The Biggest Risk [Updated-2]

When I periodically review and assess the risks I wrote about in my September 2013 investment letter, whether here on the blog or at Seeking Alpha (i.e., the scenarios in which I could be wrong, and if so by how much), I also try to contemplate and consider new potential and possible risks. I've moved beyond clinical questions (e.g., could there be unexpected adverse events and/or poor clinical results in the future) and almost past regulatory questions (e.g., could more time be required to confirm the regulatory path) to commercial ones (e.g., could management be unable to monetize the company at a valuation commensurate with their innovation).

For me, the biggest risk, and very likely the source of disappointment if there is to be one, is whether management can sell Provectus at their desired price, let alone at the worth I see. It's a risk I have focused on almost from the beginning; a question of will they, rather than can they. A simplistic analysis (with no supporting material at this time by intent) might yield an interim assessment of "yes" or thereabouts, potentially pointing to a probable "yes" when the endgame arrives. Note that the analysis below does not contemplate contingent payments.

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We may receive more clinical, regulatory and commercial information during the next 60 to 90 days to better assess risk-reward:

• Mechanism of action (Moffitt at AACR),
• Liver program (enrollment & trial progress),
• Additional indications (maybe breast and/or colorectal),
• MM Phase 2 results (durability of response I really hope, and finally),
• A breakthrough therapy designation decision from the FDA,
• Combination therapy potential (most likely murine model work of a leading research facility at a major oncology conference),
• PH-10 mechanism of action (maybe), and
• A NASDAQ up-listing and/or regional license transactions.

Updated 3/30/14: If the stock market ultimately does not reward the company with a market capitalization such that an acquisition premium by Big Pharma (to the then market cap) cannot reach Provectus' management expectation of price and value, the principals face two obvious choices at that time: Sell, or don't sell (and build until the decision is re-visited).

Intrinsic value, as I've written on this blog in the past, is the value of an asset (in this case the company) determined by fundamental analysis (in this case my analysis) without reference to its market value (in this case the share price). Extrinsic value, borrowing terminology from option pricing, is worth or value assigned or determined by external factors. The stock market is an example of an external factor (market capitalization is the result). An M&A transaction is another example.

You'll recall in January 2014 I argued for a worth of $150 per share or a total of $30 billion, my estimate of the company’s intrinsic value on a net present value, an amount that could accrue to Provectus shareholders upon an M&A transaction and over time through an earn out.

One measure of extrinsic value is the company's approximately $400 million market capitalization as of Friday's closing price (although I would prefer to adjust the number to accommodate a fully diluted shares outstanding figure). Another measure would be the price at which Big Pharma might bid to management to buy the company today, formally or informally. Management can turn them down (and re-inform them of their price expectations), but the price point is an extrinsic value point. 

Another way to come at the outcome of the simplistic analysis above is to evaluate stock price appreciation adjusted for dilution over time. Interestingly, on a percentage change basis, adjusted market cap roughly mirrors that of Big Pharma's apparent assessment of value.

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The larger point of the blog post is that having the bigger or biggest risk to my investment thesis as management not being able to sell the company for the price they want (assuming there are no other bigger risks, and management's expectations of price are appropriately and sufficiently high enough) is a "good" problem to have. That the stock market doesn't currently value Provectus anywhere close to these price level discussions is no small thing. The stock market as a snapshot in time, however, is just one measure of extrinsic value.

Updated 3/31/14: Using figures provided by management on Provectus' corporate website presentation for common stock, and stock options & warrants outstanding (approximately 173 and 37 million, respectively), the above tables then would appear as:

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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.

Sell in May and go away? April showers bring May flowers, and June flowers, and July flowers, and...

This is a follow-up to my January 27th March Madness post. I added other items denoted by the + prefix to the bolded item title.

PV-10
Early-April's AACR annual meeting provided the forum for both Moffitt and Provectus to provide definitive clinical relevance for the drug. In the case of Moffitt, tumor-specific immunity. In the case of Provectus, combination therapy effectiveness. In both cases, systemic benefit. Definitive for the FDA. Definitive for Big Pharma.

PV-10 + “other stuff”
I think but cannot fully validate combination therapy interest in PV-10 includes anti-CTLA4 agents (Bristol-Myers Squibb, Pfizer, Astrazeneca), anti-PD-1 agents (Merck, BMS, Roche, GlaxoSmithKline and Teva Pharmaceuticals), BRAF inhibitors (Daiichi Sankyo and GSK), and kinase inibitors (Bayer).

The liver trials
The expanded liver P1 trial report must be complete before the company can apply for BTD for liver. How many of the "up to" number of patients are required; up to 24 patients receiving PV-10 and up to 12 patients receiving sorafenib and PV-10. 24 and 12, respectively? Or a subset? Assuming the company achieves breakthrough therapy designation (see below), would a subset and interim analysis, rather than the full set and preliminary final data, be sufficient as the FDA's EOP2 further builds up their understanding and knowledge of PV-10?

The SPA
Management guidance is Q2. At this point, I think June may be when we see the SPA achieved. Is management submitting applications for both the SPA and BTD (see below)?

+Breakthrough Therapy Designation
The company regularly has asked the FDA for accelerated approval. The manner in which the company has sought to demonstrate PV-10 and PH-10's value proposition (and, thus, rose bengal's value proposition) -- very safe, very efficacious, multi-indication potential -- also is consistent with trying to accomplish an accelerated path to market for the drugs (i.e., efficient and effective use of capital). It seems to me BTD is more like a badge (as the "designation" in the title denotes), and should or must be followed by a pathway. The accelerated pathway may be either accelerated approval or a "faster Phase 3" trial. It seemed Moffitt data presented at AACR was very important to making the case for BTD. Such data may have been available starting in early-April when the AACR conference commenced. Whether the data was transmitted to the FDA then, or remains to be sent in the near-term is unclear. At this point, I think Q3 (July) may be when we see BTD achieved.

Shelf filings
The two $50MM common stock filings were pulled in early-April (here and here). The $100MM mixed securities shelf remains.

The regional license deal for China
I think Chinese officials, whether governmental and/or pharmaceutical, were present at AACR. I also think Peter met with Chinese officials in Europe during his recent trip there.

+Wall Street vs. Main Street
It will be interesting to see what may unfold in the next 60-90 days. When the share price pushes through $2 and the stock lands on the NASDAQ thereafter, a number of retail investors holding Provectus shares are very likely to close their positions (sell their holdings) between $2 and $4 per share. I think there will be an intense turnover of the company's shareholder base. That is, unfortunately, the way of this capital markets world, as institutional/professional investors (hedge funds, mutual funds, etc.) will buy what retail folks sell. I hope they (retail investors) don't, but I think they will. We are, after all, the "dumb money" to them.

India
A visit to India likely will be made by Peter in the near-term. Japanese-headquartered Daichii Sankyo owns a majority stake in India-based Ranbaxy Laboratories. There are other interested local Indian companies, too. Pfizer India is an autonomous body capable of its own deal making.

Japan
Nearly 20 companies are interested in a regional PV-10 license. Visitors to the blog from Japan are frequent and corporate (pharmaceutical and otherwise) of late.

Moffitt
AACR (see PV-10 above). I think human work is moving ahead faster than expected.

+Value Prop vs. Clinical Relevancy vs. MOA

To me, value proposition is and has been the most important aspect of my investment thesis: very safe, very efficacious and multi-indication potential. It helps to underscore the risk-return of an investment in Provectus. Clinical relevancy is critical to the FDA and Big Pharma's understanding of where PV-10 fits in, as much as MOA is critical.

More valuation-raising work to be done
See below for a sample. I will elaborate on this sketch in a subsequent post.

Peer-based management compensation proposal coming
This was not included in the company's proxy statement.

PH-10
I think translational work done at a world-renowned university in a laboratory whose head has a world-class reputation with the FDA probably now is complete.

+Sell to Cheap? Hardly.

I bet management could and would protect Rose Bengal’s economics in a size and scope commensurate with the depth and breadth of their innovation. There are sufficient blocks of share ownership, when rallied in a coordinated manner, that will support a takeout (end game) valuation management believes is appropriate and sufficient. My reach across the shareholder base is both broad and deep, and growing. Make no mistake of the value of Provectus these blocks recognize and want to see achieved. Make no second mistake of my intensity, determination, capability and competence to ensure this value is realized and monetized...

What a $PVCT #Week, #Month and #Year Thus Far

What year-to-date performance for PVCT, and versus the iShares Nasdaq Biotechnology Index (to compare): +43% v. +9% (+6.5% for the S&P 500 Index).

One year. Different: -8% v. +25% (+11.2%)

Did An #Institutional #Investor in $PVCT Close Its Shop?

Funds blow up and/or close down all the time. Natural selection. Darwinian evolution. Call it what you want. The recent depression in certain commodity prices was attributed by some to the blow up of a couple of funds and the liquidation of their positions.

Many commodity markets are deep (i.e., very liquid), like certain U.S. large cap equity names for example, and closing of positions (more often long, thus liquidation means selling) don't usually move prices much unless those positions were large to very large. Market participants in the know about such closings/liquidations often step out of the way until the fund(s) is(are) done.

Sizable positions in less liquid or illiquid assets or stocks can move prices much more. And knowledgeable market participants do the same thing. They wait, and then they act (if they desire to act at all).

I have written about Revelation, a formerly large shareholder of Provectus stock, converting its preferred shares into common and selling them. The firm's latest Form 13G filing indicated a dramatic reduction in beneficial ownership. Sometimes investors decide they've had enough and throw in the towel. It happens to institutional and retail investors alike.

Rumors are circulating about Revelation sold its Provectus warrants too. Sometimes investors sell because their closing down, and their selling has nothing to do with their investment thesis related to a particular holding. A hedge fund doesn't sell its warrants, digging around for the very last scrap in its larder, if it's throwing in the towel on its thesis. The situation arises because the fund and perhaps the firm itself are closing down.

A graph of Revelation's quarter-end 13F SEC filings from 12/31/11 to 12/31/12 is below.

The number of holdings (13F entries) and amount of assets under management related to these holdings (cash is not reported) for the period or quarter ending 12/31/12 are down considerably from, say, the last quarter-end of 9/30/12, let alone year-over-year.

We obviously don't know Revelation's fund terms and conditions (e.g., redemption notices, gates, etc.), but it is very possible the fund and maybe the firm is closing.

Short interest for the period ending February 15 is reported tomorrow. The large spike in short interest, perhaps attributed to the "fake short" caused by converting preferred shares into common shares, might fall and confirm Revelation was responsible for it. Rear-view mirror stuff.

If the Big Seller has been Revelation liquidating its Provectus holding, the loss of this downward pressure on the stock may permit natural buying interest to push the share up dramatically more.

Will $PVCT Peter Procure Provectus Peking Pork?

#China: A $30B #Pharma Opportunity for #Biotech $PVCT?

If you look at Provectus' most recent website presentation, which can be found here (n.b., this link will remain the same; however, the presentation to which it is linked will change as the presentation is changed), the bottom of slide/page no. 21 indicates management sized the company's opportunity in China (the four cancer indications of interest there being melanoma, liver, bladder and lung) as $30 billion.

How did they arrive at this number? Management used:

• Counsel and input from several key Big Pharma executives,
• A customary DCF calculation,
• A conservative 10-year time frame, and
• Conservative penetration rates.

"Conservative" above is the company's viewpoint, and not mine. Other assumptions, which Provectus has either not yet confirmed or not commented on, should include:

• A discount rate (for management's DCF analysis) of the company's WACC,
• A price of $5,000 per single use vial of PV-10 (although this may have changed),
• Upfront and milestone payments gross of the agent's* success fee, and
• A certain double digit royalty percentage, also gross of success fee.

The $30 billion is an NPV figure. Most folks, on first blush, probably would laugh not only at the perceived deal value but at management's attempt to secure anything remotely close. This topic, of the perceived value (among other valuation aspects) of a China deal, is a worthwhile blog thread to pursue further.

Management, if pressed, might simply say the China deal could be worth about $1 billion, with customary features:

• 4-5% upfront payment,
• 11-15% milestone payments, and
• 75-80% royalty payments (i.e., the balance of a $1B NPV value).

It appears Peter is traveling to China the week of February 25th. I imagine he could return with (i) no deal, (ii) a deal (reportable event) or (iii) an exclusive agreement (i.e., letter of intent) for a certain period of time (e.g., 60 days) with the chosen/target strategic partner to consumate a deal (reportable event, too). I plan to write more on this topic as his trip nears and as it progresses.

* Successfully entering, networking (guanxi), navigating and ultimately securing business in places like China often requires the use of experienced, well-connected and often in-country intermediaries and agents such as the one Provectus has utilized for China and India.

$PVCT: March Madness 2013

March Madness 2013 begins on Tuesday, March 19 and ends on Monday, April 8. The Final Four will be played in the Georgia Dome in Atlanta, Georgia. I contend this period (including leading into it) will be an important time for the company, its more mainstream awareness, and the share price.

There is a lot of information to digest, from Craig's presentation at the Noble Financial Capital Markets Ninth Annual Equity Conference to Peter's trip to New York City.

PV-10
Most of Pete’s time lately, probably more than anything else it seems (save for another effort), is focused on communicating PV-10's unique immunotherapeutic characteristics in the context of global oncology. You see this manifested in discussions with Big Pharma (as Craig commented at Noble: "interactions with potential global license partners," and by that he does not include just Pfizer) and continued visiting with life sciences investors (trying to get them off the sidelines and into the stock).

PV-10 + “other stuff”
I think Craig et al.’s SITC work (PV-10 + systemic chemotherapy), their upcoming AACR work (PV-10 + systemic immunotherapy), Foote et al.’s expanded work (PV-10 + radiotherapy), and Craig’s skunk works work on more combinatory explorations (e.g., intra-tumoral GM-CSF, systemic interleukin, anti-PD-1 antibodies/agents, etc.) is opening a lot of eyes at Big Pharma and the FDA very wide.

Management is contemplating an MM Phase 1 trial combining PV-10 and ipilimumab (while Craig mentioned this in his Noble presentation, I also followed up). Perhaps the protocol might include the assessment of safety and efficacy in a number of patients with metastatic melanoma (Cohort 1 receives PV-10) and in a number of patients who are taking ipilimumab, an approved treatment for MM (Cohort 2).

As I wrote earlier this week, this combination work of PV-10 + ipi  clearly targets and is in response to serious interest from Big Pharma: Bristol-Myers Squibb & ipilimumab/Yervoy and Pfizer/MedImmune-AstraZeneca & tremelimumab (MedImmune in-licensed tremi from Pfizer in 2011 for global development rights to the drug while Pfizer retained rights to specified types of combination therapies).

The liver trials
Let's segue from combination therapies to the expanded liver P1 trial, and what the likely results will mean for the design and very likely outcome of the liver P2/P3 trial. I think there is enough information to speculate (of course, the foundation of the speculation merely is a framework, and not overly substantial) or project success of PV-10 + sorafenib (a systemic drug, so see PV-10 + other stuff above) over the sorafenib-alone treatment arm. Interference studies and other work confirm PV-10 is orthogonal to sorafenib (and lots of other drugs, too): PV-10 does not interact negatively with sorafenib, and appears to enhance sorafenib's benefit by PV-10 first boosting the immune system.

When Provectus announces -- via an upcoming PR -- that patients have begun to be enrolled and treated in the expanded liver P1 trial, the timeline of results making their way to the FDA should not be lengthy. The same FDA group of folks reviewing Provectus’ pivotal MM Phase 3 trial design suitable for an SPA, Division of Oncology Products 2 (DOP2), are the same folks (i.e., DOP2) who will review the company’s liver Phase 2/Phase 3 trial design suitable for accelerated approval.

The hard work, time, energy, resources, expense, etc. exerted to get the SPA for MM should pay-off when it comes time for management to request AA for liver.

The SPA
Barring another eleventh hour request or issue, it appears the SPA should arrive around March 15.

While it certainly is possible that the SPA arrives earlier, I am setting my own expectations for the Ides.

Shelf filings
The pulling of the two $50MM common stock filings still are in process with Provectus’ attorneys. Management believes the act of pulling them is form over substance, since the company will not be using them. I think communicating their intended action to pull them and/or the actual act and notification to the market of pulling them is substantive.

The regional license deal for China
Work continues, and the process of arriving at and consummating a deal progresses. Should Pete travel to China again (he visited there in late-November 2012), it would be to close the deal, the announcement of which should follow via PR and 8-K filing.

In terms of setting my own expectations for this item, a deal could get done by or around late-February. If Celsion's China deal is worth several hundreds of millions of dollars (per the analysts and others commenting on valuation), by comparison I think you're looking at a Provectus China worth at least $1 billion (perhaps as much as $2 billion) with higher upfront, milestone and royalty payments.

India & Japan
As a result of a completed China deal, Provectus’ visibility should be much more pronounced. Deals in India and Japan could follow thereafter, but more of the deal process must progress before I would speculate about timing. India could be accelerate given the level of interest of the top Bio-Pharma players in the country. For now, I’m not setting any expectations.

Moffitt & Reproducibility
Craig expanded in some detail about Moffitt's work in his Noble presentation: their reproduction of his work, his reproduction of their work, their upcoming data release and presentation(s), etc. According to Craig, Moffitt's immunological MOA characterization work results (mouse and human) will be revealed imminently. I think Craig's comments related to reproducibility, particularly in the context of creating and making a product (i.e., PV-10, PH-10), were very important and very true.

I think it is easy, at this point, to connect the dots so as to speculate (identify) about which conference Moffitt will present their highly anticipated results. I still expect forthcoming visibility about these Moffitt results in late-January, and some data released in stages in March, prior to the full dataset being released at the expected conference in early-April.

More valuation-raising work to be done
When I wrote my blog post entitled $PVCT: Immunologic Potential, and thus Value, I set a very lofty valuation for the company, particularly as it related to the expectation of management for an upfront payment ($3 billion at last check) at the end-game. You don't get from $67.65 million (Google Finance's market capitalization for the company as at 1/25/13) to $3 billion in one leap.

Rather, Provectus arrives there in several leaps and bounds, together with perhaps some end-game auctioning momentum and exuberance: China, India, Dermatology, momentum share buying, etc.

Peer-based management compensation proposal coming
As management noted in a previous filing, a peer company-based bonus compensation structure should be part of a new compensation plan that management should introduce with Provectus' next proxy filing likely in late-April.

PH-10
From a review of history, it appeared Provectus was on the cusp of securing a deal to license its dermatology business (i.e., inflammatory skin disorders) in early-2011. Up to that point, management's valuation expectations, on a net present value (NPV) basis, were about $500 million.

No term sheet materialized from the most serious prospective partner, which would have triggered the official hiring of the financial adviser (Bank of America Merrill Lynch) and an auction process involving the other prospective partners. I think the lack of certain desired information at the time, since fulfilled by the Psoriasis Phase 2c trial, created a valuation gap between the prospective lead and Provectus that prevented the parties from coming together on suitable top-line term sheet parameters. Hence, the prospective lead declined to extend a term sheet it knew would be turned down management.

As time progressed (i.e., as the psoriasis Phase 2c trial was completed), a process appears to have been established that paralleled Moffitt's work on PV-10. Namely, a world renowned cancer research center engaged in work, initially at their own expense, to explore and characterize the immunological mechanism of action of Provectus' oncology drug.

In addition to better understanding PH-10 immunologic MOA, and on a related note, more insight into the drug's distinct lack of toxicity is necessary to better inform the FDA and assist in the design of the eventual Phase 3 trial.

It is not unreasonable to analogize PV-10's path to PH-10's, and thus potentially explain the delay in getting to a dermatology license or sale transaction. Immunologic mechanism of action characterization work is being done on PH-10 by a world-class institution to complete the understanding of certain prospective dermatology licensees before they fully commit to jumping into the pool. I think management's NPV figure for the dermatology business has increased significantly to at least $750 million (perhaps as much as $1 billion).

As for expectations, Craig did note in his Noble Presentation that we should look for the company to request a end-of-Phase-II (EOP2) meeting with the FDA. Presumably this announcement, if one is made by the company, or step precedes or signals the extension of a term sheet for dermatology is imminent, inbound or at least very close at hand.

$PVCT: Something Wicked[ly Good] This Way Comes?

Trading volume and price have behaved like opposite from December 27-January 9 compared to, say, November 7-December 26.

Volume has nearly tripled, and price has gone from a "flat" range to close to vertical.

This volume/price action is not disimilar from behavior about a year ago that preceded the company's announcement about FDA guidance on the SPA. See my blog posts here and here.

Is (are) something(s) being anticipated? Or is Provectus simply receiving more investor love?

Click figure to enlarge it.

In my blog post $PVCT: China Process, I wrote the first step would be the signing of a term sheet between Provectus and a Chinese pharma company. I also wrote such a signing may or may not be an 8-K event, depending on Provectus' counsel's interpretation or advice.

I don't believe a signing is an event, since there is too much uncertainty related to ultimately whether a/the deal is consummated. Rather, the 8-K event will be something closer to the consummation of definitive agreements (the license transaction itself). I dug out some of my old term sheets that may be applicable to the situation (and would be different from Letters of Interest or Intent for M&A transactions).

There are customary and not-so-customary conditions to closing. The party extending the initial term sheet (i.e., the Chinese company) sets certain conditions for the transaction to close. The receiving party can and usually does counter to some extent.

Term sheets typically are not binding. I never put a binding term sheet (binding on terms and most conditions) on the table when I was making venture capital investments. There was the safety valve (usually due diligence to our satisfaction) that could be utilized to walk away from the deal. A China pharma company simply extending a term sheet to Provectus (which both parties eventually sign some negotiated and mutually agreeable version) does not mean there is a likely probability of a transaction being closed.

There usually is exclusivity; that is, a period of exclusivity. This clause (exclusivity) and period (exclusivity period) with the party that extended the term sheet allows the parties to negotiate, finalize and consummate the deal (and enable one of the lucky parties, eventually, to get money!).