Daiichi Sankyo: A Dark Horse Challenger to Big Pharma Buying $PVCT

Earlier this month I identified visits from Daiichi Sankyo in Tokyo spending many, many hours on the blog. Later, I confirmed visits from Daiichi's U.S. headquarters in Parsippany, New Jersey. I think Daiichi Sankyo is interested in a multi-faceted relationship with Provectus.

Plexxikon reported interim analysis of its MM Phase 3 trial for vemurafenib (Zelboraf) in January 2011. In February, the following month, the company announced it was being acquired by Daiichi Sankyo. When a corporate approaches a target, the dance generally begins with an introduction typically 3 to 6 months or more before an acquisition, if achieved, is announced. By this math, Daiichi may have begun speaking with Plexxikon around mid-2010. Plexxikon treated the Phase 3 trial's first patient in January 2010.

Daiichi, one could argue, acted aggressively. "Just a few months after Daiichi Sankyo Co. Ltd. purchased biotech Plexxikon Inc. of Berkeley, Calif., for nearly $1 billion, the Japanese pharmaceutical company is reaping the benefits. A drug developed by Plexxikon and now owned by Daiichi, vemurafenib, was approved for treating metastatic melanoma by the U.S. Food and Drug Administration, the company said Wednesday." (Source here)

Think about it. Daichii approaches Provectus before Moffitt's data has been presented at AACR in April. Before Provectus' contemplated pivotal MM Phase 3 trial is finalized -- where "finalization" means the receipt of the SPA -- and well before enrollment is commenced. That should come as no surprise because PV-10 is far superior to vemurafenib (Zelboraf) and has more multi-indication potential already (whereas vemurafenib did not).

Daiichi has the balance sheet to pay what Provectus desires. In 2008 Daiichi announced that it would pay up to $4.6 billion for a controlling stake in Ranbaxy Laboratories, one of the largest manufacturers of drugs in India; this deal valued all of Ranbaxy at $8.5 billion (a 31% premium to its stock market capitalization prior to the announcement).

Daiichi also has a Japanese cultural approach to M&A that might force Pfizer's hand. That is, it could push Pfizer to act because it has to act to protect an asset (Provectus) it values but heretofore has no impetus to acquire.

"Global studies of M&A point out that once executives dive into the transaction process, they often become so invested in the deal that they cannot pull out even when necessary. In most markets today, however, common wisdom prevails that being able to walk away is a hallmark of M&A sophistication. That notion is rare among Japanese practitioners of outbound M&A." (Source here)

"The demands of Japanese-style consensus building, requiring the hard-won agreement of many parties, make abandoning a deal particularly hard. The potential loss of face in such a decision makes participants reluctant to suggest it, even if the logic of proceeding is undermined by new information."

Daichii was agressive in acquiring Plexxikon, paying more for the company than anyone else offered or was willing to pay. From all accounts, the acquisition is or eventually should be accretive.

If Daiichi executives set their mind to licensing PV-10 (or PH-10) or acquiring Provectus, then Big Pharma (including, in particular, Pfizer) might lose the asset to the Japanese if they're not willing to counter bid.

Trying to Connect $PVCT Dots to Pfizer

As readers of this blog know, I've been trying to connect the dots from Provectus to Pfizer for a while. I think the larger company ultimately acquires the smaller one. When Pfizer would move to acquire Provectus is unclear, in the absence of a bid for the company by another Big Pharma, and whether it would do so certainly is not certain. Nevertheless, I think there simply are too many dots. The public ones are the corporate advisory board's Dr. Eagle and joint Provectus-Pfizer patent application.

Management denies Pfizer made an all cash $7 per share bid for the company in 2011, valuing the company around $1B. Since no 8K form was filed (formality, language, materiality), no bid was made, right? That year, melanoma treatments vemurafenib/Zelboraf (Plexxikon) and talimogene laherparepvec/T-Vec (BioVex) were acquired for $1B top-line figures. Interestingly, partial T-Vec MM Phase 3 trial results caused Amgen shares to rally last week, while the takeaway from the HemOnc Today conference in New York this past Friday and Saturday was systemic benefit from injectables is a keen area of focus.

Is Pfizer a passive spectator on Provectus' sidelines, or is it more vocal and active than we know?

I had hoped to connect another dot between Pfizer and Provectus through more information about a China deal. China is a unique market, and partnerships with local players rather than in-country Big Pharma subsidiaries appear to be the way to go. A vocal Pfizer might encourage Provectus to partner up with Sinopharm or Hisun or maybe Shanghai Pharma, Chinese pharmaceutical companies with Pfizer relationships of one sort of another. Interestingly, injectables are the preferred route of administration for oncology drugs in China.

Alternatively, Provectus might elect to do something with another Big Pharma in China along the lines of what AstraZeneca did with Ironwood. If this happens, Godzilla (Pfizer) might have a fight over the company on its hands.

Like with China, several of the leading local players in India are very interested in PV-10. Pfizer's Indian subsidiary, Pfizer Limited, India (which appears to be a wholly owned but independent subsidiary), may also be a potential player too. Could (would) Pfizer encourage (direct) Provectus to do a deal with Pfizer India, which might not have nearly as many shortcomings or competitive disadvantages in India as Pfizer China has in China (when compared to the likes of Sinopharm or Hisun)?

Can management ultimately optimize ROI, an effort that is no small feat? Any Big Pharma would be hard pressed to pay Celgene-Abraxis upfront money, which is management's expectation, for a sub-$100 million market capitalization company like Provectus is valued at now. Regional license discussions continue in China, India and Japan. Global license interest grows. Moffitt data surfaces in two weeks. Action and time will tell.

$PVCT's #China #Pharma Process In More Detail

Peter should be off to China in a week. What may or could happen?

A. He secures a deal.
If Peter gets a deal done, he:

1. Returns with the upfront payment,
2. Signs an memorandum of understanding ("MOU") that at least identifies the Chinese strategic partner by name, or
3. Signs a letter of intent ("LOI") with the partner where key provisions (i.e., terms) would have been agreed to by the partner and Provectus to provide the basis for definitive agreements.

Along branches (2) and (3), definitive agreements could be completed, signed and then enable the company to receive the upfront payment within 30 to 60 days.

B. Peter does not secure the deal because the intermediary Provectus used for China is unable to get the strategic partners to do the contemplated deal.
It appears the process of bringing partners to the table, after blessings have been provided by and an agreement has been reached with the Chinese central government, is not dissimilar to an arranged marriage. Potential brides with dowries of different amounts, composition and strategic value in hand assemble in a "room" -- depending on whether the current agent is able to get them into the room (i.e., get them to agree to the general terms and conditions previously approved by the government) -- for Peter and the team that will travel with him to China, to pick. If no bride has a sufficient dowry, he returns to China with a new agent or intermediary, say in another month or more, to renew his attempt to secure a deal. Management believes China will not turn the company down because of strong interest there to do a deal with Provectus.

C. The Board and management elect to turn down a China deal because of Big Pharma interest to do a much larger global license for PV-10.
Enough said.

What are the probabilities of A, B and C? I do not know, although I do have my opinion. Like you, I will wait to see what PR and SEC filing, if any, are issued and made the week of March 4th, and then ask for explanations if necessary.

I have high expectations for management to get a very good deal done if China, if and should they close such a deal. The market and most observers of Provectus have little to no expectations. Expectations may rise closer to the week of March 4th, but more likely only after a deal has been struck and its details made known. To life sciences investors and investors at large, China and Provectus is the ultimate "Show-Me," as they say in Missouri.

My own expectations are in the table below.

$PVCT: #Godzilla ($PFE) Vs. #Mothra

A blog reader and frequent e-mailer sent me this article: Is AstraZeneca getting ready to buy a pipeline? by FierceBiotech's John Carroll. Thank you.

The story comes from Reuter's Ben Hirschler's article New AstraZeneca CEO plans to invest through tough year. A notable quote:

After reading both of the articles, I could not help but think of Craig's comments and related presentation slide at the Noble conference.

Godzilla versus Mothra?

Let's get it on!

$PVCT: March Madness 2013

March Madness 2013 begins on Tuesday, March 19 and ends on Monday, April 8. The Final Four will be played in the Georgia Dome in Atlanta, Georgia. I contend this period (including leading into it) will be an important time for the company, its more mainstream awareness, and the share price.

There is a lot of information to digest, from Craig's presentation at the Noble Financial Capital Markets Ninth Annual Equity Conference to Peter's trip to New York City.

PV-10
Most of Pete’s time lately, probably more than anything else it seems (save for another effort), is focused on communicating PV-10's unique immunotherapeutic characteristics in the context of global oncology. You see this manifested in discussions with Big Pharma (as Craig commented at Noble: "interactions with potential global license partners," and by that he does not include just Pfizer) and continued visiting with life sciences investors (trying to get them off the sidelines and into the stock).

PV-10 + “other stuff”
I think Craig et al.’s SITC work (PV-10 + systemic chemotherapy), their upcoming AACR work (PV-10 + systemic immunotherapy), Foote et al.’s expanded work (PV-10 + radiotherapy), and Craig’s skunk works work on more combinatory explorations (e.g., intra-tumoral GM-CSF, systemic interleukin, anti-PD-1 antibodies/agents, etc.) is opening a lot of eyes at Big Pharma and the FDA very wide.

Management is contemplating an MM Phase 1 trial combining PV-10 and ipilimumab (while Craig mentioned this in his Noble presentation, I also followed up). Perhaps the protocol might include the assessment of safety and efficacy in a number of patients with metastatic melanoma (Cohort 1 receives PV-10) and in a number of patients who are taking ipilimumab, an approved treatment for MM (Cohort 2).

As I wrote earlier this week, this combination work of PV-10 + ipi  clearly targets and is in response to serious interest from Big Pharma: Bristol-Myers Squibb & ipilimumab/Yervoy and Pfizer/MedImmune-AstraZeneca & tremelimumab (MedImmune in-licensed tremi from Pfizer in 2011 for global development rights to the drug while Pfizer retained rights to specified types of combination therapies).

The liver trials
Let's segue from combination therapies to the expanded liver P1 trial, and what the likely results will mean for the design and very likely outcome of the liver P2/P3 trial. I think there is enough information to speculate (of course, the foundation of the speculation merely is a framework, and not overly substantial) or project success of PV-10 + sorafenib (a systemic drug, so see PV-10 + other stuff above) over the sorafenib-alone treatment arm. Interference studies and other work confirm PV-10 is orthogonal to sorafenib (and lots of other drugs, too): PV-10 does not interact negatively with sorafenib, and appears to enhance sorafenib's benefit by PV-10 first boosting the immune system.

When Provectus announces -- via an upcoming PR -- that patients have begun to be enrolled and treated in the expanded liver P1 trial, the timeline of results making their way to the FDA should not be lengthy. The same FDA group of folks reviewing Provectus’ pivotal MM Phase 3 trial design suitable for an SPA, Division of Oncology Products 2 (DOP2), are the same folks (i.e., DOP2) who will review the company’s liver Phase 2/Phase 3 trial design suitable for accelerated approval.

The hard work, time, energy, resources, expense, etc. exerted to get the SPA for MM should pay-off when it comes time for management to request AA for liver.

The SPA
Barring another eleventh hour request or issue, it appears the SPA should arrive around March 15.

While it certainly is possible that the SPA arrives earlier, I am setting my own expectations for the Ides.

Shelf filings
The pulling of the two $50MM common stock filings still are in process with Provectus’ attorneys. Management believes the act of pulling them is form over substance, since the company will not be using them. I think communicating their intended action to pull them and/or the actual act and notification to the market of pulling them is substantive.

The regional license deal for China
Work continues, and the process of arriving at and consummating a deal progresses. Should Pete travel to China again (he visited there in late-November 2012), it would be to close the deal, the announcement of which should follow via PR and 8-K filing.

In terms of setting my own expectations for this item, a deal could get done by or around late-February. If Celsion's China deal is worth several hundreds of millions of dollars (per the analysts and others commenting on valuation), by comparison I think you're looking at a Provectus China worth at least $1 billion (perhaps as much as $2 billion) with higher upfront, milestone and royalty payments.

India & Japan
As a result of a completed China deal, Provectus’ visibility should be much more pronounced. Deals in India and Japan could follow thereafter, but more of the deal process must progress before I would speculate about timing. India could be accelerate given the level of interest of the top Bio-Pharma players in the country. For now, I’m not setting any expectations.

Moffitt & Reproducibility
Craig expanded in some detail about Moffitt's work in his Noble presentation: their reproduction of his work, his reproduction of their work, their upcoming data release and presentation(s), etc. According to Craig, Moffitt's immunological MOA characterization work results (mouse and human) will be revealed imminently. I think Craig's comments related to reproducibility, particularly in the context of creating and making a product (i.e., PV-10, PH-10), were very important and very true.

I think it is easy, at this point, to connect the dots so as to speculate (identify) about which conference Moffitt will present their highly anticipated results. I still expect forthcoming visibility about these Moffitt results in late-January, and some data released in stages in March, prior to the full dataset being released at the expected conference in early-April.

More valuation-raising work to be done
When I wrote my blog post entitled $PVCT: Immunologic Potential, and thus Value, I set a very lofty valuation for the company, particularly as it related to the expectation of management for an upfront payment ($3 billion at last check) at the end-game. You don't get from $67.65 million (Google Finance's market capitalization for the company as at 1/25/13) to $3 billion in one leap.

Rather, Provectus arrives there in several leaps and bounds, together with perhaps some end-game auctioning momentum and exuberance: China, India, Dermatology, momentum share buying, etc.

Peer-based management compensation proposal coming
As management noted in a previous filing, a peer company-based bonus compensation structure should be part of a new compensation plan that management should introduce with Provectus' next proxy filing likely in late-April.

PH-10
From a review of history, it appeared Provectus was on the cusp of securing a deal to license its dermatology business (i.e., inflammatory skin disorders) in early-2011. Up to that point, management's valuation expectations, on a net present value (NPV) basis, were about $500 million.

No term sheet materialized from the most serious prospective partner, which would have triggered the official hiring of the financial adviser (Bank of America Merrill Lynch) and an auction process involving the other prospective partners. I think the lack of certain desired information at the time, since fulfilled by the Psoriasis Phase 2c trial, created a valuation gap between the prospective lead and Provectus that prevented the parties from coming together on suitable top-line term sheet parameters. Hence, the prospective lead declined to extend a term sheet it knew would be turned down management.

As time progressed (i.e., as the psoriasis Phase 2c trial was completed), a process appears to have been established that paralleled Moffitt's work on PV-10. Namely, a world renowned cancer research center engaged in work, initially at their own expense, to explore and characterize the immunological mechanism of action of Provectus' oncology drug.

In addition to better understanding PH-10 immunologic MOA, and on a related note, more insight into the drug's distinct lack of toxicity is necessary to better inform the FDA and assist in the design of the eventual Phase 3 trial.

It is not unreasonable to analogize PV-10's path to PH-10's, and thus potentially explain the delay in getting to a dermatology license or sale transaction. Immunologic mechanism of action characterization work is being done on PH-10 by a world-class institution to complete the understanding of certain prospective dermatology licensees before they fully commit to jumping into the pool. I think management's NPV figure for the dermatology business has increased significantly to at least $750 million (perhaps as much as $1 billion).

As for expectations, Craig did note in his Noble Presentation that we should look for the company to request a end-of-Phase-II (EOP2) meeting with the FDA. Presumably this announcement, if one is made by the company, or step precedes or signals the extension of a term sheet for dermatology is imminent, inbound or at least very close at hand.

$PVCT: Provectus to Present Data on PV-10 at the American Association for Cancer Research Annual Meeting in April 2013

Provectus issued a PR yesterday announcing the acceptance of Craig et al.'s poster presentation -- Combination of PV-10 immuno-chemoablation and systemic anti-CTLA-4 antibody therapy in murine models of melanoma -- at the American Association for Cancer Research (AACR) Annual Meeting in April 2013 in Washington, D.C.

Management checked with AACR to see what they could and could not say about the abstract and work in the PR. Provectus, at this point, is allowed to say (i) the abstract is accepted and (ii) the title. They cannot release data until the embargo is lifted, which will be in stages and does not start until sometime in March.

As Craig mentioned during his presentation at the Noble Financial Capital Markets Ninth Annual Equity Conference (click the preceding link to view it) around about minute 14:00, there is very significant interest to see how PV-10 works with systemic treatments (e.g., chemotherapy, immunotherapy, etc.), because it has become clear these secondary treatments work better after an initial use or application of PV-10.

You may recall from my post Provectus Pharmaceuticals Announces H. Lee Moffitt Cancer Center Initiates Phase 1 Study of PV-10 to Elucidate Bystander Effect the notion of PV-10 making cancer treatment more effective in combination with other therapies also is important (very, actually); particularly for late stage patients (a group not targeted by Provectus' current registration pathway for PV-10, which is to facilitate the treatment of Stage III and early-Stage IV patients) and those with heavy tumor burden.

Craig et al.'s work announced today -- the combination of PV-10 and systemic anti-CTLA-4 antibody therapy -- clearly targets and is in response to serious interest from Big Pharma: Bristol-Myers Squibb & ipilimumab/Yervoy and Pfizer/MedImmune-AstraZeneca & tremelimumab (MedImmune in-licensed tremi from Pfizer in 2011 for global development rights to the drug while Pfizer retained rights to specified types of combination therapies).

PV-10 + systemic chemotherapy: Craig etl al.'s murine work -- Generation of an antitumor response and immunity using a small molecule drug (PV-10) -- at the Society for Immunotherapy of Cancer (SITC) 27th Annual Meeting on October 26 and 27, 2012 in North Bethesda, Maryland explored time to progression and tumor growth from PV-10 alone, 2 cycles of 5-FU, PV-10 and 2 cycles of 5-FU, and a saline control. Provectus concluded co-administration of PV-10 immuno-chemoablation with other systemic therapy, in this case, 5-FU, can yield potent synergy in uninjected tumors (Combination of PV-10 with systemic chemotherapy can yield synergistic benefit in untreated tumors supportive of ongoing clinical work; f/n: A study to assess PV-10 chemoablation of cancer of the liver; clinical trial NCT00986661). PV-10 did not interfere with the systemic chemotherapy agent, nor did it create or cause a toxic reaction. In fact, by boosting the immune system, PV-10 allowed the chemo agent to perform better.

PV-10 + radiotherapy: Foote et al.'s initial and ongoing work combining PV-10 and radiotherapy are showing dramatic improvement for patients with much later stage disease (Stage IV) and heavy tumor burden. At least 10 patients have been treated, a follow-up to the success of their initial work on 3 patients.

PV-10 + systemic immunotherapy: As I wrote earlier, there is very significant interest to see how PV-10 works with ipilimumab (an anti-CTLA-4 agent). Because ipi is human-specific, Craig used a mouse anti-CTLA-4 antibody. Craig et al.'s work is a necessary pre-cursor to human trials (one cannot simply run such experiments without sufficient data to show the FDA how the combination might work and that it is safe). This mouse study will be used to convince regulators that Provectus should be allowed to run a Phase 1 trial combining PV-10 and ipi (as Craig mentioned at the Noble conference).

Click to enlarge figure.

Other combinations: As a treatment PV-10 lies in the "sweet spot" of the addressable market of patients afflicted with melanoma that comprises the vast majority of patients. Patients with very late stage disease and/or very heavy tumor burden, depending on whose numbers you use, probably comprises 2-5%. Nevertheless, as with today's announcement that heralds the successful demonstration of PV-10 and a systemic immunotherapeutic agent (as with the company's SITC-presented earlier work that successfully demonstrated the combination of PV-10 and a systemic chemotherapeutic agent) Provectus is seeking further combinations to make very late stage disease patient treatment options better (e.g., intra-tumoral GM-CSF, systemic interleukin, anti-PD-1 antibodies/agents, etc.).

Today's PR is not related to the anticipated Moffitt immunological MOA characterization work (mouse & human) that will be presented later this year at a high profile conference like AACR. Moffitt presumably will notify Provectus if the cancer center's abstract(s) has (have) been accepted. Then, management will work with Moffitt to coordinate news flow.