How China May Shape Up

Relying on anecdotal evidence in general and connecting the dots specifically, the Chinese have displayed a willingness to do deals before regulatory clarity has been made transparent, and this appears to be the case with Provectus too.

There may be strings attached, "ifs, ands or buts," etc. in any prospective deal structure between the interested Chinese party and the company to reflect future uncertainty or condition precedents.

The prospective partner in an eventual China regional transaction (at least, most likely, China, Hong Kong, Macau and Taiwan, and potentially certain other Asian countries and geographies) appears to have been narrowed to two companies: Hisun-Pfizer Pharmaceuticals and Eddingpharm.

Hisun-Pfizer is the joint venture between Pfizer and Zhejiang Hisun Pharmaceutical, initially formed to sell low-price generic drugs but more recently desirous of selling branded ones.

Eddingpharm is a private venture-backed company (venture investors include OrbiMed Advisors Caduceus Asia Partners Fund, Domain Associates, and Sequoia Capital China Growth Fund) focused on marketing drugs of Western pharmaceutical companies in China and Asia. Eddingpharm's willingness to do a deal prior to regulatory clarity may be seen in its license agreement with Syndax for entinostat in China and other Asian countries in early-September. Syndax received breakthrough therapy designation from the FDA for entinostat one week later.

Recent Eddingpharm deals include Syndax for breast, lung and other cancer indications (September), GlaxoSmithKline China for a breast cancer drug (April 2013) and Chiesi Farmaceutici for two respiratory disease products (April).

It's unclear to me whether Peter met with both Hisun-Pfizer and Eddingpharm, or one of them, when he was in China the week of September 2nd. I think Pete's September trip was a follow-up meeting (e.g., pre-screen, due diligence, etc.) primarily or exclusively with Eddingpharm, which has offices in Hong Kong, Shanghai (where Peter visited, at least) and California. Hisun-Pfizer was introduced to the company by Pfizer's Dr. Craig Eagle.

I understand Peter may be in New York already (i.e., today).

He has made three trips to China thus far: November 2012, February 2013 and September. Will there be a deal signed and announced this week or soon ("yes"), will be have to return to China ("maybe"), or will there be no deal ("no")?

If wishes were horses, beggars would ride. If turnips were bayonets, I would wear one by my side.

If rumors were dots I'd connect them too:

• The lead indication for China appears to be liver cancer,
• There has been speculation of a $10 million upfront payment,
• There has not been much rumor mongering on milestone payments. If I had to speculate, perhaps $50-100 million, but it will boil down to what the company can negotiate and ultimately would accept, and
• The net present value of the deal is $1 billion. Like any discounted cash flow analysis, you utilize a variety of assumptions to arrive a number that easily can be revised or changed by the practitioner undertaking it. I think the goal of this number is to reflect the level or percentage of royalty or sales, together with the term of the agreement.

Horse, beggars, turnips, bayonets...

It has been speculated Eddingpharm already extended terms to Provectus. Peter may be in New York to determine if Hisun-Pfizer will consummate a transaction, or then proceed to accept Eddingpharm's deal.

What Provectus says via 8-K filing and press release, or does not say, whenever (should ever) it says (say) so, if it has anything to say, will go a very long way to telling us what the future of the share price holds.

A China deal would entice some buyers off the sidelines, initially staunch and then hoover up the sale of convertible preferred stock that has been and currently is being dumped. Once the preferred stock is dealt with, it's more than likely the share price would gap up to the next level of share or warrant selling-induced resistance.

$PVCT: A Slow, Hot, Smoky Summer Monday

I appreciate the comments and e-mails from blog readers I received over the last week. Thank you. I realize some of you would visit once or a couple of times a day, while others would visit 15-20 times during their daily waking hours. I'm still blogging, but not nearly as much as I used to (as I transition the blog per my "$PVCT: Moving On, Moving Up" post).

A blog reader commented, in regard to my "For $PVCT, it's the FDA's move" post, that although I wrote the ball is now in the FDA's court, Craig's recent remarks, including his letter to shareholders (May 13) and reported comments at the annual general meeting (June 27), suggest Provectus has not yet made an application to the FDA for some process that would result in an approval, whether for an special protocol assessment or breakthrough therapy designation ("BTD"). The reader went on to write: So, in a sense, the ball in is the company's court to first file [some application] with the Agency. I say it's the FDA's move because regulatory clarity is what is needed by Provectus, and I think the company has provided answers to all of the Agency's questions. Of course, the FDA cannot move if the company has not submitted an actual application for which a decision from the Agency is required. A consensus of opinions I solicited over the last couple of months pointed to the belief management had submitted an application for BTD sometime during that period. Recent information purports to suggest that, as late as last week, more time was needed to submit the application.

I've been trying to wrap my head around the role(s) Maxim Group's Dr. Echo Yinghui He, MD, PhD is playing for/with the company. Her position with Maxim is as an equity research analyst, and she provides coverage of Provectus. Dr. He's last company update note was dated January 29, and she is expected to provide another one after Moffitt's peer-reviewed article is published. It appears she has an additional role of some sort with the company as it relates to Provectus' efforts to seek and secure a regional transaction in China.

$PVCT: Maxim Group -- Melanoma leading PV-10 development with liver cancer following; Reiterate Buy and $3.50 PT

Maxim Group analyst, Dr. Echo He, MD, PhD, issued an equity research note today on Provectus. Management circulated the report via Provectus News.

Dr. He's $3.50 price target, which is mostly irrelevant to me (coverage is more important), did not change from her previous reports. The price target also remained the same as the price target of her predecessor, Dr. Yale Jen, Ph.D., who now is at Roth Capital. Because of management's refusal to play the Wall Street game, generally speaking, equity research reports like these have some but not extensive value.

I do not think she changed top line revenue figures to reflect the addition of a liver indication, although she did make expense reductions in her model. The analyst also did not include the potential, probability-adjusted value of out-licensing opportunities in China or elsewhere.

As such, the $3.50 price target yields a baseline valuation of about $400MM market capitalization (using Dr. He's diluted shares outstanding) that effectively is a reasonable estimate of liquidation value to which the current share price and market cap must catch up. This value of course is nearly or completely illiquid because management would never monetize the company at this level.

Further increases in either price targets or actual market cap obviously will be based on key and pivotal milestones actually being achieved.