And Now For Something Completely Different: $PVCT

Provectus' share price opened at $0.64 on August 22nd, a price it had closed at on August 21st and 20th, and August 1st and July 30th, and July 12th, and July 3rd, 2nd and 1st, and... Following Moffitt Cancer Center's August 22nd release of its rather startlingly titled press release Single Injection May Revolutionize Melanoma Treatment, Moffitt Study Shows, the share price closed at $0.63, down a cent from its open that day. The following day the share price closed at, you guessed it, $0.64. Average daily trading volume for the week numbered just north of 96,000 shares.

This week closed with a share price of $1.04 and an average daily trading volume (for the week) of a little more than 848,000, nearly 9 times that of the week Moffitt's PR came out.

In between:

• Agora Financial came out with a newsletter alert about the company on August 27th,
• Peter traveled to China a third time the week of September 2nd,
• Provectus issued a PR about its ECCO 2012 abstract on September 12th,
• The company issued a PR about its new and novel synthesis patent on September 13th,
• An interview of Peter by The Wall Street Transcript ("TWST") was published on September 16th, and
• An interview of Peter by The Life Sciences Report ("TLSR") was published on September 19th.

Peter said very bold and interesting things in the TWST interview, which the company later revised (the original version was circulated via Provectus News, while the revised version is available on Provectus' website via the link above). He followed this up with equally bold language in the TLSR interview, which effectively was another press release (having been paid for by the company), albeit an informative one.

But, I don't think the stock jumped 40% in two weeks because Peter was bold (the share price moved dramatically in the last couple of days, as high as $1.14, a figure not seen since May 2011).

I think the market sniffed something(s) out: A China deal. Peter was in New York ostensibly, it would seem, to try to close a regional license transaction. Did he? Regulatory clarity. We've been waiting for what seems like forever for the moving playing field of oncology to stop moving. Did it? Time will tell if the market was correct.

To add to the anticipation of next week and the week after: First, Moffitt will hold a symposium on September 28th, Update for Clinicians on Diagnosis and Treatment of Melanoma and Other Cutaneous Malignancies, where one hopes PV-10 is mentioned. Second, Provectus' ECCO 2013 poster presentation will be made September 30th, when one hopes a PR or two are issued by the company to provide much more data from the MM Phase 2 final clinical study report.

Peter's TWST transcript revision is interesting. It was changed from "So our goals are to be in a Phase III trial in melanoma or submitting for FDA approval, and to be in Phase II in liver cancer, potentially with breakthrough therapy designation, because we have also filed the application for breakthrough therapy designation in both the melanoma and liver indications" to "So our goals are to be in a Phase III trial in melanoma or submitting for  FDA approval, and to be in Phase II in liver cancer, potentially with breakthrough therapy designation, which means an application for breakthrough therapy designation in both the melanoma and liver indications."

Transcription error? I doubt it. Slip of the tongue, or pen? Maybe, on two counts. First, I think next week should commence the earliest we might hear about regulatory clarity (as I previously wrote, and framed in the first of two blog polls). Second, with the incredible success of the 6-patient HCC Phase 1 trial, and patients already treated in the expanded Phase 1 trial, achieving breakthrough therapy designation for this indication would seem highly probable (I think the company will have much more to say about this indication, and there interaction with the FDA about it).

We are, however, approaching the end of the quarter, around when, whether before or after, the company undertakes a BDO-induced fund raising to maintain the accounting firm's going concern opinion of Provectus. Balancing this need to raise capital, or perhaps satiating it in full and then some, is the potential exercise of warrants priced at $1.00. As at December 31, 2012, there were approximately 14 million of these warrants outstanding and exercisable (out of about 30 million warrants with a weighted average exercise price of $1.05).

Since then, the company:

• Issued 1.9 million warrants to consultants in exchange for services during the three months ended March 31, while about 900K were forfeited,
• Issued 2.6 million warrants to consultants in exchange for services during the three months ended June 30, while about 1.1 million were forfeited,
• During the three months ended March 31, issued 7.8 million $1.00 warrants, which includes fee-based warrants to Network 1 Financial,
• During the three months ended June 30, issued 5.6 million $1.00 warrants (including those to N1), and
• Issued 4.3 million $1.00 warrants related to February's Series A 8% Convertible Preferred Stock issuance.

The above reconciles with the 50.3 millions warrants outstanding and exercisable as at June 30, 2013 on page 9 of the most recent 10-Q. Assuming the consultant warrants have an exercise price of $1.00 (both issued and forfeited), there are nearly 35 million $1.00 warrants as at June 30. Speaking to the company and several capital markets folks on this issue, the prevailing view is that a share price in the $1.25-1.50 range will cause a substantial portion of these warrants to be exercised and provide the company with a large amount of cash. Some of the resultant common stock may be subsequently sold at those or slightly higher share prices, while others may be held longer or much longer.

The next couple of weeks should provide several opportunities for news flow (e.g., a China deal, regulatory clarity, Moffitt, ECCO, CAB, etc.), and a completely different situation for the share price.

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.

A More Aggressive Pathway To Approval for $PVCT

A meme making the rounds yesterday relates to an August 2010 article in knoxvillebiz.com about Provectus entitled "Knox company enters clinical trial stage for cancer drug." In it, Eric is quoted as saying of the FDA "If we had an ironclad explanation of this bystander effect that they could understand that it was…real and…why it was occurring, they would be more amenable to a more aggressive pathway to approval."

There was a great deal of consternation regarding my comment in my "$PVCT: A Slow, Hot, Smoky Summer Monday" post that recent information purports to suggest that, as late as last week, more time was needed to submit the breakthrough therapy ("BTD") application. Related frustration later was voiced by some shareholders about the special protocol assessment ("SPA"), the process for which appeared further elongated when management wrote in May in the annual CEO letter that it had every reason to believe the SPA would be achieved in 2013. As recently as March, in Dr. Andtbacka's presentation at the HemOnc Today conference in New York, a presentation slide indicated the MM Phase 3 trial under SPA would begin enrolling patients in mid-2013.

Peter would neither address Craig's comments about BTD (and other topics) after the annual general meeting in June nor my comment above (when other shareholders queried him about it). He also sidesteps SPA and BTD application submission questions, pointing out to shareholders (and the general public) that Provectus will not discuss specifics of the SPA process beyond what management has said in press releases and various corporate and investors presentations on the website and elsewhere.

More specifically, Peter will not address the topic of whether Provectus has or has not applied for the SPA and BTD. He did communicate Provectus expects to work with the FDA to get the SPA, and that the company is considering and very optimistic about BTD because management has been speaking with the FDA all along about accelerated approval ("AA").

I'm not convinced Provectus has submitted the BTD application, but I think the delay is due more to reconfiguration than having to fill a substance gap. When I recently asked Peter if the company had all the information and data necessary to complete the BTD application (i.e., did management feel it had answered all of the FDA's questions about PV-10), he replied it did. In truth, Eric is the only person at Provectus with a "real-time" view on the situation and process with the FDA, but I take Peter's reply to me to be as much of a current snapshot as one could obtain.

Is the right question to ask "when will the SPA and BTD submissions be made" (or, has the SPA and/or BTD application been submitted)? These are questions on the minds of most shareholders. It's clear to me management understands they have not completed the SPA process as quickly as they or shareholders would have liked. Everyone wants the ultimate milestone reached; namely, the SPA and, now, BTD.

I think the better question is to ask "what's needed (or what's left information- or data-wise) to get PV-10 approved." In my "For $PVCT, it's the FDA's move" post, I queried what remains. Safety and efficacy has been established beyond question. MOA, at least from a murine model perspective, has been explained and is understood. Proof of systemic properties and benefit has been shown. I also spelled out potential regulatory clarity outcomes: the SPA, AA, BTD (several options) and outright approval. It's no longer about whether the drug should be approved, but rather how it should be approved.

Segue to another Provectus article that also recently made the rounds again, February 2013's Cancer Watch's "Back to Phase 1: Understanding Systemic Effects of PV-10." In it, Moffitt's Dr. Amod Sarnaik said the cancer research center's focus "...is on discerning the presence of immune cell infiltrate in untreated tumors after PV-10 injections into other lesions. “We are really interested in harnessing immune cell infiltrate as a form of treatment,” he said, noting also that while creating cancer vaccines has been thought of traditionally as one of the Holy Grails of cancer research, cancer vaccines have turned out to be not strong enough to generate an adequate immune response." The literature suggests a a link between the immune infiltrate in several human carcinoma types and prognosis and response to therapy (2011). Later, the potential prognostic and/or predictive role of the immune infiltrate in this setting attracted attention (2012). The concept here is that tumor-infiltrating leucocytes ("TILs") may possess true predictive potential in cancer patients, where in some clinical settings the immune infiltrate can reliably predict if a specific patient will respond to therapy or not (Senovilla L et al. Oncoimmunology [2012, 1(8):1323-1343]). Later, in the same Cancer Watch article, Dr. Sarnaik said of Moffitt's Phase 1 feasibility study, "This is a straightforward study that will give a yes or no answer," which simply means Moffitt and he want to confirm what they already have seen pre-clinically (Moffitt's posters at SSO 2012 and AACR 2013) and in Provectus' prior clinical studies. One wonders if Moffitt's quantification of the significance of the immune-mediated response might further the belief in the independent predictive quality of PV-10-derived immune cell infiltrate for long-term survival of cancer patients.

Which brings me back to the meme I used to open this post. By completing the feasibility study, it would seem Moffitt would have provided the FDA with the "ironclad explanation of the bystander effect" sought by Provectus in 2010. Which then leads to contemplating the resulting "more aggressive pathway to approval." AA, BTD or outright approval? It's no longer about whether the drug should be approved, but rather how it should be approved. When Craig presented in town to biotech and life sciences industry folks, and some investment management people, in early-June, he said the FDA had asked Provectus to submit a BTD application.

If it's not a question of when was the SPA and/or BTD submitted, I think it's a question of when was (and what proportion of) Moffitt's feasibility study data (was) transmitted to the FDA. This remaining item should be what's left, or what remains. Interim results already have been generated. By early-June, before ASCO, the bulk of the work had been completed.

I read Peter's "very optimistic" stance by Provectus about BTD relates to the outcome management thinks is possible or probable. Perhaps they know the outcome, or at least have a good to very good idea about it. As of June 28, the FDA's CDER's performance on breakthrough requests was 98%, where where action was taken within 60 days of receipt of a request for BTD. It's possible for the so-called clock to be shorter than the planned time frame.

If, at best, management surmises the regulatory clarity outcome, or range of outcomes -- outcomes that in all likelihood clearly define the path and time to approval (the "time value of money" to both Big Pharma and life sciences investors) -- it would seem rational to not strike a regional transaction until the regulatory veil has been lifted. Two Chinese, one Indian and one Japanese pharmaceutical companies very recently entered into confidential disclosure agreements ("CDAs") with Provectus. I don't have a sense at the moment about the names of the Indian and Japanese firms, but I think one of the Chinese companies is Hisun-Pfizer Pharmaceutical. China economics for Pfizer continues to interest me: 25% of PV-10 sales if Provectus strikes a deal with a Chinese pharmaceutical company by virtue of owning/receiving that royalty figure, 49% if the Provectus partners with Hisun-Pfizer, and 100% if Pfizer goes it alone in China (since Hisun-Pfizer was established to produce branded generics).

A Proactive FDA (and $PVCT)

I first wrote about a proactive FDA in April blog post "$PVCT: A Proactive FDA" and June post "$PVCT is Going for BTD. BTD is Tantamount to Approval." I thought and think this when reading Sarepta Therapeutics' mid-April PR and Adam Feuerstein's "A Proactive FDA Is Already Reviewing Sarepta's Muscular Dystrophy Drug (Updated)" article, and placing Peter's comments about the Provectus' interactions with the FDA over the last 6-12 months (in particular) in this context.

Sarepta wrote what I thought was a cogent PR, such as noting among other things "The FDA has requested that Sarepta provide additional information from the existing eteplirsen dataset to inform a decision on the acceptability of this dataset for a New Drug Application (NDA) filing under the Subpart H Accelerated Approval regulatory pathway."

Feuerstein's piece quotes Baird analyst Brian Skorney: "On the surface it appears that the FDA is requesting information that would normally be part of the NDA review process," he writes in a research note. "This appears to be a bit of a departure from precedent and shows the FDA's willingness to remain flexible (at least publicly) on this review. We believe that the agency is essentially doing the bulk of the review on this application prior to submission and would view a recommendation by the agency to file based on the available data as a very strong indication that it will result in an approval."

He then concludes: "Exactly. Once you get your head around the FDA reviewing a drug that's not officially filed for approval, the Sarepta situation makes more sense."

I think the rumor the FDA suggested/asked/etc. Provectus to submit an application for breakthrough therapy designation ("BTD") is true. Another rumor, which I cannot as yet validate, is that Provectus used Pfizer’s palbociclib BTD application as a guide.

Whether the FDA has indeed been proactive with Provectus is unlikely to be validated until we gain a measure of regulatory clarity, as I do not think management will alter is communications approach to regulatory matters. By proactive I mean the FDA granting BTD (only securing the SPA is insufficient to frame the outcome as proactive).

I came across this "Regulation of immunotherapeutic products for cancer and FDA’s role in product development and clinical evaluation" article by FDA Center for Biologics Evaluation and Research ("CBER") and Center for Drug Evaluation and Research ("CDER") staff.

The abstract is: "Immunotherapeutics include drugs and biologics that render therapeutic benefit by harnessing the power of the immune system. The promise of immune-mediated therapies is target specificity with a consequent reduction in off-target side effects. Recent scientific advances have led to clinical trials of both active and passive immunotherapeutic products that have the potential to convert life-ending diseases into chronic but manageable conditions. Clinical trials investigating immunotherapeutics are ongoing with some trials at advanced stages of development. However, as with many products involving novel mechanisms of action, major regulatory and scientific issues arising with clinical use of immunotherapeutic products remain to be addressed. In this review, we address issues related to different immunotherapeutics and provide recommendations for the characterization and evaluation of these products during various stages of product and clinical development."

I think the FDA's BTD decision translates into either a safety/truncated trial or accelerated approval. Better and best. Time will tell. But, it strikes me the effort and path Provectus has engaged in to prove and elucidate the systemic properties and benefits, as well as the immune system properties and benefits, of local-regional agent PV-10 have been high and far from straight/straight forward. The path does seem like it is coming to some end soon.

It does appear the discussion of systemic proof and benefit has expanded to a discussion of the proof and benefit of the stimulation of the immune system. Moffitt has much more information to convey about PV-10, which we await in the form of a peer-reviewed publication. Provectus will present proof of a local immune effect at a European cancer conference this fall.

Much or a good amount of the Pfizer-Provectus-related activity recently in New York appears to be related to China, and what appears to be an effort by Pfizer to encourage or establish a transaction/relationship between Hisun-Pfizer Pharmaceuticals and China. Again, time will tell, as I think more time is needed here.

$PVCT & $PFE's Hisun-Pfizer Pharmaceuticals Co., Ltd.

In my blog post "I think the situation with $PFE and $PVCT has escalated," I wrote the injection of PV-10 and its subsequent chemoablative action creates lots of antigens. The creation of lots of antigens is the key to the successful, sustainable treatment of cancer and, thus, its cure. Antigen presentation is a process in the body's immune system by which macrophages, dendritic cells and other cell types capture antigens and then enable their recognition by T-cells. PV-10 creates an "antigen storm," the creation of many antigens, much more than than any other antigen-creating material currently available. One would think Dr. Eagle is well are of this.

In the context of Provectus' white paper describing PV-10's systemic immuno-stimulatory effects, it is interesting to read Dr. Eagle's comments about stimulating the immune system and doing so to in a specific way. What follows is a transcript of a Generex conference call from October 2010, where Dr. Eagle had sat on this company's scientific advisory board ("SAB"). Interestingly, in November 2010, Dr. Eagle visited with and viewed Provectus's presentation of its preliminary MM Phase 2 results at an Australian conference.

Bold emphasis below is mine. The "Eric" below refers to/is Dr. Eric Von Hofe, President of Antigen Express, Generex's wholly owned subsidiary (and not Provectus' Dr. Eric Wachter).

Thanks Eric. For the people on the phone, my name is Craig Eagle, and I’m an MD by training in Australia, and I’ve been working with Generex for the last six to nine months as part of its Scientific Advisory Board, and really what I want to do and discuss today was two very high-level concepts particularly around Antigen Express and the immune portfolio.  And the first is around the science. We all every day depend upon the immune system to protect us from diseases whether it be cancer or infections. And we know, and certainly many companies in the field of cancer technology are looking at ways to augment the immune system to attack cancer. One of the things that Antigen Express is working on is looking at it from two angles. One is to stimulate the immune system in itself, that’s (two key) protein, and the other is to (inaudible) direct and stimulate the immune system to a specific target. Now the beauty of this approach and the reason that I think there’s a lot of potential research required here to prove whether these compounds achieve treatment in cancer centers around the fact that, as Eric mentioned, the platform. 

In particular the platform of stimulating the immune system and directing it is a platform that has been recommended in the scientific world of (immuno-) oncology, and at the moment, the forerunner is looking at HERC2 breast cancer. Now the beauty of looking at HERC2 breast cancer as the forerunner is that Antigen Express, I believe, has designed the right experiments to test whether the vaccine works, but also HERC2 expression breast cancer is an area that has already shown and been well defined to have benefit from treatment, in particular, people may be familiar with a product called Herceptin, and Herceptin was a breakthrough for treating patients with that particular cancer.
And so the vaccine will then add and be able to augment potentially the immune system in a (robified) cancer population that still needs further treatment.  Also, what makes it exciting from the Antigen Express point of view, in my view, is related to the fact that they can build on that cancer immunology to then branch out to other cancers where there could be positive results.  In particular, the signs would suggest that the HERC2 expression, just like Herceptin, has been used in other cancers, could be explored with further research on its benefit there.

Finally I just want to move along to other areas, and Eric mentioned those, and that is the immune system could be used in (antigen effectives (ph) or as an immune modulator for areas like diabetes.  So now when you look across multiple and different biotech companies, and certainly from a research point of view, there are probably three criteria that are key to remember. The first is that, as Eric mentioned, in the Antigen Express space there’s a platform. A platform to stimulate the immune system to achieve what it needs to achieve to control cancer, infections and other diseases, and it’s just a case of producing, testing and doing the right research to develop those products forward.  The second area, then, is to do the right experiments and the right testing, and Eric and the team at Antigen Express have been working very hard to make sure that the trials that they are doing are trials that we (to the) right questions from a scientific point of view.

So the quality of the trials has to be paramount and above all very important to show whether the (products) worth or not.  And finally the third area is actually an overall direction for the potential treatment of patients in a (robified) population.  So I’ve already mentioned that HERC2 breast cancer is well defined and there is a very significant unmet medical need with women with cancer of the breast who get their cancer progressing despite the best standard of care, and so there’s certainly potential here to actually save lives and help women with breast cancer.  So all in all I think that Antigen Express creates a great, stable platform to actually explore and research these compounds moving forward.  I’ll hand over now to Gerry Bernstein who can then further discuss the metabolic aspects of Generex. Gerry?

Dr. Eagle's interest in or perspective of stimulating the immune system with great specificity seems very consistent with Provectus' path to immuno-oncology.

As an aside, in checking Generex's SAB website page and the SAB website page of it's subsidiary Antigen Express for links to use in this post, it would appear Dr. Eagle is not mentioned on either site's SAB pages anymore. I believe he still is a director on the boards of Regenicin and Assured Pharmacy.

Pfizer announced the signing of a memorandum of understanding ("MOU") with Hisun Pharmaceuticals in June 2011 to establish their joint venture ("JV"), Hisun-Pfizer Pharmaceuticals, which no doubt took many months to construct before signing. The JV was contributed to/funded in September 2012, nearly 15 months later.

Recent articles about Hisun-Pfizer suggest a very independent company from Pfizer. The economics of the JV are notable for Pfizer, which owns 49% of it versus Hisun's 51% controlling stake. Kevin Xiao is CEO of Hisun-Pfizer, with whom Peter interacted this week.

Whether a deal gets done with Hisun-Pfizer for China more than likely is up to the Chinese, and not exclusively Pfizer, who I think are encouraging a transaction for this geography between the JV and Provectus parties. I think that because I think, after Peter and Eric's recent trip to New York and various meetings with Pfizer there, Dr. Eagle has more recently taken a more active role in his interactions with Provectus (although I'm sure he's been a contributing SAB member since he joined).

I think the situation with $PFE and $PVCT has escalated

Following the week of June 10th, during which Peter spent a considerable amount of time in New York and Eric later did as well, it appears to me the situation with Pfizer, the relationship, such as it was and now is, changed.

Call it what you wish: The situation or relationship evolved. The relationship was taken to a new level. The situation escalated in a positive way. Etc.

However you wish to describe or frame it, Eric being brought further into the picture points to a discussion that very likely broadened and deepened from what it only was the week before when Peter and Eric were at ASCO with Pfizer's Craig Eagle.

From what I have discerned thus far, and I certainly do not have anywhere near the entire picture, Peter again met with Dr. Eagle, a member of Pfizer's Oncology Business Unit ("OBU"), which is part of the Specialty Care and Oncology organization that also includes the Specialty Care Business Unit ("SCBU"). Eric's visit included, at least, meetings with OBU senior leadership. Peter also met with senior corporate leadership (not, however, Pfizer's Chairman and CEO Ian Read).

There were more meetings, too.

Peter's role encompasses represents the first-line of and continuing business development interaction and communications with potential license partners, both regional and global. Given the demands on Eric's time, bringing him into New York City for further discussions with Pfizer is not atypical of a relationship that has grown, poised to grow or being considered for growth.

The question for me is the nature of the discussions, both the ones Peter had and the one(s) Peter and Eric had. Did discussions include or address regulatory clarity, commercial validation, and/or business strategy of one sort or another? Time only will tell.

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I also understand Peter met with the company's Chinese intermediaries. I believe Pfizer is encouraging, as best it can or in a manner consistent with and in its own interests, a relationship between Hisun-Pfizer Pharmaceuticals, Pfizer's Chinese joint venture with Zhejiang Hisun Pharmaceuticals, and Provectus.

Since no press release was made nor 8-K filed last week, it would seem more work is needed and/or more time is required for a relationship to be consummated, if at all.

Peter leaves for his trip to Japan next week. If a deal is to be had, it will require him to take a side trip to Taizhou Zhejiang, China, where Zhejiang Hisun Pharmaceuticals is headquartered (and where I presume Pfizer-Hisun has its China location, although not necessarily). I think it is more likely Peter returns with an MOU and no upfront payment. Recent chatter suggests the upfront payment is lower than I first expected, at $10 million, but with two healthy-sized, regulatory-oriented milestone payments of $50 million each.

Should Peter secure the MOU, it is possible the company announces the event via a PR on June 18 at the earliest. If this happens, I would not be surprised if Maxim Group equity research analyst Dr. Echo Yinghui He, MD, PhD, then issues a research note describing the deal and valuing it at $1 billion on a net present value (i.e., taking into account upfront and milestone payments, royalties, market penetration, indications, cash flows).

If we hear nothing upon or shortly after his return, then follow-up is required.

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Moffitt Cancer Center has definitively and unambiguously concluded PV-10 has systemic properties and benefits, which the FDA wanted to understand before considering accelerated approval.

We're now trying to digest a larger truth, that local chemoablation of a cutaneous lesion with PV-10 leads to transferable immunity. As described in Provectus' recent white paper, according to Moffitt's Dr. Shari Pilon-Thomas, "We think that when you inject PV-10 into a tumor, it  destroys the tumor, releasing tumor fragments that are then taken up by immune cells. The immune cells travel to the lymph nodes where they ‘educate’ or activate T-cells which can in turn travel anywhere in the body."

The question of PV-10's systemic properties and benefits has been answered. Academics and researchers will read it in a peer-reviewed journal in the coming months, now that the manuscript has been approved for publication.

The next question for Moffitt is how does it maximize the process by which PV-10 generates immunity. Moffitt's Dr. Jeffrey Weber, the driving force behind the approvals of immunotherapy treatments ipilimumab (Yervoy) and vemurafenib (Zelboraf) for Stage IV metastatic melanoma patients (and considered a/the "god" of immunotherapy), is now firmly behind PV-10. The landscape for treatment therapies for Stage III patients is barren, and wide open for PV-10, which is and has been the point of the regulatory path Provectus chose for its drug. Stage I, II and IV are, of course, also in play.

Dr. Pilon-Thomas now searches for answers to questions like “Is it just because you inject the drug and it goes everywhere and then kills tumor cells at other sites? Or is injecting PV-10 inducing
a T-cell response, such that T-cells travel throughout the body and kill tumors in their various locations?”

To Pfizer's Dr. Eagle and his Big Pharma counterparts, none of what Dr. Pilon-Thomas asks matters as much as the massive creation of antigens that PV-10 causes, and how can PV-10 be optimized to treat and cure all stages of cancer.

PV-10 creates antigens. It creates a lot of them. The creation of lots of antigens is the key to the successful, sustainable treatment of cancer and, thus, its cure.

Antigen presentation is a process in the body's immune system by which macrophages, dendritic cells and other cell types capture antigens and then enable their recognition by T-cells.

PV-10 creates an "antigen storm." Provectus' drug compound is more powerful than any other antigen-creating material for the expression of antigens to the immune system.

Dr. Eagle knows this, and his counterparts at Big Pharma are quickly learning this too.

The not-so-incremental innovation of Abraxane's nanotechnology delivery system -- the albumin-bound formulation of, say, paclitaxel may help you understand the paradigm shift that is PV-10 better. PV-10's genius and innovation is its stimulation of the immune system. PV-10's storm of antigen creation is singularly unique.

For Dr. Eagle and others, the question now is how to optimize the use of PV-10 by itself and in combination with other therapies, when, and with what specific therapies for what situation. How. When. With what.

Even when  PV-10 is an approved, Pfizer will be use it in combination (typically for late/end stage patients) until it does not have to because PV-10 is then able to run the entire race and not be handed the baton to cross the finish line. Thus, the very intent of the joint Pfizer-Provectus combination patent application is strategic, financial and commercial.

The Pfizer-Provectus relationship has changed. How much is the question now.

$PVCT's Empire State of Mind

New York

Concrete jungle where dreams are made, oh

There's nothing you can’t do

Now you’re in New York

These streets will make you feel brand new

Big lights will inspire you

Let's hear it for New York

(Empire State of Mind by Jay-Z, featuring Alicia Keys)

First, now, I want to blog about Peter's week in New York (with a particular focus on Pfizer), which ends today (although I don't know if he'll return to Knoxville tonight or tomorrow morning). There are some items that should be discussed. Others require further explanation.

Second, on Saturday, perhaps, I'll blog about Craig's presentation here in town Wednesday night. I learned several interesting things.

Third, on Sunday, I'll blog about the FDA's pending regulatory decision about the SPA, accelerated approval, and breakthrough therapy designation that translates into either accelerated approval or a truncated Phase 3 trial. In my mind, it's good, better, best. The FDA's validation, at this point, is more important than the validation of a regional or worldwide deal, transforming (or nearly so, depending on the outcome) disbeliefs overnight.

There lies, or will lie, a common thread in these blogs, and the thread is "disbelief."

Since April 2010, when Provectus held an end-of-Phase 2 meeting with the FDA regarding PV-10's regulatory pathway for metastatic melanoma, the share price has lost nearly 60% of its value.

Dilution, on a fully diluted basis (i.e., preferred stock, common stock, stock options, warrants), from December 31, 2009 to December 31, 2012 [to make the math easier], totals nearly 70% (although warrant net exercises might, in due course, reduce comparable dilution to 60%).

Yet, in the intervening period, from April 2010 to June 2013, PV-10's efficacy has increased, the drug still maintains a pristine safety and adverse event profile, PV-10's mechanism of action is understood, and there now is proof of the drug's systemic properties and benefits.

I posit, that despite the above mentioned dilution, shareholders are better off in 2013 than 2010. Depending on the assumptions one uses for intrinsic value then and now, you should come up with a reasonable, objective increase in value or valuation (5-15x).

Again, to make the math easier, I used 2012 and 2009 year-end numbers from Provectus' 10-K. A $2.5B intrinsic value is, in reality, emblematic of a post-AACR PV-10.

But, for most shareholders, what matters only is the change in their share price (or market capitalization), and that's been downward, a lot (-60%).

The stock market, some/many in the Wall Street community, some/many potential investors and some/many existing shareholders do not believe in nor trust management, and thus do not believe in the data. If they did, they would buy or buy more shares. These disbeliefs, the first more problematic and resulting in the second, have led to the obscuring of value that clearly exists in Provectus and that Big Pharma very much sees and desires.

Although disbelief in or lack of trust in management mostly results from self-inflicted wounds, these wounds are far from fatal, and there should be no doubt about the immense value management has created in its innovation of PV-10.

Simple, angelic or divine regulatory clarity will transform disbelief in both management and PV-10 overnight.

Peter is in New York this week working with various parties regarding regional license transactions in India, China and Japan, as well as having follow-up meetings with shareholders, analysts and Big Pharma.

Peter has had and will have meetings with Pfizer and Pfizer-related people. Eric is NYC on Friday to join Peter in Pfizer-related, and perhaps Pfizer, meetings. It is unintelligent to think Pfizer is not interested in PV-10 and Provectus. I think more pertinent questions are when, under what circumstances and for how much Pfizer will buy, rather than why or for what reason.

Pfizer's M&A strategy [subscription to The WSJ is required to access the preceding link] is more likely to comprise "biotech bolt-ons and small tie-ups" (like acquiring Provectus) rather than "megamergers" or the ilk (like acquiring Celgene).

Pfizer's threshold for these smaller purchases is $4B. That is, it won't pay more than $4B in an upfront payment for a biotech bolt-on or small biotechnology company like Provectus.

Healthcare investment bankers suggest the acquisition premium paid for public companies in the space range mostly from 30-50%, but can be as high as 100%. "Premium" means the per share price paid for a company in excess of its then current, pre-acquisition announcement, share price.

Pfizer is not unwilling to pay a 100% premium. For example, if Company XYZ's current share price is $4, Pfizer may be willing to pay $8 per share.

Celegene bought Abraxis BioScience for a $2.9B upfront payment (net of Abraxis' cash on hand). Provectus management has the expectation of at least a Celegene-Abraxis value for its acquisition by, say, Pfizer. Should Pfizer be willing to pay a 100% premium for Pfizer, Provectus' market capitalization must reach at least $1.45B, through regulatory clarity (the greater the better) and, more than likely, regional license deals, before Pfizer might consider bidding $2.9B for the company (using the Celgene-Abraxis example).

If Provectus seeks a $4B payment from Pfizer, the market cap must reach $2B.

Peter utilizes Pfizer, when he discusses this Big Pharma, as a proxy for significantly increased Big Pharma interest in Provectus post-AACR. He also brings up Pfizer because of the recent focus on immunomodulatory agents and the company's joint patent application with Pfizer for these agents in combination with PV-10.

Pfizer is captivated by PV-10. Among a variety of other touch points and situations, Craig Eagle first engaged Provectus when he traveled to Australia for Dr. Agarwala's presentation preliminary MM Phase 2 trial data in November 2010. Pfizer and Dr. Eagle proffered a unique deal to Provectus that ultimately did not materialize. Craig joined the company's corporate advisory board in August 2011. The joint patent application worked its way through Pfizer in 2012 before being filed in October of that same year. Eric and Peter spent time with Dr. Eagle at ASCO 2013. Which brings us to this week, where topics of discussion and meetings include China.

There should be no doubt about Pfizer's interest in Provectus. Of course, there is no certainty that Pfizer will buy Provectus, or buy it at a Celgene-Abraxis-like valuation.

There also should be no doubt about other Big Pharma and Big Biotech's interest in the company as well. Of course, there is no certainty that any of these companies will buy Provectus, or buy it at a Celgene-Abraxis-like valuation.

Regulatory clarity awaits. Disbelief must be transformed.

There is, however, without a doubt, in front of your eyes, significant Big Pharma interest in Provectus.

Chinese pharma companies look West

I found this recent China Daily article about Chinese pharmaceutical companies and their partnerships with multinational pharmaceutical companies interesting.

"Hisun got a breakthrough in China's pharmaceutical industry by taking a controlling stake in the joint venture with Pfizer, the world's largest drug-maker by sales. Hisun has a 51 percent share in Hisun-Pfizer Pharmaceuticals Co, with a total investment of $295 million and registered capital of $250 million. Pfizer holds the remaining stock..."The negotiations (between Hisun and Pfizer) took more than a year. It's really tough with rounds and rounds of bargains and discussions. We got stuck on the controlling stake," said a senior executive of Hisun, speaking anonymously."

Provectus' process to consummate a regional license deal in China has been informative. It think its nearing its end.

Hisun-Pfizer Pharmaceuticals Co., Ltd. & $PVCT?

Putting one's ear to the ground, it appears there is belief among several (and notably different nodal groups/sub-networks of) shareholders that Zhejiang Hisun Pharmaceuticals and Pfizer's joint venture entity, Hisun-Pfizer Pharmaceuticals Co., Ltd. ("Hisun-Pfizer"), very shortly will extend an MOU to Provectus. Peter returns from India and will be in the office the week of May 20th, before he departs around the end of the week of May27th for Chicago and the ASCO Annual 2013 Meeting.

$PVCT & Hisun-Pfizer Pharmaceuticals Co., Ltd.

The release of Pfizer's Q1 earnings earlier this week reminded me of the Big Pharma's joint venture with Chinese pharmaceutical company Zhejiang Hisun Pharmaceuticals, Hisun-Pfizer Pharmaceuticals Co., Ltd. ("Hisun-Pfizer" or "HPP").

From Pfizer's September 30, 2012 10-Q, "On September 6, 2012, Pfizer and Zhejiang Hisun Pharmaceuticals (Hisun"), a leading Chinese pharmaceutical company, created a new company, Hisun-Pfizer Pharmaceuticals Co., Ltd. (HPP), to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets. In accordance with our international reporting periods, this transaction will be accounted for in the fourth quarter of 2012. HPP was established with registered capital of $250 million. Zhejiang Hisun Pharmaceuticals holds a 51% equity interest and Pfizer holds a 49% equity interest in HPP. The parties will contribute select existing products to HPP, which will have a broad portfolio covering cardiovascular disease, infectious disease, oncology, mental health, and other therapeutic areas. The parties will also contribute manufacturing sites, cash and other relevant assets. Our investment in HPP will be accounted for under the equity method."

The equity method of accounting, "...the process of treating equity investments, usually 20–50%, in associate companies...," means Pfizer's "...proportional share of the associate company's net income increases the investment (and a net loss decreases the investment), and proportional payment of dividends decreases it." Source here.

As Pfizer characterized the HPP in its 2012 annual report: "During 2012, we continued to pursue “bolt-on” business development opportunities to supplement our research efforts and product offerings. These are acquisitions or collaborative arrangements that we can readily integrate and that expand our reach or capabilities...Together with Zhejiang Hisun Pharmaceuticals, we launched Hisun Pfizer Pharmaceuticals Company Limited, a joint venture to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets."

The stated goal of "[T]he joint venture between Hisun and Pfizer aims to strengthen the  ability of both companies to address health care needs in China and reach more patients with high quality and low cost  medicines in the branded generics arena."

HPP is an investment vehicle, with a limited staff, the senior leadership of whom (e.g., the CFO) appears to be resident in New York City. In many respects, one might view Hisun-Pfizer as, perhaps, a tax-efficient or effective, China-focused and effective operations, pass-through entity of sorts, allowing business in China to be conducted by Pfizer and Hisun but without comparable overhead of either a Hisun or a Pfizer.

The $490 million gain Pfizer registered in Q1 2013 from the transfer of some product rights to HPP puts a finer point on this.

A blog reader wrote to me that it's one or the other, a regional license deal in China or a global license deal but not both. I disagree. There is a legitimate discussion about China influencing global and global influencing China, per my China vs. The World post. The key to a decision, I think, ultimately lies in the answer to this math equation:

d(China) + d(Global) < > d(China, Global), where d(x) is the value of a deal for geography x

China pharmaceutical companies, local players, are interested in PV-10. Global pharmaceutical companies are interested in PV-10 in China. Global players have relationships with local players that include ownership, joint ventures and strategic relationships.

Path A: A deal with a Chinese company could pay Provectus and, thus, its endgame global/Big Pharma acquirer 20%+ in annual royalties.

Path B: A deal with a Big Pharma-related Chinese company would pay 20%+ and {20%+ times the Big Pharma's ownership percentage of the Chinese company}, a number greater than 20%+.

Path C: A deal with a JV like Hisun-Pfizer would pay Pfizer 49% (the outcome could be different for another Big Pharma's China JV).

(The above is a theoretical or academic exercise, and not necessarily overly precise).

A deal for China between Provectus and HPP, rather than a local player or Hisun, is more valuable in the long-term for Pfizer or another Big Pharma with a comparable JV set-up than acquiring Provectus after a deal was done with a local Chinese player.

As such, a deal with Hisun-Pfizer tells much more about the end-game and Pfizer's potential or likely intentions and future action.