January 29, 2013

$PVCT: Maxim Group -- Melanoma leading PV-10 development with liver cancer following; Reiterate Buy and $3.50 PT

Maxim Group analyst, Dr. Echo He, MD, PhD, issued an equity research note today on Provectus. Management circulated the report via Provectus News.

Dr. He's $3.50 price target, which is mostly irrelevant to me (coverage is more important), did not change from her previous reports. The price target also remained the same as the price target of her predecessor, Dr. Yale Jen, Ph.D., who now is at Roth Capital. Because of management's refusal to play the Wall Street game, generally speaking, equity research reports like these have some but not extensive value.

I do not think she changed top line revenue figures to reflect the addition of a liver indication, although she did make expense reductions in her model. The analyst also did not include the potential, probability-adjusted value of out-licensing opportunities in China or elsewhere.

As such, the $3.50 price target yields a baseline valuation of about $400MM market capitalization (using Dr. He's diluted shares outstanding) that effectively is a reasonable estimate of liquidation value to which the current share price and market cap must catch up. This value of course is nearly or completely illiquid because management would never monetize the company at this level.

Further increases in either price targets or actual market cap obviously will be based on key and pivotal milestones actually being achieved.

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