June 8, 2012

A Mini-Onc Deal for PV-10: China & Hepatocellular carcinoma

As I have written in the past, there are several deal transactions that could be in the offing. These include a dermatology deal (the license of PH-10 for inflammatory skin disorders), mini-oncology deals (geography and indication specific), a strategic minority investment (an investment for equity by PFE, JNJ or another big pharmaceutical company) and the end-game (the acquisition of Provectus by PFE or the like). Timing, of course, is everything.

While there are several possible mini-oncology options, leading ones include metastatic melanoma in Australasia (Australia, New Zealand, New Guinea and neighbouring islands in the Pacific Ocean), and hepatocellular carcinoma in China and Japan.

Let's explore China.

As reported by Reuters earlier today, "China has overhauled parts of its intellectual property laws to allow its drug makers to make cheap copies of medicines still under patent protection..." This and other well documented related issues makes doing business in China very challenging for Western companies.

In addition to (but likely irrespective of) intellectual property protections and applications the company has undertaken or carried out in China to date, Provectus counters the Reuters-reported concern by entering into a partnership with a dominant PRC-sponsored (People's Republic of China- or state-sponsored) pharmaceutical company that is sufficiently motivated to quash internal pirating and implicitly government-backed to facilitate effective drug sales.

This is the approach Western Big Pharma is taking; namely, partnering up with an inside player.

A back-of-the-envelope calculation for potential sales, using a treatment price range of $5K-15K and a market penetration range of 10-30%, yields an annual sales range for China of about $200MM-1.5B.

The rest of the world (ex-U.S., ex-European Union) adds another $100MM-900MM. Japan, South Korea and Taiwan comprise one-third of this.

A mini-oncology deal in China for HCC dramatically alters Provectus' near-term and long-term prospects and positioning. If, and when? Only time will tell...

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