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.

Well, Did You or Didn't You...?

It's been a few days of quite the price action and trading volume since Moffitt issued its press release Single Injection May Revolutionize Melanoma Treatment, Moffitt Study Shows, following low to moderate volume within a roughly $0.60 to $0.70 per share trading range since about mid-April.

The PR was followed by a positive piece in Agora Financial's investment newsletter Breakthrough Technology Alert on August 27th entitled Study Shows Provectus' Compound Makes Cancer "Dye" and an article in Seeking Alpha today (September 6th) entitled Provectus Pharmaceuticals: Small Cap, Huge Upside.

Last 3 months

Last 12 months

Into the buying interest that ensued convertible preferred shares were sold (i.e., preferred stock were converted into common stock, and then sold) dampening the upward share price move: a close of $0.64 on August 21st, a high of $0.89 on the 28th, and a close of $0.74 on September 6th -- moves of 15-40%. Not bad.

Like a coiled spring, a "little bit of good news" goes a long way when it comes to Provectus' share price.

But, this is where the capital structure hurts. The overhang of shares ready, able and willing to be sold weighs heavily on the share price for the time being. While there certainly has been buying interest, it is no where near the levels to overcome the amount of shares available for sale by folks who are more than content to sell their common and/or preferred stock and wait for their warrants to become the primary driver of value in their portfolios.

You might think of the 75-cent share level as a key "resistance level" because the preferred shares issued in 2010 and 2013 were priced at this figure. As at June 30, 2013, there were 1,481,665 2010s and 3,400,001 2013s. Somewhere between 750,000 and 1 million 2010s may have been converted and sold into the recent share price bump. Sustained selling may ensue of more 2010 preferred, if not the remainder of them, should buying interest continue.

The next key resistance level may be around $1.05 for warrants and their potential exercise.

I hope there is continued news of progress that would drive greater and greater awareness of the drug, Provectus and, thus, the share price.

As I wrote above, a Seeking Alpha article on Provectus was published today:

"Given that PV-10 has an outstanding safety profile, no debilitating treatment side effects, and has been effective in treating solid tumors that normally have a high mortality rate, the remarkably low market capitalization makes the investment premise obvious."

The blog received a mention (see the red underlined sentence portion in the illustration above), which I appreciated.

Peter has been in China, ostensibly (obviously) to try and secure/agree to a regional license transaction. I hope this process, which began last spring or summer (I think), followed by his first trip to the country in November 2012, a second trip in February 2013, meetings in Washington, DC at AACR in April 2013 and several meetings (I think) in New York, will culminate in a transaction or transaction agreement with this September visit. The two leading parties for a regional deal appear to be Pfizer joint venture Hisun-Pfizer Pharmaceuticals and pharmaceutical marketing company Eddingpharm (Hong Kong and Shanghai).

Very recent speculation has been that an MOU has been secured; proof only will be pudding'ed when Provectus files an 8-K for this material event (and issues a subsequent PR). For now, we wait.

It is quite possible a regional transaction with an Indian pharmaceutical company follows very quickly on the heels of a China transaction (if one ultimately is consummated). I do not believe Peter would have to fly back to India, which he initially visited in June, to close this deal. The two leading parties for a deal on the sub-continent appear to be Dr. Reddy Laboratories and Japanese pharmaceutical company Daiichi Sankyo's Indian subsidiary Ranbaxy Laboratories.

I often wonder about the status of Provectus' November 2010 discussion with Australia's Therapeutic Goods Administration ("TGA") regarding the use of interim data from the first half of metastatic melanoma Phase 3 study subjects (when such a trial would be run), in conjunction with safety data collected in earlier studies of PV-10 for melanoma, to allow early evaluation for marketing approval for MM. If Moffitt's results thus far, such as the cancer center's work published in PLoS, have moved the FDA, it would not be unreasonable to think it also has moved the TGA. When the FDA provides the much needed and long awaited regulatory clarity for PV-10, TGA may approve PV-10.

In July I learned (diligenced) the second liver trial site, Tampa, Florida's Southeastern Center for Digestive Disorders & Pancreatic Cancer, had not yet enrolled patients. It appears patients now have been enrolled, and I would expect a near-term PR from Provectus to mark this milestone.

Abstracts for ECCO 2013, the European cancer conference at which the company will present MM Phase 2 trial data, should be available online on September 12th.