely to press management on details that they likely were not going to be comfortable or able to divulge, and venture into other clinical areas where, again, management might not desire to answer some questions. I thought management should be prepared to answer all questions, or answer none (i.e., don't hold a conference call). In the end, management decided not to hold a call.

It will be highly unlikely that we will hear or learn about the submission of the final protocol. Doing so would be completely out of character for the company. It would be analogous to Provectus issuing a PR to tell the market of an upcoming EOP2 meeting with the FDA. They did not do this, except in the one case of Craig mentioning such at an investor-oriented conference last March (as a result, in the abundance of caution and simply conducting good process, the company filed an 8-K). Rather, the market will hear via PR about the official receipt of the SPA when the FDA informs the company it indeed has achieved it. My expectation of a mid- to late-March date for this event comes from the calculation of 45 days after January 18  and the assumption that no further iterations will be required (if there is an iteration or two or more, my expectation will change).

Time line? (update)

I previously blogged clinical- and regulatory-oriented time lines. I have revised my expectation regarding the release of the top-line psoriasis Phase 2c trial data. Click on the table below to see a much larger version on your screen.

Photogen Technologies

In conducting due diligence on management, I spent a good amount of time understanding their history at Photogen.

A snippet: In November 2002, the company's founding shareholders, three of whom were Craig, Tim and Eric, split off Photogen's therapeutic line of business (which, of course, became Provectus) in exchange for and by canceling their ~20MM+ shares (pre-reverse split; the post-reverse split number was ~5MM+). Photogen stock ranged from $1.00 (December) to $8.38 (January) that year.

In January, for example, their holdings would have been valued at more than $160MM. By November, as finalization of the divorce from Photogen approached, their holdings dropped considerably in value (along with the Nasdaq, where PHGN shares traded; the technology index fell from 2059 in January to 1140 in October before rebounding to 1479 by the end of November, closing the year at 1348). The share price low, in December, was a post-reverse split figure; thus, the pre-reverse split price per share was $0.25.

Data like this, among other information, can assist in understanding and determining Provectus' principals' respective cost basis.

Orbimed Advisors' 12/31/11 13F

Corporate advisory board member David Darst is a member of Orbimed's private equity team (not its public equity team). Orbimed's 12/31/11 13F filing shows no Provectus holdings. I put Orbimed in the group of investors that know the company very well but are waiting for a PR stating Provectus has received the SPA before they will buy shares.

PR Protocol

I recently asked management why a PR was not issued about Craig's presentation at the BIO CEO & Investor Conference. The company's protocol for issuing PRs about management presentations at investor-oriented conferences is based on whether the presentation is webcast. If the presentation is webcast, a PR is issued. If it is not, no PR is issued. For example, Craig's presentation at the Noble Financial Capital Markets Conference was webcast. As a result, a PR was issued. His presentation at BIO CEO was not. No PR was issued.

I told management I disagreed with this protocol (see expanded rationale below). I do not think there is a fine line between substantive PR and hype. I think the line is, in fact, very wide. Objective dispassion can be achieved in writing PRs (having done it myself "in-house" for a portfolio company of mine some time back). Self-aggrandizing or hyperbolic PRs are pretty easy to spot (I don't mean to pick on these folks, but if you have to issue a PR on this topic, then...). I would argue the company has a history of being informative and/or substantive in its PRs, and not prone to hyperbole or being vacuous.

Attendance at these investor-oriented conferences is used by companies primarily to raise market awareness: Let investors know more about you so they, the investors, will buy more of your shares. If you do a bad job, you've probably presented them with a rationale for shorting your stock.

Provectus is somewhat hamstrung for now by being a penny stock traded over the counter. Some prospective buyers cannot or will not buy shares under a certain price per share. Others cannot or will not buy OTC shares. The larger point is that most hedge funds, whether biotechnology-focused or simply long-short "whatever," are specifically or generally momentum types. Broadly speaking, HFs will pile into a stock of which they are made aware, whether this means the stock because of its price (read: higher than a few dollars in share price) or its rising (or falling) price pops up on their screens (causing them to do some research into it, or buying or shorting because the growing herd is doing the same). Not as many potential institutional investors or HFs are looking at Provectus stock (or the company) at the present time as you would think or hope.

Not issuing a "simple," straightforward or down-the-middle-of-the-fairway PR about Craig's presentation at BIO CEO is a small lost opportunity to increase company awareness to a subset of the investor class.

I understand the protocol will be reviewed amongst themselves and with the company's PR firm, PLR; however, I do not think it will change. Craig and the team set a high PR bar in regards to disseminating clinical trial or clinical data. It appears they set a similarly high PR bar for investor-oriented conference participation as well.

Updated Corporate Presentation

Provectus updated its corporate presentation on the website (and distributed it today via Provectus News). Two slides on topics the company previously has not directly referenced publicly in the past were included: administration/monitoring and anticipated reimbursement.

Materials like this should foster more dialogue about PV-10’s place in the clinic when the drug is approved.

Revelation (formerly Osmium) Special Situations Fund

Recall that Chris Kuchanny's investment (hedge fund) firm, Revelation (formerly Osmium) Capital Management, participated in a private placement of shares by Provectus in March 2010.

Revelation filed an amended Schedule 13G today, detailing a 5.21% beneficial ownership of 4,052,323 shares of common stock and warrants to purchase up to 1,750,000 shares of common stock. Revelation's historical filings show:

The placement's basic deal structure was the purchase of a preferred share with an 8% dividend (payable in either cash or stock at Provectus' election) at $0.75, and a warrant on one-half of a common share (with an exercise price of $1.00.

It appears Revelation has not sold any shares since purchasing them (although it could be that it's converted all of its preferred share holdings into common stock; it held 1.75MM preferred shares as of the previous 13G filing) despite a 38% drop in the share price over that period of time:

H. Lee Moffitt Cancer Center & Research Institute

About a month ago, I independently confirmed the qualitative result of Moffitt’s immunology work. I self-embargoed revealing this due diligence until the abstract is made public on the eve of its poster presentation.

Recall, over dinner, Craig said Moffit had confirmed the bystander (remote) 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.

Think of this work as another critical brick laid as part of the continued strengthening of the foundation of PV-10's clinical value proposition.

Medical and Investor Conference Participation

Company participation in and attendance at, by management and/or PIs and/or medical/clinical partners, at conferences thus far in 2012 (actual, expected, potential, maybe):

Get Shorty (update)

Initial post here.

Short interest through January month-end (click on the chart/illustration to expand it):

Maxim Group Growth Conference

The company is expected to participate in the 5th annual Maxim Group Growth Conference on March 26.

HemOnc Today Melanoma and Cutaneous Malignancies

The company will participate in the HemOnc Today Melanoma Meeting on April 13 and 14.

The 14th Annual BIO CEO & Investor Conference

Craig is presenting at the 14th Annual BIO CEO & Investor Conference. The speaking slot is Monday, February 13 at 8:30 am ET.

OneMedRadio Interview

OneMedPlace's OneMedRadio's Dr. Malini Chatterjee recently interviewed Craig Dees. You can hear the interview here. It's nearly 40 minutes, and certainly is worth a listen. Management said they did not pay OMP for this research coverage.

Here's what struck me about the interview:

• I chuckled when I heard the interviewer's comments on the previous guidance from the company on the SPA process. I think the company unofficially secured the SPA (my post on this topic is here). I must not be the only one. The interviewer's phrases were telling, paraphrasing: "Provectus received the blessing of the FDA for the final design" and "the FDA came to a consensus with Provectus on the design."

• The interviewer spoke several times on Rose Bengal's prior approval by and large safety dossier already on file with the FDA. Caig said management specifically chose Rose Bengal because of this long and well documented safety history, but that it was not the only halogenated xanthene in their portfolio.

• Craig's comments about their prior knowledge of the cold-loading dose, which enabled Provectus to be more effective in their approach to PV-10 dosing.

• He said he hoped the [monitoring] committee would stop the Phase 3 trial early on the basis of statistically superior numbers of the PV-10 arm compared to the comparator arm (of either DTIC or TMZ) and Rose Bengal's large safety dossier. -- [It make sense that management will very likely include an interim data read-out as part of the final protocol. Interim data generated from such a read-out presumably would be the basis for seeking early approval in Australia and terminating the Phase 3 trial in the U.S. for purposes of an early NDA filing.]

• The interviewer commented on the likelihood that the Phase 3 trial would be an open label one. Craig noted that PV-10's distinct color and intra-tumoral injection makes it very difficult to blind the study to either the treating physician or the patient. He also drove home the point that it is difficult to compare PV-10 either with historical standard of care drugs (like DTIC and TMZ) or recent approvals (like Yervoy and Zelboraf) on the basis of safety, efficacy, method of delivery, patient population, cost, among other things. -- [The former are provided intravenously or ingested and measure benefit in a very small number of months, while the latter are for very late stage patients (and is very expensive) or a genetic subset of the population (and patients relapse with the disease coming back with greater ferocity).]

Some other comments of Craig:

• A reminder Provectus is designing a Phase 1 pancreatic trial. --[Look for another creative and intelligent trial design by management. Typically Phase 1 trials test if a new treatment is safe (safety toxicity) and look for the best way to give the treatment (dosing). Management's version of a Phase 1 trial yield efficacy results (revealed for HCC, currently unrevealed for breast). A potential primary endpoint might be pain relief.]

• The European market for MM is increasing.

• While Craig did not want to provide specific comments about size of the accessible MM population for PV-10, he was very clear the eventual accessible patient population PV-10 was going to be much bigger than that of the label indication. In previous posts, I have noted management's strategy is to get approved quickly for a very focused indication. Of note was his comment that PV-10 could be used first by physicians contemplating surgery for their patients.

• Price of treatments is becoming more important. Craig mentioned the cost of treatment several times in the interview: the prohibitive or near-prohibitive cost of treatments on the market and the flexibility Provectus has with their pricing. -- [A stumbling block for much higher Yervoy sales is, among other  things, the excessive cost of treatment. Provecust has not yet issued guidance on the price of PV-10. The presumed $20,000 to $30,000 cost is an assumption made by research analysts at Rodman & Renshaw and Maxim Group, and not based on any specific guidance from management.]

• At about 14:39, Craig provides a nice perspective on the mechanism of action: System wide anti-cancer immunity. Anti-tumor immunity. Self-destruct mechanism.

• He talked about the consistency, reproducibility and repeatability of results thus far, comparing Phase 1 trial patients with the first cohort of the Phase 2 trial and the suitable stage-based patients in the second cohort. The second cohort included much sicker patients who management felt needed to be in the trial because it was the right thing to do for them.

• Craig said it was important to watch patient acquisition. -- [The faster patients are enrolled and treated in both arms, the faster we can expect the time for the comparator arm to fail, and thus patients in that arm can be moved over to the PV-10 arm, as a precursor to waiting for the interim results to be made available.]

Saving Private Ryan

Provectus is a publicly traded company. From the outset, I viewed Provectus as a public private company -- a private company that happens to be publicly traded. I still do. This blog post may be too much of inside baseball, but I want to tie this post to why I believe the end-game valuation and outcome is both substantial and realistic.

As a public company, Provectus has:

• Shares that trade over-the-counter. To me, all this means is that you have some level of liquidity to buy and sell shares, that the share price can go up and go down, and that if the share price exceeds a certain level for a certain period of time the stock is eligible (after certain other criteria are met) to be listed on a larger stock exchange.

• Timely and informative regulatory reporting. The company meets SEC reporting requirements. There are rare instances where it does not, such as when the company had to restate certain financials because management characterized and valued the preferred stock in a manner inconsistent with how the SEC wanted it characterized. Uninterestingly enough, you get as much information from reading Provectus filings as you do from listening to Bil Belichick press conferences.

• Many shareholders. You know who you are. We can vote on board members, corporate structure changes, amendments and other things.

The above and $3 (give or take) will get you a venti (with whip) Americano at Starbucks.

As a private company, Provectus has a board of directors controlled by company insiders. There is no requirement for the company to have an independent board (i.e., the number of independent directors outnumber insiders) so long as it remains traded over-the-counter. If and when the stock is eligible to move to the AMEX or NASDAQ, board composition will require changes. Further, the audit and compensation committees controlled by insiders. Again, this will change if and when the stock moves to a much larger stock exchange.

I am being quite general in my statements of Provectus as a public private company. Why does it matter? Yes, biotechnology companies historically have tapped public markets through IPOs and secondaries, PIPEs and placements, to raise the necessary money to fund their development. Private companies that eschew this path raise money from venture capital firms and other like investors.

A key difference lies in how certain stakeholders like management and investors behave in each circumstance. As a public company, shares held by management and investors (here I'm referring to institutional investors, but there's no reason not to include you and me) come and go through the mechanism of the public market. Motivations may differ, but they're usually the same. The markets are a mechanism for liquidity for these folks.

As a private company, management and investors (here, venture capital firms and perhaps angel and other early individual investors) exit upon an IPO or acquisition of the company. Secondary markets for shares of private of companies (read: Facebook and other notable Silicon Valley start-up companies, among others) is not really an option for the vast majority of privately held biotechnology companies. In other words, they're locked in for some time. This speaks to the motivations of the management team (and to a certain extent the investors who back them).

Provectus management ultimately is looking to position the company for an acquisition by a global pharma company at an egregiously large valuation. Along the way, they may transact a dermatology deal (A), an investment by a global pharma company like Pfizer or Johnson & Johnson (C) and/or a limited, geography-specific oncology license or two (B). They might sell a few shares when the price reaches $5 to $10, and take some money off the table. But, the prize is the end game, and management is keeping their eye on the prize.

I write all of this to lead you into a discussion of determining the valuation of the company as if it were private. Venture capital investors talk of a company's pre-money valuation -- the valuation of a company before consideration of the amount of money invested in it during an investment round. The company's post-money valuation is equal to its pre-money valuation plus the investment amount. A rudimentary way of backing into pre- or post-money valuations is to determine the number of shares, warrants, options and other equity securities offered to an investor (call this number X), and divide X by the total number of outstanding shares, warrants, options and other equity securities of the company (call this number Y). Divide the result of X divided by Y (call this number Z) into the investment amount (call this number M). M divided by Z will give you the post-money valuation. M/Z minus M will give you the pre-money valuation.

Going back several years, I calculated (very roughly) Provectus' pre-money valuation before several investment rounds it has consummated with institutional and accredited investors:

The main conclusion I draw from this is that management, has most recently set Provectus' pre-money valuation, as a private company, at about $88 million. If management behavior towards monetization is comparable to managers of private biotechnology companies, the monetization expectation of at least several billion dollars generates a sale multiple consistent with public company valuation techniques.

Time line? (update)

I previously blogged clinical, regulatory and publication time lines. In an updated version below, the peer-reviewed paper in a global publication now more likely appears towards the end of Q3 or sometime in Q4. Click on the table below to see a much larger version on your screen.

Transaction

It seems very clear to me that from here on out Provectus is in a very fluid and dynamic situation. While I do not believe something, anything is imminent, I do think, by virtue of what management achieved in terms of breakthroughs in every major program last year and so far this year (melanoma, liver, dermatology, immunology) the company is much closer to the end-game (the acquisition of the company) than it has ever been.

I think the key to understanding management's thinking about the end-game is to understand how they view this journey. I do not think they ask themselves the question, "can we sell the company," which would suggest lower price expectations or price expectations based on what other CEOs and management teams and board of directors are willing to exit their respective situations.

Rather, I think Provectus management is engaged in a business decision: "for how much can we sell the company." As a result, this perspective requires management to assess what interim transactions are necessary or would (could) facilitate a much larger valuation for the full acquisition of the company.

Can vs. How much. These are two very different lines of thinking; two very different sets of tactics and strategies.

I'd like to expand on what I think could happen in terms of transactions.

Let's first establish the kinds of transactions:

• A = a dermatology deal; the complete license/sale of this business, which is a separate/distinct therapeutic business from oncology
• B(n) = a mini-oncology deal (1...n), whereby the company licenses PV-10 to treat a specific indication in a specific geography; one or two such deals are possible: MM in Australia or Australasia, and HCC (liver cancer) in China or Japan
• C = a minority equity investment (by a pharmaceutical company such as, for example, Pfizer or Johnson & Johnson)
• D = the complete acquisition of the company

Now, let's establish an order (which could be more likely than another) to the transactions:

1. A, C, B, D.
• Common to all of these potential or possible transaction flows is the sale or complete licensure of the dermatology business (PH-10).
• I think a small equity investment -- 4-5 million shares issued/sold to a strategic partner (e.g., PFE, JNJ, another global pharma company) at $4-5 per share follows (the math here is, roughly, a $15-20 million investment at a $450-550 million post-money valuation [read: 3-3.5% dilution, assuming 113-114 million shares issued and outstanding]).
• One or two mini-oncology deals.
• The complete acquisition of the company.
2. A, D.
• A highly successful dermatology sale would (could) be the catalyst for the sale of the entire company because of the proof points that an "A" deal would establish: interest, value, valuation, demand, etc.
• The wild card here, and more likely a very small probability of occurring, is the commencement of the auction process for the derm business acting as a catalyst to spur a global pharma such as Pfizer or Johnson & Johnson to acquire the entire company before Provectus gets too rich in terms of price or valuation.
3. A, C or B, D.
• An equity investment by a global pharma company or a limited oncology license might spur the eventual sale of the company for the same reason I wrote above: such sequential validation might start to dramatically raise the value of the company in a world of such scarce assets.