Some Size of Short Likely to be Visited upon Provectus Next Week

Certain brokers called certain Provectus shareholders late last week -- that is, the brokerage firms (or "brokers") where these shareholders have their shares of Provectus held -- to see if they, the shareholders, would loan any of their PVCT shares to be used to cover short interests. Although it varied, shareholders were offered low double-digit (annualized) interest on shares.

This information clearly indicates firms/funds/traders are planning to/should/will short Provectus stock in front of what news if any the company may issue next week. This market behavior and potential activity is not unexpected. The share price has run-up considerably, and the company telegraphed it will say something next week (you'll recall the date of January 15th was a byline in the company's December 18th PR).

As a shareholder, you may instruct your broker to not permit your shares in Provectus, or the stock of any public company you also may hold, to be borrowed.

Let's say the interest rate offered to the above mentioned Provectus shareholders was 10%, 11%, etc. This is an annualized rate, which means it's effectively or should be considered having a one-year or 12-month return on investment for the shareholders receiving it (assuming they agree to lend their shares). U.S Treasury interest rates, see below taken from Bloomberg today (these rates are reflective of market rates as of Friday, January 10th), show 12-month or one-year rates are effectively zero percent.

The upshot is that folks who want to short Provectus stock next week think they will be able to make much more than the 10% or 11% or higher they are offering to shareholders to borrow their stock. A 10-11% annualized return for "doing nothing" might seem pretty good to shareholders. It's a very large "risk free rate," in the finance theory sense of the word, when the current, comparable risk free rate is the 12-month Treasury bill rate of effectively 0%.

Why do they think they'll make >>10-11% or more shorting Provectus stock? Because they believe Craig, Tim, Eric and Peter will say nothing or very little next week.

Updated 1/23/14: A reader noted my dates below were incorrect. I have revised them accordingly. Thank you.

Updated 1/11/14 (I previously had written 1/11/13): Blog reader question: Does the potential shorting make you nervous at all? I am worried that the PR will be as subdued as always. Though I think they have no choice but to give an accurate rendition of the minutes...Perhaps the shorts are planning to short an exuberant run-up that runs too high?

No, potential or actual shorting does not make me nervous. I'm comfortable with my investment thesis, which likely is a much longer-termed one than prospective short-oriented traders would have. Yes, such traders also may be preparing to short if exuberance in the stock pushes the share price "too high." I would expect management to say what they can or want to say in any press release issued next week. Whether or not an FDA guidance-related PR is subdued, it would not change the substance of the progress I think they've made as it relates to working towards the approval of PV-10 for melanoma.

Updated 1/11/14 (I previously had written 1/11/13): The brokers are Fidelity.

Like Nothing Else

If you write, like I did, "PV-10, a novel oncology compound, exemplifies innovation over incrementalism, meaningful over marginal, productized technology over hypothetical, and changing the world over accepting the status quo, with not an insignificant amount of serendipity over contrivance. In sum, these form the quintessential essence of a paradigm shift in the treatment of cancer," you're placing an oncology treatment far, far above what is available to patients today and in tomorrow's pharmaceutical and biotechnology drug pipelines.

Of course, if you're Moffitt Cancer Center, how do you top, "Single injection may revolutionize melanoma treatment?"

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We approach, we think, a moment of [regulatory] clarity, where having asked (or shortly will formally ask) for outright approval, accelerated approval or a single arm trial, in that order (and, I assume, under the umbrella of breakthrough therapy designation), Provectus management awaits a decision from the FDA about the path forward for PV-10's approval. Anticipation has grown, and should continue to grow as we approach the middle to the end of the month; the share price has grown too: 34% over the last 3 months, 20% over the last one month, 13% over the last 5 days.

Through 2013, up until Moffitt's PR above, Provectus' share price was rather flat.

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In 2012, the stock fell considerably.

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But, with Moffitt's statement and PR, things changed; since August 22nd, the share price has risen dramatically. Moffitt Cancer Center, clearly an ardent champion for and supporter of PV-10, was the 19th ranked hospital for cancer by U.S. News & World Report for 2013-2014.

Other ranked hospitals, where resident key opinion leaders ("KOLs") exist who are supportive or in favor of PV-10 according to management, include Memorial Sloan-Kettering Cancer Center (#2), Johns Hopkins Hospital (#4), Dana-Farber/Brigham and Women's Cancer Center (#5), UCLA Medical Center (#11) and Duke University Medical Center (#18).

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Put into the context of a longer timeframe, like from the beginning of this year, the share price move is notable and noticeable (as is the increase in trading volume).

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Since 2012, too (again, notice the difference in daily trading volume, moving from left to right).

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And, since 2011.

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And, since 2010.

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Déjà vu all over again, or different this time? Sometime in April [I think] 2010 Provectus asked for accelerated approval ("AA"), at the end of April saying: Provectus Reports on Successful End-of-Phase 2 Meeting with U.S. FDA and Gains Clarity for Licensure of PV-10 for Metastatic Melanoma. While they were told no (on the merits of their argument for AA) and/or to elucidate PV-10's mechanism of action, the outcome seemed contrary to management's expectations at the time.

Sometime in December 2013 the company should ask for outright approval ("OA") on the merits of a vast amount of clinical data from Provectus' melanoma Phase 2 trial and Moffitt's melanoma Phase 1 feasibility study (Detection of Immune Cell Infiltration Into Melanomas Treated by PV-10), some precedent (I think Perjeta for neoadjuvant breast cancer treatment) and, it seems, a collaborative relationship with a proactive FDA. It would seem the case for OA is considered strong. But if unsuccessful in gaining this desired outcome, Provectus then should ask for accelerated approval, with a positive result accompanied by a confirmatory study or additional confirmatory data. A single arm trial, "the final ask," might comprise 100 patients and a primary endpoint of progression free survival (although I'd be surprised if the trial was not halted after no more than 20 or so patients were enrolled and treated).

Assuming Provectus indeed gains clarity from the upcoming meeting or call with the FDA, it's not clear what if anything substantive management can or will say about it, via PR. The week of December 16th, or for that matter the remainder of the month of December, may come and go without significant detail about the clarity achieved.

It is interesting to revisit the title of Provectus' first End-of-Phase 2 meeting in April 2010, first noted above: Provectus Reports on Successful End-of-Phase 2 Meeting with U.S. FDA and Gains Clarity for Licensure of PV-10 for Metastatic Melanoma. I wonder what hint of guidance December's PR could give.

And the decision(s) is(are)...

I read through Provectus' recent 3rd quarter 2013 10-Q filing (filed on November 12th) and prospectus supplement (November 12th). The changes in and additions of language from/to the 2nd quarter filing (August 8th) and previous supplement (August 8th) are several and, in my view, notable. See my underlining below.

1. 10-Q: Management's Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources 

We are also considering the global licensure of PV-10 as well since it has come to our attention that this is of interest to potential partners. We have provided data on a confidential basis to both potential global and geographic partners for both PV-10 and PH-10 via a secure electronic data room that is monitored 24 hours a day, seven days a week and houses formal data submissions to the FDA as well as various corporate governance related documents. 

We also expect to continue with the majority stake asset sale and licensure of our non-core assets. However, the primary objective of the Company is to strategically monetize the core value of PV-10 and PH-10 through various transactions, leveraging value creation up to and including an appropriate merger and acquisition transaction that includes upfront cash and acquirer stock in exchange for Company ownership as well as a contingency value right to facilitate potential upside post-acquisition. We believe regulatory clarity is determined by specifying the expected approval pathways of both PV-10 and PH-10. This may include the potential for breakthrough therapy designation for PV-10 to treat metastatic melanoma and an accelerated approval path for PV-10 to treat refractory recurrent melanoma. Such clarity will help facilitate transactions with potential partners. Additionally, the existing and forthcoming mechanism of action related clinical and nonclinical data for both PV-10 and PH-10 will further aid in both regulatory clarity and transactions with potential partners.

2. Prospectus Supplement #3: Cautionary Note Regarding Forward-Looking Statements

Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements include those discussed in our filings with the Securities and Exchange Commission (including those described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, and elsewhere in this Quarterly Report on Form 10-Q), and the following:

• Our ability to license our dermatology drug product candidate, PH-10, on the basis of our Phase 2 atopic dermatitis and psoriasis results, which are in the process of being further developed;

• Our determination, based on guidance of the Food and Drug Administration (FDA), whether to proceed with or without a partner with a Phase 3 trial of PV-10 to treat recurrent melanoma and the costs associated with such a trial, unless the path to approval of PV-10 is accelerated, and whether Breakthrough Therapy Designation acceptance is viable and enables an accelerated path;

• Our determination whether to license PV-10, our recurrent melanoma drug product candidate, and other solid tumors such as liver cancer and cancers metastatic to the liver, if such licensure is appropriate considering the timing and structure of such a license, or to commercialize PV-10 on our own to treat recurrent and metastatic melanoma and other solid tumors such as liver cancer and cancers metastatic to the liver; and

• Our ability to raise additional capital if we determine to commercialize PH-10 and/or PV-10 on our own, although our expectation is to be acquired by a prospective pharmaceutical or biotech concern prior to commercialization.

3. Prospectus Supplement #3: Management's Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources 

We are also considering the global licensure of PV-10 as well since it has come to our attention that this is of interest to potential partners. We have provided data on a confidential basis to both potential global and geographic partners for both PV-10 and PH-10 via a secure electronic data room that is monitored 24 hours a day, seven days a week and houses formal data submissions to the FDA as well as various corporate governance related documents. 

We also expect to continue with the majority stake asset sale and licensure of our non-core assets. However, the primary objective of the Company is to strategically monetize the core value of PV-10 and PH-10 through various transactions, leveraging value creation up to and including an appropriate merger and acquisition transaction that includes upfront cash and acquirer stock in exchange for Company ownership as well as a contingency value right to facilitate potential upside post-acquisition. We believe regulatory clarity is determined by specifying the expected approval pathways of both PV-10 and PH-10. This may include the potential for breakthrough therapy designation for PV-10 to treat metastatic melanoma and an accelerated approval path for PV-10 to treat refractory recurrent melanoma. Such clarity will help facilitate transactions with potential partners. Additionally, the existing and forthcoming mechanism of action related clinical and nonclinical data for both PV-10 and PH-10 will further aid in both regulatory clarity and transactions with potential partners.

The company provided new, seemingly prospective "bullish" language before. In Provectus' 2nd quarter 2012 filing (August 8), management wrote in the report's MD&A section:

We are seeking to improve our cash flow through both the licensure of PH-10 on the basis of our Phase 2 atopic dermatitis and psoriasis results, and the geographic licensure of PV-10 on the basis of our Phase 2 metastatic melanoma and Phase 1 liver results in certain areas of the world, as well as pursuing a strategic investment strategy, and continuing with the majority stake asset sale and licensure of our OTC products as well as other non-core assets.

These additions reflected the beginning of discussions with potential partners for regional transactions (China, at the time), and [I can only assume] discussions about a minority equity investment from Big Pharma (Pfizer, at the time, I believe, but Johnson & Johnson purportedly was interested too). No deal for China has materialized yet, and Pfizer's investment in the company's PVCTP "IPO" did materialize either. So, while these quarterly filing or prospectus statements neither predict nor portend the future, they do, however, give us insight into management's regulatory affairs, and business and corporate development activities.

Given how careful management and/or their lawyers are with their language (at times, careful borders on unintelligent), the new language in this week's filing and prospectus is striking when taken in the context of what many shareholders expect, which is a regulatory clarity decision from the FDA. Here's what jumps out at me:

• The reference to the electronic data room. While discussions with global (e.g., AstraZeneca, Amgen) and regional partners (e.g., several in China, India and Japan this year and last) are one thing, entering a data room is another and typically means certain partners have entered into a confidential disclosure agreement ("CDA") with Provectus in order to enter and gain access to substantially more and often very sensitive information. I am not saying any global pharmaceutical company has entered into a CDA with Provectus yet; however, several regional pharmaceutical companies very likely have. The Agency reference likely refers to the kind and amount of data being provided to the FDA in support of whatever the company has asked of it, and thus would be available to prospective partners to review, such as Moffitt pre-clinical (i.e., combination trials involving PV-10 and various checkpoint inhibitors like anti-CTLA4, -PD-1 and -PDL-1 agents) and clinical data in a reporting format acceptable to the FDA, as well as copies of pertinent or germane regulatory communications. It's not lost on me that "formal submission" crops up, as it should be pretty clear by now the company has made an ask(s) of the Agency, for which we wait a decision(s).

• The reference to acquisition deal structure. Upfront payments and earn-outs paid later, when the company is not fully acquired only for cash, have been used on several transactions in the sector, such as Celgene's acquisition of Abraxis (a favorite example of Peter) or Sanofi-Aventis' of Genzyme. It may not be significant, or it might be, but there is no mention of payments achieved through clinical, regulatory and/or commercial milestones (or more simply, milestone payments). I am struck by the deal structure language only because it was used in this filing, rather than earlier or later. Like with the emergence of the strategic investment strategy in 2012, which I believe was mostly in reference to discussions with Pfizer, this M&A deal language might provide disclosure comfort (for Provectus management and representatives) should acquisition discussions have taken place, however "informal" they may have been (and may be).

• The specificity of clarity. This specifying of clarity seems like a "staged expansion of labels," with accelerated approval ("AA") or outright approval ("OA") being sought for Stage IIIB-C patients with recurrent melanoma refractory to treatment, and breakthrough therapy designation ("BTD") being sought for metastatic melanoma more broadly with more refinement or definition likely to follow the awarding of it.

• The reference to cancers metastatic to the liver. The Phase 1 liver trial included successful treatment of colorectal cancer that had metastasized to the liver. In the blog's News tab, I noted in July that compassionate use program ("CUP") sites had treated treated ocular melanoma metastasis to the liver, and a neuroendocrine tumor ("NET") that had metastasized to the liver. Together with data from the expanded Phase 1 liver trial, I wonder if data from these cancers metastatic to the liver might form the basis for a liver cancer BTD application, possibly further advance regional transaction discussions for China, and point to an additional effort by management to raise overall valuation through a second indication and its variants.

Above, management wrote they believe regulatory clarity is determined by specifying the expected approval pathways of both PV-10 and PH-10. They further wrote this clarity may include the potential for BTD for PV-10 to treat metastatic melanoma and an AA path for PV-10 to treat refractory recurrent melanoma. Understood. Shareholders should take note.

While the SPA very likely was granted or made available to the company earlier this year, we now know from the 3rd quarter filing's language Provectus has asked for, generalizing, AA/OA for refractory recurrent melanoma, and BTD for metastatic melanoma. We could surmise with some non-trivial degree of certainty these asks were made in October, and might estimate decision timing as December or January, allowing for some holiday slippage.

Management is holding a special meeting of shareholders on December 16th to seek approval for the change of the company's name from Provectus Pharmaceuticals to Provectus Biopharmaceuticals, and the reincorporation of the company from Nevada to Delaware. There is a good amount of literature that weighs the pros and cons of incorporation in both states, and their comparative merits. There also is perhaps some benefit to the subsequent change in stock CUSIP, the alphanumeric code identifying the company's trading ticker or symbol, as it relates to mitigating short interest. Provectus started life in the early-2000s as a reverse merger into a public Nevada-incorporated shell (a so-called reverse IPO). Reincorporation into/as a "clean" Delaware entity might give both global and regional partners extreme comfort of whom they were buying or from whom they were licensing, as opposed to if the company had begun life as a privately held Nevada- or other state-incorporated company. Why change thing(s) now?

Management dramatically increased the expense of lab supplies and pharmaceutical preparations in this year's 3rd quarter (~$259K), "...the result of securing drug substance and drug product for pivotal clinical studies with the newly patented synthesis of Rose Bengal." The figure was ~$32K for 1Q13 and 2Q13 together. Let's say each 5 ml vial of PV-10 cost a few dollars, like $10, to manufacture its contents. Let's further say the average number of vials used by a melanoma patient or a CUP patient afflicted by melanoma or another indication is 6. In 1H13, ~3,215 vials may have been produced for the equivalent use of ~535 patients. In 3Q13, using the same artificial math, ~26K vials would have been for 4,315 patient equivalents. As an aside, I might be high on cost per vial, and number of vials per patient.

Let's explore if production was for pivotal clinical studies such as a pivotal Phase 3 trial. Assuming a 180-patient trial per the most recent SPA trial parameter slide, the above cost and patient use vial assumptions above, and the purported requirement of 3 production runs (for whatever Agency reason(s)). This would yield an expense of about $32K (3,240 vials, 540 patient equivalents), ~13% of the actual expense in 3Q13, which assumes the company conducted these runs in the 3rd quarter. I'm more inclined to think they did these runs in the 1st and 2nd quarters. Why so much product now?

As I wrote above, it seems to me [now] management often or typically utilizes certain MD&A language to provide a measure of disclosure comfort. Strategic investment strategy or M&A deal structure language are, in my view, some examples of this. Why discuss or reference end-game deal structure now?

The FDA may say "Only a SPA for you," or BTD, or AA and a post-marketing study, and BTD, or OA, and BTD.

The company has asked for AA/OA and BTD, and probably thinks they have a very good chance at attaining both asks. I'm not completely convinced they know what they'll get from the FDA, but I think they're confident of the outcomes based on their interactions with the Agency, the Phase 2 data, Moffitt's data, and the feedback from their regulatory affairs team.

Is "now" because they're prepping for what might happen after now? Anticipation among longtime shareholders who have closely followed Provectus, management and the situation is high, so high one easily could cut it with a proverbial knife. I am open to and prepared for disappointment, where disappointment is a full Phase 3 under an SPA, because that "negative" outcome clearly must exist on a Gaussian-like distribution of potential outcomes if management does not know what they'll get from the Agency. But the "positive" outcomes that populate the same distribution likely comprise much if not nearly all of it -- I assume, having pushed past the SPA for some time, management has delivered substantive datasets from their own work and Moffitt to advocate for something more -- provide the thought, belief and hope of something much, much more.

Boom!

Boom indeed.

PV-10 v. Standard of Care

Among several aspects of the Provectus story I detailed in my post Expect More, one was the evolution of the parameters of the pivotal Phase 3 Randomized Controlled Trial ("RCT") for the company's lead indication, metastatic melanoma ("MM").

The last change, until somewhat recently, was made to the "Planned Phase 3 Trial" slide in June 2012, when Dr. Agarwala presented some new and final MM Phase 2 trial data at the 2nd European Post-Chicago Melanoma Meeting 2012, Interdisciplinary Global Conference on Developing New Treatments for Melanoma, which as was prelude to ESMO 2012. At that time, when discussing the consensus Phase 3 trial path, Provectus presented a trial endpoint of PFS, which it previously had noted; however, the trial's patient population had been reduced from 250-300 to 180, and refined from Stage III-IV-M1a to Stage IIIB-IIIC.

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The above slide has been included in the company's corporate presentation on the website under Press Center, Press Kit. PV-10 would be compared to systemic chemotherapy (dacarbazine or "DTIC," or temozolomide or "TMZ"). DTIC is normally administered by intravenous infusion. TMZ is the pill version of DTIC. From March:

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Management, in particular Craig and Eric, have long tussled with what they consider the ethical dilemma presented by running any RCT involving PV-10. Even though the main reason for using the RCT design is a scientific one, that society is likely to suffer as a direct result of avoiding such high quality evidence, there is no true comparator to PV-10 in terms of a drug that also is rose or pink colored, and injected intralesionally (into a lesion) or intratumorally (into a tumor).

The skeptic could argue the RCT, "the gold standard for a clinical trial," is necessary to truly establish PV-10's efficacy and effectiveness within the desired patient population. After all, these promising intralesional agents BioVex's OncoVex, later Amgen's talimogene laherparepvec or T-vec, and Vical's Allovectin-7 struggled to meet its primary endpoint and Allovectin-7 did not in their respect RCTs. Interestingly, and "supporting" the skeptic's position, while T-vec was compared to subcutaneous granulocyte-macrophage colony-stimulating factor ("GM-CSF"), Allovectin-7 was compared to DTIC and TMZ. The ethicist might counter that without a true comparator, at a minimum in terms of color and delivery route, there indeed is an ethical issue with providing a clearly insufficient comparator like DTIC or TMZ whose limitations and lack of efficacy are fully known.

A "trial parameter" changed during the summer, after the 8th World Congress of Melanoma (which was held in conjunction with the World Meeting of Melanoma Centers, the Post-Chicago Melanoma Meeting 2013 and the 9th Congress of the European Association of Dermato-Oncology) from July 17-20 in Hamburg, Germany. This change then was communicated via the website presentation, the version from November:

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No longer PV-10 vs. Dacarbazine or Temozolomide, but then/now PV-10 versus Standard of Care.

Consider the NCCN Guidelines for treating melanoma, what is the standard of care for Stage IIIB-C patients, let alone those refractory to treatment?

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There are standard treatment options for Stage 3 patients, and treatment options for patients with recurrent melanoma.

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I don't see standard of care: "Treatment that is accepted by medical experts as a proper treatment for a certain type of disease and that is widely used by healthcare professionals. Also called best practice, standard medical care, and standard therapy."

Did the FDA conclude comparing PV-10 to something required a different perspective than historical thinking or practice?

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Why did the company change this parameter? I cannot find the standard of care for the treatment of Stage 3B-C patients as supported by the company's MM Phase 2 clinical trial data (i.e., patients refractory to multiple treatments like surgery, chemotherapy, immunotherapy, radiotherapy, investigational agents, and amputation). Is "PV-10 versus Standard of Care" an homage to the reality there is no standard of care?

Attendees at Provectus' annual shareholders meeting at the end of June, which preceded the changes to the "trial parameter," observed notable changes in the attitudes of company principals. Clearing this hurdle, challenge or regulatory discussion point of how to compare PV-10, or perhaps how to think about PV-10, could have been considered by management to be a very notable achievement in their pursuit of the approval of PV-10.

In the year 2013

In Provectus' annual CEO letter published May 2013, management wrote under Regulatory Progress:

"Provectus is finalizing details for submission of a pivotal Phase 3 randomized controlled trial ("RCT") of PV-10 for metastatic melanoma, suitable for Special Protocol Assessment ("SPA"), to the Food and Drug Administration ("FDA"). While preparation for submission of our SPA has taken longer than expected, it is crucial to remember that oncology presents a moving playing field. Fine tuning of the study design is expected to mitigate clinical efficacy risk, optimize patient accrual, and increase FDA's confidence that the study design and protocol will ensure the best possible outcome for our pivotal trial. We have every reason to believe this key milestone will be achieved in 2013."

"Provectus is also considering applying for the new Breakthrough Therapy Designation for PV-10 to treat melanoma. This new regulatory pathway was announced with the passage of The Food and Drug Administration Safety and Innovation Act (FDASIA) in July 2012. Breakthrough Therapy Designation is intended to expedite the development and review of drugs for serious or life-threatening conditions. The criteria for breakthrough therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy. A breakthrough therapy designation conveys all of the fast track program features as well as more intensive FDA guidance on an efficient drug development program. However, because this program is relatively new, the potential impact of receiving such designation is still unclear, but could be pivotal in achieving an accelerated path for approval of PV-10."

It now appears Provectus has made its [final] submission of a pivotal Phase 3 RCT of PV-10 for metastatic melanoma ("MM"), suitable for SPA, to the FDA, and also submitted its application for BTD for PV-10 to treat melanoma.

Based on connecting some dots, the submission date very likely was after October 1st. Below is a table of CDER BTD requests from October 1-25, where I think Provectus' request is one of the eight the Agency received during this period:

The recent partial federal government shutdown ran from October 1-16, with operations resuming October 17th. Assuming Provectus hears within 60 days of submission of its BTD request, and adjusting for a delay of about half-a-month related to the shutdown (there might be an adjustment for when the FDA actually received the application itself), we should learn about this outcome around or before mid-December.

Updated 11/1/13: The next six weeks, maybe sooner or potentially later, may provide a fuller picture of the regulatory clarity path management has hoed the last several years and the final step(s) or finish line. I'm still foggy about how and the process by which management is requesting exactly whatever they're requesting.

The SPA is a step on the way to approval, albeit no guarantee of such upon completion. Accelerated approval ("AA") and outright approval ("OA") are steps too (but closer to being actual destinations). Fast Track, BTD and Priority Review, while designations, are processes that speed access to new important therapies by leading to subsequent steps. A good, recent article on BTD is FDA Speeds Things Up: Breakthrough Therapy Designation Is Changing How the Agency Operates (October 1, 2013, Genetic Engineering & Biotechnology News). Some of the article's quotes are striking:

• "...the designation’s greatest value was that it prompted an “all-hands-on-deck” mentality at CDER."
• "...the breakthrough designation can rely on preliminary clinical evidence demonstrating substantial improvement on a significant clinical endpoint, while the fast-track could be based on nonclinical data such as the drug’s mechanism of action."
• "Under breakthrough designation, he said, “everything is on the table” for discussion in order to move the process along as quickly as possible. Communications that might typically take weeks and months take minutes under the breakthrough pathway."

BTD and the SPA are two independent regulatory pathways, so it makes sense management has been cultivating multiple options (including pursuit of approval via AA). I'm not clear, however, if AA is another independent pathway or an outcome of BTD in this case. The Agency notes "...a drug that has received a breakthrough therapy designation or a fast track designation can be eligible for the accelerated approval pathway, if the relevant criteria are met."

Setting aside the parallel pursuit of the SPA, it would seem several outcomes are possible if BTD is awarded: the SPA (and a "full" Phase 3 trial), a modified version of the Phase 3 trial under the SPA, AA or OA.

What's the ask? Whether directly or unrelated to the BTD application, the first ask very likely is AA, or potentially OA, for Stage IIIb-IIIc melanoma patients refractory to treatment on the basis and strength of Provectus' multi-thousand page final MM Phase 2 clinical study report and Moffitt's PLoS paper Intralesional Injection of Rose Bengal Induces a Systemic Tumor-Specific Immune Response in Murine Models of Melanoma and Breast Cancer: compelling clinical data showing PV-10 can forestall the onset of metastatic disease, and the elucidation of PV-10's mechanism of action (and systemic benefit). The second ask, or perhaps the "other side of the coin" of the first ask, should be, of course, BTD.

I Wait. You Wait. He/She Waits. They Wait.

wait·ing [wey-ting]

For management...

When will Provectus principals complete the management of the regulatory approval process for PV-10's lead indication of metastatic melanoma ("MM")? After all, that's what they, the markets and shareholders have been and currently are waiting for.

I'm not particularly certain if or when breakthrough therapy designation ("BTD") application was submitted to the FDA. If it was, it recently was sent in. If it wasn't, it should be transmitted very soon.

It appears the quest for BTD comprised the following:

• The application itself, and the criteria for the award of such therein,
• The MM Phase 2 final clinical study report,
• Moffitt Cancer Center's publication of the work summarized by its AACR 2013 poster presentation,
• The MM Phase 3 SPA protocol, and
• The programmatic elements of this trial.

Protocol & Program: I believe the Agency and Provectus already agreed to the Phase 3 protocol and program, which I believe the company first conveyed in its October 2, 2012 press release entitled Provectus Pharmaceuticals Presents Final Phase 2 Melanoma Data at ESMO 2012. I don't think there has been any "issue" with the SPA, but rather a change of perspective of where it fits into the regulatory approval process, if at all (that is, a change in focus from the SPA as the primary path to approval to, now, BTD and whatever comes with the new designation).

Moffitt Cancer Center: Its contribution to the effort (i.e., the BTD application) is complete:

• It began with SSO 2012 in March 2012: Intralesional Injection of Melanoma with Rose Bengal Induces Regression of Untreated Synchronous Melanoma in a Murine Model,
• Followed by AACR 2013 in April 2013: Intralesional Injection with PV-10 Induces a Systemic Anti-tumor Immune Response in Murine Models of Breast Cancer and Melanoma,
• Followed by the PLoS paper in July: Intralesional Injection of Rose Bengal Induces a Systemic Tumor-Specific Immune Response in Murine Models of Melanoma and Breast Cancer, and
• Completed by Moffitt's PR in August: Single Injection May Revolutionize Melanoma Treatment, Moffitt Study Shows.

As an aside, views of Moffitt's PLoS paper appear to have increased at least 20-25% in the days following its PR.

I believe the paper was transmitted to the FDA around the time it was published (July). Aside from the powerful statements in the PR, I believe it also conveyed a sufficiency of prior efforts to date to demonstrate proof and elucidate the benefits of PV-10's systemic properties. As a result, I do not think completion of Moffitt's Phase 1 feasibility study is necessary in order to submit the BTD application. Moffitt expects to publish a paper on this human study early next year.

Provectus: What remains, then, is the completion of the final clinical study report. The process to arrive there has been a very lengthy one:

• It began with the Melanoma 2010 in November 2010: Full Phase 2 Study Data on PV-10 for Metastatic Melanoma, which were preliminary data,
• Followed by ESMO 2012 in October, 2012: Final Phase 2 Melanoma Data,
• Completed by ECCO 2013 in September 2013: PV-10 Data on Locoregional Disease Control in Metastatic Melanoma.

I imagine the finalization of the study report has marked the end of the company's analysis of the MM Phase 2 trial dataset. ECCO 2013, while not necessarily linked to the completion of the report, provides the venue for the company to discuss heretofore unpublished clinical results, such as the durability of PV-10's immune response.

The time taken to finalize the study emanates from continued efforts by Eric to mine the data, which appears to have led to a representation of better efficacy results and more knowledge about what transpired and was seen.

Data mining has both pros and cons.

A positive can be, for example, a better or more correct assessment of the adjudication of whether an injected lesion was a CR, PR, PD or SD, which was the iteration on display at ESMO 2012 (vis a vis Melanoma 2010). A con can be sub-dividing the data into certain categories (whatever the miner wants them to be) and attempting in order to attempt make a clinical case or proposition based on such subsets, or one of them, that conflicts with the initial conclusion or proposition of the overall dataset.

If the company is true to form, based on how the data process, analysis, representation and presentation has progressed thus far, I would expect Provectus to issue a PR at ECCO 2013 highlighting results that only further establish PV-10's clinical value proposition, particularly with respect to the key target population of MM Stage IIIb and IIIc patients, which I think is the label being sought under BTD.

As for when or whether the final clinical report was submitted to the FDA, I suspect only the Shadow knows (and Eric, too). I'd imagine before the end of August, at least at this writing, is not unreasonable.

For the FDA...

When and what will the decision be?

I suppose the Agency has be asked first, which of course boils down to, first, the timing of Provectus' BTD request and, second, what the FDA decides comes with BTD, if the designation is so awarded.

Although I may well be wrong, there may not be a particular order to things, such as submitting the final clinical study report for the MM P2 trial to the Agency before submitting the BTD application. It does make sense, I suppose, that a decision cannot be made until all of the components are all "done:" the application, the final study report, Moffitt's publication, the SPA protocol, and the Phase 3 trial's programmatic elements.

Assuming the final clinical study report is in, I think the focus is on when the Agency will weigh in on BTD for PV-10 and MM. The so-called decision clock is a 60-day one. Human nature would suggest evaluators would take most if not all of the available time, although it's possible a decision might arrive faster than that.

But what comes with BTD?

Management consistently has communicated they have asked the FDA for the accelerated approval ("AA") of PV-10 since 2010. Is Provectus asking for the same thing now? As I have previously written, it's not unreasonable to think the collaboration between the Agency and Provectus's regulatory affairs team centers around what comes with BTD:

• AA (which means skipping a Phase 3 trial altogether, but likely completing some sort of post-marketing study),
• A truncated or modified Phase 3 trial (i.e., shorter, in some form or fashion, such as a smaller number of patients, or a single-arm study), or
• A quicker response on the SPA-designed/agreed upon Phase 3 trial, or outright approval of PV-10.

These outcomes have been the essence of the blog's polls, which, when you take out the timing factor, overwhelmingly voice shareholder belief the likely outcome is AA after BTD is attained.

I think management thinks the initial outcome, overwhelmingly too, is BTD. I think they think AA is the most likely outcome thereafter; that is, what follows or comes with BTD. It's hard not to believe a further trial of some sort would be a disappointment, ultimately further delaying, although not by much in the grand scheme of things, the distribution of the drug, which certainly has proven its clinical value proposition, to physicians and their patients.

For Moffitt Cancer Center...

What's next?

More indications. More combinations. More superlatives about PV-10. I keep going back to Moffitt's PR from last week.

Clinical value proposition (as I think of and articulate it): Oncology compound PV-10 is very safe, very efficacious locally and systemically, and very specific in its action. The drug robustly stimulates the immune system both locally and systemically, drug creates systemic anti-tumor immunity, is both a targeted therapy and an immunotherapy, works on multiple cancers, and has the potential to be used as a pre-neoadjuvant, a neoadjuvant, a monotherapy, an adjuvant and a combination therapy.

Moffitt's PR unequivocally hammers home the point [bold emphasis for portions from the PR]:

• Safe: "The researchers said the dye solution...may be safer than existing immunological agents."
• Locally efficacious: "In the initial study, researchers injected a single dose of PV-10 into mice with melanoma. The result was a significant reduction in the skin cancer lesions..."
• Systemically efficacious: "In the initial study, researchers injected a single dose of PV-10 into mice with melanoma. The result was...a sizable reduction in melanoma tumors that had spread to the lungs."
• Local immune response: "Early clinical trials show PV-10 can boost immune response in melanoma tumors..."
• Systemic immune response: "Early clinical trials show PV-10 can boost immune response in...the blood stream."
• Multiple indication viability: "The result was a significant reduction in the skin cancer lesions, as well as a sizable reduction in melanoma tumors that had spread to the lungs."

While management consistently has communicated the contemplated MM Phase 3 protocol would provide the opportunity for accessible patient lesions to be injected as often as necessary (the effectiveness of which has long been established in compassionate use program) -- since, for example, an initial injection may be administered incorrectly and thus are ineffective, or more volume of compound is necessary for the volume of tumor targeted -- it was very compelling to read Moffitt's conclusion only one treatment (one shot) was necessary.

One shot, one kill. That's revolutionary.

For China...

When will a deal be consummated?

It might seem China momentum has slowed or ground to a halt relative to the activity earlier this year. It also might seem that prospective Chinese partners, with whom Peter has met on several occasions, back in China, in Washington, DC at AACR 2013, and in New York (as well as, of course, over the telephone), since his first trip to the country in November 2012 (he made a subsequent trip in February 2013, and should travel to there again in September), are the primary reason for the apparent slow walk. Provectus has employed multiple agents or intermediaries in China to facilitate introductions to government and commercial leaders with the hopes of securing a license deal.

The absence of a deal by now (although, put into context, only 10 months or so have elapsed since Peter's first visit and direct engagement of interested parties) might suggest disinterest, delay or desire for more information on the part of prospective Chinese licensees. It's not unreasonable for the short-list of companies that have interest to license PV-10 to want to wait for regulatory clarity. After all, that's what Big Pharma also are waiting for.

Knowing Provectus management, however, it also suggests, at least to me, that company principals also are waiting. I believe if management wanted to do a deal, any deal, one could be had right now. Let's say $10MM upfront, several tens of millions of dollars in milestone payments (I think between $50 and $100 million) and a sizable double digit percent royalty payment. Whatever the details of a potential deal, I believe the Chinese would do a deal now if they could (i.e., if management would agree to sign).

But, I think management wants to wait for regulatory clarity to reveal itself before signing this or thinking of signing this deal. Why? Because, while I don't think regulatory clarity necessarily changes the terms of a Chinese deal (in fact, I think the company has moved beyond terms to what happens if/when a deal is signed, such as an in-country trial, choice of trial site, manufacturing considerations given China's proclivity to respect other folks' intellectual property, etc.), clarity may well change how other players, specifically global ones, behave and act.

It appears Hisun-Pfizer Pharmaceutical is the leading prospective Chinese partner, an introduction that was facilitated by Pfizer. Perhaps clarity might encourage Pfizer to go direct to China, rather than permit a pathway via Hisun-Pfizer. While striking a deal with Hisun-Pfizer should be a lucrative opportunity for Provectus, and thus shareholders, it is possible clarity allows for a more valuable geographic relationship through Pfizer itself.

Management can only know that, and more, after clarity is attained, when all of the players are given the opportunity to act and/or react based on more information.

For India...

When will a deal be consummated?

Peter's first trip to India was in June, following which he remarked how sophisticated and nuanced Indian pharmaceutical company executives and researchers were in their knowledge of Rose Bengal and PV-10. Indian companies have been aggressive in their business expansion efforts, whether through M&A or licensing. Recall, for example, Sun Pharmaceuticals's late but larger and unsuccessful bid for Bausch & Lomb, which eventually was acquired by Valeant Pharmaceuticals in May. As with China, I believe there are companies interested in and willing to do (i.e., sign) a deal now.

A potential risk, it would appear, and I am unsure how this would or will play out in discussions, is the issue of pharmaceutical companies struggling to obtain and enforce patent rights under India’s patent system. Provectus' pricing flexibility with PV-10 is immense, with gross margins in excess of 99%. India's goal, it seems, with their behavior towards Western pharmaceutical companies, aside from providing domestic players with opportunity and advantage, ostensibly is to bring down the cost of drugs for the local population, which simply cannot afford them (2012 per capita GDP in US dollars was $1,500 for India versus $50,000 for the U.S.).

I would assume in doing a deal in India and China and elsewhere would (will) require some level of pricing harmonization, or at least keeping this in mind, so all geographic parties, countries as well as regional and global licensees, are happy.

For Japan...

When will a deal be consummated?

Peter's first trip to Japan was in May. I think the Japanese continue to do their due diligence, although I think this includes both PV-10 and PH-10, whereas interest in China and India appears to be primarily focused on PV-10.

Peter may travel to Japan, too, when he travels to China (potentially with Eric) in September. I do not believe there are Japanese pharmaceutical companies that are desirous of signing deals now; however, Japan remains a key value driver should management elect to consummate a transaction there.

One of the challenges for Peter is that while Chinese companies wish a license geography that includes China, Taiwan, Hong Kong and Macau, Japanese companies routinely ask for both Japan and Chinese territories or areas.

For PH-10...

When will management reveal more information about progress to date?

Think about PV-10's "one shot one kill" (as well as its systemic benefits and immune response). Amazing.

PH-10's unique lack of toxicity also should be considered revolutionary, much as Moffitt framed PV-10. Think about the ability to continually apply the PH-10 gel so as to moderate, improve or over time cure an inflammatory skin disorder with fear or concern of toxicity and side effects.

I'm sure there is much to say and even more to learn about PH-10 and the second therapeutic area of anti-infection.

Compassionate use program...

When will more information about progress be to date be revealed?

The compassionate use program ("CUP") has been for quite a while and is becoming a great asset for Provectus and opportunity for patients seeking relief.

For metastatic melanoma, patients who went from the MM Phase 2 trial “expanded access” continued to receive as much PV-10 as they needed. The CUP or expanded access study on the clinicaltrials.gov website is separate.

The CUP program has treated multiple indications, where the indication-oriented protocols to treat afflicted patients has been allowed by the FDA; that is, different protocols for different patients.

I presume Provectus collects information on how physicians use and deliver PV-10 for different indications to both inform the company for eventual protocols for eventual trials and understand best or new practices for down the road. It is this broad spectrum of result from PV-10 treatment that continues to exceed even the loftiest of expectations.

It strikes me the CUP is, very loosely speaking, de facto approval of PV-10 by the FDA. I understand the limitations set on the program despite what I have to think are routine requests by hospitals and clinics to be CUP sites or physicians desiring to to compassionately use PV-10. I imagine, at this point in time (and until the drug is approved), despite the demand and need for the drug, that management is careful to work with only those folks the company is close to or via Provectus investigators and/or medical folks with whom they have direct experience with in prior studies. It makes me wonder how much of an influence the program has had on the FDA's decision-making.

"They" say great things comes to those who wait.
In this instance, I think, believe and hope so, too.

Provectus’ Whisper Number

Whisper numbers, on Wall Street, are the "unofficial and unpublished earnings per share forecasts of companies that circulate among professionals on Wall Street." (Source: Wikipedia)

According to Per Afrell, a former analyst at UBS Warburg, buy and sell side research analysts generally maintain a 20 plus page spreadsheet to calculate their earnings per share estimates. When the estimate is first calculated by sell-side analysts, the number is submitted to companies such as First Call to be averaged with other analysts’ estimates for the consensus earnings estimate. As new information is made available and plugged into the spreadsheet, the calculation may change several times leading up to a company’s actual earnings release. However, the analyst is generally not going to issue a new report and revise his or her published estimate with each new calculation, resulting in the analyst’s true expectations differing from his or her published number. Therefore, when someone within the firm, an institutional client, or even a retail client asks the analyst his or her expectation for the company, the response is often different than the published estimate. This number then gets passed among trading desks and professional traders as the whisper number.

I regularly communicate with upwards of 50 Provectus shareholders, a very heterogeneous mix of small to large to very large stockowners, which notably does not include biotechnology-focused investors but does comprise a number of current and former Wall Street-types. I also track what company service providers say and hearsay, too. Understanding their individual and collective perspectives can be useful and insightful. Wisdom of crowds, and all that, combined too of course often with helpful and correct contrarian viewpoints…

The blog’s poll about what, if any, clarity the company could or would receive by the time ECCO 2013 rolls around (end of September, beginning of October) continues. As of the writing of this post, 56% of responders (43 votes) say “no clarity” (several answered this way because, while they expect Provectus eventually will receive one of the other poll question choices, they don’t believe it will arrive by the end of next month, per the poll question). 44% say “clarity” of some sort (36 total votes) with 34% (27 votes) believing breakthrough therapy designation (“BTD”) and accelerated approval (“AA”).

Without the end date of September-end, or with, say, a 2013 year-end date (per May’s CEO Letter), many of the “no clarity” votes would have transferred to one of the “clarity” options. It is striking, not the least bit unexpected and a little ironic that the choice among “clarity” is BTD: Accelerated Approval (27 of 36 clarity votes, or 75%).

Why have so many poll respondents thus far chosen BTD & AA from among the “clarity” options? More than likely, these folks have responded in a manner directly influenced by their discussions with management, indirectly because of what they may have heard management (and others) say or intimate, or simply because they let themselves believe what they wanted to believe or believe they had heard.

As a result, it strikes me that no less than management’s credibility is at stake over the next few months; credibility, as I see it, in regards to managing (drug development, regulatory clarity) and monetizing (regional and/or worldwide license transactions, eventual sale of the company) the business, and not so much if at all in regards to innovation. A shareholder who spoke to Drs. Agarwala, Sondak, Thompson and Weber, among other interested parties, confirms as much regarding innovation. Choices have consequences and ramifications, such as those, among many others, that relate to patents and patent allowances, PV-10 production runs, and transaction condition precedents.

I’m excited, like most shareholders, for the outcome (what it could be, and eventually is), for the company (achieving regulatory clarity is a key milestone in Provectus’ history and for management team members) and of course shareholders (a move out of the cents doldrums).

When I constructed the poll question, I combined the achievement of BTD with what it might translate into (i.e., a single arm, smaller patient number Phase 3, AA, or some other clarity as a catchall for something else). It’s not yet clear to me into what achieving BTD ultimately would translate.

As such, it seems to me, from listening to and hearing shareholders (and, in particular, certain among them), Provectus’ whisper number is BTD. I think the prevailing viewpoint among various folks is that the company already has submitted its BTD application for PV-10 and metastatic melanoma. Thus, the expectation would appear to be Provectus receives this designation when FDA regulatory clarity is revealed (there always is the possibility they do not, or do not on the first try, or receive something less desirable or expected). I don’t think anyone outside of the company has a credible sense of when, however (i.e., will a 60-day clock be used?, or will the decision come down sooner?).

As for what BTD translates into, or entails, for Provectus and PV-10, such as next steps in the regulatory process (if any), label, time to approval, etc., I think those come later.

Whenever clarity arrives, did management meet expectations, and thus the whisper number, of achieving BTD?

Did they beat expectations by concurrently achieving something more desirable with it?

Or did they fail to meet expectations, whether that is "just" getting the SPA, or still not yet achieving clarity of any sort?