Potential Catalysts & "Catalysts"

Caveat: I have been hilariously off-base in the past. See, for example, my August 31, 2014 blog post Potential Catalysts.

Updated (8/9/15): To reflect a longer period of pivotal melanoma Phase 3 site activation, and to include as a catalyst the potential approval of Amgen's intralesional agent for metastatic melanoma talimogene laherparepvec (T-Vec).

Updated (8/9/15): To reflect a year-end start to a Phase 1b trial combining PV-10 and an immune checkpoint inhibitor in patients with advanced melanoma.

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"Provectus Biopharmaceuticals' Novel Synthesis Patent Application Allowed by Chinese Patent Office"

Image source

Provectus issued press release Provectus Biopharmaceuticals' Novel Synthesis Patent Application Allowed by Chinese Patent Office on Monday, noting the company "...received notification of allowance from the Chinese Patent Office for its patent application protecting the synthetic process used to produce the small molecule Rose Bengal, the active pharmaceutical ingredient (API) in PV-10, the Company's lead oncology drug candidate."

The synthesis patent, according to Provectus, "...covers the process under which pharmaceutical grade Rose Bengal and related xanthenes are produced, reducing the formation of certain previously unknown transhalogenated impurities that currently exist in commercial grade Rose Bengal in uncontrolled amounts. The requirement to identify and control related substances is in accordance with International Conference on Harmonisation (ICH) guidelines for manufacture of API suitable for clinical trial material and commercial pharmaceutical use."

A screenshot of the allowance is below:

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The joint Provectus-Pfizer combination patent application filed in China also is below and, according to Provectus, "...covers a method of treatment of cancer that comprises administering a therapeutically effective amount of an intralesional chemoablative pharmaceutical composition in combination with a therapeutically effective amount of a systemic immunomodulatory anticancer agent. The systemic immunomodulatory anticancer agent comprises anti-CTLA-4 antibodies including ipilimumab and tremelimumab." Claims not yet made public purportedly include anti-PD-1 and anti-PD-L1 antibodies.

Image source

Both patent applications were submitted at the same time to their respective geographic regulatory agencies. That is, the synthesis patent was filed on September 17, 2010 with both the U.S. and Chinese patent offices, and the combination patent was filed with both agencies on March 9, 2012. According to Eric (paraphrasing), Provectus files Patent Cooperation Treaty ("PCT") versions of the company's PTO patent applications simultaneously in designated jurisdictions within their respective PCT deadlines. Such filings may be made months after the U.S. case is filed. This allows management to obtain initial input from U.S. examination before the process commences in earnest in other jurisdictions, and to fine tune claims before international prosecution starts. Additionally, Provectus also typically elects to file first in certain key jurisdictions the company has learned are both important and rigorous, which allows management to further refine their international claims before proceeding with other jurisdictions. See IP & China (December 26, 2014) on the blog's Archived News II page.

Protecting intellectual property around the world is good process, and a valuation driver for Provectus. An important component of the company's upcoming pivotal Phase 3 trial for locally advanced cutaneous melanoma would be clinical sites in international locations, such as Australia (a given based on prior participation in Provectus' metastatic melanoma Phase 1 and 2 trials), Western Europe, and so-called emerging market/developing countries.

A China site, and its associated investigator, should be on the roster when the trial starts, or shortly thereafter. The site, at least one of them in the country, should be the Peking University Cancer Hospital (also known as, or having the other titles of, the Beijing Cancer Hospital, the Beijing Institute for Cancer Research, and Peking University School of Oncology). Clinical studies registered on ClinicalTrials.gov for the Beijing Cancer Hospital may be found here (there are 3 that are recruiting).

The investigator should be  Professor and Dr. Jun Guo, M.D., Ph.D (Vice President of Clinical Oncology, Peking University; Deputy Director, Beijing Institute for Cancer Research; Director of Department of Melanoma & Renal Cancer, Peking University School of Oncology). Clinical studies registered on ClinicalTrials.gov for Dr. Gou may be found here (there are 102 of them of various statuses). See also The Asia Melanoma Group (November 26, 2014) on the blog's Archived News II page.

St. Luke's University Health Network's and Provectus' lead melanoma Phase 2 trial investigator Dr. Sanjiv Agarwala spoke at Dr. Guo's October 17th-19th Beijing melanoma conference (2014 Beijing International Melanoma Congress), which was co-chaired by Dana-Farber/Harvard Cancer Center's Professor and Dr. Keith Flaherty, M.D. See 2014 Beijing International Melanoma Congress (October 7, 2014) on the blog's Archived News II page.

Dr. Guo is the head of the Asia Melanoma Group, the establishment of which was announced at above mentioned Beijing conference. See China Daily article New group offers hope to melanoma sufferers:

"The new group consists of 17 leading melanoma experts from countries including China, Singapore, Korea and Hong Kong. "Given Asian patients' differences in genetic background and disease types to Europeans, it is high time Asian experts stand together to form a group that will break down barriers in research on melanoma," said Guo Jun, deputy director of the Beijing Cancer Hospital and head of the newly-established group. The incidence of melanoma is higher among white people than Asians but Asian people have a much higher probability of mucous melanoma than Caucasians, which usually has a poorer prognosis than melanoma on the skin, Guo explained."

Dr. Guo also is a member of Melanoma International Foundation's Scientific Advisory Board, which is co-chaired by Dr. Flaherty.

Amgen's pivotal metastatic melanoma Phase 3 trial for T-Vec did not include any clinical trial sites in China. International locations included sites in Canada, South Africa, and the United Kingdom

Provectus notebook

Pilon-Thomas & Moffitt Cancer Center. Frequent medical writer of PV-10 Janet Fricker has an article out in Medical News Today today about Moffitt's poster presentations at SITC 2014 entitled Melanoma shows improved regression with combination of PV-10 and checkpoint inhibitor.

The article has an interesting quote from the cancer center's Dr. Shari Pilon-Thomas, Ph.D. about their work:

"The spirit of our study was to determine whether combining PV-10 with a checkpoint inhibitor would enhance the systematic immune responses of the initial injection of PV-10."

Phrased via slightly different editing: The spirit of the study was to determine whether combining ABC with XYZ would enhance the systematic immune responses of ABC. Not, whether combining XYZ with ABC would help XYZ.

Pfizer. Pfizer announced Monday it had (i) a PD-1 agent and (ii) licensed a PD-L1 agent from Merck KGaA (Germany), thus changing the competitive landscape to look more like the below:

Click to enlarge.
See blog post "Together, these studies support the induction of increased tumor-specific immunity after co-inhibitory blockade in combination with IL PV-10 therapy."

Interestingly and notably, Pfizer immediately guided 2014 and 2015 earnings downward as a result of the transaction and to recognize its upfront payment as a certain significant item.

Some preliminary opinions on the deal include:

Jacob Plieth, EP Vantage: "This disproves the notion that a handful of big names – Merck & Co, Bristol-Myers Squibb and  Roche – had already seized all the early promise in  PD-1/PD-L1 inhibition."

The Deal Pipeline: "Pfizer in May walked away from AstraZeneca after painting itself into a corner by describing a takeover proposal - one of a series - as "final..." The deal would have also given Pfizer access to AstraZeneca's own immuno-oncology treatment, which are known as anti-PD-L1 compounds...The New York company has now found a less contentious way to access the technology." 

Pfizer's view of its immuno-oncology pipeline now, in cancer-immunity cycle terms, is:

Click to enlarge. Pfizer presentation, November 17, 2014.

Merck & Co., (U.S.A.). Merck announced positive results from a Keytruda (PD-1) melanoma trial on Sunday. The comparator for late-stage patients in this trial was systemic chemotherapy, the co-primary endpoints were progression-free survival ("PFS") and overall survival ("OS"), a secondary endpoint was overall response rate ("ORR"), and additional data was collected on duration of OR, patient-reported outcomes (the EORTC QLQ-C30 questionnaire) and safety (adverse events).

Provectus' upcoming melanoma Phase 3 trial of earlier stage patients whose disease has not spread to distant sites (which is not late-stage disease, where the disease indeed has spread) has a comparator of systemic chemotherapy, a primary endpoint of PFS, and secondary endpoints of complete response rate ("CRR"), duration of CR, patient-reported outcomes (the Skindex-16 questionnaire), OS and safety (adverse events).

China. I thought the comments by Sinopharm A-THINK's CEO in Provectus' PR Provectus Biopharmaceuticals Extends Memorandum of Understanding with Sinopharm-China State Institute of Pharmaceutical Industry and Sinopharm A-THINK Pharmaceutical Co., Ltd that "...it is hopeful that a contract will be finalized in the coming weeks" were interesting. They become notable if and when a meaningful and material deal is consummated. I don't doubt part of the deal process is for both parties (Sinopharm and Provectus) to interact with the China Food and Drug Administration.

The Cancer-Immunity Cycle. The Medical News Today article about Moffitt, PV-10 and SITC also noted:

"The mechanism, [Dr. Pilon-Thomas] adds, is thought to be that injection of PV-10 into melanoma lesions results in tumor cells releasing antigens that induce T cell immunity, with the checkpoint inhibitors then "releasing the brakes" on the resulting T cells. Next, the team plans to investigate the types of immune cells released at the tumor site." {Underlined emphasis is mine}

"[T]he types of immune cells released at the tumor site" refers to cycle steps 5 and 6 in Chen & Mellman's (2013) Oncology Meets Immunology: The Cancer-Immunity Cycle:

"In the first step, neoantigens created by oncogenesis are released and captured by dendritic cells (DCs) for processing (step 1). In order for this step to yield an anticancer T cell response, it must be accompanied by signals that specify immunity lest peripheral tolerance to the tumor antigens be induced. Such immunogenic signals might include proinflammatory cytokines and factors released by dying tumor cells or by the gut microbiota (Figure 2, Table 1). Next, DCs present the captured antigens on MHCI and MHCII molecules to T cells (step 2), resulting in the priming and activation of effector T cell responses against the cancer-specific antigens (step 3) that are viewed as foreign or against which central tolerance has been incomplete. The nature of the immune response is determined at this stage, with a critical balance representing the ratio of T effector cells versus T regulatory cells being key to the final outcome. Finally, the activated effector T cells traffic to (step 4) and infiltrate the tumor bed (step 5), specifically recognize and bind to cancer cells through the interaction between its T cell receptor (TCR) and its cognate antigen bound to MHCI (step 6), and kill their target cancer cell (step 7). Killing of the cancer cell releases additional tumor-associated antigens (step 1 again) to increase the breadth and depth of the response in subsequent revolutions of the cycle." {Underlined emphasis is mine}

Click to enlarge. Chen & Mellman, Figure 1, http://www.cell.com/immunity/abstract/S1074-7613(13)00296-3

Australia. In November 2010 Provectus wrote in their press release Provectus Meets with the Therapeutic Goods Administration to Review Path for Approval of PV-10 in Australia:

"The recent meeting focused on manufacturing, characterization and specifications for PV-10, along with a review of clinical data and anticipated Phase 3 study design and endpoints. The proposed primary endpoint of progression free survival, which Provectus proposed to the U.S. Food and Drug Administration (FDA) earlier this year in its first end-of-Phase-2 meeting with FDA, was deemed appropriate for assessment of efficacy in light of established European Medicines Agency (EMEA) standards adopted by TGA. Use of interim data from the first half of Phase 3 study subjects, in conjunction with safety data collected in earlier studies of PV-10 for melanoma, was discussed to allow early evaluation for marketing approval for metastatic melanoma, and TGA agreed that these data should be sufficient for this review if the analysis confirmed efficacy."

I learned from folks in Australia that management will be there around the time of the annual scientific meeting of the Clinical Oncology Society of Australia (December 2nd to 4th). I would think visiting the TGA, Australia's FDA, would be on their trip itinerary.

In addition to sites in Australia for Provectus' melanoma Phase 1 and 2 clinical trials and the company's compassionate use program, and the work therein, investigator-initiated work was and is being done combining PV-10 with radiotherapy. Preliminary work (3 patients) was published in 2010 as A novel treatment for metastatic melanoma with intralesional rose bengal and radiotherapy: a case series in Melanoma Research. Follow-up investigator-initiated work by the same lead (Dr. Matthew Foote, M.D.) appears to be one patient short of full enrollment and treatment (25 patients).

Click to enlarge. Above screenshot taken from a presentation
by Dr. Sanjiv Agarwala, M.D. at the 2nd European Post-Chicago Melanoma Meeting (2010)

The average cost of drug R&D. A study by the Tufts Center for the Study of Drug Development out today said developing a new prescription medicine that gains marketing approval costs $2.6 billion. A related article on the study by FierceBiotech author John Carroll framed Tuft's estimate in the context of an estimate by Doctors Without Borders of $186 million.

Through September 30, 2014, Provectus has spent (balance sheet item Accumulated Deficit) $157 million for multi-indication viable PV-10.

"PV-10 delivers greatest effects when all lesions are injected"

The title of an article published this week by medical writer Janet Fricker, who has written several times about PV-10, provided a cogent description of the drug's value proposition for its patient population afflicted with melanoma, and, eventually, I believe, for all solid tumor cancers: PV-10 delivers greatest effects when all lesions are injected, which discussed Provectus' completed Phase 2 trial data presented at ESMO 2014.

Because PV-10 is very safe, the more you give, the more you get. No dose limiting toxicity.

The article frames what might be expected from the upcoming pivotal Phase 3 trial for unresectable locally advanced cutaneous melanoma, in large part because of the trial's design whereby all lesions will be injected:

"The latest analysis reported at ESMO reveals that the subgroup of 28 patients who had all their lesions injected achieved a progression free survival of 9.8 months compared to 6.0 months for the seven patients who had a median of five untreated lesions. “The progression free survival of 9.8 months compares favourably with historical progression free survivals of less than 2.5 months for DTIC/TMZ,” commented Sanjiv Agarwala, the first author from St. Luke’s Hospital and Health Network, Bethlehem, Pennsylvania." {Underlined emphasis is mine}

The more lesions into which PV-10 is injected ("the more you give"), the more antigens are created and released, the more antigens then are presented, the more the immune system then is primed and activated, the more T-cells then are trafficked to tumors, the more T-cells then infiltrate tumors, the more cancer cells then are recognized by T-cells, and the more cancer cells finally are killed ("the more you get").

No dose limiting toxicity. PV-10 can deliver its greatest effect because it can be injected into all lesions until they (and occult cancer cells) go away.

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Provectus made a Form D filing on October 15th related to a possible financing of up to $15 million through Network 1 Financial Securities. I previously wrote about this two weeks ago. See Fundraising (October 3, 2014) and Fundraising -- Updated (October 4, 2014) on the blog's News page. The filing noted: "Sales in the offering will be staged incrementally at the sole discretion of the Company."

It has been said the company could require additional cash to meet requested or demanded requirements of the New York Stock Exchange and/or Provectus' accounting firm BDO. Be that as it may, Provectus concurrently is trying to close a regional license transaction with Chinese pharmaceutical distributor Sinopharm and garner sufficient payment at the signing of a definitive agreement in order to obviate the need to raise money via Network 1.

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A deal structure that potentially may provide insight into Provectus' discussions with Sinopharm is Celsion's 2013 license deal, ultimately not consummated, with Zhejiang Hisun Pharmaceutical Company ("Hisun) for China. This deal was constructed as:

• $25 million at signing of a definitive agreement (Celsion previously received $10 million from two payments, which then were credited against the signing amount),
• $55 million in upfront milestone and regulatory milestone payments over 18 months,
• $45 million in sales target milestone payments, and 
• Escalating double-digit sales royalties over ten years.

Because no further or amended Form D filing has been made as of this writing (to disclose Provectus took in money from the above mentioned offering), I assume Peter is able to "hold off" the NYSE and/or BDO for a period of time until he can ascertain what cash he would receive from Sinopharm upon signing of a definitive agreement (should such a license transaction be completed).

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St. Luke's Cancer Center's Dr. Sanjiv Agarwala, M.D. is presenting at 5:30 pm local time (5:30 am EST) on October 18th (today) at the 2014 Beijing International Melanoma Congress. See 2014 Beijing International Melanoma Congress (October 7, 2014) on the blog's News page. An interview with Peter conducted by BioMedReports, which discussed the Provectus-Sinopharm memorandum of understanding, was published on October 16th. I very much dislike Provectus raising this topic beyond the initial press release of August 18th (much like they repetitively mentioned their breakthrough therapy application earlier this year). Nevertheless, the interview, likely conducted this week, and proximate to Dr. Agarwala's presentation, at which I imagine Provectus principals and/or advisors should be in attendance, contained some noteworthy items, among them:

"We will be able to assign the license agreement and will control the supply chain unless we agree to do otherwise." Being able to assign the license to an end-game acquirer is an important Provectus-Sinopharm contract item. Under what circumstances would Provectus agree to relinquishing supply chain control? I would think Provectus would consider this only in the context of Big Pharma discussions about a transaction for the company, and only in conjunction with a global partner that has an existing (e.g., Pfizer's 2012 national retail strategic cooperation framework agreement) or planned partnership with Sinopharm.

"Also, PV-10 as an anti-tumor agent that is injected is very appealing to the China and India patient population and their caregivers."

Peter also replied, in answer to the question of what is the object PVCT has in doing business in Asia: "For our signature drug, PV-10 to treat liver cancer, most of the liver patients are in Asia versus the US or Western Europe." I think it's obvious the Chinese, in this case Sinopharm, are more interested in seeing or confirming the final and/or filed liver protocol for a Provectus Phase 2 liver trial than they would be in a filed protocol for the Phase 3 melanoma trial.

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Returning to the Celsion deal structure, it seems to me the nature of the discussions and negotiations between Provectus and Sinopharm probably now revolve around how much of near-term money is available (from Sinopharm) to be paid (to Provectus) at (i) signing of a definitive agreement and (ii) upon checking of whatever box(es) to be deemed an upfront payment. This matters for both substantive and cosmetic reasons. For example, more money sooner is better than the same money later...duh. More money sooner makes a bigger splash. All of this assumes the other compoents of the deal structure are sufficiently good.

Ultimately, Provectus shareholders want management to close a good deal that is well structured, and not contrived. Management has not reached for nor agreed to [very likely informal] deal offers in the past that poorly valued their innovation. I do not expect them to start settling now.

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On October 15th the company issued another press release about Moffitt's presentation at the annual meeting of SITC in early-November, and filed an associated 8-K. Of note was the comment Moffitt's poster will be available and presented at two sessions, during the regular poster viewing one and at an evening Presidential reception. In addition, Craig's obligatory quote contained a couple of potentially notable words and phrases, which I hope ultimately are indeed notable.

“Dr. Pilon-Thomas and her team at Moffitt have been doing very interesting work assessing the potential combinations of PV-10 with immune checkpoint inhibitors for melanoma. Their work may be an important step forward as part of our corporate strategy for addressing unmet need in late stage melanoma patients and in other uses of PV-10.” {Underlined emphasis is mine}

I suppose “very interesting” means unprecedented and unique in scientific parlance? Does “other uses” means other indications (like breast cancer, which was included in Moffitt's AACR 2013 poster: Intralesional Injection with PV-10 Induces a Systemic Anti-tumor Immune Response in Murine Models of Breast Cancer and Melanoma)?

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Finally, in a press release and associated 8-K filing on October 16th Provectus confirmed Dr. Agarwala's presentation of PV-10 clinical data and value proposition (as a monotherapy and in combination) as part of a satellite session sponsored by Amgen and titled “Oncolytic immunotherapy – engaging the immune system to target melanoma” on November 15th at the 11th International Congress of the Society for Melanoma Research in Zurich, Switzerland. See Melanoma Congress 2014 (October 15, 2014) on the blog's News page.

Dr. Agarwala's continues his three-month world tour of Spain (September 28th), Russia (October 12th), China (October 18th) and, now, Switzerland (November 15th). Medical oncologist Agarwala may see the potential opportunity to enhance his position as a global key opinion leader with the success of PV-10 as a monotherapy for earlier stages of disease.

Medical oncologist and Moffitt Cancer Center's Dr. Jeffrey Weber probably sees the potential opportunity to further enhance his position as a global key opinion leader responsible for translating investigational compounds into approved drugs with the success of PV-10 in combination with immune checkpoint blockade (inhibitors) for late stage disease. That, however, is for a later discussion and debate once we learn more about Moffitt's presentation and data at SITC 2014 on November 8th.

A China Tale, and Process

From the traditional folksong of Tiger Woman,
adapted by Laurence Yep

From Peter's first trip to China in November 2012 when he began to engage Chinese pharmaceutical companies for a regional partnership, to Eric and Peter's recent trip in August 2014 (the former's first) to sign a memorandum of understanding ("MOU") with one of them, Provectus principals have made five trips to China. These also include February, September and December 2013. 

The November 2012 trip comprised introductory meetings with companies of varying size and geographic scope. Subsequent follow-ups with some additional initial get-togethers too, essentially trips in 2013, comprised gradually more serious meetings with a short-list of more interested companies and increasing senior levels of their leadership. These introductions were facilitated by a number of individuals, agents and third parties that included strategic advisory board members, Network 1 Financial, and Maxim Group. Potential partners have interacted with Provectus in the interim via e-mail and phone, and conducted due diligence via the company's electronic data room. The culmination of these efforts and trips resulted in a first MOU for a China regional partnership with two subsidiaries of Sinopharm Group in August.

Generally speaking, an MOU is to a licensing deal or business relationship what a term sheet is to a venture capital investment and a letter of intent ("LOI") is to an acquisition: formalizations and acknowledgements of serious discussions towards the above mentioned ends, frameworks or outlines of business-investment-acquisition terms, conditions, rights, etc., and lists or mentions of other customary and perfunctory ifs, ands or buts.

Provectus noted in their press release:

During the next three months, the parties will seek to enter into a definitive licensing contract, subject to additional negotiation, due diligence, and any required regulatory and corporate approvals. The parties will further address the details of the license; the use of the technology from Provectus to Sinopharm A-THINK in China; the process for commercialization; and payments to Provectus (upfront, milestone and royalties). Provectus intends to manufacture PV-10 in the USA and Sinopharm A-THINK will distribute PV-10 in China. {Underlined emphasis is mine}

I'm reminded of our corporate venture capital process back in the day (our process flow is below), which I believe is a reasonable facsimile of Provectus' process and the process from Sinopharm's perspective in this situation.

Click to enlarge.

Preliminary analysis/assessment. Prior to Peter's trip, third parties introducers would have pre-submitted information about Provectus, PV-10, summary and previously public information about pre-clinical and clinical data, regulatory interactions, etc. to potential Chinese pharmaceutical company partners for their analysis and assessment, and to gauge any interest to learn more.

Management team meeting(s). The parties would have had an initial meeting, and potentially or eventually other more serious ones.

Due diligence. Although the graph above is linear and discrete in its steps, some actions are undertaken in parallel and are continuous, like due diligence, even after engagement is formalized. The potential licensee-investor-acquirer conducts due diligence in advance of and after the initial management team meeting, and as more meetings are conducted. As Provectus mentioned on several of its conference calls this year, Chinese companies (among others) have visited the electronic data room to review the various different types of documents stored there.

Due diligence of course goes beyond reading introductory collateral material, meeting management, and visiting data rooms. It extends to on-site visits of the business (Provectus), where clinical work is carried out (e.g., St. Luke’s Cancer Network, Moffitt Cancer Center) and with the people carrying this work out (e.g., Dr. Sanjiv Agarwala, M.D., Moffitt personnel), and other relevant and germane people, companies and institutions, and places. I imagine these due diligence activities are to come.

Term sheet negotiations. At some point, interest rises to a level where the parties can discuss price expectations and their associated structure, terms and conditions. If the parties can reach sufficient preliminary consensus they feel could ultimately lead to a transaction (but with no certainty nor obligation [unless they elect to bind themselves] to do so), they enter into or agree to an MOU-term sheet-LOI. As the jargon goes, MOUs are agreed to by the parties, while term sheets and LOIs are extended by one party to the other.

Negotiations of definitive agreements. When continuing due diligence is satisfactorily wrapped up, should the consensus remains the consensus, and if the broad and not so broad strokes of the MOU-term sheet-LOI are conveyed to definitive agreements, a definitive license-investment-purchase agreement may be struck for signing.

Deal closing. Documents are signed. Signatures are swapped. Money, securities, licenses, etc. change hands.

The process.

MOUs can be serious documents, and they can be far from serious. Sometimes also known as "Barney agreements" (i.e., "I love you, you love me") during the dot com era, Internet companies would enter into them with more established companies or other like venture-backed firms in hopes of demonstrating or simply giving the illusion of progress, business value creation, and rationale for increased valuation.

In the past management has garnered license and acquisition interest, in hand or through conversation, but nothing that rose to the level of both seriousness (met price expectations) and tangibleness (was on paper). For example*:

• Galderma's rumored 2010 interest in Provectus' dermatology business (on paper, but not serious),
• A Big Pharma's rumored 2011 interest to buy the intralesional drug compound company (not serious, and not on paper),
• Orbimed and Domain Associates-backed Eddingpharm's rumored 2013 interest to license PV-10 for sale in China and its territories (on paper, but not serious), and
• The above Big Pharma's rumored 2014 interest to acquire Provectus for twice its 2011 bid (still not serious enough, and still not on paper).

Provectus' MOU with Sinopharm is the first serious commercial interest the company has tangibly garnered. Tangibly serious because (i) it met management's price expectations as translated into potential payments to Provectus (i.e., upfront, milestone and royalties) and (ii) it was on paper.

To what, if anything, will/could the MOU between Provectus and the Sinopharm subsidiaries lead? The easiest way to answer this question of course is to wait and see if/when a license deal transaction is consummated between the parties. In the interim, I look at the situation this way: Provectus agreed to sign a document that formalized their discussions with Sinopharm towards the end of consummating a license deal and business relationship with the Chinese healthcare company under a framework of financial and business terms and conditions that may good to great [for Provectus], and we should know by mid-November or earlier if the parties ultimately do something together.

Finally, I wanted to comment on some of the verbiage in the MOU PR:

The MOU contains customary provisions regarding confidential information, publicity, and intellectual property, and is non-binding upon the parties (except for certain non-material provisions). The MOU shall continue in effect until the earliest of the replacement of the MOU with a definitive agreement, one month prior written notice by either Provectus or Sinopharm, or ninety days from the signing of the MOU.

In order to facilitate my comments, I also provided a sample or model venture capital investment term sheet below, which I utilized during my corporate venture capital investment days.

Click to enlarge. Sample venture capital investment term sheet, page 1.

Click to enlarge. Sample venture capital investment term sheet, page 2.

Click to enlarge. Sample venture capital investment term sheet, page 3.

Click to enlarge. Sample venture capital investment term sheet, page 4.

Click to enlarge. Sample venture capital investment term sheet, page 5.

Click to enlarge. Sample venture capital investment term sheet, page 6.

Click to enlarge. Sample venture capital investment term sheet, page 7. 

Click to enlarge. Sample venture capital investment term sheet, page 8.

Click to enlarge. Sample venture capital investment term sheet, page 9 (of 9).

Provectus' MOU PR naturally did not discuss "price," or payments to Provectus (upfront, milestone and royalties). Management would not have signed an MOU if those elements were neither to their liking nor codified (summarily or specifically) in the document. The first page of a term sheet (i.e., page 1 above) or the first paragraph of an LOI, aside from pleasantries, typically addresses the headline numbers of a prospective deal. I previously have commented on this blog about Provectus' price expectations for a China partnership. One wouldn't have expected the company to detail price agreements with Sinopharm in either the PR or the associated 8-K filing. Additional MOUs maybe forthcoming, and there may be competitive interest. Then again, there may not be dueling interest that pushes price upwards, and I would presume Provectus then would be comfortable with price as outlined in the Sinopharm MOU (with perhaps some further wrangling to finalize agreement on the timing of payments).

The MOU PR discussed "customary provisions regarding confidential information, publicity, and intellectual property," some of which find commonality with the venture capital investment term sheet (i.e., page 7, Confidentiality). Later versions of my terms sheets included sections dealing with publicity, and intellectual property (of the target company) as and when appropriate.

MOUs, term sheets and LOIs are broadly binding (i.e., material and non-material provisions) when the parties agree to be so bound, or when one party wants the other party to be bound and the other party agrees to such binding. Usually, as illustrated by the sample or model term sheet above, these relationship documents generally aren't binding in any meaningful way (to allow an out for either party, but many times the the one wanting to partner, invest or purchase). For non-material binding provisions see page 8, Binding Provisions. For outs, see page 7, Conditions to Closing.

As the MOU PR noted, the term sheet often references the definitive investment (or securities purchase) agreement that replaces the MOU or term sheet. See page 7, Purchase Agreement or page 1, introduction, for example.

Term sheets often include a target closing date (see page 7, Closing Date) by which time the parties hope or seek to complete their negotiations to consummate a transaction (i.e., finalize definitive agreements, sign them, exchange whatever). The parties mutually agree on a timeframe; however, the closing date is not set in stone and can be mutually modified through subsequent revisions to the term sheet (in large part to maintain exclusivity until a transaction is done). Provectus MOU PR noted a ninety-day period, which should be the target or contemplated closing date.

Exclusivity clauses almost always are part of terms sheets and LOIs to provide sufficient timing for the parties (especially the motivated one) to consummate a transaction. They may be part of an MOU in terms of the transaction (i.e., Sinopharm may exclusively negotiate with Provectus until such time as a deal is done, or the parties part ways). I imagine if the MOU had an exclusivity clause, the MOU PR would have mentioned it (not saying anything about it says something too). Exclusivity certainly may be part of the business terms; in this case it is: "Sinopharm-CSIPI and Sinopharm A-THINK desire to obtain an exclusive license to commercialize PV-10 within [the People's Republic of] China territory, and PVCT is willing to grant such license to Sinopharm."

* Listen to Provectus' echo chamber long enough, do some due diligence and, pardon the pun, connect some dots, and you eventually make out what the original voice that started the echo said or meant to convey. And while it doesn't mean a hill of beans if it's not translated into share price, the sound nevertheless is informative and instructive.

Potential Catalysts

Potential catalysts through 1Q15 could include:

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Commencing enrollment of its pivotal late-stage trial for melanoma (locally advanced unresectable/unresected cutaneous melanoma) is a key milestone and important catalyst for Provectus because the eventual outcome should provide clarity about the prospects for PV-10's regulatory validation (i.e., the drug's initial pathway to approval).

Securing a good-to-great regional transaction or two, in these cases for the world's two most populous countries, among other things (i) validates the drug's commercial prospects, (ii) more than bolsters Provectus' balance sheet with non-dilutive monies, (iii) brings partners to the fore that can facilitate late-stage trials in their respective geographies for primary liver cancer (and potentially breast cancer), further strengthening PV-10's multi-indication viability, and (iv) establishes a viable non-U.S. centric go-to-market strategy.

Moffitt Cancer Center's presentation of pre-clinical work underscoring their contention (initially conveyed at the 2014 annual meeting of the American Society of Clinical Oncology, and later at the 4th European Post-Chicago Melanoma & Skin Cancer Meeting) -- intralesional PV-10 may be rationally combined with systemic immunotherapy for the treatment of metastatic melanoma, and PV-10 would be a good candidate to evaluate in conjunction with available systemic therapies and new agents in development (respectively) -- could be the catalyst for a drug combination study of PV-10 and an anti-PD-1 agent like nivolumab or pembrolizumab. I think a study only materializes if (because) the data is sufficiently compelling to encourage one of the Big Pharmas to accede to more favorable non-clinical-related terms and conditions than to what other combo study partners have agreed. This data should be presented by Moffitt at the 2014 annual meeting of the Society for Immunotherapy of Cancer in early-November.

Notepad

1. DAMPs. Following up on my Damage-Associated Molecular Patterns, and Immunogenic Cell Death (August 21, 2014) news item, I'm curious (fascinated) by PV-10's potential role in immunogenic cell death, and thus the release and surface expression of damage-associated molecular patterns ("DAMPs"). DAMPs "..link the dying tumor cell with innate immunity, culminating in adaptive anticancer memory responses."

The recent paper by Panzarini et al. (2014), Rose Bengal Acetate PhotoDynamic Therapy (RBAc-PDT) Induces Exposure and Release of Damage-Associated Molecular Patterns (DAMPs) in Human HeLa Cells, observed that key DAMPs -- ATP, HSP70, HSP90, HMGB1 and CRT -- were exposed and/or released after treatment of cell lines with Rose Bengal acetate and photodynamic therapy. I understand this work involved using PDT and a functional RB derivative, and was carried out on cell lines; however, what interests me about it is the study's goal, which was to determine if RB could trigger apoptosis and autophagy -- cell death -- and thus expose and/or release pivotal DAMPs.

Very interestingly, in my view, the researchers also noted their data represented the fourth demonstration of the exposure of the HSP90 DAMP by indication and third demonstration by drug compound: "In fact, exposure of HSP90 was shown only in lung cancer [36] and myeloma [37] treated with Bortezomib and in bladder cancer cells treated with capsaicin [38]." Bortezomib is a proteasome inhibitor (Millennium Pharmaceuticals [Velcade]/Venus Remedies [Cytomib]). Capsaicin is a neurotoxin and active component of chili peppers.

Moffitt previously showed PV-10 (Rose Bengal) in their murine model work released HMGB1.

2. Innate and Adaptive Immunity. As I wrote above, DAMPs, or their impact once exposed and/or released, form a bridge between the body's innate and adaptive immune systems (or non-specific and specific, respectively). See my blog post PV-10 is not bigger than Mother Nature for a discussion of the immune system; "The immune system protects organisms from infection with layered defenses of increasing specificity."

In 1994, "[t]wo papers appearing in the same year presaged the deeper understanding of innate immune reactivity, dictating the subsequent nature of the adaptive immune response. The first...speculated...free radical-mediated reperfusion injury-was seen to contribute to the process of innate and subsequent adaptive immune responses. The second...suggested the possibility that the immune system detected "danger", through a series of what we would now call damage associated molecular pattern molecules (DAMPs), working in concert with both positive and negative signals derived from other tissues." {Underlined emphasis is mine}

• Land W, Schneeberger H, Schleibner S, et al. (January 1994). "The beneficial effect of human recombinant superoxide dismutase on acute and chronic rejection events in recipients of cadaveric renal transplants." Transplantation 57 (2): 211–7.
• Matzinger P (1994). "Tolerance, danger, and the extended family." Annu. Rev. Immunol. 12: 991–1045.

I've written that PV-10 harnesses the immune system, rather than restraining, blocking, manipulating, etc. parts of it. Note that Chen & Mellman (2013) title step 3 of their cancer immunity cycle illustration "Priming and activation." {Underlined emphasis is mine}

3. It's A Small World. The authors of the RBa-PDT paper come from Italy's University of Salento, and do not appear to have any disclosures related to Provectus. While the company has engaged certain principal investigators and their respective hospitals in Australia and the United States, as well as Moffitt Cancer Center, there is a body of work from researchers espousing Rose Bengal's potential as a cancer therapeutic who are currently or not at all unaffiliated (or appear to be unaffiliated) with the company. They are, among others (representative papers below):

• The "Italians" (2014): Above,
• The "Iranians" (2014): Rose Bengal suppresses gastric cancer cell proliferation via apoptosis and inhibits nitric oxide formation in macrophages, Updated (8/23/14): One of the Iranian authors co-published work with Provectus in 2006,
• An "American" (2012): Selective toxicity of rose bengal to ovarian cancer cells in vitro, and
• The "Japanese" (1986): Induction of thyroid tumors in (C57BL/6N x C3H/N)F1 mice by oral administration of 9-3',4',5',6'-tetrachloro-o-carboxy phenyl-6-hydroxy-2,4,5,7-tetraiodo-3-isoxanthone sodium (Food Red 105, rose bengal B).

4. Amgen's talimogene laherparepvec ("T-Vec"). Related to Amgen's T-Vec, the FDA announced a November 6th advisory committee ("AdComm") meeting (Cellular, Tissue and Gene Therapies Advisory Committee) to discuss the draft guidance for industry entitled "Design and Analysis of Shedding Studies for Virus or Bacteria-Based Gene Therapy and Oncolytic Products." Does this bode well or poorly for T-Vec in regards to its ease of administration and use, or lack thereof?

5. Info. An interview with Peter formed the basis for today's Seeking Alpha article Provectus' Latest Developments Spark Investor Interest -- CFO/COO Culpepper Explains Why. Of note to me was his answer to the interviewer's question "What is the anticipated market trajectory for PV-10?"

Peter: "We anticipate PV-10 phase 3 for melanoma to be one path for PV-10 approval. We anticipate also combining PV-10 to treat patients with disease inaccessible to direct injections. We also anticipate treating primary liver cancer patients in an upcoming randomized phase 2 study and seeking an expedited approval path in that important indication as well."

Taking this response at face value would suggest the upcoming (anticipated) liver Phase 2 trial would be for primary liver cancer (hepatocellular carcinoma), and not include cancers metastatic to the liver. A subsequent or concurrent study might examine this aspect of liver cancer, but the contemplated Phase 2 trial would not, or so it seems to me. Liver cancer of course is a very large unmet need in Asia. One would hope Eric garnered the feedback he required [from his recent Asia trip] to finalize and file the liver Phase 2 trial protocol.

Provectus’ Worth

When I’m asked the question “What do you think Provectus is worth,” more often than not the person asking wants to know at what price do I plan to sell our shares. Much less often does the person ask the question with the intent of wanting to understand my view of the company’s value, and share his or hers (and their underlying thinking and rationale) with me.

In the past I’ve written, albeit sparingly, about my view of Provectus’ worth. On the Silicon Investor stock board several years ago I wrote (under the handle pvct investor) the company was worth, generically speaking, about $15-20 per share. At the time the math worked out to a billion dollar value. Back then a simplified version of my investment thesis was management had created at least a billion dollar company when sufficient regulatory clarity was achieved and a commercialization timeline was set forth. Since then I’ve used the same per share figure in rare conversations on the topic, irrespective of increased dilution (i.e., more shares times the same dollar range) over time.

I think Provectus is worth a lot.

A lot more than its December 31, 2013 share price of $2.41. The company now sports a small cap valuation of $337 million (enterprise value is $197 million, per Yahoo! Finance). Think about that for a moment. Entering 2014 the company is a small cap one; "...a company with a market capitalization of between $300 million and $2 billion." 12 months ago, the share price entered 2013 at $0.56, making Provectus a micro cap company ($50-300 million), barely.

2013. What a year for the company, and for the stock. A one-year stock performance of +314%.

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Some perspective: A five-year stock performance of +150%.

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More perspective: The share price began to move in ernest in August (still, it was green throughout), going parabolic in December.

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August 22nd: Single Injection May Revolutionize Melanoma Treatment, Moffitt Study Shows

December 18th: Provectus Type C Meeting With FDA Oncology Division Held December 16, 2013

To value, or not to value. Up until this point I’ve been circumspect about blogging detailed posts about my views on Provectus’ value, valuation, per share price, worth, etc. The time has not been right. Although I have commented from time to time about relative valuation, such as the company’s market capitalization at a point in time compared to where I thought it might or should be (i.e., Provectus’ valuation at/compared to the so-called biotech valuation curve), the blog to date has been focused on the drug’s clinical and business value propositions, and market awareness and validation of them. Market in this instance speaks to a large set of constituents: the FDA, Big Pharma, medical community key opinion leaders, physicians, patients, life sciences investors, the generalist investment community, retail investors, media, etc.

All of this changed with Moffitt's August 22nd PR and Provectus' December 18th one; public declarations by the respective parties of important, milestone-like steps or achievements on the way to an eventual regulatory conclusion and accomplishment. It felt like two simple questions finally were being answered: Would the FDA acknowledge a local therapy could be a treatment for cancer? Would the Agency consider PV-10 for approval?

This time its different. Now, December 2013 entering January 2014, does have a different feel to it. Like the share price, awareness measured by blog visitation and readership statistics went parabolic in December, and correlated unsurprisingly with visitation to and readership of Provectus' website, www.pvct.com.

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December 2013. January 2014. 2,720 unique visitors (94% over the previous high), 10,040 visits (58%) and 20,085 page views (103%) from 50 U.S. states and the District of Columbia (11%), 894 U.S. cities (99%), 70 countries (59%) including the U.S., and  173 international (non-U.S.) cities (41%).

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I present these blog statistics merely to reinforce the seeming phase change in the stock and company awareness that appears to have taken place last month. More eyes than ever are turned towards Provectus. With their December 18th PR, management clearly is setting the table for and the market up for a key announcement about or much more insight into regulatory clarity. The signs appear to be there: "Official minutes expected by January 15, 2014," "The purpose of the meeting was to determine which of the available paths that Provectus' novel oncology drug PV-10 will take in pursuit of FDA approval and commercialization," "The minutes will clarify the available regulatory paths and, therefore, allow the Company to better estimate a time-line to commercialization of PV-10," no mention of a Phase 3 trial or the special protocol assessment that consumed shareholders' thinking (guessing) about regulatory clarity in 2012, and "This meeting with the FDA is a significant step forward in establishing a pathway to initial U.S. approval of PV-10 for the treatment of melanoma. There are different possible routes to approval of PV-10 such as a breakthrough therapy designation or accelerated approval, and each of these has different requirements and time lines."

Breakthrough therapy designation ("BTD") is not a pathway or route to approval. Past BTD grants have led to further steps in the processes of the respective grantees in regards to their own drug approval pathways. Accelerated approval ("AA") is a pathway, often comprising release of the drug, and some post-marketing requirement(s) by the FDA and post-marketing commitment(s) by the sponsor. There is no certainty with the Agency, as drug candidate evaluation for approval can be a long, arduous, shifting, intense, substantive, uncertain, persistent, collaborative process.

It's easy to treat January 15th (more generally, the week of January 13th) with skepticism or not the least amount of doubt, even as a blogger about Provectus, long-time shareholder, long-term investor like myself. It would disingenuous to say I have no trepidation about that date or week. What will the outcome be? What if anything will management say? How will what they do or do not say, via PR, affect my investment thesis? I admit to a little trepidation, but much more excitement. The December 18th PR, adjusting for there-are-no-certainties, appears to suggest two potential outcomes, A or B, and the always present but likely improbable [note, not impossible] outcome C.

You can't handle the truth! Today Adam Feuerstein is out with an article entitled Biotech 2013 By the Numbers: A Blockbuster Year, noting: "In a year where the markets outperformed, the biotech sector performed even better, posting returns not seen since 1999. Phenomenal. No wonder we saw a huge influx of generalist investors into healthcare stocks in 2013." Putting Provectus' 2013 stock performance in more perspective, Feuerstein also writes: "A single biotech and drug stock (Lannett) posted a six-fold bump in share price this year. Nine stocks increased in value by five times, 3 stocks quadrupled in value and 26 stocks tripled in value, according to S&P CapitalIQ."

A blog reader recently wrote to me: "Does it scare you that Adam Feuerstein tweeted this? I'm stunned he would make such an arrogant statement. He does have a lot of influence." 'This' refers to the tweet below on December 17th, following the company's PR Provectus Announces Name Change to Provectus Biopharmaceuticals, Inc. and Reincorporates in Delaware. No, it does not scare me. I also don't feel he is being arrogant but rather just superficial, cursory or dismissive in a passing way.

Feuerstein's business model is one of a skeptical, truth-telling, snarky, biotech journalist. I follow him on Twitter and regularly read his columns as part of my ongoing, situational due diligence of Provectus (my only biotech investment). As I've written a few times, and he routinely reminds his readers, it's important to thoughtfully and actively engage skeptics and the "other side of the trade" in order to ensure one's investment thesis, long or short, remains sound and relevant.

I'm not troubled by the essence of Adam's tweet's snark. It's not unreasonable to criticize management for a name change and a name change PR, however "better" the potential for future branding, when information releases about a host of other substantive topics and issues (reasonably within their control of or decision making for comment) go unaddressed, such as updates on or discussions about:

• The publication of the final metastatic melanoma Phase 2 trial in a high impact cancer-focused journal or periodical,
• The compassionate use program (HIPAA compliance notwithstanding),
• The status of PH-10 (Rockefeller study progress or results related to completing additional research into the unique properties of PH-10 regarding its mechanism and lack of toxicity, so as to schedule an End-of-Phase 2 meeting with the FDA to review PH-10 for psoriasis and atopic dermatitis and plan a transition to Phase 3 testing, and to complete discussions with potential licensees, hire a financial advisor and sign a licensing agreement that covers dermatological indications for PH-10),
• The expanded Phase 1 liver trial (in order to meeting with the Agency and begin Phase 2/3 clinical trials of PV-10 for liver carcinoma),
• Investigating new oncology indications for PV-10, such as bladder cancer (what about pancreatic cancer?), and
• Additional immunology studies at Moffitt Cancer Center regarding PV-10's mechanism of action.

I think the re-jurisdiction, while not overly crucial in my mind (Nevada and Delaware attorneys can agree to disagree), was an important signal from management, who remain very clinical in the legal dimension of their business practices and process (of which I am not critical for the most part, and do appreciate). A skeptic might dismiss the 8-K filing associated with the December 18th PR as nothing or next to nothing. I would not.

To Feuerstein's other comment about Provectus' crappy drugs, I take it as more general snark than specific opining on PV-10 (or PH-10). Even the most cursory evaluation of the publicly available pre-clinical and clinical data from the company and various third parties (e.g., Moffitt, other researchers in the U.S., the Middle East, Australia, etc.) should elicit at least an "interesting-but-I-need-to see/know-more" comment from an intellectually honest, industry savvy skeptic. Feuerstein's business model requires him to be aware of or superficially cover a lot of companies (more than a hundred?), approach tens of companies with some depth and, from time to time as the situation presents itself, focus on a handful of companies in great detail. Like other analysts (good journalist equals good analyst), including myself, he employs pattern recognition to discern good from bad (his pattern recognition is different from mine because of our respective professional experiences). If one doesn't have or take or require the time to diligence Provectus, it's not unreasonable to arrive at the same skeptical-flavored conclusion: PV-10 is or might be snake oil upon first impression (because it is so improbable with respect to conventional wisdom). Crappy, not so much. That the drug is too good to be true or snake oil was a nearly universal impression among the medical oncology community until recently (or at best that PV-10 was solely a local ablative agent), because no ablative agent had ever elicited significant systemic effect.

I’ve been loath to encourage blog readers only to focus or anchor themselves on share price when visiting and reading the blog. As I wrote under the blog's Disclosure tab, I of course “talk my book” by expounding on the merits of Provectus, the drug, management and the stock. The difference between what you may read elsewhere on the Web (mostly, but not exclusively) and “Connecting the dots…Provectus Biopharmaceuticals” is that I’ve told you who I am. I’m open to being corrected, and to being wrong (even though I don’t think or believe I am). I've not been able to incur transparent (i.e., not anonymous) debate and discussion on the pros and cons of the drug and stock sufficient enough yet to push back on my investment thesis, or make me re-think its core. That may well come in time with even more awareness. What makes a market are buyers and sellers. Stating the very, very obvious: If buyers are right, price goes and stays up. If sellers are right, price goes and stays down.

Revisiting the Feuerstein-Ratain rule, its essence (while constructed from the premise of the likelihood of success of large and small companies undertaking Phase 3 clinical trials) is this: "The stock market is known to anticipate future events, as opposed to reacting to the past. Thus, it is not surprising that sophisticated investors are able to judge the probability of success, which is reflected in the share price." For the longest time, as Provectus lay mired as a nano or micro cap company, the market spoke that it judged management not to be successful, and not having a high probability of success. Moffitt's August 22nd PR changed some minds (the valuation went higher). Provectus' December 18th PR (give or take the actual date itself) changed many more minds (the valuation went even higher). The story is not over, and those minds are free to change them back again. Which leads us once more to January 15th (more generally, the week of January 13th).

China. Dalam Disember 18 PR, Craig mengulas "Di samping itu, perbincangan kami dengan beberapa rakan pelesenan antarabangsa yang berpotensi tidak terjejas dalam apa jua cara." Terdapat khabar angin dalam proses mencapai transaksi lesen serantau bagi China telah datang ke penghujungnya, dan kita dapat belajar lebih minggu depan.

A not-so-final word on worth. My estimation of Provectus’ worth is a large number. To what you’re asking of me? Assuming I am right (which, in truth, means if management is right) I hope to and think I will sell my shares for a very high price. Inevitably you take what the market or buyer gives you. More on this as the new year unfolds.

As I wrote in my September 22nd investment letter about why I'm long Provectus Biopharmaceuticals, the key downside risk (as for any investment, understanding risk and reward) at this point is management being unable to monetize the company at a valuation commensurate with their innovation. There undoubtedly are other risks, as I highlighted in the Seeking Alpha version of my investment letter: "There are common risks most if not all biotechnology company stocks face: dealing with the FDA can be at times a complex and opaque process, clinical trials fail, seeking funding can be a long, arduous and dilutive process, and the industry itself is prone to bubbles and busts that contribute to generically rising and falling share prices."

2014.