Blog Reader Question

Could you please quantify for me the percentage of companies that apply for an SPA that eventually receive it? Are large investors waiting on the sidelines because they want to see the endpoints and efficacy of PV-10 compared to standard care/placebo? What causes the large investors to wait on the sidelines when their entry point into PVCT could be 3/4 times the present stock price in a relatively short period of time?

Could you please quantify for me the percentage of companies that apply for an SPA that eventually receive it? Under a well-defined but at times opaque process companies work with the FDA to seek SPAs for their drug compounds and pivotal trials. A cursory Web-based search reveals one or three companies who sought SPAs but ultimately did not secure them because the companies terminated the process (presumably strongly influenced by their interactions with the FDA). As I have written before, I think Provectus has reached a verbal agreement on the SPA with the FDA. We await the PR to make this agreement known.

Are large investors waiting on the sidelines because they want to see the endpoints and efficacy of PV-10 compared to standard care/placebo? No. The life sciences investors to whom I refer are not waiting for this information, but rather the SPA PR from Provectus. Others wait for the PR and the stock to trade on the NASDAQ. You appear to be referring to the interim analysis of the MM Phase 3 trial or, perhaps, the post-trial analysis.

What causes the large investors to wait on the sidelines when their entry point into PVCT could be 3/4 times the present stock price in a relatively short period of time? Some of these life sciences specialists (i.e., large investors) want to see management have an SPA fully in hand to provide certainty of the regulatory path. Others want the SPA and the stock to trade on a major exchange like the NASDAQ, together with the comfort that comes with greater liquidity and trading volume. Others, but a much smaller subset, want the SPA, the NASDAQ and the final dispelling of any lack of comprehension about PV-10's systemic benefit that comes with the pending release of more Moffitt murine study work. Despite the return proposition you proffer, these investors consider the risk-return proposition. It is less risky for them to buy upon or after the SPA announcement than before, no matter how much they think the SPA is in the bag for the company.

Your question is a good one, and one that perplexes me from time to time. I began my capital markets career as a proprietary currency derivative trader for a Top 20 global commercial bank. Then, I spent several years making strategic equity investments in technology start-up companies on behalf of a Fortune 300 corporation that, while guided by business unit goals and interests, provide my team with a very open-ended mandate. This experience was followed by stints opportunistically investing in both privately held and publicly traded companies for an ultra-high net worth individual and, later, a small hedge fund. As I invest for my own firm, I look for the best investment idea, irrespective of who, what, when, where, why and how. This applies to both long and short approaches to an asset class or equity security.

Inevitably, I have been early to take action in many cases. In most cases, it has worked out because of discipline and conviction in the face of emotional macro and micro reaction, unless the underlying investment theses change. Sometimes, however, I am just plain wrong. For Provectus, I began nibbling in 2007 and 2008, but increased our holdings significantly from 2009 to 2011. I made the decision to convert our profits in mid- to late-2010 (early), from being mostly out of the market starting in late-2007 (early) and returning in March/April 2008 ("lucky"), into more shares of the company.

Over the course of my career, I have never been truly constrained by the institutional investment charters or frameworks that appear to be restraining the life sciences investors to whom I referred. They have a set of investment rules and criteria they think works best for them and sets them up for success. Management has presented to them, and continues to update them. Many of them see and understand Provectus' clinical, regulatory, business and stock value propositions. The lack of an SPA and the stock on a major exchange seem to be the crux of what holds them back.

Pete travels a good deal, meeting with existing and prospective equity research analysts, existing and prospective investors, board members, corporate advisory board members, prospective partners, etc. Typically, this travel does not necessitate an Out of Office [automated] e-mail notice, since he is very diligent in responding to inquiries. Occasionally, he utilizes this notice (about 6 times in the last 2 years), traveling for a few days in such instances. In July he traveled for the entire month, utilizing the Out of Office notice:

Life sciences investors think Provectus will get the SPA, but they want to see it formally and officially in hand. So, they wait, but those who have dipped a toenail or toe into the water, and those who stand at water's edge have been prepped by Pete. These investors, firms and funds will descend on the stock when the SPA is announced. A feed frenzy should ensue when a mini-oncology or dermatology deal is announced. The dam breaks completely when a relationship with Pfizer finally comes to light.

I will know if I have been early or am wrong in short order.