Ophthalmology Deal Structure

A to-be-formed Provectus spin-out would advance the combination therapy of Bascom Palmer's light source (device) and a formulation of Provectus’s pharmaceutical-grade rose bengal sodium (drug)

On Wednesday, March 27th, Provectus announced that it entered into an agreement with the University of Miami (the “University”) for the exclusive worldwide license of the University’s intellectual property related to photodynamic antimicrobial therapy (“PDAT”) for treating bacterial, fungal, and parasitic (acanthamoeba) infections of the eye.

The license agreement contemplates Provectus forming a majority-owned start-up company in which the University would be a minority equity shareholder, aimed at developing and commercializing the University’s PDAT medical device in combination with a formulation of the Company’s proprietary pharmaceutical-grade rose bengal sodium (“RBS”) active pharmaceutical ingredient. Provectus would contribute the license to the new entity and have an exclusive RBS supply arrangement with it.

Rose bengal PDAT emerged under the leadership of Jean-Marie Parel, IngETS-G, Ph.D., FARVO, Director of the Ophthalmic Biophysics Center (“OBC”) at Bascom Palmer Eye Institute (“BPEI”) at the University of Miami Miller School of Medicine. The OBC team and Dr. Parel have spent many years advancing their PDAT technology using rose bengal against different types of treatment-naïve and -resistant keratitis. The OBC has established the merits of its innovation through extensive in vitro testing, pilot in vivo safety and clinical studies, and the scrutiny that comes with numerous peer-reviewed publications and medical conference presentations of rose bengal PDAT’s methodology, datasets, and results. BPEI’s rose bengal PDAT is also the subject of two international randomized, double masked, clinical trials for acanthamoeba and fungal (NCT05110001) and bacterial (NCT06271772) keratitis.

Provectus filed an associated Form 8-K with the SEC that summarizes the business terms of the license agreement and includes a copy of the agreement.

In a nutshell

The potential risk, downside, and cost to Provectus — if the Company does little or nothing in the next 12 months — is an upfront fee of $10,000 paid to the University and the loss of the license.

Underscoring the license agreement is the potential creation of a new biotechnology start-up company: “NewCo” in the license agreement and “EyeCo” in this Substack post. The University agreed to Provectus contributing the license to EyeCo, and Provectus plans to contribute an exclusive license for RBS supply to it. Thus, EyeCo has an initial treatment (i.e., device + drug) and an initial indication (i.e., infectious keratitis).

The potential reward, upside, and opportunity to Provectus — if the Company launches EyeCo — is the potential value of the equity that Provectus would own of EyeCo as an emerging ophthalmology business through the life cycle of its birth, operation (and investments in it), growth, and potentially acquisition. This upside could potentially be substantial.

Initial regulatory strategy

Provectus plans to potentially meet with the OBC team, BPEI senior leadership, and others at the University in April to discuss a variety of topics.

The crux of Provectus’s regulatory strategy (based on preliminary discussions with a regulatory consulting firm) is to potentially leverage the sum total of available clinical data — data generated by BPEI and/or international medical centers who have used the OBC’s device and commercial-grade rose bengal-based “drug” (potentially up to 600 people; potentially not including the two above mentioned clinical trials but subject to confirmation) — when seeking a pre-Investigational New Drug (“IND”) meeting with the FDA.

The goal of this potential regulatory approach is to mitigate having to start from scratch with the device and an RBS-based drug product candidate. The consultant’s belief of potential outcomes could range from, at worst, just establishing safety and needing prove to, at best, demonstrating some measure of activity or efficacy with a potential bridging study to fill the clinical gaps.

The consultant’s premise is that commercial-grade rose bengal (e.g., the 80% and/or 95% dye content rose bengal from Sigma-Aldrich used by BPEI) represents the potential floor of safety and efficacy compared to what a comparable formulation of Provectus’s pharmaceutical-grade RBS could potentially achieve.

FDA feedback from the pre-IND meeting should then help to hone EyeCo’s business plan.

Scenario planning EyeCo

At the outset of EyeCo’s creation and launch, Provectus would own 95% and the University would own 5% of its common stock, respectively.

Trying to keep this example as simple as possible, a subsequent series of venture capital-type steps could be, but do not necessarily have to be or may not be:

First, potentially raise a Series A preferred stock round of $5-10 million at some initial valuation of EyeCo to potentially achieve some initial set of milestones. Such milestones could include achieving a consensus with the FDA on a clinical development plan, generating bridging study data from the investigational therapy of OBC device and Provectus drug, and hiring seasoned biotechnology executives to lead EyeCo. A key outcome would be the pre-money valuation of this round; that is, the valuation of EyeCo that would determine the amount of dilution incurred by Provectus and the University for this step.

Second, potentially raise a Series B preferred stock round of $10-25 million to potentially achieve another set of milestones. Such milestones could include undertaking a pivotal randomized controlled trial (versus the standard of care) to seek approval of an initial indication such as first-line bacterial keratitis, and hiring experienced executives. A key outcome, again, would be the pre-money valuation of this round, where such further investment would further dilute the equity ownership of Provectus and the University.

At this point, if EyeCo has been successful in achieving some, many, or all of its milestones, and depending on the industry backdrop, EyeCo shareholders (e.g., Series A, Series B, the University, and/or Provectus) could encourage the company to pursue a Series C preferred stock round of funding to become a commercial-stage ophthalmology company (remaining private for some further amount of time), to pursue an initial public offering (raising a further round of funding for its then-business plan), and/or seek to be acquired by a commercial-stage pharmaceutical company.

Provectus’s goal in this process of business building is to try to maximize the value of its EyeCo share ownership for Provectus shareholders, while also trying to maximize the value of EyeCo shares for its shareholders.

We believe that the spin-out for an ophthalmology-focused business involving RBS potentially allows for more focused business by those charged with leading EyeCo, helps validate RBS’s medical science platform, is much less or not at all dilutive for Provectus shareholders in trying to expand the platform, and could provide some-to-substantial capital for re-investment in Provectus (for our cancer and other priorities) if EyeCo goes public and/or is acquired, and Provectus’s shares in EyeCo are monetized.

What we don’t know, yet…

Provectus’s success in ophthalmology and this proposed approach, or lack thereof, will play itself out from the fundraising that the leadership of EyeCo and we will have to do.

There are current unknowns that make it difficult, but far from impossible, to forecast the overall success trajectory of EyeCo (from Provectus’s perspective), such as the potential valuations of the fundraising rounds mentioned above (and thus the value of Provectus’s EyeCo ownership).

The University’s Office of Technology Transfer has been collaborative, understanding, and accommodating through this process, and is open-minded about the potential flexibility of the timelines in the agreement. They and we want to see EyeCo be as successful as it can possibly be.

Provectus may hold a conference call for shareholders if and when EyeCo is launched and a Series A round of funding is closed.

Each catalyst for EyeCo could be a catalyst for Provectus. EyeCo’s story is just beginning. Stay tuned to this space, the Provectus Substack, to learn more.

Forward-Looking Statements

The information provided in this Provectus Substack Post may include forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, relating to the business of Provectus and its affiliates, which are based on currently available information and current assumptions, expectations, and projections about future events and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Such statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are often, but not always, identified by the use of words such as “aim,” “likely,” “outlook,” “seek,” “anticipate,” “budget,” “plan,” “continue,” “estimate,” “expect,” “forecast,” “may,” “will,” “would,” “project,”  “projection,” “predict,” “potential,” “targeting,” “intend,” “can,” “could,” “might,” “should,”  “believe,” and similar words suggesting future outcomes or statements regarding an outlook.

The safety and efficacy of Provectus’s drug agents and/or their uses under investigation have not been established. There is no guarantee that the agents will receive health authority approval or become commercially available in any country for the uses being investigated or that such agents as products will achieve any revenue levels.

Due to the risks, uncertainties, and assumptions inherent in forward-looking statements, readers should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this Provectus Substack Post are made as of the date hereof or as of the date specifically specified herein, and the Company undertakes no obligation to update or revise any forward-looking statements, whether because of new information, future events, or otherwise, except in accordance with applicable securities laws. The forward-looking statements are expressly qualified by this cautionary statement.

Risks, uncertainties, and assumptions include those discussed in the Company’s filings with the U.S. Securities and Exchange Commission, including those described in Item 1A of Provectus’ Annual Report on Form 10-K for the period ended December 31, 2022 and the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2023.