June 29, 2013

For $PVCT, it's the FDA's move

Just the weekend is left in the month of June. Saturdays and Sundays typically are historically low visitorship days for the blog. Yet, it's on track for another record high in unique visitors. The number of visits should fall 10% from May because I blogged about 40% less in June.

As a refresher for those who might not know, I speak to Peter on a monthly basis. During these conversations, which last between one and two hours, we cover a lot of ground and discuss a number of topics. I also routinely communicate with Craig and Peter via e-mail; 10,403 as of this post (about 2,600 a year), and counting...

I caught up with Peter earlier in the week for one of these monthly calls. There's a lot that can be written about.

In this post, I want to write about whose move it is.

When I ask Peter why Big Pharma, particularly Pfizer, has not moved on a global license with the company, he responds by framing the situation this way: No one moves unless they have to move. Everyone moves when somebody moves.

While Craig will say Pfizer only will move after interim metastatic melanoma ("MM") Phase 3 results of a contemplated trial under a special protocol assessment ("SPA") with the FDA, when the SPA was the more likely path, and which I get and understand (now, and given the implications of breakthrough therapy designation ("BTD")), I want to be "more macro" or "big picture."

Let's look at this using game theory. According to Peter, the "rules" are:
  1. No one moves unless they have to move.
  2. Everyone moves when somebody moves.
Essentially, in a two-player game, a player moves or doesn't move, as in the matrix or table below.

Click on the figure to enlarge it.
At any moment in current time, with no impetus to act (i.e., no one moves unless they have to move), the optimal outcome for the players is the fourth quadrant (bottom-right) Doesn't Move-Doesn't Move, where the players expend no money (0,0). Because everyone moves when someone moves, Provectus enjoys the best outcome (-3,-3) because the ensuing auction drives up the price of the target.

{No one moves unless they have to move, Everyone moves when someone moves} This is circular, is it not, in the absence of an exogenous event?

Because if no one will move unless they have to move, at the moment no one will move, what event, outside this system, causes someone, and thus everyone, to move? No one wants to move until there is regulatory clarity.

The event is the FDA providing that clarity for a metastatic melanoma ("MM") indication. Clarity comprises:
  • An MM Phase 3 trial under SPA,
  • Accelerated approval ("AA"), for which the company regularly asks the FDA, which means skipping the P3 trial altogether (a post-marketing study, however, would be required),
  • BTD, which then translates into AA, followed by a post-marketing study
  • BTD, and a truncated P3 trial (i.e., shorter, in some form or fashion, such as a smaller number of patients),
  • BTD, and a modified P3 trial (i.e., a single-arm study),
  • BTD, and a quicker response on the above mentioned SPA-designed/agreed upon trial, or
  • Outright approval of PV-10.
That's a lot of choices, the range of which suggests a different FDA perspective for each one. If you consider it historically, the range of options reflect the data provided by Provectus over time to make the case for PV-10 (I think we can rank some higher than others, and I'll get to that later).

It seems clear the path to regulatory clarity has put questions about safety and efficacy to rest. If you think about the drugs the FDA has evaluated and approved over time, they've had increasingly incremental benefit (although, over time, increments add up), where the approval decision really does appear to boil down to weighing the side effects of a drug in the context of the incremental efficacy it may provide. PV-10 has a pristine safety profile, and efficacy never seen before.

With questions of safety and efficacy distant in the rear view window, the regulatory path approached and eventually cleared questions about mechanism of action ("MOA") with the help of Moffitt. Although it might have been said MOA never really was needed to secure the SPA, it became clear with a drug so novel and data so new (and never really seen before, in terms of how fundamentally better it was over other treatments) that understanding MOA was necessary. Nearly 3 years later, Provectus had fully answered the FDA's questions regarding proof of systemic properties and benefit for PV-10, thanks to Moffitt. The validation of this third party, with a world-class reputation, led by someone in Dr. Jeffrey Weber who had been responsible for the approval of drugs like ipilimumab and vemurafenib, appears to have been crucial to the FDA's consideration of PV-10.

What remains? Safety and efficacy established beyond question. MOA understood. Proof of systemic properties and benefit shown.

It's no longer about whether the drug should be approved, but rather how it should be approved. This brings me to the list of possible clarity options above. Any item on that list could be a potential and viable outcome, and I'd be happy with it because the company, the drug and the share price require regulatory clarity.

In truth, I think the company has moved well past the SPA. As I wrote before, I think any discussion between Provectus (Eric) and the FDA is about when to use it, in which situations, and in what combinations with other drugs. Having moved beyond safety and efficacy, beyond MOA and systemic-ness, I think we're now in a more nuanced discussion of how to maximize or optimize the use of PV-10: when to use it, in which situations, and in what combinations with other drugs.

A more likely outcome (but how probable I cannot yet assess) is accelerated approval to smaller or faster Phase 3 trials to, perhaps, outright approval of PV-10.

Let's return to Peter's Provectus' game theory "rules:"
  1. No one moves unless they have to move.
  2. Everyone moves when somebody moves.
"No one" and "everyone" includes Big Pharma, life sciences investors and, as importantly, Provectus. If we're then waiting for the FDA to move -- to provide regulatory clarity -- then why would global players, regional players and Provectus itself all not simply wait until the FDA moves by making a decision (all potential outcomes being positive), whatever that decision turns out to be?

When the SPA was the more likely pathway, an SPA, a Phase 3 trial, regional deals in China, India and Japan, interim Phase 3 results and stock market uptake seemed like the approach to raising valuation to management's expectations of a sizable upfront payment.

I'm not saying management is waiting to see the outcome of regulatory clarity to negotiate from an even better position. With BTD now the more likely pathway, with potentially accelerated approval or an accelerated (or, even, direct) path to market on tap, the choice of license suddenly becomes much different. The time value of money, as Peter would say, means a much more immediate path to market and thus sales dollars. Different players now have different levels of urgency to get a deal done with Provectus than under the scenario of "a plain old" SPA.

I'm not sure whether it's checkers or chess for management when you have drug like PV-10. Safety and efficacy established beyond question. A pristine safety profile. Efficacy never seen before. MOA understood. Proof of systemic properties and benefit shown. A unique MOA. A unique pathway.

No one, not Big Pharma, not regional players, not life sciences investors and, not least of all, not Provectus management has to move until the FDA moves. Then, I think, expect and suspect, everyone moves.

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