$PVCT Dilution: 2009 to 2013YTD

What a $PVCT #Week, #Month and #Year Thus Far

What year-to-date performance for PVCT, and versus the iShares Nasdaq Biotechnology Index (to compare): +43% v. +9% (+6.5% for the S&P 500 Index).

One year. Different: -8% v. +25% (+11.2%)

$PVCT: Get Shorty (Update)

Short interest at 2/15/13 (~1.58 million) increased by ~11% over 1/31/13 (1.42 million). Since January 14, 2011:

Since January 14, 2012:

Volume since the last reporting period (through today's market session) has been 1.8 million shares (assuming this OTC reporting from Yahoo! Finance indeed is accurate; as a reminder, I obtain the short interest figure from the OTC website):

Did short interest drop significantly this week? To the extent it may matter, we'll find out the result of the period ending February 28 on March 11.

The rumor mill has started churning. You would figure it was getting close enough to the likely event outcome that it had to start in ernest at some point. I heard several.

The first rumor purports Peter will return with an agreement (but no cash yet) with a Chinese pharmaceutical partner. The agreement -- call it what you wish (e.g., an MOU, an LOI, etc.) -- thus would allow Provectus to issue a PR (because the agreement would be a material event) revealing the name of the Chinese firm and key provisions of the anticipated license agreement that would form the basis for a definitive contract, which likely would be consummated and funded within 30 to 60 days.

The second, which I won't go into any detail, would lead one to think the Chinese partner is Hisun.

Maxim Group's Dr. Echo Yinghui He, MD PhD, a Senior Analyst who also covers Provectus, purportedly accompanied Peter on his China trip.

Finally, a large Hong Kong-based Provectus shareholder purportedly also joined Peter. From what I gathered, the shareholder's purpose was Reaganesque.

Peters returns Saturday. A PR next week? Maybe...

Did An #Institutional #Investor in $PVCT Close Its Shop?

Funds blow up and/or close down all the time. Natural selection. Darwinian evolution. Call it what you want. The recent depression in certain commodity prices was attributed by some to the blow up of a couple of funds and the liquidation of their positions.

Many commodity markets are deep (i.e., very liquid), like certain U.S. large cap equity names for example, and closing of positions (more often long, thus liquidation means selling) don't usually move prices much unless those positions were large to very large. Market participants in the know about such closings/liquidations often step out of the way until the fund(s) is(are) done.

Sizable positions in less liquid or illiquid assets or stocks can move prices much more. And knowledgeable market participants do the same thing. They wait, and then they act (if they desire to act at all).

I have written about Revelation, a formerly large shareholder of Provectus stock, converting its preferred shares into common and selling them. The firm's latest Form 13G filing indicated a dramatic reduction in beneficial ownership. Sometimes investors decide they've had enough and throw in the towel. It happens to institutional and retail investors alike.

Rumors are circulating about Revelation sold its Provectus warrants too. Sometimes investors sell because their closing down, and their selling has nothing to do with their investment thesis related to a particular holding. A hedge fund doesn't sell its warrants, digging around for the very last scrap in its larder, if it's throwing in the towel on its thesis. The situation arises because the fund and perhaps the firm itself are closing down.

A graph of Revelation's quarter-end 13F SEC filings from 12/31/11 to 12/31/12 is below.

The number of holdings (13F entries) and amount of assets under management related to these holdings (cash is not reported) for the period or quarter ending 12/31/12 are down considerably from, say, the last quarter-end of 9/30/12, let alone year-over-year.

We obviously don't know Revelation's fund terms and conditions (e.g., redemption notices, gates, etc.), but it is very possible the fund and maybe the firm is closing.

Short interest for the period ending February 15 is reported tomorrow. The large spike in short interest, perhaps attributed to the "fake short" caused by converting preferred shares into common shares, might fall and confirm Revelation was responsible for it. Rear-view mirror stuff.

If the Big Seller has been Revelation liquidating its Provectus holding, the loss of this downward pressure on the stock may permit natural buying interest to push the share up dramatically more.

$PVCT: Source of the Short and the Selling?

From a Form 13-G filing today by Revelation Special Situations Fund, the fund's position dropped from 5.21% reported in February 2012:

To 2.22% reported in February 2013:

This activity may be the source of the short reported 1/31/13 and what seems as relentless selling of the stock.

$PVCT: Get Shorty (Update)

Short interest at 1/31/13 (1.4MM) increased by ~47% over 1/15/13 (964K), the highest it's been in 2 years.

PVCT: Change -- Pete is presenting at #BIOCEO13 on February 11 @ 1100 ET

Conference details may be found here. Craig is under the weather, and cannot travel to BioCEO in New York.

$PVCT: A reminder Craig is presenting at #BIOCEO13 on Monday @ 1100 ET

Conference details may be found here.

$PVCT: Get Shorty (Update)

Short interest at 1/15/13 (964K) increased by ~26% over 12/31/12 (766K), and was last seen two months ago at 11/15/13 (966K), the aftermath of the now terminated PVCTP “IPO,” and three-and-half months ago at 9/28/12 (959K), the beginning of the “IPO” chaos.

I am a little surprised, yet perhaps not surprised, by the uptick in short interest. I can understand why it is happening. There probably is some modest shorting of the stock (why one would short a penny stock mystifies me at a very low level; it's like rubber necking in some regard), say a couple of hundred thousand shares, because of the share price run-up through January 11. It also could be the balance of the short interest, above the historically innocuous 400-500K level, is related to the continued conversion of the preferred shares (hundreds of thousands of shares?) by funds like Revelation and others.

These funds probably have sold more of their since-converted-into-common shares earlier in the month and late last month (as they look to complete their departure from the stock) when buyers from two locales (one domestic, one international) bought shares. They probably also further knocked the share price down to current levels, which were of course last seen before the late-December/early-January share price run-up.

Despite management’s efforts to bring so-called “serious” life sciences investors into the stock, these folks remain firmly on the sidelines. I appreciate Peter’s tenacity and persistence.

What will it take to bring the life sciences folks in and the generalist funds in and/or back? A little more time: say, a month or two.

For the former, it is looking more and more like what is necessary is the revelation of the highly anticipated Moffitt data (combined with profound statements like “…the nearest thing to a cure for cancer we’ve seen.”) A China regional oncology deal and the SPA will of course help a lot, too. Ironically, both of these should arrive [very] roughly around the same time as Moffitt’s data, conclusions and declarative statements begin to be and are fully unveiled.

For the latter, it will take more mass awareness and an upward moving share price whose momentum-based vortex subsequently draws these investor types into and back into the stock.

$PVCT: The Challenge. The Opportunity. The Total Addressable Market.

Source material: "Black swan theory," Wikipedia. "The black swan theory or theory of black swan events is a metaphor that describes an event that is a surprise (to the observer), has a major effect, and after the fact is often inappropriately rationalized with the benefit of hindsight. The theory was developed by Nassim Nicholas Taleb to explain:

• The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology
• The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
• The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs."

"Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black swans"—undirected and unpredicted." Taleb introduced black swan events in his 2004 book Fooled By Randomness.

I think the pervasive use of PV-10 -- first, second, last and everywhere in between during the treatment of cancer patients -- as a potential black swan event.

Click figure to enlarge it. Source map here.

Assume:

• A PV-10 treatment price (for the necessary cycles of RB to treat a particular indication), using a number of injections per vial, a number of vials per cycle, a number of cycles per treatment (the number of cycles will vary from indication to indication), the price per vial of PV-10, etc.,
• The treatment of a percentage of annual, global, new incidences of cancer,
• An average annual royalty rate,
• Initial penetration rates that grow to their respective equilibrium levels, and
• Perhaps some fine tuning on a per indication basis (although I am fan of a McKinsey'ish 8-20 to garner a perspective of the size of the potential black swan event.

The result is a very large total addressable market.

My point is this: A dispassionate and objective case can be made for a good return on investment outcome for Provectus shareholders, including myself. My investment, while founded on this outcome, is, however, more focused and a play on the potential of a PV-10 black swan.

$PVCT: Immunologic Potential, and thus Value

"The holy grail for cancer would be to trigger the body's own immune system to fight off the cancer so that you somehow stimulate the anti-bodies in a way that that happens." Fareed Zakaria, CNN GPS, from a December 9, 2012 interview with Dr. Ronald DePinho, President, M.D. Anderson Cancer Center

The progression of PV-10 & Provectus potential value

Click figure to enlarge it.

My expectation (above) most certainly is a very lofty one.

The conclusions of the forthcoming immunologic mechanism of action characterization work by Moffitt Cancer Center could be profound. Will Moffitt researchers make full-throated statements regarding PV-10's immunologic potential?

PV-10: A robust (strong), durable (long-lasting), portable (vaccine-like) immune-mediated response.

$PVCT: Form 4 Filing -- Insider Buying

Peter filed a Form 4 today in which he bought another 133,333 of common stock, a cash expenditure of $100K.

This purchased related to Eric and Peter's prior purchases of common stock at $0.75 per share in the October raise for which Form D filings by each of them previously were made. Investors in this fund raising placement were issued one 5-year warrant for each common stock share purchased (i.e., 1-to-1). The warrants have a $1.00 strike price.

$PVCT: Travel

Peter is on travel this week.

Updated: Peter is in Asia.

$PVCT: Get Shorty (Update)

Short interest as at October 31, reported today, was 965,742 shares -- down 10% from the October 31 reporting period (1,072,941). See the graph below.

Click on the figure to enlarge it.

$PVCT: Form 4 Filings -- Insider Buying

Eric and Peter filed Form 4s today in which:

• Eric bought 666,666 shares, and
• Peter bought 133,333.

It appears they were two of five investors who bought common stock at $0.75 per share in the October raise for which the Form D filing previously was made. Investors in this fund raising placement were issued one 5-year warrant for each common stock share purchased (i.e., 1-to-1). The warrants have a $1.00 strike price.

Since the raise had to take place after the PVCTP "IPO" was terminated, the premium to the then current closing share price probably was in the range of 15-25%, and 30%+ from today's closing share price.

UPDATE (correction): I misread the filing, and have since updated this post. My apologies.

$PVCT: Now dash away! Dash away! Dash away all!

The mostly institutional, but non-life sciences, participants of Provectus' March 2010 private placement (1Q10) are likely mostly gone. I think nearly 85% of the preferred shares have been converted to date into common stock and sold over time. My assumption is that these folks either held the preferred to enjoy the coupon, or converted them into common share that they sold right away.

Click on the figure to enlarge it.

The preferred shares in the placement were issued at $0.75 per share. Most of the 85% -- about 60% of this number -- converted and very likely sold within 3 quarters of the placement. 15% gradually sold as the common stock share price stayed above the issue price (through 2Q12). Another 10%, I think, sold in last quarter (3Q) and are selling thus far this quarter (4Q).

Click on the figure to enlarge it.

Some funds took profit very quickly. Others held on to take profit more slowly or in hopes of greater but still faster return. I wonder if some of the recent pressure on the stock has been due to the departure of more of the remaining funds that participated in the placement.

Click on the figure to enlarge it.

$PVCT.OB: The First Anniversary of This Blog

I wrote my first blog post on November 16, 2011. At the time of that post: "The share price is $0.88. 14,700 shares have traded." Today, it closed at approximately $0.53, down about 40%, and traded about 54,000 shares.

Click on the figure to enlarge it.

In the past 12 months, Provectus' notable PRs included:

• October 29, 2012: Provectus Presents Nonclinical Data on Antitumor Immune Response to PV-10 Immuno-Chemoablation (very key),
• October 17, 2012: Provectus Pharmaceuticals Terminates Proposed Convertible Preferred Stock Offering (the failed IPO),
• October 2, 2012: Provectus Pharmaceuticals Presents Final Phase 2 Melanoma Data at ESMO 2012 (key),
• September 28, 2012: Provectus Pharmaceuticals' Patent Application Published for Combining Local and Systemic Therapies for Enhanced Treatment of Cancer (the joint Pfizer-Provectus patent app),
• September 27, 2012: Provectus Expands Protocol for Phase 1 Liver Cancer Study (important),
• June 26, 2012: Provectus Pharmaceuticals Presents Final Phase 2 on PV-10 At 2nd European Post-Chicago Melanoma Meeting 2012 on June 22, 2012 (visibility),
• May 30, 2012: Doug Ulman, National Cancer Survivorship Advocate, Joins Provectus Pharmaceuticals' Corporate Advisory Board (a great get),
• May 14, 2012: Provectus Pharmaceuticals Forms Independent Board to Meet Corporate Governance Requirements (an important corporate governance advance),
• April 10, 2012: Phase 2 Data on Provectus's PV-10 to Be Presented at the HemOnc Today - Melanoma and Cutaneous Malignancies Conference on April 13, 2012 (visibility),
• March 26, 2012: Intralesional PV-10 Treatment Leads to the Induction of Anti-Tumor Immunity  (very key),
• March 23, 2012: Mechanism of Action Data On PV-10 Demonstrates Therapy Induces Immunologic Response (very key),
• March 19, 2012: Provectus Announces Top Line Phase 2 Data For PH-10 in Its First Randomized Controlled Psoriasis Study (important), and
• January 18, 2012: Provectus Receives Guidance From FDA On Pathway to Approval for Phase 3 Trial of PV-10 For Metastatic Melanoma (important regulatory step).

As for the blog itself, readership has steadily grown.

Click on the figure to enlarge it.

Thank you for visiting and reading!

$PVCT.OB: Get Shorty (Update)

Short interest as at October 31, reported today, was 1,072,941 shares -- down 13% from the October 15 reporting period (1,230,229), which was up 28% from the September 28 reporting period (959,298), which was up 48% from the September 14 period (650,550), which was up 34% from the August 31 period (486,559). See the graph below.

There is a pernicious inter-period short of 250-270K in October. You may recall I presented what I thought was a structural period-to-period short figure of 470-480K. The balance of 490K during the October 15 period could be related to the conversion of the preferred stock into common stock. 490K of preferred shares were converted in Q3 per the filing.

$PVCT.OB: Trying to See Provectus' Forest For Its Trees

The SPA: The path to the SPA, from an investor perspective, like mine, has been an interesting and informative one. It also has been a difficult and impatient one. You may recall I linked to this article about pursuing an SPA: Special Protocol Assessment, a Blessing or a Bane? The author's take home messages certainly resonate:

• "Make sure you really need an SPA. It may take longer to obtain one than you think."
• "If you choose to pursue an SPA, be unambiguous in the questions you ask and meticulous in your filing. Be realistic about the timing."
• "Be prepared to explain your reasoning to investors and board members."

You probably have heard different versions, views and reasons of when the SPA will, might or could arrive. From:

• A "final" re-submission sometime in September or October [early- to mid-November], to
• Within 6 weeks or by December 15 [now through mid-December], to
• Foreshadowing by the October 2 PR's specifics regarding the trial design [mid-November], to
• Using math for the September 19 PR first indicating the MM Phase 3 trial would commence in late 2012 or early 2013 [mid-November through at least early-January].

You may recall A, which I blogged here, that ended in the January 18 PR; B, the 45-day count after the end of March and best case Q2; and C, base case Q3. I see A as demonstrating the potential upturn in the share price when the SPA arrives, B as the markets taking a wait-and-see attitude, and C as more increasing skepticism about the SPA rather than simply a commentary on timing.

The person on the management team who has had and continues to have the best perspective on SPA timing is Eric. Management had to waive off their base case Q3 expectations using their September 19 PR. The October 2 PR clearly was intended to affirm the SPA was on its way (using trial design specs and quotes by Eric), but no one knows exactly when the SPA will arrive including, I think, Eric.

"It's not a matter of if, it is a matter of when, and we are much closer to the end than we are to the beginning."

Your and my best bet is to keep an eye out for the SPA over the next few weeks, but do not be surprised if it arrives in December (maybe or possibly) or January (I highly doubt). When it does arrive, those who doubt the potential for the SPA to move the share price, thinking it has been priced into the share price (which I think is incorrect) might be surprised.

License deals. Management reminds us they currently are pursuing PH-10 and PV-10 geographic deals, which they think can happen at any time. They remain very confident one or more of these will happen.

More Moffitt data. The October 29 PR (more specifically, the poster included with the PR) noted more Moffitt data is expected in 2013 (the AACR annual meeting). Management is trying to get some information out about Moffitt's ground-breaking results sooner. Moffitt's Phase 1 MOIA human trial to elucidate the bystander effect should begin in November. Turnaround should be swift (i.e., a few months if that).

Surprises? Perhaps, including certain publications in play and other potential surprises, but we will have to wait and see.

Blog Reader Questions

You mention that management believes the company is worth between $7-10 billion. At 113 million shares outstanding, that would indicate a price per share between $62 and $88. Is this plausible?

The figure you should use in the denominator is about 155 million shares fully diluted, which would includes preferred and common shares, stock options and warrants. Using, for example, the 2011 10-K:

• 3,531,665 preferred shares,
• 110,596,798 common shares,
• 14,890,956 options, and
• 25,119,247 warrants.

$7 billion ÷ 154 million = $45 per share. At $10 billion, $65. 

Since there will be a difference between the strike or exercise price and the share price at the time either a stock option or warrant are exercised, as well as cashless exercises features, the total number of options and warrants included in the denominator typically would not be the figures above, but a lesser amount. So, the per share range is a rough estimate.

I think you approach the answer to plausibility in two ways by asking: at what price would management sell, and for what price would Big Pharma pay?

You won't pry the company out of Craig's cold dead hands for less than $50-60. That is the easy answer. If you think you have a/the near cure for a number of cancer indications (and can validate it as such), at what price would you sell?

As for what Big Pharma would pay, I think it ultimately depends on the intensity of the auction. The corporate development or M&A folks at a Big Pharma company will do their respective valuation work to arrive at a range of valuations for Provectus (e.g., Comparable Company Analysis, Discounted Cash Flows Analysis, Precedent Transactions). They will use this (and knowledge about the size of their respective checkbooks) in their discussions with the company, but also in the context of negotiating against other Big Pharma companies interested in buying Provectus. Management's valuation work along these lines informs their own expectations of value.

Why did they need the IPO for a Nasdaq listing if a derm or geographic deal was in the cards? Or the SPA, for that matter?

I think management thought they could secure a NASDAQ listing through the PVCTP "IPO" for the sake of the listing itself: the greater awareness it would bring the stock and company, and the greater accessibility to the stock for a wider swath of buyers. Management had a valuation threshold below which they would not consummate a deal (i.e., pricing) for the IPO. If they got the terms they wanted, they would do an "IPO." If they did not get acceptable terms, they would not do an "IPO," and continue exploring deals for dermatology or oncology in certain geographies. The latter, of course, is what transpired.