September 9, 2012

Not So Random Thoughts About $PVCT.OB

This is how humans are: We question all our beliefs, except for the ones that we really believe in, and those we never think to question. -- Andrew "Ender" Wiggin in Speaker for the Dead by Orson Scott Card

Recent selling: There was speculation again this week Dr. Adams, the large (formerly quite large) Southern California-based shareholder was undergoing more forced selling. It was speculated at the time he also was responsible for selling on July 16 and 17. Having spoken with people who actually spoke with Dr. Adams and his representative about acquiring all of his shares (but were subsequently turned down), I have greater appreciation for history and the current situation. Nevertheless, I am perplexed by the irrationality of the situation, but it is what is.

In the course of Maxim trying to garner indications of interest in (informally flog) the preferred stock offering this week, it is possible but by no means certain that some of this week's volume, such as Friday's, could be attributed to some of those folks receiving such calls. Traders and short-term investors (oxymoron?) are who we think they are. If they think a dilutive fund raising is imminent, it is not an unreasonable action for them to dump or short PVCT shares. Selling may continue next week from either or both of Adams and folks thinking they can get out in front of a preferred stock offering, which, as I wrote in my prior blog post, is not a certainty.

Lack of buying: Dr. Adams' and possible Maxim-induced selling of shares aside, one cannot ignore lack of buying. There are folks on the other sides of all of these trades. But, stating the obvious: if there is more demand than supply -- more buying interest than selling interest -- share prices go up. The opposite, as unfortunately in the case of Provectus, also is true. The share price has drifted downwards about 9% over the last month.

Life sciences investors still appear to be on the sidelines waiting for the SPA and/or more Moffitt data. I probably underestimated the historical level of skepticism PV-10 and management faced (circa 2008-2010) by these investors who really did not believe the drug (i) could do what it was doing loco-regionally and systemically and (ii) would be approved as a systemic agent. The dialog has changed dramatically since Moffitt's initial murine study work was released in March 2012. These same investors acknowledge the seriousness of Provectus' work to finalize the regulatory path and further demonstrate PV-10's systemic effectiveness. Nevertheless, they need to understand the very specific details of the trial design and Moffitt data.

PFE interest: I recently heard from several non-company sources the rumor Provectus rebuffed an overture from Pfizer to buy the company in the second half of last year for $7 per share. I am not certain, but I think this figure was all cash.

Using a fully diluted share number of 145MM (taken from the most recent 10-K, but not adjusted for the strike and exercise price-based share adjustment from option and warrant exercises), $7 per share yields an approximate $1B valuation, which (if indeed broached in the fall of 2011) would have been consistent with two billion dollar deals and their makeup announced earlier in the year and that both others and I used as comparable transactions:
  • Amgen's acquisition of BioVex and OncoVex (now talimogene laherparepvec/T-Vec) for $1B ($425MM upfront, $575 in milestone payments) announced in January 2011, and
  • Daiichi Sankyo's acquisition of Plexxikon and PLX4032 (now vemurafenib/Zelboraf) for $935MM ($805MM upfront, $130 in milestone payments) announced in February 2011.
There is absolutely no doubt in my mind that Pfizer is interested in a transaction with Provectus. The questions, of course, are "what kind(s)" and "for how much."

Keeping Provectus' options open: The company is entering a dynamic time that, finally, could result in its metamorphosis. While I do hope the SPA PR comes out soon -- please, pretty please, with sugar on top!!! --- it is going to come out. Management's guidance remains Q3 as its base case.

Management will present at several conferences in September and October, including at least two investor conferences (R&R, BioX) and two medical ones (ESMO and MD Becker).

Much more Moffitt data is coming this month and next.

The SPA PR provides complete clarity of the regulatory path. The receipt of the SPA is tantamount to approving PV-10, given the past efficacy performance of the drug. Moffitt data reinforces PV-10's immense systemic benefit, further increasing the scope of the drug's treatment applicability. From here, the company's negotiating leverage -- for a derm deal, a mini-oncology deal, a strategic investment from Pfizer or other Big Pharma company, etc. -- obviously would increase immensely.

I think the recently filed preferred stock facility is an example of Provectus keeping their options open as they progress through September and October.

As always, time will tell. Patience my young Padowan. Really?

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