Metastatic Melanoma: A Murine Study Confirming an Immune Response with PV-10

Via Provectus News, yesterday, the company circulated an article appearing in the June 2012 edition of Cancer Watch highlighting Moffitt's first two studies that confirmed PV-10's direct effect and systemic response.


It is a good and very important read, and sets the stage for the potential release of Moffitt's subsequent work possibly later this year.


More than reading a review of outcome of Moffitt's initial work, I was struck by several items in the article:

• In addition to Moffitt's Dr. Toomey, who led the immunology-related work, meaningful, substantive and positive quotes by several key opinion leaders (KOLs):
• Dr. Merrick Ross, Professor of Surgery at MD Anderson Cancer Center (Texas),
• Dr. Robert Andtbacka, Assistant Professor of Surgical Oncology, University of Utah School of Medicine, and Huntsman Cancer Institute (Utah),
• Dr. Donald Morton, Chief of the Melanoma Program at John Wayne Cancer Institute (California),
• Dr. Amod Sarnaik, Assistant Professor of Cutaneous Oncology at Moffitt (Florida); and,
• Dr. Vernon Sondak, Professor of Surgery, Chief of Cutaneous Oncology and Director of Surgical Education at Moffitt (Florida).

• A cogent and unequivocal summation by Dr. Andtbacka of Dr. Toomey's findings of higher concentrations or amounts of interferon-γ: "Interferon-γ is thought to be the quintessential cytokine mediating an immune response to melanoma. The fact that restimulating splenocytes with the tumor produced a lot more interferon-γ is very promising."

• Supportive comments, in context, by key KOL Dr. Morton, who is widely recognized as a pioneer of surgical oncology research in general, of vaccine therapy for melanoma and of intralesional therapy: "While Dr. Toomey’s research needs to be confirmed on a much larger scale, the findings are interesting and promising."

• Dr. Sarnaik's striking comments that a PV-10-induced antigen response is more like a surgical strike with clear patient benefits that accrue thereof: "The PV-10-induced antigen response is more like a “surgical strike” in that only a subpopulation of cells is targeted for destruction, and immune cells that remodel or repair an immune reaction are recruited."

• Dr. Toomey's comments on the importance of the systemic effect at cancer's unseen level, because of the likely existence of microscopic levels of metastases that cannot be visualized and treated directly: "The hope is that if you have a lasting immune response, you’ll end up with longer disease-free survival and overall survival."

• The opportunity, now, to experiment on how PV-10 might further increase efficacy through further stimulating the immune system by combining the drug with a host of other therapies.

• Dr. Sondak's closing comment: "There is no question that there is a  clinical need for this sort of treatment."

The questions posed by the article's author have already clear answers:

• Does the PV-10-induced immune response last? More than likely yes, given the statements by Dr. Agarwala in Munich that PV-10 has a durable response. Of course, the durability of the immune response has not yet been commented on by Moffitt.

• Are multiple injections useful? Yes, as demonstrated in the compassionate use program.

• Why do some patients respond to PV-10 and others not? More than likely due to improper or ineffective injections.

• Would re-treatment help non-responders? Yes, as demonstrated in the compassionate use program. Use enough water to douse a fire, and you put it out. Use enough PV-10, and cancer goes away.

• Would pre-neoadjuvant use (prior to surgery) be beneficial? Yes. The lack of disfiguring results with PV-10 should mean surgery need not be the first thought in a physcian's treatment decision tree. For example, imagine a world where women need not suffer the indignity of a mastectomy. Ever.

• Front-line therapy? Yes.

This is just the beginning, or the tip of the iceberg, of the revelation of Moffitt's work. What more can we expect? How spectacular could the results of their further work be?

• Has Moffitt conducted studies on other cancer indications to validate (confirm) PV-10's multi-indication viability?

• Have they validated (confirmed) the durability of PV-10's immune response?

• Has Moffitt combined PV-10 with other therapies, such as ipilimumab (Yervoy)?

Pivotal MM Phase 3 Trial Design: Study Size Dramatically Reduced

Tucked away inside Dr. Agarwala's presentation was a slide on the planned MM Phase 3 trial.

It appears no details of the design of this pivotal trial remain to be hammered out.

I found it very notable that the study size figure dropped dramatically from prior guidance in past presentations. Now180 patients; down from 300. Why the dramatic reduction of almost 40%? The FDA wanted Provectus to have a higher effect size (i.e., a lower hazard ratio), which drives a lower study size. Most studies have much larger patient numbers because their effect sizes are lower (i.e., higher hazard ratios), which means these studies have very incremental improvements. PV-10's improvement is staggeringly large.

While the the physician (and patient) have a choice between DTIC and TMZ, the selection of comparator (or standard of care) is essentially the same, as one is the metabolized form of the other.

The response assessment period of 12 weeks is a time point to start tracking progression and allow crossover to the active PV-10 arm.

Takeaway: The dramatic reduction in the agreed upon study size is a very clear and very meaningful example of the FDA helping Provectus to get PV-10 approved and in the hands of doctors and bloodstreams of patients.

2nd European Post-Chicago Melanoma Meeting 2012 (more)

My summary conclusions from, among other things, Dr. Agarwala's presentation, management's presence at the Munich conference, data analysis, further information gathering and due diligence:

• Provide a patient enough PV-10, whether through more re-treatments or delivering more drug in general, and MM (cancer) goes away;
• The trial did not sufficiently positively impact several patients because the limited treatment regimen, by trial design, handcuffed PV-10;
• The implication (of the two points above) is that doctors should/must/will try PV-10 first, before either surgery or another non-surgical therapy, to illicit an efficacious result for the patient before determining what other treatment option to utilize;
• There is a clear systemic benefit;
• Overall disease burden is reduced;
• PV-10's response is durable;
• The FDA is helping to get the drug approved; and
• For FDA regulatory purposes only, PV-10 will be used for Stage 3 disease. As soon as PV-10 is approved, the drug will be used for Stage 2 and Stage 4 disease.

Provectus Pharmaceuticals Presents Final Phase 2 on PV-10 At 2nd European Post-Chicago Melanoma Meeting 2012 on June 22, 2012

Today, the company released Dr. Agarwala's presentation of top-line final data from Provectus' MM Phase 2 clinical trial at the 2nd European Post-Chicago Melanoma Meeting 2012, Interdisciplinary Global Conference on Developing New Treatments for Melanoma in Munich, which was made this past Friday.

I will be blogging my analysis of the data, information gathering and due diligence in several posts.

PV-10 will be approved for Stage 3 melanoma (focused regulatory label). As soon as PV-10 is approved, the drug will be used for Stage 2 and 4 disease.

Munich, And Beyond

Provectus' clinical data to date paints a very clear and very promising treatment picture of injected lesions. Inject PV-10 directly into a melanoma lesion (i.e., deliver the drug intralesionally), and the lesion shrinks a lot. Injected lesions shrink a lot of the time. The preliminary objective response of the metastatic melanoma Phase 2 trial, both complete and partial response, was 49% (55% for unresectable Stage 3 and early-Stage 4 (i.e., M1a), which is the target patient population for the label management seeks for PV-10 from the FDA). The trial's local-regional control, comprised of complete and partial response and stable disease, was 77%; here again, loco-regional application is part of the desired label. There is no doubt the FDA thinks PV-10 should be used as a local agent to treat metastatic melanoma. With an SPA in hand, patients and their doctors will be a major step closer to broadly accessing the drug for local treatment of melanoma.

Craig frames Provectus' approach to treating cancer in the following way: the harder you punch the immune system, the greater the response. He references a lecture by a veterinary virologist who showed a picture of a cow with a basketball-sized papilloma hanging from its stomach. The professor said, paraphrasing: "Cut that off aseptically and cleanly, and it will grow back every time. Tear it off, make it bleed, kick dirt into the wound, and it will never come back." Shock the heck out of the immune system with tissue destruction (wake it up), break tolerance and encourage a large-scale release of tumor antigens into the system so they can be seen in context. 

The clinical data to date also has provided a perspective on PV-10's effect on bystander lesions. If injected lesions had a positive objective response, patients' bystander lesions did as well: preliminarily, a 67% objective response and 72% loco-regional control. To many, the "problem" is the available data does not provide a clear picture of the reduction of patients' overall disease burden. It is not possible to tell from the Phase 2 clinical data if PV-10 provided an overall clinical benefit. It's one thing to clear up an injected lesion, but it's another thing to positively impact cancer that has spread to other parts of the body, like internal organs or lymph nodes.

What does the final data for the metastatic melanoma Phase 2 trial show? Did injected lesion response rates improve over preliminary results? If so, how much and why [did they improve]? Did bystander lesion response rates improve over preliminary results? If so, how much and why? What was the response from the overall disease burden? How long did responses; how durable were responses? Munich results should be available on Tuesday.

Dirt (in the story above), like a vaccine adjuvant, riles up the immune system causing it to attack. Much of what Provectus  is doing is treating cancer like an infectious disease, and recruiting immune system help. There's another explanation, besides "PV-10 did not work," for non- or poorly responsive injected lesions and bystander lesions that responded poorly or did not respond at all. PV-10's mechanism of immune response is an autophagy-induced, system-wide anti-tumor one. Sufficiently inject the lesion (or tumor); induce autophagy and shrink or eliminate the lesion; and, induce the immune system, via the antigens released from successfully treating the injected lesion(s), to successfully treat bystander lesions and remote cancerous locations. In other words, effectively punch the target lesion enough so the immune system can more effectively punch cancer around the patient's body enough. Proper action. Beneficial reaction.

In their first model, Moffitt treated C57BL/6 mice with PV-10 and saw 3 of 5 mice with 3 or less lung metastases (3, 0 and 1, respectively) while all control mice treated with PBS had over 250 lung metastases. Moffitt's goals were to see if PV-10 produced a systemic response, since any such response for an intralesional (local regional) agent is unheard of, and, more importantly, understand the nature of tumor-specific immunity and the interferon gamma production assessment.


If they wanted to (i.e., if the goal of the work was to cure the mice), Moffitt could have gone 5-for-5, by injecting more drug directly, with additional re-treatments, or simply more in general.


The Munich presentation and Moffitt's work marks the beginning of a much better understanding by the broader market (e.g., FDA, big pharma, key opinion leaders, medical community, serious life sciences investors, etc.) of the vast potential for systemic benefit PV-10 delivers to patients.

Perhaps even the beginning of the end-game?

Teknovation.biz: Knoxville start-up Provectus presenting at today’s “Invest Tennessee Equity Conference”

An article on Provectus by Teknovation.biz, a service of Pershing Yoakley & Associates, P.C. Some of the principals in the firm own stock in Provectus.

"A local pharmaceutical start-up with a very promising cancer drug is one of 10 companies, including three Fortune 500 firms that will make presentations at today’s second annual “Invest Tennessee Equity Conference” in Nashville.

Provectus Pharmaceuticals, Inc. specializes in developing oncology and dermatology therapies including its novel PV-10 drug that is designed to selectively target and destroy cancer cells without harming the surrounding healthy tissue. The company’s specific cancer focus is on melanoma, breast cancer and metastatic cancers of the liver.

Craig Dees, the company’s Chief Executive Officer, will make today’s presentation. Provectus joins a blue ribbon set of presenters including three Tennessee Fortune 500 companies – FedEx Corporation (#70), International Paper Company (#111) and AutoZone Inc. (#320) – along with other well-known names like Regal Entertainment Group, Inc., and Miller Energy Resources, Inc.

Ahead of today’s event, Dees, sat down with teknovation.biz to discuss the creation and evolution of the firm. The discussion was fast-paced and multi-faceted as the enthusiastic Dees discussed the work that he and two colleagues have been pursuing since their days at Oak Ridge National Laboratory (ORNL) more than a decade ago.

His colleagues and company co-founders are Tim Scott, President, and Eric Wachter, Chief Technology Officer.

One clearly sees that Dees is extremely passionate about the team’s work and collective belief that the PV-10 drug will dramatically change the lives of people with melanoma, breast and liver cancers.

He explains that current approaches “don’t cure very well and they make people horribly sick . . . because we try to poison the cancers.” PV-10 is a drug that “kills only the sick stuff,” he says, adding that “the drug is out of normal tissue quickly,” something that he believes is extremely important.

“We’ve been working at it really hard for six years,” Dees says, and he expects the drug to be on the market within two to three years. His optimism is based on the fact Provectus has completed Phase 2 testing for metastatic melanoma and Phase 1 testing for both breast and liver cancers.

“We are now negotiating parameters of Phase 3 testing with the FDA (Food and Drug Administration),” Dees adds.

In addition to its PV-10 for cancer treatment, Provectus also has a PH-10 drug for dermatological use to treat atopic dermatitis and psoriasis. Phase 2 testing has been completed for both uses.

The manner in which Dees, Scott and Wachter became a team is typical of the serendipitous nature of entrepreneurship and discovery.

Dees notes ironically that the three were doctoral students at the University of Wisconsin at the same time and had offices “probably not 150 feet from each other.” Yet, it was not until they met later at ORNL that they found a common interest and saw that they had very complementary skills.

Dees has a doctorate in molecular virology, while Scott’s is in chemical engineering and Wachter’s in chemistry. Dees says that they “took a mixture of our skills” – a chemist, a biologist and a chemical engineer – and began to explore new opportunities.

“Our first patent was written on a wall at X-10,” he says, using the alpha numeric reference to ORNL. “That was probably alright, because the building leaked so much that the walls were repainted every month.”

The trio left ORNL and founded Photogen Technologies, Inc., to commercialize a multi-photon laser technology to treat cancer.

Dees recalls that the epiphany that led to the PV-10 and PH-10 drugs occurred on a Sunday night in Photogen’s Oak Ridge Highway laboratory. They were so enthused by the idea that they rushed to the Knoxville Airport and somehow convinced the security officials to let them run a lab sample through the X-ray machines to test their theory.

The results were exactly what their epiphany had predicted, and they immediately thought, “A cure for cancer was just reduced to practice at the airport.”

The new approach “obsoleted our laser technology that Sunday night,” Dees said, explaining that the trio had “come up with something better and cheaper.”

“We are very much a product of this area,” Dees says proudly. He admits that investors have tried to lure the company to other locations, but he has successfully resisted those attempts.

“There’s not a single advantage in moving to New York City,” Dees recalls telling one investor. He cited this region’s advantages as lower cost of living, better education systems, lower crime and research institutions like ORNL and the University of Tennessee.

“We have the core cadre right here,” he says.

With its plans to have product in the market within two to three years, Dees said Provectus will most likely outsource manufacturing and possibly other areas like marketing. Companies like Provectus are “good at innovation,” he adds.

And, in characteristic fashion, Dees started talking about other ideas that he has for patents in the future, saying about one that he’ll “write that down sometime.”

Ironically, Dees pursued a medical degree for a short period of time, but he admits that he found it “boring.” Today, he and his partners are pursuing what they believe is truly a cure for cancer."

Quick Hits for June 20

I don't expect to blog much, if at all, until the beginning of next week. In the interim, some quick hits...


For readers who know me, you also know I'm currently on a family summer road trip, which I also refer to as our 4th annual Griswoldesque vacation. The road trip is a uniquely American rite of passage.

 

Dr. Agarwala's Munich presentation is at the end of this week, on Friday, June 22 (morning, Munich time). The MM P2 data being finalized, which this presentation marks, is important. Like Maxim noted on June 8, I [obviously] expect positive results. Much more importantly, I also expect such positive results to be very interesting.

My current expectation is the company could (should) report receipt of the SPA for the MM pivotal Phase 3 trial by the end of June, which is next week. It is possible we do not hear until the middle of July (I hope not much later than this). Management's current guidance is best case Q2 and base case Q3.

While Provectus' pursuit of the SPA for MM is designed around a clinical and business strategy to pursue approval for the intralesional delivery of PV-10 for local-regional treatment of Stage 3 and early Stage 4 MM, Moffitt's work is directly aimed at validating and further demonstrating the systemic benefit of the drug and therefore its use as such. This underscores the nature of the pursuit of accelerated approval for PV-10, a parallel path to management's work with the FDA to achieve the SPA. As a result, more information on Moffitt's work is very highly anticipated. Does Moffitt know their place in history?

While one cannot project timing of the regulatory path, one could argue PV-10 approval, now, is a certainty.

Craig is presenting at InvestTennessee on Thursday, June 21 at 10:45 am ET. Eric and Peter are in Munich.

The path to and timing of a dermatology deal likely will hinge on a review of the final psoriasis Phase 2 data by prospective partners as well as their take on the FDA's view of PV-10 toxicity or, more to the point, lack thereof. While it does not appear we're quite there yet, it does appear it might be soon.

The annual meeting is next Thursday, June 28 at 4 pm ET. If you have not yet voted your shares, you should. Voting allows you to voice your opinion of management and their approach, whether you agree  or disagree with them, and agree or disagree with some or all of their business tactics and strategy.

Current cash balances, combined with likely monthly cash burn estimates, suggest a comfortable situation (operating runaway) for the near- to medium-term until one or more triggers or catalysts play out. Big pharma understands management has the ability to raise the money it needs (of course, money comes at a price).

Blog Reader Comment

Short interest in this stock is a meaningless statistic. Many of the reported shorts are just a result of "fails" and not outright shorting of the security.

I agree that Provectus' short interest is not too meaningful at this point. When I first wrote about short interest, here, I noted that short interest is useful to know, as long investors typically like to know if there is a large short interest (or negative investor sentiment) lined up against them.


I stil do not think management or shareholders need worry about short interest for the time being. Concern and awareness will be greater when the stock lists on the NASDAQ.

PVCT short interest as a percent of float is around 0.6%. To compare:

Get Shorty (update)

Initial post here. Short interest through May month-end (click on the chart to enlarge it).

Short interest, which set a new high (for the measurement period dating back to January 14, 2011) in May, has trended upward together with the upward trend of the share price since the mid-December share price low.

Sidoti & Company’s Micro-Cap Conference

Management presented today at Sidoti & Company's Micro-Cap Conference in NYC.

What's In A Name?

There is a two-fold reason for why the share price is where it is. The first reason relates to PV-10 being a local agent. The second relates to there being no "name" in the stock.

What's in a name? While there are or may be several large hedge fund or hedge fund-related shareholders like AQR (an AQR fund) or Revelation, there is no serious life science name in the stock.

Despite having a Orbimed employee on the advisory board (David Darst), this well known life sciences firm and fund does not own any shares. It would seem that Orbimed, like other very serious life sciences investors, while acknowledging that PV-10 works systemically, wants to see Provectus obtain the SPA for the pivotal MM Phase 3 trial and see additional information from Moffitt before they jump into the stock. At the appropriate time, perhaps soon, they and others will rush for the door, most likely at or around the same time, hoping to get into the theater and grab seats.

They'll find out that a good number of seats have been taken, and that what remain are somewhat scarce. I speculate, together with some other large shareholders, that less than 10 groups or syndicates of long-time, patient and knowledgeable [of the end game process and outcome] shareholders -- both management and investors -- own at least 60% of the float. The number could be as high as 70%. These folks won't sell easily or, in some cases, at all. Without sufficient float, acquiring meaningful share positions will prove very difficult.

Now, a name doesn't have to be an investor. It also can be a strategic investor or corporation through either a minority investment in Provectus and/or a license transaction (e.g., dermatology, HCC & China, MM & Australasia, HCC & Japan, India, etc.).

That is why this period of time, now and through the second half of the year, should be the most dramatically positive for the share price in the company's history. In addition to the SPA and Moffitt, as I blogged earlier about, one or more deal/license transactions add another dimension to the outcome.

One transaction should create a cascading effect that substantially increases Big Pharma's interest in Provectus to further partner with the company and, ultimately, acquire it.  

Why Use A Local Agent To Treat A Systemic Disease?

There is a two-fold reason for why the share price is where it is. The first reason relates to PV-10 being a local agent. The second relates to there being no "name" in the stock (I will address in a subsequent post).

Why use a local agent to treat a systemic disease? This, by far, probably is the biggest issue management must deal with in discussions with very serious life science constituents, including the FDA, Big Pharma, fundamental life science investors and equity research.

To be clear, Provectus is pursuing a focused label, one that enables intralesionally-deliver PV-10 to be local-regionally treat Stage 3 and early Stage 4 patients with metastatic melanoma. The receipt of the SPA, either this month (management's guidance: best case Q2; me: later this month) or next month (management: base case Q3; me: if not late-June, than early-July), describes the specifics of the regulatory path for PV-10 as a local agent. As a result, the share price should pop to reflect the addressable market opportunity of the local agent: use the local agent to treat the local disease.

Should Provectus stock rise to $2 or $3 per share (irrespective of what capital market dynamics occur because of a move from the OTC to the NASDAQ, a $200-300 million market capitalization would not seem unreasonable for a local agent-oriented biotechnology company. Vical, for example, has a market cap of about $265MM.

But, no local agent has ever been approved by the FDA for systemically treating cancer. And the addressable market opportunity to systemically treat MM and other cancer indications is the home run, and when the market cap could rise into the billions.

No one questions now that PV-10 works systemically, but life science constituents simply do not know why the drug works systemically. Until they understand, the default view will be to use the local agent to treat the local disease -- by definition. The release of more information from Moffitt, to elucidate why the drug works systemically, to further demonstrate its systemic efficacy, to further demonstrate is multi-indication viability, and to demonstrate its systemic benefit on humans, greatly informs those who want to understand why the drug works the way it does.

As a result, this kind of elucidation provides a forum for the FDA to analyze, assess and, we hope, approve a local agent for systemically treating cancer: accelerated approval.

This is why coupling the SPA milestone with the additional Moffitt work is important. The proximity to a dramatic rise in the share price, reflective of immense intrinsic value, has never been closer in the history of the company.

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...

China & Liver Cancer

Bayer and Onyx Pharmaceuticals'  Nexavar (sorafenib) was approved by China's State Food and Drug Administration for the treatment of hepatocellular carcinoma (HCC), or liver cancer, in 2008. At the time, the companies quoted Bayer's Dr. Gunnar Riemann, PhD, as saying: "China has the highest number of liver cancer patients worldwide with more than 340,000 new cases diagnosed each year and the incidence is continuing to rise." 2008 data: HCC is the most common form of liver cancer and responsible for ~90% of primary malignant liver tumors in adults. More than 600,000 cases of liver cancer are diagnosed worldwide each year:

• More than 400,000 in China, South Korea, Japan and Taiwan,
• 54,000 in the European Union, and
• 15,000 in the United States.

In the Asia-Pacific region, more than 8% of the general population is infected with chronic hepatitis B and 2-4% is infected with chronic hepatitis C. Both infections are the leading causes of primary liver cancer worldwide.

Contribution Margin

First and foremost, a product should have a good-to-great product value proposition. How good or great is it? In the case of PV-10, there are clinical and business pieces:

• PV-10's clinical value proposition has been repeated and reproduced by management, principal investigators and Moffitt in murine models, animals and people for multiple cancers: very efficacious, very safe, and both local regional and systemic benefits.

• The drug's business value proposition: easily administered (PV-10 is injected into target lesions by interventional oncologists in outpatient setting by a physcian or appropriately trained nurse practitioner or nurse; injections into tumors on organs inside the body require an imaging assist).

PV-10's product value proposition is great. So, now, consider a product's potential profitability.

How profitable can a product be when it's sold? In the case of PV-10, extremely. With margins in excess of 99% (assuming no consideration for sales returns) even at prices as low as $5,000 for a course of treatment, PV-10 is a very profitable drug.

If a product is profitable, what's the payback period before each incremental sale of a treatment course of PV-10 drops to the bottom line? That is, when does pure profit kick-in? In the case of PV-10, very soon.

If the Company brings this to market, the payback period is measured in months to a couple of years (depending on the ramp of use, and thus market share penetration). Although the expected outcome is for Provectus to be acquired by Pfizer, J&J or some other Big Pharma, I draw your attention to this scenario simply to emphasize the efficiency of management's use of capital (as compared to industry norms and averages).

If Pfizer brings this to market, and we focus on the payback period on the allocation of the acquisition price to metastatic melanoma (of $1.5B), said payback period, based on the likely price range of a treatment course, is measured in several years (again, depending on the the ramp of use, and thus market share penetration). Depending on Pfizer's global price point, the payback period might be even less than a few years before each incremental sale drops to the corporation's bottom line.

In other words, PV-10's contribution margin is spectacular.

I Want It All (all of the melanoma market, that is)

You could think about the addressable market for PV-10 in two ways.

The first way is based on the label or claim under which Provectus is seeking approval for PV-10: Stage 3 and early Stage 4 metastatic melanoma, local-regional application.

The second way is based on where PV-10's value proposition exceeds the value proposition of other treatments and therapies, including surgery. I contend the real addressable market is the entire melanoma market.

Some background (sources: here and here, where I have directly used or copied text):

• Stage I melanoma is characterized by tumor thickness, presence and number of mitoses, and ulceration status. There is no evidence of regional lymph node or distant metastasis. Stage I is treated by surgery to remove the melanoma as well as a margin of normal skin.

• Stage II melanoma is also characterized by tumor thickness and ulceration status. There is no evidence of regional lymph node or distant metastasis. Wide excision is the standard treatment for stage II. Because the melanoma may have spread to lymph nodes near the melanoma, many doctors recommend a sentinel lymph node biopsy as well. If it is done and the sentinel node contains cancer, then all the lymph nodes in that area are surgically removed. In certain cases, some doctors may advise adjuvant therapy (additional treatment) after surgery.

• Stage III melanoma is characterized by the level of lymph node metastasis. There is no evidence of distant metastasis. Surgical treatment for stage III usually requires lymph node dissection, along with wide excision of the primary tumor as in stage II. Adjuvant therapy may help some patients fight off recurrence longer.

• Stage IV melanoma is characterized by the location of distant metastases. Skin tumors or lymph node metastases causing symptoms can often be removed by surgery. Metastases in internal organs are sometimes removed, depending on how many are present, where they are located, and how likely they are to cause symptoms. Metastases that cause symptoms but cannot be removed surgically may be treated with additional therapies.

Summarizing simply:

Recall PV-10's clinical value proposition has been repeated and reproduced by management, principal investigators ("PIs") and Moffitt in murine models, animals and people for multiple cancers: very efficacious, very safe, and both local regional and systemic benefits. The drug's business value proposition: easily administered (PV-10 is injected into target lesions by interventional oncologists in outpatient setting by a physcian or appropriately trained nurse practitioner or nurse; injections into tumors on organs inside the body require an imaging assist).

PI Dr. Merrick Ross, a surgical oncologist, believes PV-10 should be a first-line treatment after surgery has failed, while PI Dr. Sanjiv Agarwala, a medical oncologist (a hemonc), believes PV-10 should be used even before surgery is considered.

Given PV-10's safety profile, the drug could (should) be used as the first tool out of the oncologist's tool kit, even before surgery is contemplated or employed. If success is not achieved, surgery and/or combination therapies that include PV-10 could be utilized.

The implication is that the entire melanoma market is in play for PV-10, with maybe the exception of very late stage melanoma, a small percentage of market; however, this portion might (and probably will) be addressed by combination therapies (e.g., PV-10 + radiotherapy, PV-10 + Yervoy, etc.).

Of course, the immediate label for which PV-10 would be used does not support my contention above. The label applies to a smaller portion of the market.

But, as more and more information is available to oncologists (i.e., trial data, immunology data from Moffitt), the addressable market for PV-10 becomes the entire market for melanoma.

I think that makes (has made) for interesting conversations with Big Pharma.

Price? Price Per Month Of Life Extension? Does It All Boil Down To Cost?

The discussion about the cost of oncology drug treatment is quietly growing larger. Sure, someone yells loudly once and while, and then silence. Another bellow, and then more silence. The volume is rising.

A decade or two ago, who would have thought the U.S. would have lost its AAA rating (global reserve currency and destination of the fearful notwithstanding)?

The point is what was unthinkable is now thinkable.

Cure cancer at any cost? Live a month or two or three longer? What's that worth? What are you willing to pay? What are you able to pay? In the U.S., for example? In India?

These are all good questions. Questions whose asking are becoming louder and more frequent with time.

For now, how much do different oncology treatments cost?*

• BMS' Yervoy: $120,000 for a 4-dose treatment;
• Roche's Zelborak: $56,400 for a 6-month course of treatment;
• Dendreon's Provenge: $93,000 for a 3-infusion treatment in a month;
• J&J's Zytiga: $40,000 for an 8-month cycle;
• Medivation's MDV3100: $40,000 to $60,000 for a course of treatment (analyst estimate); and,
• Seattle Genetics' Adcetris: >$100,000 for a course of treatment.

* Roughly, for purposes of the following analysis and commentary. Figures may have changed.

Compare to Provectus' PV-10: $20,000 to $30,000 (analyst estimate). Provectus wins. Adjust for life extension, by dividing the treatment costs above by the number of months the respective drug extends life. Provectus wins more handily.

Companies are profit-driven organisms. They usually endeavor to charge as much as the market can bear. From a profit perspective, if a drug costs a lot to develop and bring to market, the drug development company will have to charge a high price to recoup those historical expenses. Once costs are recouped and before the patent cliff arrives, treatment costs are pure profit.

If a drug company developed a drug dramatically less expensively than the industry norm, how would that result influence its pricing strategy? If the drug also produced dramatically better efficacy and possessed a robust safety profile, how would pricing strategy further change?

PV-10’s gross margin is more than 80%. Gross margin is in excess of 99% when not including a sales return-type allowance. At a $20,000 treatment cost assumed or inferred by analysts, an 80% margin suggests a $4,000 drug cost. But, what if the actual cost to produce a treatment course of PV-10 is, say $1,000? Or $500? Or $100?

What if the eventual acquirer of Provectus decides to charge $15,000 for PV-10, or $10,000, or maybe just $5,000, to encourage adoption and use (assuming sufficient physician education and buy-in to PV-10's clinical value proposition). What if physicians then begin using PV-10 as a first-line treatment after surgery, or a "true" first-line treatment before surgery (i.e., the first tool out of the oncologists tool kit)? What is the impact of this "predatory pricing" -- predation of competitors, not of patients -- on the lifespan and sustainability of the competitive landscape and the size and growth of the global addressable market for PV-10? The implications are of great import.

This part of Provectus' story may not get a lot of press, but it is very important to the company's two main customers at the current time: the FDA and big pharma.

An Investment Letter: Why I’m Long Provectus Pharmaceuticals (Redux)

A rewrite of my first investment letter...

Preface

At a June 1^st closing share price of $0.88 and market capitalization of $99 million, Provectus Pharmaceuticals is an exceptional long idea.

I began due diligence on the Company in 2006, and started accumulating shares in 2007. My historical and ongoing diligence comprises thousands of interactions with Provectus management. As a result, my view of the Company’s prospects has evolved over time. If our portfolio was one hundred percent cash and I was investing from scratch, would I establish this position in Provectus and, if so, how big would it be? The answer is I would have the same position I have today.

In writing this investment letter to and sharing my investment thesis with you, I borrowed from Whitney Tilson’s Why We’re Short Netflix letter as well as OneMedPlace Research’s December 2011 report, which is a well-written primer on the Company.

Provectus Pharmaceuticals (PVCT)

Provectus is a Knoxville, Tennessee-based biotechnology company with two lead compounds in early- to mid-stage clinical trials: PV-10 for oncology (metastatic melanoma, hepatocellular carcinoma, recurrent breast cancer, other solid tumors) and PH-10 for dermatology (atopic dermatitis, psoriasis, other inflammatory skin disorders). Rose Bengal, the active pharmaceutical ingredient (“API”), has an established safety profile with the Food and Drug Administration (the “FDA” or “Agency”) for prior human use as an intravenous hepatic diagnostic (Robengatope) and topical ophthalmic diagnostic (Rosettes and Minims), and has been used in liver function studies for more than 90 years.

Investors often underestimate or overestimate risk in the context of the return they should expect. Just because a so-called safe asset or security could provide a safe return does not mean the expected return is commensurate (i.e., high enough) for that level of risk. Conversely, just because a so-called risky security could generate a robust return does not mean the expected risk is commensurate (too high) for that amount of return. Provectus’ stock is a situation where the risk-reward profile is clearly and visibly out of whack. The return opportunity is much more than commensurate for the potential risk.

The Company’s share price has trended downward over the last five years however, losing nearly 50% of its value along the way, despite clinical, regulatory and business value propositions that have increased over time.

Clinical: PV-10 is very efficacious and safe, and produces very beneficial local-regional and systemic effects on cancerous tissue. Pre-clinical and clinical results have been repeated and reproduced. Further efficacy, particularly when tumor burden is high, is achieved by combining PV-10 with other therapies, such as radiotherapy and Bristol Myers Squibb’s Yervoy, because PV-10 facilitates the efficacious action of these treatments.

Regulatory: The path to drug approval in the U.S. and Australia for metastatic melanoma (“MM”) is clear, but not yet completed. The path for hepatocellular carcinoma (“HCC”) is in process. Orphan drug status has been received for both MM and HCC. The path for recurrent breast cancer has been started. The FDA has been very constructive. Interactions with the Agency have been unusual in a good way.

Business: PV-10 is very easily administered and should be easily reimbursed. Provectus has significant treatment pricing flexibility (as currently contemplated, gross margins are very high), incurs very low manufacturing costs to produce the drug and requires very low costs to scale manufacturing to meet domestic and international demand for the drug when it is approved. The Company has a large, well-protected intellectual property portfolio of U.S. and international patents.

Stock: Provectus recently formed an independent board of directors. The corporate advisory board has been tactically and strategically populated. The stock, however, does not trade on a major exchange and has limited equity research coverage. No license deal in either oncology or dermatology has been struck, as managed has turned down or resisted license interest because of valuations below their acceptable minimum at the time. There has been no historical insider selling and plenty of insider buying. The Company’s balance sheet is solid, with committed and structural access to capital.

So, why am I risking my professional reputation, a large portion of net worth and my sanity on this company, its management team and the stock, when most institutional investors, including biotechnology-focused investors, have mostly or completely ignored Provectus? Healthcare fund manager OrbiMed Advisors, a firm with whom the Company has an association through a corporate advisory board member for several years owns no shares as of a March 31^st 13F filing (David Darst, the advisor, is a member of OrbiMed’s private equity team and not their public equity one). Hardcore biotech investors understand the situation and opportunity. There are two practical and pragmatic reasons for their lack of participation in the stock: a yet-to-be-received Special Protocol Assessment (“SPA”) from the FDA for the Company’s pivotal MM Phase 3 trial and a security that trades over-the-counter.

At just under $100 million, Provectus’ valuation is extremely low. Fair value is at least $200-300 million. Once the Company receives an SPA for its pivotal MM Phase 3 trial and more information on the drug’s mechanisms of action and immune response are further elucidated, followed by the out-licensing of Provectus’ dermatology drug PH-10 for inflammatory skin disorders, institutional and retail investors should become much more aware of the stock and its risk-reward proposition. There is substantial cash and contingent upside above fair value in excess of $2-3 billion.

Rose Bengal and PV-10: A tremendous clinical value proposition

Through early- to mid-stage trials and a compassionate use program, Provectus’ clinical results have been impressive. The Company has completed Phase 1 and 2 trials for MM, for which Provectus received orphan drug status; a Phase 1 trial for HCC, for which it received orphan drug status; a Phase 1 trial for recurrent breast cancer, for which the Company demonstrated efficacy; and Phase 1 and 2 trials for atopic dermatitis and psoriasis, for which Provectus demonstrated efficacy given limitations of trial designs. These trial results show, suggest and infer much better overall survival benefit, much higher levels of tumor destruction and disease reduction, beneficial local-regional and systemic effects on cancerous tissues, multi-indication viability, and repeated reproducibility of outcome in and across pre-clinical and clinical trials.

PV-10 is very efficacious: Clinical results indicate, for MM and HCC, and more than likely suggest, for recurrent breast cancer and several other indications treated in the compassionate use program, materially superior results for objective response, complete response and progression free survival (taken alone and when compared with the results achieved by standards of care and competing drugs). Results infer such for durable response. Understanding the caveats of comparing clinical trial results, PV-10's response rates for injected lesions, non-injected lesions and non-injected systemic lesions exceeded other intralesional therapies like Vical's Allovectin-7 and Amgen's talimogene laherparepvec (formerly BioVex’s OncoVEX GM-CSF). Substantial unmet needs exist for melanoma treatment despite the approvals of Yervoy and Zelboraf, whose efficacy outcomes and safety profiles pale in comparison to PV-10.

Two fair criticisms of PV-10 are the small number of trials completed (oncology: 4, dermatology: 4) and the small number of patients treated (oncology: >200, dermatology: >225). Efficacy, however, has been repeatedly superlative in pre-clinical work (from bench research, in murine models and on animals), clinical trials (MM, HCC, recurrent breast) and the compassionate use program. Further, Provectus, its principal investigators and H. Lee Moffitt Cancer Center & Research Institute (“Moffitt”) have reproduced superlative efficacy in pre-clinical work, clinical trials and murine models (and human studies), respectively.

PV-10 is very safe: Rose Bengal is an FDA-approved API, with a century of safe and successful use in humans as an intravenous hepatic diagnostic and topical ophthalmic diagnostic. Patients treated with PV-10 predominantly suffer only mild to moderate adverse events. There have been neither NCI CTCAE Grade 4 or 5 events nor clinical trial insurance claims. Paraphrasing: “Rose Bengal has a 30-minute “half-life,” which is the amount of time the compound is in the patient’s bloodstream before it is excreted in the bile. It is very stable in the human biological system, and although the portion remaining in the bloodstream is excreted rapidly, the portion that has been absorbed by the cancer tissue actually remains in its parent form for weeks until the dying cancer tissue is absorbed by the body and the remaining Rose Bengal is excreted.” (Amy Baldwin’s Investment Choices For Melanoma Awareness Month). Such historical and ongoing safety means no surprises in future clinical trials or, once approved, from patient use.

PV-10 has both local-regional and systemic beneficial effects on diseased tissue: PV-10 has an autophagic mechanism of action and an autophagy-induced, system-wide anti-tumor mechanism of immune response. Rose Bengal partitions into diseased cells. Entering the cells’ lysosomes, it causes them to leak or rupture. Autophagy cascade subsequently occurs. Moffitt independently confirmed PV-10’s local and systemic response benefits in murine models, and also identified the quintessential immune-mediated response: Splenocytes from PV-10-treated mice produced interferon-γ in response to B16-F10 melanoma cells. Shortly, Moffitt should confirm the same in human studies.

PV-10 has demonstrated multi-indication viability: PV-10 has been used to treat MM, HCC, recurrent breast cancer, squamous cell carcinoma, scalp sarcomas and colorectal cancer (mets to the liver). Moffitt conducted further murine model work on other cancers besides metastatic melanoma to successfully demonstrate multi-indication efficacy and immune response.

Two fair criticisms of PV-10, again, are the small number of trials completed and small number of patients treated. Yet, multi-indication success has been repeatedly shown in pre-clinical work, clinical trials and the compassionate use program. Further, Provectus, its principal investigators and H. Lee Moffitt have reproduced multi-indication success in pre-clinical work, clinical trials and murine models, respectively.

PV-10’s regulatory path is becoming clearer

Management's interaction with the FDA has been unusual in a good way. This month or next, I expect the FDA will grant an SPA to Provectus for it’s pivotal MM Phase 3 trial. Australia’s Therapeutic Goods Administration already has agreed to a data analysis and review process that allows early evaluation for MM marketing approval. Accelerated approval, at a later date, is a very real possibility, based on Moffitt’s historical and ongoing murine model and human study work. Provectus is pursuing a very focused label for PV-10, the supporting proof of which already has been demonstrated: loco-regional treatment of Stage III and early-Stage IV MM.

The company may finalize designs for a pivotal HCC Phase 2/Phase 3 randomized control trial using Sorafenib later this year. Drug orthogonality between PV-10 and sorafenib has been shown.

A very profitable business value proposition

PV-10 has the potential to be a very profitable drug. It is easily administered and should be easily reimbursed. Because of a relatively low amount of capital spent and required to bring the drug to market, Provectus and its eventual acquirer will have significant treatment pricing flexibility. PV-10 has a very low manufacturing cost. The cost to scale manufacturing is very low. The Company has a large, well-protected intellectual property portfolio.

Ease of drug administration: A medical or surgical oncologist makes treatment decisions. PV-10 is injected into target lesions by interventional oncologists in outpatient settings. An appropriately trained nurse practitioner or nurse can provide the same service. Injections into tumors on organs inside the body require an imaging assist. In either case, effective administration of the drug does not require a meaningful change to a physician’s current practice and practice behavior. There is no pre- or post-treatment care, nor is co-treatment needed. In the future, PV-10 could be ingested or deployed intravenously. For dermatology, patients apply PH-10 as a topical gel to the targeted area of skin.

Low treatment price: For the purposes of their valuation models, equity research analysts who follow Provectus assumed a treatment price of $20,000 to $30,000, which is not necessarily what the Company and its eventual acquirer could or would charge. At these prices, however, PV-10’s gross margin is more than 80% (in excess of 99% when not including a sales return-type allowance). Given PV-10’s equivalent to dramatically better efficacy and safety profile, predatory pricing (as it relates strictly to competitors’ treatment pricings) could be very lucrative. Pricing flexibility, resulting directly from the very low cost to produce the drug is a sustainable competitive advantage.

Physicians should be very easily reimbursed for PV-10 treatments. It is anticipated treatment would be reimbursed as chemotherapy or a procedure, and a potential crosswalk to other reimbursed interventional oncology procedures, such as image-guided therapy. Treatment price and reimbursability should be key drivers of adoption.

Low manufacturing cost: Provectus’ $110 million deficit accumulated during the development stage as of March 31^st, combined with nearing the end of the regulatory approval process, means the eventual amortization of development expenses will not materially influence pricing.

It costs very little to manufacture PV-10. Synthesis of the API to modern pharmaceutical standards is well defined. Rose Bengal has a well-behaved, fully characterized impurity profile. Provectus owns the only formulation that meets the FDA's International Conference on Harmonization (“ICH”) guidelines. The cost to scale the production of PV-10 is very low. Critical process parameters and best practices are complete. PV-10’s formulation utilizes standard equipment.

Broad and deep intellectual property: The Company has more than 50 global patents issued and pending, with numerous applications filed and in process, covering the drug and subsequent (additional) family of compounds, and synthesis of the active pharmaceutical ingredient to modern pharmaceutical standards. Provectus’ family of compounds extends oncology applications far beyond traditional patent cliff.

Paraphrasing: “Rose Bengal is an old agent; the composition of matter patent has expired but Provectus filed a synthesis patent that spells a method to manufacture this agent that is devoid of any impurities and is the only formulation that meets the FDA's ICH guidelines. This patent maybe as robust as a composition of matter patent because without using this synthesis protocol, medicinal grade Rose Bengal can never be synthesized. Additional picket-fence is provided by use, indication, formulation and mechanism of action patents.” (OneMedPlace Research’s December 2011 report)

The key opinion leader community wants to use an emerging therapy like PV-10 with other agents like Yervoy, Allovectin-7, talimogene laherparepvec (formerly OncoVEX), and other anti-CTLA-4 and anti-PD-1 compounds.

The stock has a weak to modest value proposition at the moment

Provectus has an independent board of directors that includes Alfred E. Smith IV. The Company’s corporate advisory board includes Dr. Craig Eagle, Vice President of Strategic Alliances and Partnerships for the Oncology unit at Pfizer, and Doug Ulman, President and Chief Executive Officer of LIVESTRONG.

Provectus’s stock does not trade on a major exchange. Reduced requirements to list on the NASDAQ (e.g., market value of listed securities standard, net tangible asset minimum, minimum $2 bid for five consecutive days), however, present a lower bar to clear.

Although equity research analysts that cover the stock are highly-ranked or thoughtful, coverage is by firms with historical investment banking relationships or niche/boutique businesses and clienteles: Maxim Group, Rodman & Renshaw, Roth Capital, and Stonegate Securities. Firms with no promised or implied relationship could initiate coverage post-SPA.

Provectus has not yet entered into a license deal. Lack of a deal (or deals) does not mean no deal can be had. Management is seeking valuations commensurate with their view of value, turning down or resisting several opportunities in the process.

There has been no insider selling and plenty of insider buying. Insider exercising of options and purchasing of underlying common stock totals several million dollars to date. Most of these exercises have been done by one of the four principals. The other three principals have made small to moderate purchases.

The Company has a solid balance sheet, and committed and structural access to capital. As of March 31^st, cash and cash equivalents totaled $5 million. Provectus owes no debt. The Company has a $30 million equity line of credit committed by a Chicago-based investment firm, and two $50 million shelf filings.

A management team in which I believe and support

Provectus is the story of an old molecule, a business scientist (Craig Dees), two scientists (Tim Scott and Eric Wachter), a businessman (Peter Culpepper), a decade of clinical development and a journey that began in the 1990s. This four-man team has been together for eight years, and should remain together through the acquisition of the company.

Management is intelligent, repurposing an old diagnostic compound as an anti-cancer agent and understanding the value of the molecule’s safety history in working through the regulatory process. Management is competent, getting this far in clinical development while accumulating a $110 million deficit during the development stage. Management is hardworking; while creating near composition of matter patents and scooping other companies requires intelligence and creativity, hard work increases the probability of execution and implementation.

I believe management is ethical and possesses a good moral compass.

While not having sold a single share of stock, management has made in-kind contributions (at the Company’s inception) and exercised options at an expense of $20 million.

But what if I’m wrong?

What if I am wrong? What would that scenario look like?

Could there be poor clinical results in the future? Given the repeatability, reproducibility and veracity of pre-clinical and clinical results, likely no.

Could there be unexpected adverse events in the future? Given Rose Bengal’s multi-decade, historical safety, likely no.

Could more time be required to confirm the regulatory path for MM? This is the likely scenario if I am wrong. I am prepared for more time to elapse for regulatory clarity to be achieved. Management may have to raise additional capital to fund operations until such time as this ambiguity is resolved to their satisfaction. This, however, is finite and can be bounded by several millions of dollars or several percentage points of potential dilution. This downside risk, however, is more than commensurate with the vast upside return opportunity when the regulatory ambiguity is indeed resolved.

Shareholders would incur further dilution if management elects to conduct the pivotal MM Phase 3 trial itself. I am prepared for this outcome because the dilution caused by raising capital to carryout the trial should be made up by a higher valuation resulting from Phase 3 trial results that are projected to exceed Phase 2 results.

And in conclusion…

Provectus is an extremely undervalued stock whose current share price ignores unambiguous pre-clinical, clinical, safety and multi-indication viability data for oncology therapies; ease of drug administration and low drug production costs; a large intellectual property portfolio; and, an intelligent, hard working, ethical management team.

Once the unknown of the regulatory path begins to be known, Provectus’ valuation should increase. The share price will display substantial upside when acquisitive pharmaceutical companies fully accept Rose Bengal’s value proposition.

Disclaimer

This letter is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein should constitute a solicitation, recommendation or endorsement to buy or sell any security by the author. The author owns shares of stock of Provectus Pharmaceuticals. He has no obligation to update the information contained herein and may make investment decisions in the future that are inconsistent with the views expressed in this letter. The author makes no representation or warranties as to the accuracy, completeness or timeliness of the information, text or other items contained in this presentation. The author expressly disclaims all liability for errors or omissions in, or the misuse or misinterpretation of, any information contained in this letter.

Quick Hits for June 2

Blog reader contribution: You can find out new board member and outsider Jan Koe's beneficial ownership of Provectus stock here. He directly or indirectly owns 636,300 shares and 100,000 warrants ($1.25 exercise price).


ASCO 2012: Management is in Chicago for meetings with key relationships.


Is it possible...that longtime (and historically large shareholder) Donald Adams and/or related parties (Joan Adams) were selling into the buying interest (as he or they have in the past) on the day Doug Ulman was added to the corporate advisory board? While this action does not abrogate management's role and responsibility to generate awareness of the company and buying interest in its stock, it certainly is unfortunate and frustrating.


Blog reader question: So considering all the info/news we have seen in the past couple of months, what can go wrong? It seems they should/will get the SPA. They have enough cash till next year. They have a slight chance of getting the A.A. from the FDA. They have shelf stock as a safety net. They should get a derm deal = more $. They should be able to sell the company / drug. They are ready to jump to the NASDAQ. Its cheap. Its easy to produce. Maybe the phase III results wont be that attractive: I doubt it because with the Compassionate use program their results where better since they where able to use as much of PV-10 as they wanted. And the list goes on... From a pessimistic POV why should i NOT BUY more shares? As an investor i am always looking for the "catch", the downside.

The "catch" -- really, the challenge and opportunity -- is whether Provectus can harness recent and future triggers or catalysts to raise the share price to a height that is near or exceeds what management deems to be fair value for the company. 

An acquirer should (and likely would) pay a premium to the then current share price to buy Provectus. But if the share price is not high enough, even a healthy premium may not get still provide a valuation well below the implied share price management thinks is the right number. Let's say the company offered itself to Pfizer right now. Pfizer would pay about $300MM, or a couple of hundred million dollars as a premium to the current market capitalization of $99MM (as of Friday's close), plus some kind or form of contingent value right. That figure is well below the $3B expectation for an upfront payment (plus a/the CVR).

The fairly obvious point of getting on to the NASDAQ is to harness the catalysts to foster as much irrationale exuberance in the stock to drive the share price up to at least about $1-2B, or about $10-20 per share (rough math), so that when Pfizer (or some other big pharmaceutical company) decides to buy Provectus, they'll pay at least $3B upfront. Funds and institutions that cannot or will not buy the stock on the over-the-counter exchange will initiate positions once it is available on the NASDAQ. Other entities will enter above $5 based on their respective charters or constraints.

The catch, then, is simply whether all of the company's intrinsic value is successfully manifested in a higher share price.

Do (should) I you worry about:

• The dance cards of prospective acquirers filling up without Provectus (i.e., do I worry about M&A chairs being filled when the music stops? No, because the pipeline needs of Big Pharma are so significant, and the potential of both PV-10 and PH-10 is so vast. Many solid tumor indications still are very much wide open for emerging therapies for blockbuster impact, and there is no topical drug like PH-10 on the market or in development.

• A loss of Big Pharma interest in PV-10 and Provectus, or about the drug and the company being overtaken by some as yet unnamed or named competitor or drug or therapy flavor of ASCO or the year? No, because Rose Bengal is so unique, and Big Pharma readily acknowledges such uniqueness. Management has created a new class of therapy for both PV-10 and PH-10.

• Big Pharma playing hardball with the company in the event the cash balance is not has high as management would hope whenever Provectus tells Pfizer and other suitors the company is interested in doing a deal (either license or full-on acquisition? No, given that the company has the Lincoln Park Capital agreement in place, along with two effective S-3s.

• Big Pharma could (would) call Provectus' bluff about acquisition and say "go develop PV-10 yourself," as a way of driving valuation down for them to buy the company later? No, because as Big Pharma business development folks will tell you, “we’re desperate.”

Recall...that management has turned down several license offers or curtailed license interest because the initial valuation overtures did not meet Provectus' own valuation hurdle figures.


Moffitt data...is a very significant part of the company's future.