i.am.a.pvct.inv...'s  Instablog

Taken From Connecting The Dots...Provectus Pharmaceuticals (February 5, 2013).

I think the SPA will have a material but limited impact on share price. Over time, I have heard the SPA was (i) for the benefit of investors and the stock market, (ii) necessary to clarify the regulatory path of PV-10 and Provectus' lead indication of melanoma for Big Pharma, and (iii) of critical importance to serious life sciences investors' decision to get off the sidelines and into the stock for the aforementioned reason of regulatory clarity. Now, it seems, regulatory clarity is the residual reason for continuing to pursue the SPA in the absence of business decisions that honestly could only have been made with the benefit of hindsight (and, thus, now are somewhat irrelevant). In the absence of anything else happening at the time it arrives, perhaps by or before mid-March, I think the SPA could push the share price to $1.25 or higher.

I don't think Moffitt's full effect will be felt this quarter. Moffitt's full data set and profound statements about PV-10's place in treating cancer patients should be available after quarter-end, even though the cancer center's abstract(s) and some portions of its data set may be revealed in February and March, respectively. I do not think these limited looks will be sufficient to move the share price meaningfully higher than where it is now. Some life sciences investors anticipating Moffitt's results might dip a toe or two into the water, but the vast majority of folks are more likely to wait for the conference presentation(s). Current wisdom appears to be that Moffitt's full set of data, observations and conclusions will be of overwhelming significance to Big Pharma and life sciences investors.

Dermatology needs more time. I do not think a first term sheet will be extended to the company for Provectus' dermatology business before quarter-end to trigger the formal hiring of the financial adviser/investment banker and start of the auction process to out-license PH-10, even though the annual meeting of the American Academy of Dermatology (where management and its world-class dermatology advisory team should be) occurs in early-March. I think a couple of additional steps are needed, such as (i) the completion and writing up of the immunologic mechanism of action and toxicity characterization work by the investigative dermatology laboratory of a renowned university and (ii) the setting of an end-of-Phase 2 meeting with the FDA.

China, China, China. While I don't think ultimately not consummating a China deal is the end of Provectus' world, I very strongly believe management must close a substantial regional license transaction such as the one being contemplated in China (in the absence of a global oncology license being consummated in its place). China is first up; India and Japan will take time and very likely not be completed this quarter. A China deal (i) provides the company with needed cash for pivotal and key clinical trials without equity dilution, (ii) helps management regain a substantial amount of credibility it lost from the sub-par execution and unfortunate outcome of the ill-fated preferred share PVCTP "IPO," and (iii) dramatically increases management's credibility, to nearly match their credibility as innovators, because of the size, scope and quality of the contemplated China deal. On balance, I am impressed with management's China deal process. Process comprises both transaction steps and outcome.

Adam Feuerstein tweeted the following today:

(click to enlarge)

The Celsion (NASDAQ: CLSN) deal earlier in January was a call option-license transaction, with the option owned by Hisun. The option premium was $5MM. CLSN jumped 10-15% on the announcement of this pseudo-deal (about $25-30MM on a $250MM market cap). After poor ThermoDox Phase 3 results, Hisun walked away having lost the premium it paid.

Opexa Therapeutics (NASDAQ: OPXA) entered into a similar call option-licensing transaction with Merck Serono. Opexa receives a $5MM upfront payment for granting Merck the option to exclusively license Tcelna (imilecleucel-T) for the treatment of multiple sclerosis. OPXA jumped 160% today (about $10-11MM on a $7-8MM market cap).

Thus far, the substance of the contemplated China does not appear to have wavered. Structure seems customary, with no ifs, ands or buts. In the absence of anything else happening at the time a deal may be concluded, perhaps in late-February, I think the China deal could push the share price well above $2 (an increase of more than 200%, or about $150-160MM on a $70MM market cap) and keep it there.

The overhang of warrants at $1 (11MM), $1.12 (4MM+), $1.25 (5MM+) and $1.50 (~3MM) may create downward pressure on and several ceilings for the stock. Upward pressure may come from the SPA's arrival shortly after a China deal is inked, more than a hint of Moffitt's data and opinion around the same time, and the greater audience and buying that comes from a shift to a major stock exchange like the NASDAQ (5 consecutive days of greater than a $2 share price). Competing pushes and pulls will be resolved somehow, and perhaps we end the quarter closer to $5 than 60 cents.

Adam Feuerstein also wrote today about ZIOPHARM Oncology and the Feuerstein-Ratain Rule, and the likely outcome of this company's pending phase 3 sarcoma trial. With a market cap of $350MM, historical microcap oncology company data suggests a 17% chance of success, which is better than 0%, but a far cry from an ~80% success rate for $1B+ market cap companies.

Feuerstein's greater message is this: "The logic behind the F-R Rule borrows a bit from Occam's Razor. Good cancer drugs are scarce and valuable commodities, and potential Big Pharma partners and institutional investors are forever scouting for opportunities to buy, license or invest in companies with drugs that have a high probability of success. Said another way, there are very few, if any, cancer drugs that come out of nowhere to be big sellers."

A China-Moffitt combination can be very powerful, increasing Provectus' market value to the point where it "...can be a reasonably accurate proxy for the future success of a cancer drug in a phase III clinical trial."

I asked Pete, in his many meetings since SSO and, later, ESMO with Big Pharma, key opinion leaders, serious life sciences investors, etc., whether anyone had expressed skepticism about PV-10's efficacy, safety and benefit. He replied that literally no one has been skeptical, and attributed this lack of skepticism to the undeniable safety history of Rose Bengal as well as its obvious data sets of its use.

The issue for management from the beginning, I think, has been the necessity to show Rose Bengal delivered intralesionally or locally provides a systemic benefit. I also think no one initially and for some time believed Craig when he described his philosophy to curing cancer, the approach as manifested in the action of the drug itself, and the work he had done to demonstrate a Rose Bengal cure. Many more believe him today, after successful clinical trials, mouse work that is filling in more portions of his canvas' painting, and various and varied work by investigators and researchers around the world.

Disclosure: I am long PVCT.OB.

Additional disclosure: I am a large shareholder of Provectus Pharmaceuticals. I have not sold any shares as of this Instablog submission.

Taken From Connecting The Dots...Provectus Pharmaceuticals (February 4, 2013).

Celsion's share price was obliterated last Thursday, down more than 81% and lower than price levels in 2012 before the stock made a dramatic run-up later in the year. On Friday, the stock dropped nearly 13% more. This morning it is down another 10%. Celsion "...announced what appeared to be an absolutely catastrophic failure from their Phase III heat trial for ThermoDox," and succumbed to the Feurstein-Rattain rule.

I am less interested in the stock, and more interested in comparing Celsion's deal with Chinese pharmaceutical company Zhejiang Hisun Pharmaceutical ("Hisun") with Provectus' contemplated China deal and the process by which both companies arrived at where they are.

The Celsion deal essentially was a license transaction call option owned by Hisun. Positive ThermoDox results were necessary for Hisun to exercise its option to further negotiate an eventual license transaction for China, Hong Kong and Macau. While Hisun is not one of the top pharmaceutical companies in mainland China (according to 2011 market caps), based on the table (below) I previously published, I must acknowledge I previously was incorrect about suggesting or implying the no name-ness of Hisun, which launched a joint venture with Pfizer in September 2012, Hisun-Pfizer Pharmaceuticals Co.

I am a big fan, proponent and practitioner of process. Good process doesn't make a bad deal good, but can make a good deal great. In the case of Provectus, management's good process could make a good China deal a great one.

Success in China for Western companies appears based on working with that country's federal government as a partner, rather than acting antagonistic, ignoring it or not involving it in one's process.

Engaging in business in China as a foreign entity can be a very challenging endeavor for the largest of multinational corporations, let alone a small biotechnology company like Provectus. Two issues usually arise, the positive resolution of which typically bode well for success: the presence or lack of government support and, depending on the industry sector and business application, sufficient or insufficient intellectual property protection.

Many companies have enjoyed success because of a fruitful and "eyes wide-open" relationship with the Chinese state. When I traveled there a few years ago, that was the message of the CFO of Intel's Dalian-based organization: see and seek the government as your partner, not your opponent. Just ask how successful Google and Paypal, among others, have been in trying to thwart or circumvent the Chinese government.

A regional oncology deal in China between Provectus and a Chinese Big Pharma company has been in the works for several calendar quarters. The making of a deal emerged earlier this year in the spring. The company has worked through a process of due diligence, evaluation and negotiation to arrive where it is today.

In late-November, after a good amount of groundwork was laid, Peter traveled to China to meet with potential strategic partners and a bevy of government officials. There are multiple prospective partners for now (all of whom apparently are on the list of the top local pharmaceutical companies according to market cap above), and Provectus still is assessing the optimal one. On the government side, Pete and his intermediaries met, differently (Pete's intermediaries met with all of them, while Pete met with some of them), with senior leadership of the office of the Premier of the People's Republic of China, the Ministry of Health, the Ministry of National Defense, and the State Food & Drug Administration.

It appears he left China having established a good working relationship with the government and government officials, a relationship that since has permitted Provectus and its advisors to now work with prospective strategic partners to finalize a license transaction with a down-selected one on top-line terms and conditions blessed by the government. Government support of Provectus, PV-10 and the business relationship between the company and the eventual strategic partner has been established, as I think has been the intellectual property protections afforded Provectus (with which I think management is mostly comfortable, or understanding or realistic of how the relationship might work in the context of their IP and its protection or lack thereof).

When Pete returns from his late-February trip to China (this assumes, of course, he does travel), he could bring home a signed deal and the contemplated upfront cash payment. These monies could fund the pivotal MM Phase 3 trial, to-be-finalized HCC (liver cancer) Phase 2/Phase 3 trial and, possibly, and one or two more Phase 1 trials, and contribute to other corporate use of funds.

An interesting situation arises, since the prospective partners all appear to be from the table above, with the China subsidiaries (WFOEs/WOFEs, which I think is unlikely, or acquired domestic subs) of key Western Big Pharma companies. I need to do more homework on this aspect or facet of a potential China deal.

Of course, Pete may not be successful. Deals break down or do not come to fruition for both substantive and silly reasons. As cliched as the phrase is, only time will tell.

Disclosure: I am long PVCT.OB.

Additional disclosure: I am a large shareholder of Provectus Pharmaceuticals. I have not sold any shares as of this Instablog submission.

Taken From Connecting The Dots...Provectus Pharmaceuticals (January 27, 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 lasted 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 intended 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.

Disclosure: I am long PVCT.OB.

Additional disclosure: I am a large shareholder of Provectus Pharmaceuticals. I have not sold any shares as of this Instablog submission.