June 2, 2012

Quick Hits for June 2

Blog reader contribution: You can find out new board member and outsider Jan Koe's beneficial ownership of Provectus stock here. He directly or indirectly owns 636,300 shares and 100,000 warrants ($1.25 exercise price).

ASCO 2012: Management is in Chicago for meetings with key relationships.

Is it possible...that longtime (and historically large shareholder) Donald Adams and/or related parties (Joan Adams) were selling into the buying interest (as he or they have in the past) on the day Doug Ulman was added to the corporate advisory board? While this action does not abrogate management's role and responsibility to generate awareness of the company and buying interest in its stock, it certainly is unfortunate and frustrating.

Blog reader question: So considering all the info/news we have seen in the past couple of months, what can go wrong? It seems they should/will get the SPA. They have enough cash till next year. They have a slight chance of getting the A.A. from the FDA. They have shelf stock as a safety net. They should get a derm deal = more $. They should be able to sell the company / drug. They are ready to jump to the NASDAQ. Its cheap. Its easy to produce. Maybe the phase III results wont be that attractive: I doubt it because with the Compassionate use program their results where better since they where able to use as much of PV-10 as they wanted. And the list goes on... From a pessimistic POV why should i NOT BUY more shares? As an investor i am always looking for the "catch", the downside.
The "catch" -- really, the challenge and opportunity -- is whether Provectus can harness recent and future triggers or catalysts to raise the share price to a height that is near or exceeds what management deems to be fair value for the company. 
An acquirer should (and likely would) pay a premium to the then current share price to buy Provectus. But if the share price is not high enough, even a healthy premium may not get still provide a valuation well below the implied share price management thinks is the right number. Let's say the company offered itself to Pfizer right now. Pfizer would pay about $300MM, or a couple of hundred million dollars as a premium to the current market capitalization of $99MM (as of Friday's close), plus some kind or form of contingent value right. That figure is well below the $3B expectation for an upfront payment (plus a/the CVR).
The fairly obvious point of getting on to the NASDAQ is to harness the catalysts to foster as much irrationale exuberance in the stock to drive the share price up to at least about $1-2B, or about $10-20 per share (rough math), so that when Pfizer (or some other big pharmaceutical company) decides to buy Provectus, they'll pay at least $3B upfront. Funds and institutions that cannot or will not buy the stock on the over-the-counter exchange will initiate positions once it is available on the NASDAQ. Other entities will enter above $5 based on their respective charters or constraints.
The catch, then, is simply whether all of the company's intrinsic value is successfully manifested in a higher share price.

Do (should) I you worry about:
  • The dance cards of prospective acquirers filling up without Provectus (i.e., do I worry about M&A chairs being filled when the music stops? No, because the pipeline needs of Big Pharma are so significant, and the potential of both PV-10 and PH-10 is so vast. Many solid tumor indications still are very much wide open for emerging therapies for blockbuster impact, and there is no topical drug like PH-10 on the market or in development.
  • A loss of Big Pharma interest in PV-10 and Provectus, or about the drug and the company being overtaken by some as yet unnamed or named competitor or drug or therapy flavor of ASCO or the year? No, because Rose Bengal is so unique, and Big Pharma readily acknowledges such uniqueness. Management has created a new class of therapy for both PV-10 and PH-10.
  • Big Pharma playing hardball with the company in the event the cash balance is not has high as management would hope whenever Provectus tells Pfizer and other suitors the company is interested in doing a deal (either license or full-on acquisition? No, given that the company has the Lincoln Park Capital agreement in place, along with two effective S-3s.
  • Big Pharma could (would) call Provectus' bluff about acquisition and say "go develop PV-10 yourself," as a way of driving valuation down for them to buy the company later? No, because as Big Pharma business development folks will tell you, “we’re desperate.”

Recall...that management has turned down several license offers or curtailed license interest because the initial valuation overtures did not meet Provectus' own valuation hurdle figures.

Moffitt data...is a very significant part of the company's future.

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