April 5, 2013

$PVCT Pricing Power

Last week, when news surfaced about Biogen Idec setting the price for its new multiple sclerosis pill, a blog reader who informed me of this asked about Provectus' pricing perspective for PV-10. Tecfidera, Biogen's drug, is more commonly known as dimethyl fumarate. A good read about Tecfidera's pricing comes from Corante's David Lowe: "It [Tecfidera] joins the (not very long) list of industrial chemicals (the kind that can be purchased in railroad-car sizes) that are also approved pharmaceuticals for human use."

Management thinks it has significant pricing flexibility and thus tremendous pricing power for both PV-10 and PH-10 because of the compounds' manufacturing cost structures. Treatment cost, particularly in the context of evidence of PV-10's clinical superiority (as well as that of PH-10's), undoubtedly will be an important aspect of Provectus' discussions with prospective pharmaceutical partners, whether Big Pharma or pharma in China, India and elsewhere around the world.

Management understands and expects any pricing of PV-10 and PH-10, however, will be driven by Provectus' partners, up to (i.e., partners in regional license transactions, and the sale/license of the dermatology business) and including when the company is acquired by Big Pharma.

In other words, management will not set PV-10's price independent of partner guidance. More than likely, any PV-10 pricing will be determined after Provectus has been acquired, at least insofar as being publicly stated. Price points that management currently is considering solely are being used for business valuation purposes and done in consultation with prospective regional and global partners.

I have long been aware of and understood the cost structure underlying PV-10 (and PH-10); specifically, potential gross margins and costs of goods sold. Rose bengal's cost to manufacture and potential treatment prices, together with the drugs' efficacy and safety, make a very compelling value proposition.

Take melanoma, for example. The company surmises what each 5 ml vial of PV-10 a partner might price the vial at depending on the region of the world (e.g., U.S., European Union, Japan, Latin America, China, India, etc.). Management also can surmise the average number of vials per melanoma patient required. Such information, combined with the drug's superior clinical benefit, suggests PV-10's total value proposition (price + efficacy + safety) could very well fracture the competitive landscape of cancer treatment.

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