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Dominic Rodrigues
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Pursuing entrepreneurship through corporate development and investment management in industries like aerospace & defense, biotechnology, environmental management, financial services, information technology, and life sciences by raising, investing, developing and managing money across a range... More
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Connecting the dots...Provectus Biopharmaceuticals
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  • "Connecting The Dots"

    I no longer will upload posts from the investment-oriented blog I write about Provectus Pharmaceuticals to Seeking Alpha ("SA") as Instablog posts. Posting selectively or infrequently at SA provides a less than complete picture of my writings on this topic.

    Please visit Connecting The Dots for information about and my perspectives on this company.

    Disclosure: I am long OTC:PVCT.

    Additional disclosure: I have not sold any shares as of this Instablog submission, and also author the blog "Connecting the dots...Provectus Pharmaceuticals." Additional and future disclosures may be found under the Disclosures tab on my blog.

    Oct 29 11:37 AM | Link | Comment!
  • Waiting For Godot

    Taken from Connecting The Dots...Provectus Pharmaceuticals (October 13, 2013).

    In the play Waiting for Godot by Samuel Beckett, "...Vladimir and Estragon...wait endlessly and in vain for the arrival of someone named Godot." In his 1956 review of a version of the play Brooks Atkinson writes Waiting for Godot conveys "...the impression of some melancholy truths about the hopeless destiny of the human race." Considered an absurdist play, "...absurdist is a genre of literature...that focuses on the experiences of characters in a situation where they cannot find any inherent purpose in life, most often represented by ultimately meaningless actions and events."

    The wait for Provectus from the outside perspective I have at times has seemed absurd. I don't doubt there is not an insignificant amount of reality in this absurdity, and absurdity in this reality. Waiting for what from whom? Regulatory clarity, of one sort or another, from the FDA. Yes, but there was more. This wait appears to be nearing a resolution.

    The premise of why I'm long Provectus is a novel drug compound with a pristine safety profile, a treatment well tolerated by and easily administered to patients, a ready made product inexpensively produced at scale, and a vast addressable market of unmet need that should be fully and very profitably met over time.

    Provectus' discussions with the FDA may well be to, first, request some sort of accelerated path to approval (i.e., accelerated approval or outright approval) for Stage IIIb and IIIc patients with refractory, locally advanced disease, believing they have sufficiently demonstrated to the Agency PV-10's clinical value proposition for this patient population.

    According to the company's PR at ECC 2013, "[t]he international, multicenter, Phase 2 study examined the effect of up to 4 treatment cycles of intralesional (NYSE:IL) PV-10 in 80 subjects with AJCC Stage IIIB-IV melanoma. All subjects had locally advanced disease refractory to a median of 6 previous interventions. Intralesional PV-10 tumor ablation provided, after a median of 2 treatment cycles, rapid locoregional disease control." Bold emphasis is mine.

    Prior treatments trial patients received before receiving PV-10 in the study included:

    Trial results, particularly for patients with all disease treated ("In subjects where all disease was treated (35% of subjects) BORR further increased to 71% (with 50% achieving CR).") included:

    Click to enlarge the table.

    Intermittently used in the metastatic melanoma ("MM") Phase 2 trial ("PV-10 was only injected intermittently, when tumors were present during the first 16 weeks of the study..."), PV-10 enabled loco-regional disease control (complete response + partial response + stable disease) more than 8 times out of 10 enabled for patients for whom all lesions were treated (i.e., all injectable disease). It would seem reasonable to conjecture:

    ...that patients could achieve near complete or complete loco-regional control if/when all of their lesions (i.e., all injectable disease) are treated.

    I surmise (although I don't have full evidence to confirm it but I think I have sufficient evidence to suggest it, and I think management has sufficient evidence to assert it) that PV-10 can stop loco-regional MM in its tracks.

    As Provectus wrote in its ECC 2013 press release: "...[I]ntralesional PV-10 provides a viable strategy to maintain long-term locoregional control of melanoma in patients whose cutaneous and subcutaneous melanoma has recurred." For this patient population -- "...patients who are refractory to all other therapies and who have injectable disease," -- PV-10 enables them to maintain loco-regional control of MM with minimal intervention and delay, reverse or prevent progression to life-threatening visceral disease.

    Eric and his regulatory team, and thus Provectus, may be trying to accomplish a "regulatory two-step." Step #1: Ask the FDA for accelerated approval ("AA") or outright approval of PV-10 for MM Stage 3b-c patients who are refractory to all other therapies and who have injectable disease. I think this ask of the FDA by the company, finally, has been made.

    Step #2: I don't understand precisely how Provectus is seeking breakthrough therapy designation ("BTD") in the context of a request for AA or outright approval. Is management seeking BTD for both the population set identified above and late stage patients? Or, is it seeking it only for Stage IV patients, where "sped up" discussions with dedicated senior Agency staff via this accelerated pathway could help design trials to show the immediate benefits of PV-10 in combination with approved MM drugs like ipilimumab (Yervoy) and vemurafenib (Zelboraf) for late stage or heavily diseased patients? Or, it is seeking BTD for both Stage IIIb-c patients and Stage IV patients, but asking for AA or outright approval for the Stage IIIb-c folks under the BTD umbrella, and discussing more trial work with the FDA to demonstrate the benefit of combining PV-10 with certain other drugs like ipi for late stage patients?

    Ultimately, the mechanics of the ask(s) don't matter now, but rather the ask(s) itself (themselves) and outcome(s).

    If Step #1 of the regulatory two-step is asking for AA or outright approval for patients who are refractory to all other therapies and who have injectable disease, Step #2 could be asking for BTD for Stage IV patients, with the path to approval of PV-10 for this additional population subsequently to be determined through further discussion with Agency staff and/or additional trial work.

    Both in the ECC 2013 poster and press release, the company highlighted several things related to late stage patients:

    • "Regression or stasis of untreated Visceral Disease observed in subjects with OR of Target Lesions; 44% 1-year survival in Stage IV(M1c) subjects,"
    • "Second, its safety profile makes it an attractive candidate as a combination strategy for treatment of advanced disease," and
    • "PV-10's unique mechanism of action, alone or in combination with existing or emerging therapy, has the potential to shift the paradigm in oncology, where an intermittent intervention can dramatically reduce disease burden and may prod the immune system into preventing or arresting the formation of life threatening metastases."

    I think the ask of BTD of the FDA by the company, finally, also has been made.

    Although the first ask may appear to be a focused or "narrow" label -- patients who are refractory to all other therapies and who have injectable disease -- more broadly speaking it is far from narrow. The addressable market for loco-regional disease is very large because it represents nearly all incidences of melanoma. Localized melanoma, which is confirmed to the site of the disease, represents 84% of incidence (by stage distribution). Regional melanoma, where the disease has spread to regional lymph nodes, represents 9%. These statistics are from National Cancer Institute Stage Distribution and 5-year Relative Survival by Stage at Diagnosis for 2003-2009, All Races, Both Sexes data. Distant melanoma is 4%.

    Of course, the first tool out of the oncologist's tool kit for early- and initially/originally-identified melanoma (local and, perhaps where resectable, regional) typically is excision or surgical resection, particularly when it is recurrent melanoma. Aggressive loco-regional therapy would be in order to reduce the risk of relapse, and the negative impact on prognosis and overall survival after loco-regional recurrence. For physicians, PV-10, as user friendly as it is, from safety and drug administration perspectives, and because of its ability to stop loco-regional disease in its tracks (if not cure it), might turn out to be the first tool out of their tool kit.

    Best: Can management succeed in securing the first step of the regulatory two-step from the FDA? The outcome of "yes" is game-changing for the drug, the company and the stock. An outcome of BTD as a second step simply adds to the magnitude of the game-change. Better: An outcome of BTD, with a further discussion of the hows and whats, still is good. Good: An outcome of an SPA, which I have no doubt already has been agreed to with the FDA, is indeed is good but, given my diatribe above, would be disappointing yet essentially sufficient because it still is regulatory clarity.

    A cursory Google search yields Michael Sinclair's attempt to explain the play: "The purpose of human life is an unanswerable question. It seems impossible to find an answer because we don't know where to begin looking or whom to ask. Existence, to us, seems to be something imposed upon us by an unknown force. There is no apparent meaning to it, and yet we suffer as a result of it. The world seems utterly chaotic. We therefore try to impose meaning on it through pattern and fabricated purposes to distract ourselves from the fact that our situation is hopelessly unfathomable. "Waiting for Godot" is a play that captures this feeling and view of the world, and characterizes it with archetypes that symbolize humanity and its behaviour when faced with this knowledge. According to the play, a human being's life is totally dependant on chance, and, by extension, time is meaningless; therefore, a human's life is also meaningless, and the realization of this drives humans to rely on nebulous, outside forces, which may be real or not, for order and direction."

    Shareholders seem to have been waiting for the FDA to show up. Waiting for Godot conveys our lives are meaningless, and the realization of this drives us to rely on nebulous, outside forces, which may be real or not, for order and direction. At times, it's felt like Provectus' pursuit of regulatory clarity, opaque as it has seemed, incomprehensible as it has been communicated, has lacked meaning. For what and/or whom are we waiting? It might be that we've been waiting for management as a whole and Eric in particular, more than we've waited for the FDA. Godot, in the form of Eric, seems to have arrived, so to speak.

    PV-10 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.

    Some consider Google a paradigm shift in how individuals explore and utilize the Internet through its search engine, as Microsoft was a paradigm shift in the use of personal computers through its operating system. There were competing operating systems around the time of MS-DOS and Windows, as there were competing search engines. It would seem a paradigm shift is more so, now or at least recently in human history, because beyond the victorious technology/technological change there usually is a readily identifiable individual or corporate victor (or victors) who is (are) measurably monetarily successful.

    Irrespective of how technology cycles, cycles of change and/or cycles in general have materially shortened literally in front of our eyes (say, over the last couple of decades when I have been old enough to pay attention), some of us think we're capable of seeing and identifying a shift in paradigm. I think, in reality, because human activity, ours that is, on a day-to-day basis seems to have sped up, it provides the rationale to support this contention that we are able to see change in so-called real-time. Maybe it's the case we are able to see paradigms shift because we can see more quickly this change or shift after an inflection point is reached instead of as it happens.

    More to point, however, I also think we ascribe the certainty and greatness of the shift to a successful individual or company because they are monetarily or otherwise successful in that moment in time.

    (click to enlarge)

    Provectus: Four transplants from Knoxville, ostensibly with no prior meaningful experience or track record of bringing a drug to market, or building a private or public company, trying to demonstrate their technology does shift the paradigm in the treatment of solid tumor cancer, eschewing to pursue and communicate development in a less than standard way.

    It is this "less than standard way," whether conscious and premeditated, the inevitable result of shortcomings and experience, or some combination of both, that, together with the innovation and inexplicability until now of the mechanism of PV-10, has limited the embracing of the drug, and thus its creators, as a paradigm shift in the treatment of cancer.

    I recently wrote to a biopharmaceutical industry individual, now a consultant (but with broad and extensive, operationally-focused, industry experience, particularly in drug development itself and, notably, with an approved oncology drug of significant fame) about his or her views on peer review publication (in light of Eric's completion of Provectus' final metastatic melanoma Phase 2 trial study report): "So anything reputable in oncology such as NEJM, JCO, Blood, Nature, Science, BMJ, The Lancet, Lancet Oncology, any AACR publication etc would indicate a high quality article with peer review. What one is ideally looking for is a body of work by top thought leaders in high impact journals demonstrating a solid track record of data...If doing due diligence on a drug or company I would be nervous if the company only ever published with, say, third tier thought leaders in second rate oncology journals. At some point, if the drug is good enough they have to step up to the plate and allow more in-depth scrutiny by peer review. Does it matter as an investor? It really depends on your level of risk. Personally, I like to see a solid track record across a number of key areas, including high impact journals." Bold emphasis is mine.

    Coming from a predominantly (but not exclusively) non-"all things biological" background, I earnestly thought data publicly available, other found through diligence, and connected in a thoughtful (but obviously non-industry based way) would have been sufficient for others to draw what I had determined were obvious conclusions.

    Thankfully, management finally will meet the peer review criticism this year with the publication of the final study report of the MM Phase 2 trial in a top tier journal (i.e., at the top of the above list). Ironically, if the expected regulatory clarity arrives before the article's publication, any bump in share price directly related to people buying into PV-10 and its clinical value proposition as a result of publication in a high impact journal may be an incremental one.

    At the outset of this journey of mine, I hadn't fully appreciated the challenges faced by management to not only overcome the very high level of skepticism of a local agent having a systemic benefit, but to overcome the very high level of skepticism of itself.

    I did not require the data to be published in a top tier journal. As the individual above appropriately concludes, "Does it matter as an investor? It really depends on your level of risk." I'm comfortable with the level of risk at the time and now of Provectus. Others, however, are not, as evidenced from the wallowing of the share price. Lack of publication of in a top tier publication is not the sole reason for where the share price is. There are other mitigating circumstances or explanations, like presence on a minor stock exchange, capital structure, manner of fund raising that ultimately lead to problems with capital structure, etc. The peer review publication issue, unfortunately, is endemic of management's "less than standard way." Don't doubt that less than standard has temporary and, potentially, permanent valuation implications.

    Fighting the good fight of proving PV-10's systemic properties is one thing. It might constrain valuation in the interim. Fighting it with one hand tied behind your back, by being circumspect, by choosing to fundraise in certain manners (because of whatever certain reasons or circumstances), etc., has the potential to reduce valuation with the risk that some of the reduction never ever returns. I'm sure management understands by now if they didn't understand it at the outset, that $125 million raised at a $75 million [pre-money] valuation is not as good as the same amount raised at $250 million.

    (click to enlarge)

    Should Craig ultimately be successful in having PV-10 and PH-10 approved for multiple oncology and dermatology indications, such as those as displayed in Alan Ross' Seeking Alpha article Provectus Pharmaceuticals Up 17% In A Month; Potential Still Huge last week, the team and he will find themselves (even after adjusting for the additional costs still required to gain approval for many of those indications to market, and which will incurred by Provectus' acquirer) very near to or at the bottom of Forbes' Matthew Herper's list of R&D Spending Per New Drug, which is exceedingly high praise for their possessing the unique combination of innovation and cost effective development. It's not quite a list of R&D spending per approved indication, but it gives you a sense of magnitude nevertheless, and Provectus' relative success.

    Through it all, however, management has protected the economics, but "protecting the economics" can be hard to grasp. In my investment letter of September 22, I wrote: "Investors often misjudge risk in the context of return. That a so-called safe asset or security should provide a safe return does not mean the expected return is commensurate (high enough) for the risk incurred. Conversely, a so-called risky security that may have the potential to generate a robust return does not mean the associated potential risk is commensurate (too high) for the amount of return expected."

    One measure of risk in biotechnology is the weighted average cost of capital ("WACC"), which is "...the rate that a company is expected to pay on average to all its security holders to finance its assets." Said another way, it's a measure of return you would expect to garner each year for every year you hold Provectus stock. Consider the table below:

    (click to enlarge)

    Click to enlarge the table.

    Let's assume a biotech WACC of 20%. There are several studies that have analyzed the WACC for the biotechnology, and been more specific as it relates to the size of the biotechnology company, and report a range of 8-20%. Let's assume Peter achieves something close to a Celgene-takeout-of-Abraxis payment, as he mentioned in one of his September interviews. Factor in the number of fully diluted shares outstanding. Establish a share price range at which you might sell your shares ($2-12 per share in the table above). Determine the number of years you've held the stock (1-8 years in the table above). Determine your cost basis ($1 per share in the table above). Calculate your annualized return (as shown). The table is a quick 'n dirty attempt to illustrate the protection of Provectus economics for a range of exit share prices and a range of holding periods.

    I further wrote in my investment letter: "Provectus' stock's risk-reward profile is out of whack. The return opportunity is more than commensurate with its potential risk from here on out." Whether you're a longstanding shareholder, measured in a holding period closer to 8 years or thereabouts, a recent shareholder, and thus have a holding period of, say, one year or less, or someone in between, like me, depending of course on what value management sells Provectus for, your annualized return should be exceed the return required for the risk you took. In professional sports, generally speaking, the outcome only matters. Did you win or lose? An end-game in the range of most scenarios above is a win for shareholders and, thus, for management.

    Disclosure: I am long OTC:PVCT.

    Additional disclosure: I have not sold any shares as of this Instablog submission, and also author the blog "Connecting the dots...Provectus Pharmaceuticals."

    Oct 14 7:43 PM | Link | Comment!
  • Counting Down

    Taken from Connecting The Dots...Provectus Pharmaceuticals (October 3, 2013).

    In conjunction with Provectus' poster presentation and press release at ECCO 2013, an article entitled Metastatic Melanoma: blistering in PV-10 treatment predicts good outcome appeared on PharmiWeb.com, "Europe's leading industry-sponsored portal for the Pharmaceutical sector, providing the latest jobs, news, features and events listings."

    Company principal investigator Dr. Sanjiv Agarwala from St. Luke's Hospital Bethlehem, Pennsylvania provided two substantive quotes:

    "The take home message is that if you have injectable tumours and inject them with PV-10 there's a one in two chance that you will achieve a clinical response, and for these patients an additional one in two chance that a non injected (bystander) lesion will respond."

    "If blistering occurs you can reassure the patient that they're likely to achieve a good response," said Dr Agarwala, adding that this effect provided further evidence for an immunological basis for the mechanism of action.

    Keep in mind, as the company's press release noted: "PV-10 was only injected intermittently, when tumors were present during the first 16 weeks of the study, in stark contrast to typical clinical studies where treatment is given until either resistance is engendered or patients experience unacceptable toxicity." Bold emphasis is mine.

    Intermittently injected, yet PV-10 enabled one in two patients to achieve a clinical response, and for these patients, there was a one in two chance a non-injected lesion responded. I do not think it is difficult to extrapolate results should a Phase 3-like protocol be employed (because the Phase 2 trial presents such results), where such a protocol, currently in use in the compassionate use program, was elaborated upon in Provectus' ESMO 2012 press release: "In the PV-10 arm all cutaneous and subcutaneous lesions will be treated within the first two weeks, with additional treatment allowed every 14 days as necessary to achieve disease control." Bold emphasis is mine.

    In the Phase 2 results presented at ECCO, for those subjects where all of their lesions were treated (comprising 28 of 80 trial subjects), complete response (NYSE:CR) was 50%, partial response was 21%, and stable disease (NYSE:SD) was 11%. CR + PR = 71%, and loco-regional disease control (CR + PR + SD) was 71%. I imagine achieving near 100% results would not be unreasomable, assuming properly injected lesions, patients remaining with the program, etc.

    An interesting line in PharmiWeb article was the last sentence: "Provectus Pharmaceuticals believe they now have sufficient data to seek regulatory approval for PV-10." Management has long believed they've had sufficient data for PV-10 to be approved, but they've never uttered it publicly in press releases or articles such as this.

    Peter has not yet responded to my inquiry for comment on the above statement. Craig says Provectus was not its source. It is quite possible the author derived it from interviewing Dr. Agarwala. Maybe she was referring to Agarwala when she wrote back to me "...the company told her this."

    Principal investigators often turn to Eric for various information that ultimately makes it way into their quotes or presentations. Consider Agarwala's May 2013 Practical Dermatology article: "There are now data for longer follow-up periods that show those initial results are holding up." Or, consider Dr. Andtbacka's presentation in April 2013 at the HemOnc Today conference, where he referenced the potential start of a Phase 3 trial (presumably under an SPA). Eric is the source of these information, references and statements, as he very likely was the source this time, whether directly or indirectly (via Agarwala).

    Management is pursuing from (requesting of) the FDA approval of PV-10 for Stage IIIb-c patients with locally advanced melanoma and refractory to multiple prior treatments. Refractory means resistant to treatment. This approval is being sought via accelerated or outright approval for this narrow or focused label, more than likely under the umbrella of the Agency's new breakthrough therapy designation. Has the company finally submitted the application?

    Given the emergence of the quote -- "Provectus Pharmaceuticals believe they now have sufficient data to seek regulatory approval for PV-10" -- quite possibly.

    Disclosure: I am long OTC:PVCT.

    Additional disclosure: I have not sold any shares as of this Instablog submission, and also author the blog "Connecting the dots...Provectus Pharmaceuticals."

    Oct 03 10:47 PM | Link | 1 Comment
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