Fourth Quarter, Year-End 2015 Business Update/Conference Call Prep

Image source

Provectus's 4Q15 and CY2015 business update conference call is scheduled for Wednesday, March 16th at 4 pm EDT.

Topics I'd like to hear and read about (or more about) include the below. The list of items and questions is by no means exhaustive.

1. Cash balance, Cash burn, and Stockholders' Equity

• What was the cash balance at 12/31/15?

• What was the fourth quarter's [monthly] cash burn?

• What was stockholders' equity at 12/13/15?

• What was the research and development expense for the quarter?

• What was the lab supplies and pharmaceutical preparations expense?

From 1Q14 to 3Q15, the company averaged a monthly cash burn of $1.3 million. This figure was $1.4 million (per month) from 4Q14 to 3Q15. Using a 9/3015 cash and cash equivalents figure of $18.9 million, and a $1.4 million monthly cash burn, Provectus' 12/31/15 cash balance could be $14.7 million.

Click to enlarge.

Maintaining Provectus' listing of both its common stock and tradable warrants requires the company's stockholders' equity (SE) to remain above $6 million. SE equals assets minus liabilities. Net worth (another way of referring to SE), ex-cash for the quarter ending 9/30/15 looks like the below:

Click to enlarge.

Tracking net worth, ex-cash over time provides a cushion of some amount above the mere cash balance to potentially exceed the $6 million SE threshold.

Click to enlarge.

Thus, it is quite possible Provectus' CFO/COO and interim CEO Peter Culpepper does not have to "officially" raise money until well into 3Q16 (i.e., 2Q16 SE might be in the range of >$6 million to $11 million+), rather than the April/May timeframe I originally had projected. Fundraising in this theoretical sense simply compares cash balances, and cash burn and burn rates. In practice, you want to get out ahead-to-well ahead of crossing the threshold, which is what the tender offer is trying to accomplish.

Since pre-clinical, clinical trial and regulatory-related work is reported under research and development on the income statement, it's worthwhile to track, at least or at a minimum, quarterly figures for both research and development expenses, and the sub-expense of lab supplies and pharmaceutical preparations.

From 1Q14 to 3Q14, the company averaged a quarterly research and development expense of $1.2 million. This figure was $2.2 million from 4Q14 to 3Q15.

Click to enlarge.

From 1Q14 to 3Q14, Provectus averaged a lab supplies and pharmaceutical preparations expense (i.e., for both drug substance [Rose Bengal] and drug product [PV-10 and PH-10]) of $200K. This figure was $324K from 4Q14 to 3Q15.

Click to enlarge.

Setting aside of ignoring the mathematical gymnastics in gray above*, the most pertinent observations might be that lab supplies and pharmaceutical preparations expense has increased quarter-over-quarter for the last 6 quarters.

* The above was a very quick 'n dirty calculation that does not include the cost of PH-10 preparation, nor the variation in the number of vials a patient requires based on tumor burden and indication, nor other factors and items.

2. Certain disclosures (among others)

• What costs and/or cost recoupments, if any, were there or will/could there be related to the resignation of Provectus' Chairman, CEO and a co-founder Dr. Craig Dees, PhD?

• What is the status of the derivative lawsuits?

3. Stage III melanoma Phase 3 trial

• Is the timing of the trial's interim data readout/analysis still [early] August 2016?

• Peter previously said the Phase 3 trial's interim assessment of efficacy and safety would occur around mid-year 2016 or in 2016; however, during the 2Q15 business update conference call on August 6, 2015, he said: "An interim assessment of efficacy and safety will be performed by the independent data monitoring committee when 50 percent of the events required for the primary endpoint have occurred. Therefore, meaningful clinical data are potentially available via an interim analysis on a shorter timeline possibly around this time next year." {my bolded and underlined emphasis}

• Where is the version of the trial protocol that would include Amgen's intralesional agent (IL) talimogene laherparepvec (T-Vec, or Imlygic) as a comparator?

• T-Vec would be an investigator's choice of a comparator, together with the trial's other choices of comparator of systemic chemotherapy, either intravenous (dacarbazine) or oral (temozolomide) forms.

• Provectus' CTO Dr. Eric Wachter, PhD said about this protocol during the 3Q15 business update conference call on November 5, 2015: "We expect to submit the necessary protocol amendment to support use of Imlygic to FDA before year’s end."

• What is the status of trial site activations in the U.S., Australia, Western Europe (Germany, Poland), South and Central America (Brazil, Mexico), and Asia (China, Hong Kong, Singapore)?

4. Advanced melanoma (Stage IV), combination therapy (PV-10 + Keytruda), Phase 1b trial

• What guidance is there on the timing, and possibly a potential venue (medical conference), of the presentation of interim clinical trial data?

• What is the status of trial site activations in the U.S. and Australia?

• Would these sites, in addition to the single recruiting site to date (long-time PV-10 investigator and medical oncologist Dr. Sanjiv Agarwala, MD's St. Luke's Cancer Center), be part of the Phase 1b portion of the combination therapy program, or the eventual Phase 2 portion?

• My sense is that currently not-yet-recruiting sites on ClinicalTrials.gov -- long-time PV-10 investigator and surgical oncologist Dr. Merrick Ross, MD's MD Anderson Cancer Center and Australia's Princess Alexandra Hospital -- and others -- e.g., consultants Dr. Paul Chapman, MD's Memorial Sloan Kettering Cancer Center and Dr. Georgina Long, PhD's Australia's Melanoma Institute Australia/University of Sydney-- will be part of the Phase 2 portion when it commences.

• At this point in recruiting and treatment, what guidance do you have of the Phase 1b's actual or potential impact factor or effect size or treatment effect?

• The Phase 1b portion of the combination therapy program could recruit up to 24 patients, while the Phase 2 portion has pencilled in an enrollment figure of 120 -- subject to the impact factor or effect size seen from the administration of PV-10 and Keytruda in the Phase 1b study. The better the treatment effect -- that is, the more effective the combination than Keytruda alone -- the lower the Phase 2 trial's N (i.e., a number less or potentially much less than 120).

• My sense is N_Phase 2 will be less than 120. But, by how much? 

5. Phase 1 liver cancer data presentation/publication

• What guidance is there on the presentation and/or publication of more and/or initial [expanded] Phase 1 trial data?

• Initial data presentations of the same information were made in July 2015 at conferences in Barcelona, Spain (ESMO World Congress on Gastrointestinal Cancer) and Osaka, Japan (Asia-Pacific Primary Liver Cancer Expert conference).

• Eric recently started referring to work on hepatocellular carcinoma (HCC) (primary liver cancer) and cancer metastatic to the liver (secondary liver cancer) as "hepatic cancers." The initial data presentation revealed treatment of multiple liver mets, in addition to the treatment of HCC: colorectal, melanoma, non-small cell lung, and ovarian. Recently, Provectus initiated a trial program to treatment neuroendocrine tumors (NET) liver mets (see #6 below).

• My primary thoughts here, as it relates to the HCC program in Asia vs. (and) the U.S. and Western Europe (and, maybe, Australia), are that initiating a Phase 1b/2 program (SAT: SOC + PV-10, RCT: SOC +/- PV-10) may take time because of regional regulatory navigation issues; however, that may not necessarily explain time taken for the U.S. where the standard of care (SOC) is sorafenib -- thus, the Phase 1b/2 program could be a randomized controlled trial (RCT) of sorafenib +/- PV-10 because a single-arm trial (SAT) of sorafenib + PV-10 was part of the expanded Phase 1 trial.

6. Follow-on hepatic cancer trials, including NET Phase 1 study

• Why did the NET hepatic cancer trial commence before any other hepatic cancer trial, early- or late-stage?

• In the case of an early-stage Asian trial (a Phase 1b), my sense is that Eric still has to navigate regional regulatory issues in China and/or other Asian locales.

• In the case of a later-stage U.S. trial (potentially a pivotal RCT) involving sorafenib, one could imagine [expanded] Phase 1 clinical data on tumor response as well as symptom data or patient reported outcomes might be sufficient to meet the criteria for a serious or life-threatening disease or condition and demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

• The patient population of some form of accelerated path (not accelerated approval, but an accelerated regulatory review and action path) might be patients with HCC that is not amenable to resection, transplant or other potentially curative therapy. Clinically significant endpoints might be objective or overall response rate, changes in markets of hepatic function, and perhaps (informally but not formally?) progression-free survival or overall survival (both of which could form the primary endpoints of a subsequent RCT).

7. CUP data

• How many patients were treated in the compassionate use program (CUP) (aka the expanded access program) in CY2015?

• What guidance is there on the timing of the publication or publications of CUP clinical results and data?

8. PH-10 MOA data (psoriasis Phase 2 study)

• What are the results? What guidance is there on the timing of the revelation of clinical results and data?

9. Psoriasis and atopic dermatitis Phase 3 trials

• What guidance is there regarding additional (if any) regulatory and/or commercial licensing (if applicable or appropriate) steps before the commencement of one or both of these pivotal studies?

10. Further publication/presentation of Moffitt MOA data and other work.

• What guidance is there on the timing, and possibly the potential venue(s) (medical conference, journal), of further presentation and/or publication of Moffitt Cancer Center mechanism of action (MOA) and other preclinical and/or clinical work?

• The next presentation of such work will be at AACR 2016 (April), T Cell Mediated Immunity after Combination Therapy with Intralesional PV-10 and Co-Inhibitory Blockade in a Melanoma Model (Provectus press release source link).

11. Further publication/presentation of UIC MOA data and other work

• What guidance is there on the timing, and possibly the potential venue(s) (medical conference, journal), of further presentation and/or publication of University of Illinois at Chicago (UIC) MOA and other preclinical work?

12. Other preclinical and/or early stage clinical work, More stringers, More indications

• What other third parties, like Moffitt and UIC, might be undertaking preclinical and/or clinical work on PV-10?

• During the 4Q15/CY 2014 business update conference call on March 11, 2015, Eric said: "I cannot comment on other third party work that may or may not be underway with regard to nonclinical work with PV-10. Obviously that is something that might be of interest and if it is and we haven’t disclosed it it’s probably of a sensitive nature." The threshold on sensitivity, as time passes and work is completed, can be lowered if Eric wants to lower it. He could lower it if he understands and truly embraces the thoughtful rationale for doing so.

• What guidance is there on the timing, and possibly the potential venue(s) (medical conference, journal), of Foote et al.'s clinical follow-up work combining PV-10 and radiotherapy?

• During the same 4Q15/CY 2014 conference call, Eric said: "But regarding the radiation therapy publication by Foote, that is of record as having led to an investigator-initiated study that you mentioned, 25 patients. That study has been enrolling slowly. It had very specific eligibility criteria at a single center. We have had discussions over the last several months with the investigator about ways to get data from that study available publicly and we anticipate that sometime in the coming months, that is sometime this year, that there will be some presentation of interim data from that study."{my bolded and underlined emphasis}

• In addition to the melanoma, hepatic cancer and dermatology clinical study and trial programs, what other indications do you expect to commence in 2016?

Conclusion

While I don't expect Eric and Peter to address all of the above in the 2015 10-K filing and on Wednesday's call, I hope they try their best to do so, as appropriate, applicable and necessary. One of Craig's most critical and very apparent flaws as a public company manager was his inability or unwillingness or unpreparedness -- or, more likely, parts of all three -- to walk and chew gum at the same time (despite his many protestations over time to the contrary). By the way, I believe Craig had both great strengths and notable weaknesses. On net, Rose Bengal and PV-10 are where they are today in no small part because of him.

As I previously wrote, Provectus is where it is in terms of progress largely -- perhaps exclusively -- because of retail investors. Most traditional investors, including me in a past life, would have utilized them differently in a command chain (without potentially changing, disrupting or corrupting their medical, clinical, treatment philosophies and other approaches) and on the board of directors, and potentially thrown some of them out on their buttocks.

Walking and chewing gum at the same time means dismissing Craig's long-time assertion -- or at the very least placing it in proper context -- of customer prioritization; that his primary customers only were the FDA (the regulator) and Big Pharma (the buyer). Staying power for founders and managers has come from the [retail, and some early institutional] investor.

Good-to-great public company managers balance the needs, wants and desires of most major constituencies. If/when they are successful, the share prices responds accordingly and in due course.

Eric and Peter, in the post-Craig period of the life and emergence of Provectus Biopharmaceuticals, have a clear and present opportunity to speak directly to the investor: existing shareholders as well as prospective ones. I hope they embrace the situation that now presents itself, and robustly exceed the lowered expectations their prior history has established -- because Rose Bengal and PV-10 only can get to where they need and should be tomorrow in no small part because of Eric and Peter.

"Why did it take four years...to arrive at this point?"

Eric's discussion on the May 23rd conference call of the history of the company's regulatory interactions with the FDA since the end of Provectus' metastatic melanoma Phase 2 trial about four years ago to arrive at this point is informative and useful. I edited the transcript to remove "so," "um" and "uh," and made a few other minor verbiage changes to make the material more readable. Bold emphasis of dates below is mine.

Why did it take four years from the end of phase two study to arrive at this point? 

I think it is good to start back in May of 2010 when the last patient completed the phase two study. Shortly before that point, we held our first type A meeting with the Agency. That was in April of that year when we had interim data from the first 40 patients in the study.  And what was interesting to me as the study progressed, we had interim analyses scheduled at N equals 20 patients, N equals 40 patients, and then a final analysis when the total of 80 intent to treat patients, or ITT population was enrolled. And by the time we got to N equals 40 patients, the numbers were looking better than what we had seen in phase one, which we expected based on a more aggressive treatment of the patients, despite the fact that we had, uh, a larger number of stage four patients in the patient population. I'll comment that as we finally matured the data to N equals 80 patients, the response metrics remained roughly the same over time. And at this time in April of 2010, the melanoma landscape was beginning to change very rapidly with ipilimumab and vemurafenib approvals approaching on the horizon. This meeting established that what we proposed at the time for phase three study in patients with a patient population and end point similar to studies underway at that time under special protocol assessment for two other investigational intralesional therapies for melanoma would not be appropriate going forward. 

The Agency told us that they did not like our proposed patient population nor our end points, and also cast tremendous amount of doubt on the relevance of the drug in melanoma, a disease that they noted was systemically malignant and would be difficult to treat with a local therapy. 

We matured the data from the phase two study further and held a second meeting finally in March of 2011 after completing our initial analysis of data from the full 80 patient data set from the phase two study. We went into the meeting with proposed end points and patient population modified based on guidance from the first meeting. That study design was proposed to evaluate response in patients with, uh, Stage IIIB to IVM1A disease. These are patients with cutaneous or nodal disease, uh, and where all disease would be accessible by intralesional injection. In addition, we tightened the definition of dermal response that we had proposed, uh, in that first meeting in light of the Agency's advice. At this meeting, the Agency made it clear that a time to event end point would be required and expressed concern about our proposed modifications to RECIST that we felt were relevant to treatment of local recurrence. 

We met with our advisors further and finally scheduled and held a third type B meeting in October of 2011. At that meeting, we proposed modified end points in the patient population, once again based on prior guidance. This study was proposed to evaluate response in patients with cutaneous or subcutaneous recurrent or metastatic melanoma. Okay. That's a lot to digest, the cutaneous or subcutaneous recurrent metastatic melanoma that had no active nodal or visceral disease. These were patients, for example, with a history of nodal disease that had undergone nodal resection and would be candidates because their nodal disease had been surgically removed. They had no active nodal disease, similarly a case for patients that might have had limited lung mets, for example, that had been successfully treated somehow surgically, radiation, or some other therapy. Progression free survival versus DTIC was proposed for our RCT. We proposed a time to event end point in a randomized controlled trial. The Agency at that point expressed continued concern about enrolling patients with any history of visceral disease based on the concern I mentioned earlier, that there was inadequate support for use of PV-10 intralesionally in patients with systemic disease, so local therapy for patients with systemic disease. They also expressed concern about our proposed effect size, which we were willing to address. At the conclusion of the meeting, we agreed to develop a revised RCT design in patients with no history of visceral disease and no active nodal disease, and to submit this for SPA. 

Now in light of our discussions in the second and third meetings with a lead medical reviewer concerning adequacy of support for potential distant effects of PV-10 ablation, which we had noticed in our so-called bystander effect in cutaneous lesions, untreated cutaneous lesions in phase one and in phase two testing, and in a limited number of patients with visceral mets at enrollment in the phase two study. Some of them showed regression of their untreated visceral mets over the study interval in a fashion similar to some other drugs that were being developed for melanoma at the time. 

We realized we needed to get the story straight on this systemic effect before we could have significant traction with regulators in the U.S. and presumably abroad.

We began a dialogue with researchers from Moffitt Cancer Center early in 2011. Between the the second and third meeting that by the end of that year evolved into formal non-clinical studies on the cellular basis underlying the bystander effect. And eventually, it matured into the translational medicine study that's began in early 2013 that we are expected to hear results on June 2nd [2014] at ASCO. Data from these projects were reported starting in March 2012 at the Society for Surgical Oncology annual meeting in 2013 at the Society for Immunotherapy with Cancer annual meeting, and at the 2013 and 2014 annual meetings in the American Association for Cancer Research. As I mentioned, additional clinical data from this effort is expected to be presented by the Moffitt team next week at ASCO. 

We believed at this time we started, and we continue to believe now, that this aspect of the PV[-10] story may be crucial to obtaining regulatory approval. 

During this period, we also convened several advisory boards comprised of investigators and key opinion leaders to work on design of the promised RCT. We met privately with a number of these experts and other similar experts to discuss the challenges of designing a RCT that could be balanced in terms of level of intervention between the PV-10 arm and the comparator arm appropriate for patients principally with Stage IIIB and IIIC disease, and it would not suffer unacceptably low accrual or high dropout from the comparator arm. As the melanoma landscape continued to evolve, this proved to be a difficult challenge. Over the same period, we worked on modernization of our PV-10 supply chain, uh, as evidenced by a recently issued U.S. patent September of 2013 covering methods for manufacturing Rose bengal to modern quality standards. I think absent this work, it is unlikely that early investigation drug product was used up to that time could have been qualified for phase three use, and certainly not for support of an NDA. As we announced when the patent issued last fall, a drug product appropriate for such phase three use has now been manufactured. 

Finally, by October of 2013, we had become sufficiently frustrated by the difficulties posed by design of a study based on the third type [B] meeting and the discussions leading up to that third type [B] meeting, and also encouraged with the emerging immunologic mechanism data, such that we requested an additional meeting with the Agency in the fall of 2013. That request was granted. And the type C meeting was held in December of that year. At that meeting, we provided an overview of PV-10 data in melanoma from both phase one and phase two melanoma studies from our expanded access protocol, which now has enrolled over 100 patients, uh, from our hepatic tumor study, from an investigator-initiated study of PV-10, followed by radiation therapy for treatment of melanoma, and from the afore-mentioned Moffitt study. This data included an exploratory subgroup analysis presented earlier that year at the European Cancer Conference and included response metrics for patients having all or substantially all other baseline disease treated with PV-10. 

We also presented a straw man outline for Breakthrough Therapy Designation request and asked for advice on such requests. To our surprise, in the meeting the Agency focused on the [ECC] 2013 subgroup analyses and clinical response evidenced in these patients via clinical photography. We had a lengthy discussion regarding patients with locally advanced cutaneous melanoma, the need for therapies for these patients, and the types of end points appropriate for demonstration of clinical benefit. Based on our positive impression and discussions from the meeting in the meeting minutes released a month later, we prepared and submitted our Breakthrough Designation application in March [2014]. 

I warned you there was a long road, a difficult, complicated story. And what it shows is that as our understanding of PV-10 has matured over time and as the melanoma landscape has evolved over time, our interaction with the Agency has improved over time in that we now are in a position that the Agency has helped us to define indications that they believe our drug shows potential value and have helped us to define types of end points that are vastly different than perhaps progression-free survival in the proposed phase three randomized control trial from the third type [B] meeting, which would have used DTIC as a comparator. It's impossible to run that study [under] the current climate. We wouldn't enroll patients with the appropriate, uh, extent of disease burden. Yes, I can understand the feeling that maybe we're the clever student in class that doesn't listen to the advice of the teacher. But I would prefer to think that we've been working with the Agency to understand what proved to be a very difficult challenge. We're taking a new class of agent. And there's superficial similarities to other investigational drugs currently under phase three investigation or recently under phase three investigation. But those similarities are superficial at best. The effect of the drug immediately via its primary ablation is very different than other drugs that have been developed. The secondary immunologic response that appears to occur in a large fraction of patients, as evidenced by the data coming out of Moffitt, is very different than what has been shown in the past. And understanding what patients might benefit in a clinical trial setting has been complicated. I think we have very good guidance now from the agency in terms of types of patients to look at types of end points to use. And I hope that we'll be able to convince all people that are watching this story that we're definitely listening to the teacher. 

And so, in the meeting in December [2013], the Agency said, to paraphrase, hey, we like this ablative effect that you're showing in these patients with disease confined to the skin. But can you show us that that also improves symptoms that we've heard are important in melanoma, pain, bleeding, infection, for example. That would be a winning combination.