May 27, 2013

$PVCT's Regulatory Clarity And Commercial Validation Pathways

Provectus has reached the point where it can and must gain regulatory clarity and achieve commercial validation, and it seems to be on the cusp of doing both.

Regulatory clarity means (a) agreeing to a special protocol assessment (SPA) with the FDA to conduct the pivotal MM Phase 3 trial and, potentially, (b) achieving the FDA's breakthrough therapy designation whereby Provectus might (b1) secure accelerated approval and run a Phase 4 trial or post-marketing study or (b2) just run a truncated Phase 3 trial designed around the aforementioned SPA. This is the "exit," or path to approval, that both Big Pharma and life sciences investors require to know.  "What is Provectus' exit before I enter." Investors should begin to buy after regulatory clarity is transparent, although some still may wait for commercial validation. Big Pharma should seek a global license for PV-10 or to acquire Provectus after an interim analysis of the Phase 3 trial is available, whether the trial is a truncated (BTD) or fuller (SPA) study.

Commercial validation means licensing PV-10 in (x1) China, (x2) India and/or (x3) Japan, (y) entering into a global license for PH-10 and/or (z) entering into a global license for PV-10. Assuming regulatory clarity finally is transparent, and it's hard not to think prospective partners also are waiting for transparency too, there would be no reason(s) left for life sciences investors to remain on the sidelines.

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It will be interesting to see how the month of June plays out. Should the SPA be announced, the bottom branch of the tree in the illustration above is germane. Thus, one aspect of regulatory clarity is attained. Complimentary to this would be signing an MOU for China. Thus, again, one aspect of commercial validation is attained.

I think, at this point, a perspective on Provectus cash on hand and inbound cash becomes important. The company's cash balance -- publicly, last, was about $5MM as at March -- is what it is or will be when either of both the SPA and MOU arrive at whenever point(s) in June.

Should Provectus sign the MOU in June, my experience would suggest (my guesstimate is) definitive agreements (contractual arrangements) between the parties, and thus funding of the upfront payment, occurs 30-90 days later (i.e., July-September). So, perhaps, $20-30MM arrives in September. MOU milestone payments for such things like the SPA, BTD, BTD specifics and drug approvals would come, by virtue of completing the documents, immediately after said documents were struck and signed, even though some of these milestones could be achieved before such.

The stock price should rise with the SPA and MOU, but it's possible Provectus would not tap either Network 1 or Lincoln Park for cash to maintain BDO's opinion until the upfront payment from the regional deal arrives. Evidence of monetization (commercial validation) like the MOU with Hisun-Pfizer should trigger significant warrant exercise activity (i.e., at least $5 MM) and therefore any financing for BDO purposes would not be necessary.

Fly Me To The Moon

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