December 21, 2014

Let Me Tell You A Story About Pfizer

Provectus issued a press release and filed an associated 8-K this past week regarding the addition of a third Pfizer executive to its strategic advisory board ("SAB"), Deanna Angello, Director, Commercial Strategy and New Business Planning of Pfizer's Global Established Pharma business. As an aside, there are two other businesses in the reorganized company: Global Innovative Pharma and Global Vaccines, Oncology and Consumer Healthcare.

It would seem reasonable to say there Pfizer's interest in Provectus has existed since at least 2011 (and likely before, probably starting in 2010) and continues to exist, led by Pfizer's Dr. Craig Eagle, M.D. Eagle's last reported position at the firm was Vice President of Strategic Alliances and Partnerships for the Oncology unit. His professional background includes patient care (he was a hematologist-oncologist), and both managerial and participatory experiences in pharmaceutical research, drug development, regulatory affairs, pricing, reimbursement, and post-merger integration. Until I believe relatively recently, it hasn't included profit/loss ("P&L") experience.

Dr. Eagle also appears to be a forward-thinker about oncology, and the role and opportunity of the immune system to restrain, if not defeat, cancer. Consider, for example, a snippet of an Oncology Business Dynamics interview of Eagle following ASCO 2007:
"Oncology Business Dynamics: And the other investigational agent we seemed to hear a lot about was CP675,206. What’s new with this one? 
Craig Eagle: This is a very interesting compound which essentially releases the brakes on the immune system. CTLA-4 is a molecule which normally puts the brakes on the immune system and stops it from attacking tumors. CP-675,206 is an antibody which works on CTLA-4 and renders it inactive so that the immune system can attack the tumor. We presented results from a phase 2 study with 89 patients in which we saw survival times 10.3 to 11 months, which is longer than historical data. While this is preliminary data it was also encouraging enough that we are going to further our investment in the development of The CP-675,206 Phase 3 study in metastatic melanoma has completed enrollment and we are awaiting the data In this study CP-675,206 was used as a single agent administered once every three weeks." {Underlined emphasis is mine.}
CP-675,206 was Pfizer's initial label for its monoclonal antibody and immunotherapy tremelimumab, which is related to Bristol-Myers' approved immunotherapy ipilimumab (trade name Yervoy). Pfizer out-licensed tremelimumab to AstranZeneca's MedImmune in 2011.

Eagle's longstanding interest in PV-10 is a second example; a local drug that is very safe and kills cancer locally, and has demonstrated the ability to systemically kill cancer. A third example would be his contribution to and involvement in Provectus' patent application Combination of Local and Systemic Immunomodulative Therapies for Enhanced Treatment of Cancer, which covers and protects the combination of PV-10 and other therapeutic agents, particularly all checkpoint blockade categories (i.e., anti-CTLA-4, anti-PD-1 and anti-PD-L1), and of which he is a co-author (Pfizer is a co-assignee). He probably saw much earlier than most the eventual trend of the FDA and pharmaceutical industry towards the use of combinations of drugs to treat late-stage cancer.

His interest and, by extension, Pfizer's, however, has not translated into an increase in Provectus' share price. The stock price on the date of the first public Pfizer touchpoint, Eagle's addition as the first Pfizer executive on the SAB on August 30, 2011, was $0.92. The price on the date of the fourth public touchpoint, Angello's addition on December 17, 2014, was $0.88. The stock market has placed no premium on a Pfizer-Provectus relationship or association.

The historical touch points between Pfizer and Provectus, starting in 2011 -- three Pfizer executives on Provectus' SAB, and the companies as co-assignees of a combination therapy patent application that includes the pairing of PV-10 and different categories of checkpoint inhibitors -- might encourage one to ask: "Given Pfizer's interest in Provectus, why hasn't it invested in and/or acquired the company yet?"

One answer, it would seem, is not for lack of "trying." I believe Pfizer (Eagle) has tried three times. For two of those times, Provectus management would not have found the valuation proposition sufficiently compelling and thus worthwhile to pursue. In the third instance, Craig et al. likely concurred with valuation but fell short in their efforts to reciprocate Pfizer's interest to formalize the relationship/association.

Transactions, whether venture capital, private equity or portfolio management, typically stem from an underlying value proposition and, more often than not, require a catalyst. PV-10's clinical value proposition, together with the drug's ease of administration and low cost to manufacture, ship and store, is both very clear and attractive. See, for example, my blog post PV-10 (Rose Bengal) Clinical Value Proposition. The historical record of fact and "fiction" paints a picture of potential catalysts that may have provided context for either an acquisition of Provectus or an equity investment in the company by Pfizer. The facts are the addition of three Pfizer executives to Provectus' SAB, and the joint oncology combination therapy patent application the two companies made. The "fiction" includes:
  • A rumored 2011 bid for the company for the same $1 billion valuation as and around the same time when Amgen acquired Boston (Woburn), Massachusetts-based, privately held, intralesional oncology company Biovex,
  • A rumored equity investment that may have led or co-led Provectus' preferred stock "IPO (using the NASDAQ ticker symbol PVCTP) in 2012, which was to have been predicated on or catalyzed by a special protocol assessment ("SPA") for a melanoma Phase 3 trial. The "IPO" might have been contemplated at a $1 billion pre-money valuation that, while yielding a minority ownership in Provectus for Pfizer, could have provide the impetus and opportunity for Provectus to grow its market capitalization much higher, and
  • The rumored 2014 bid for the company for a valuation of more than $2 billion prior to the company's submission of its breakthrough therapy application ("BTD").

Provectus presented preliminary, full, melanoma Phase 2 results at the Society for Melanoma Research's Melanoma 2010 Congress (see Provectus' press release Provectus Reports Full Phase 2 Study Data on PV-10 for Metastatic Melanoma). Prior to that, competing intralesional oncology therapy company Biovex, venture-backed and Boston-based, began enrolling patients in its pivotal melanoma Phase 3 trial for OncoVEX GM-CSF in 2009 (the press release is here, and clinical trial information is here). In 2011 Amgen acquired BioVex for a top-line amount of $1 billion, and renamed the drug talimogene laherparepvec ("T-Vec").

Without reference to a specific timeframe but sometime in 2011 it is possible Dr. Eagle had a casual conversation with Provectus about their interest to be acquired. He may have understood PV-10's value proposition, and Amgen's acquisition of BioVex could have been a direct or indirect catalyst. In M&A parlance the acquisition would have been a precedent transaction used to provide a datapoint establishing price. Provectus management, believing they knew what PV-10 and thus the company were worth, then may have rebuffed Eagle's informal overture.

Given his work with tremelimumab, his interest in PV-10 and its potential in combination with other drugs, and/or possibly a positive opinion of Provectus' early-stage trial effectiveness and capital efficiency, all underscoring a desire to continue working with the company if he could not acquire them, it is possible Eagle tried to out-license Pfizer's anti-CTLA-4 agent to Provectus.

Eagle joined the SAB in August 2011. Pfizer out-licensed tremelimumab to MedImmune (AstraZeneca) in October.
Figure 1. Click to enlarge.

It has been said biotechnology companies typically are acquired when they are in Phase 3 trials. BioVex was acquired by Amgen after beginning its pivotal melanoma Phase 3 trial for intralesional oncology agent T-Vec (formerly OncoVEX) but before an interim analysis was read out.

In 2011 Provectus seemed like it would commence a pivotal melanoma Phase 3 trial. The company had held a meeting with the FDA in October 2011. In January 2012 management issued press release Provectus Receives Guidance From FDA On Pathway to Approval for Phase 3 Trial of PV-10 For Metastatic Melanoma noting they would seek an SPA for the trial. In July Peter filed a $100 million mixed securities shelf of both common and preferred stock; he filed the prospectus for the "IPO," an offering of preferred shares with warrants, in September (the related SEC filings are here and here, respectively). The fundraising round was to have totaled $30 million, if I recall properly, with a "fictional" pre-money valuation of somewhere around or between $800 million and $1 billion.

The situation made sense. While Provectus management may not have been willing to sell the company (i.e., give up all ownership) for a BioVex-like amount of a $1 billion, they might have been prepared to give up a percentage to Pfizer and the round's other investors to cement a relationship with the Big Pharma company. In return, however, Pfizer likely would have required Provectus to be on a firm pathway towards the commencement of a Phase 3 trial. Unfortunately, as we finally learned on the company's May 23rd conference call in the wake of the FDA's denial of Provectus' BTD application, Eric had been unable to agree upon a trial design (endpoints and patient population) with the Agency. There ended up being no investment by Pfizer because there ended up being no catalyst (i.e., no Phase 3 trial design, no Phase 3 trial).

The "IPO" was cancelled in October 2012 amid monstrous volatility in the share price.
Figure 2. Click to enlarge.

Finally, during Provectus' December 16, 2013 Type C meeting with the FDA, Provectus appeared to establish its initial pathway to the licensure of PV-10 with the Agency. See, for example, January 2014 press release Provectus's PV-10 Path to Initial Approval in U.S. Now Clear Per FDA Meeting Minutes, which was locally advanced cutaneous melanoma. The day after the meeting the company issued press release Provectus Announces Name Change to Provectus Biopharmaceuticals, Inc. and Reincorporates in Delaware in which they seemingly buried the addition of the second Pfizer executive to Provectus' SAB, Bob Miglani. Miglani appeared to have substantive international pharmaceutical business experience, and a corporate functional role (as opposed to Dr. Eagle's operational and oncology-focused role). In the same January press release above management noted they also would apply for BTD.

Sometime before Provectus submitted its BTD application it is possible Dr. Eagle had a casual conversation with Provectus about their interest to be acquired this time for $2 billion or thereabouts. He may have been more comfortable with PV-10's regulatory pathway -- albeit not completely certain about it -- and the company's BTD application could have been a direct catalyst (a successful application would have made Provectus much more expensive to buy in his mind). Provectus management, believing PV-10 and the company were worth more, would have rebuffed Eagle's second presumably informal overture.

Provectus' BTD application was denied in May 2014.
Figure 3. Click to enlarge.
2014 And Beyond

In early-November 2014 Moffitt Cancer Center presented preclinical combination therapy work at SITC 2014. Around mid-November Pfizer seemingly jumped into the middle of the immuno-oncology pool with their own anti-PD-1 agent in one hand and Merck KGaA's anti-PD-L1 agent in the other. According to the immediately linked Pfizer press release, Albert Bourla, Group President of Pfizer's [Global] Vaccines, Oncology and Consumer Healthcare business said "Immuno-oncology is a top priority for Pfizer."

Last week, on December 17, Provectus issued press release Provectus Biopharmaceuticals To Sponsor American Association of Physicians of Indian Origin in which they seemingly buried, yet again, the addition of a third Pfizer executive to Provectus' SAB, Deanna Angello. Angello appears to have substantive commercial strategy experience, which notably includes "...formulating robust business cases, and performing due diligence to thoroughly assess the commercial value and fit of in-licensing and acquisition opportunities," and an operational role in Pfizer's Global Established Pharma business, which presumably is not where the bulk of the Big Pharma company's oncology assets lie. Wouldn't they reside in Global Vaccines, Oncology and Consumer Healthcare?

Returning to the concept that many biotechnology companies or assets are acquired or licensed during their respective Phase 3 trials, Provectus soon should announce the company will begin enrolling patients in its own pivotal melanoma Phase 3 trial. Interestingly, Pfizer, but more likely Dr. Eagle, has added a colleague with experience constructing and making the business case to license a therapeutic or buy the company that owns it. It would appear, however, Angello is in a different Pfizer business than Eagle. Wouldn't his visible title put him in Global Vaccines, Oncology and Consumer Healthcare?

I speculate Eagle currently is tied (or has moved) to Pfizer Injectables, which is part of the Global Established Pharma, because he probably needs to add P&L responsibility to his resume to further his career prospects at Pfizer. The division's portfolio of products includes oncologics (PV-10 is an injectable compound of course). Additionally, if someone is going to be tapped to assess the commercial value of the drug, why would he or she come from an ostensibly different Pfizer business. Eagle may be augmenting his professional background while at the same time maintaining his running start on trying to acquire Provectus for Pfizer.
Figure 4. Click to enlarge.
The answer to the question "Given Pfizer's interest in Provectus, why hasn't it invested in and/or acquired the company yet?," if you believe my "fiction," might be that the stars -- valuation and catalyst -- have not yet aligned for both Pfizer and Provectus. It would seem to me Eagle has a reasonably long-standing belief in how to more effectively treat cancer, and a long-standing interest and belief in Provectus and their treatment approach. Craig et al. are and have been focused on protecting the economics of their fully owned cancer asset, and have not been nor currently appear inclined to give the company away. It would also appear Pfizer (Eagle) has been prepared in the past to offer a very healthy premium to the then market capitalization of the company.

While it is not a foregone conclusion Pfizer will acquire Provectus, it would appear the Big Pharma company may be in the pole position (also see my July 2012 Pole Position post). The better question to ask Provectus management, and a key question existing and prospective investors in the company should pose to themselves, might be "Can Provectus get its price?"

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