August 11, 2013

Provectus’ Whisper Number

Whisper numbers, on Wall Street, are the "unofficial and unpublished earnings per share forecasts of companies that circulate among professionals on Wall Street." (Source: Wikipedia)
According to Per Afrell, a former analyst at UBS Warburg, buy and sell side research analysts generally maintain a 20 plus page spreadsheet to calculate their earnings per share estimates. When the estimate is first calculated by sell-side analysts, the number is submitted to companies such as First Call to be averaged with other analysts’ estimates for the consensus earnings estimate. As new information is made available and plugged into the spreadsheet, the calculation may change several times leading up to a company’s actual earnings release. However, the analyst is generally not going to issue a new report and revise his or her published estimate with each new calculation, resulting in the analyst’s true expectations differing from his or her published number. Therefore, when someone within the firm, an institutional client, or even a retail client asks the analyst his or her expectation for the company, the response is often different than the published estimate. This number then gets passed among trading desks and professional traders as the whisper number.
I regularly communicate with upwards of 50 Provectus shareholders, a very heterogeneous mix of small to large to very large stockowners, which notably does not include biotechnology-focused investors but does comprise a number of current and former Wall Street-types. I also track what company service providers say and hearsay, too. Understanding their individual and collective perspectives can be useful and insightful. Wisdom of crowds, and all that, combined too of course often with helpful and correct contrarian viewpoints…

The blog’s poll about what, if any, clarity the company could or would receive by the time ECCO 2013 rolls around (end of September, beginning of October) continues. As of the writing of this post, 56% of responders (43 votes) say “no clarity” (several answered this way because, while they expect Provectus eventually will receive one of the other poll question choices, they don’t believe it will arrive by the end of next month, per the poll question). 44% say “clarity” of some sort (36 total votes) with 34% (27 votes) believing breakthrough therapy designation (“BTD”) and accelerated approval (“AA”).

Without the end date of September-end, or with, say, a 2013 year-end date (per May’s CEO Letter), many of the “no clarity” votes would have transferred to one of the “clarity” options. It is striking, not the least bit unexpected and a little ironic that the choice among “clarity” is BTD: Accelerated Approval (27 of 36 clarity votes, or 75%).

Why have so many poll respondents thus far chosen BTD & AA from among the “clarity” options? More than likely, these folks have responded in a manner directly influenced by their discussions with management, indirectly because of what they may have heard management (and others) say or intimate, or simply because they let themselves believe what they wanted to believe or believe they had heard.

As a result, it strikes me that no less than management’s credibility is at stake over the next few months; credibility, as I see it, in regards to managing (drug development, regulatory clarity) and monetizing (regional and/or worldwide license transactions, eventual sale of the company) the business, and not so much if at all in regards to innovation. A shareholder who spoke to Drs. Agarwala, Sondak, Thompson and Weber, among other interested parties, confirms as much regarding innovation. Choices have consequences and ramifications, such as those, among many others, that relate to patents and patent allowances, PV-10 production runs, and transaction condition precedents.

I’m excited, like most shareholders, for the outcome (what it could be, and eventually is), for the company (achieving regulatory clarity is a key milestone in Provectus’ history and for management team members) and of course shareholders (a move out of the cents doldrums).

When I constructed the poll question, I combined the achievement of BTD with what it might translate into (i.e., a single arm, smaller patient number Phase 3, AA, or some other clarity as a catchall for something else). It’s not yet clear to me into what achieving BTD ultimately would translate.

As such, it seems to me, from listening to and hearing shareholders (and, in particular, certain among them), Provectus’ whisper number is BTD. I think the prevailing viewpoint among various folks is that the company already has submitted its BTD application for PV-10 and metastatic melanoma. Thus, the expectation would appear to be Provectus receives this designation when FDA regulatory clarity is revealed (there always is the possibility they do not, or do not on the first try, or receive something less desirable or expected). I don’t think anyone outside of the company has a credible sense of when, however (i.e., will a 60-day clock be used?, or will the decision come down sooner?).

As for what BTD translates into, or entails, for Provectus and PV-10, such as next steps in the regulatory process (if any), label, time to approval, etc., I think those come later.

Whenever clarity arrives, did management meet expectations, and thus the whisper number, of achieving BTD?

Did they beat expectations by concurrently achieving something more desirable with it?

Or did they fail to meet expectations, whether that is "just" getting the SPA, or still not yet achieving clarity of any sort?

No comments:

Post a Comment