December 4, 2012

$PVCT: Can Management Get A Deal Done In China?

From what I can gather, Peter traveled to Singapore and China on his latest trip to Asia. I don't yet why he was in Singapore. I think there are shareholders in the country, and Singapore has long been a source of global financing for companies in many industry sectors. Peter's time in China relates to the company seeking outlying geographic licenses, as it wrote in its last two 10-Qs.

There is no doubt China has vast potential for any company, now particularly in pharmaceuticals
Click figure to enlarge it. Source: China's Pharmaceutical Industry - Poised For The Giant Leap. KPMG, 2011.
Click figure to enlarge it. Source: China's Pharmaceutical Industry - Poised For The Giant Leap. KPMG, 2011.
Click figure to enlarge it.
If Provectus were to get a mini-oncology deal done in China, the lead indication would be liver cancer, the market for which there is enormous: there are about 350,000 new liver cancer cases each year, or half of the world's total (see blog post here).

Lung cancer is comparable, as you can see from the table immediately above. A recent article on lung cancer in Beijing can be found here. I think the company has demonstrated PV-10 success with small cell lung cancer in murine models. Craig has show more results for this indication by creating and injecting lung tumors.

I suppose a potential deal could be in the order of at least $1 billion (top-line figure), comprised of:
  • An upfront payment (e.g., $25-50MM),
  • Milestone payments (e.g., $100-150MM), and
  • Royalty payments (e.g., double digit percentage).
Aside from a large, well structured deal, the choice of the partner -- the domestic Chinese pharma entity -- and securing the backing of the government are both critical.

I worked with a company in China for a few years. Because it was in the financial services space, it sought the support/imprimatur/backing of the State Administration of Foreign Exchange (SAFE) and the People's Bank of China (PBOC).

I would assume, like with Australia's Therapeutic Goods Administration (TGA), Provectus is working closely with a regulatory body and/or, more critically, a governmental agency to seek or secure backing of some sort to increase the likelihood and scope of success in China.

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