(EDITOR’S NOTE: This is the second article in a multi-part series exploring the evolution of Provectus Biopharmaceuticals Inc., a Knoxville-based company that traces its roots to research undertaken at Oak Ridge National Laboratory. Since its founding in 2002, the company has experienced a rollercoaster history even for a biotech company. Today, the leadership team that resurrected the company several years ago has it on what they believe is a well-defined path to successful commercialization of drug products in the next few years.)
Ed Pershing and Dominic Rodrigues fuel each other’s passion for the long-term impact that they believe Provectus Biopharmaceuticals Inc. can have on the lives of individual cancer patients as well as Tennessee residents. Their goals are simple but significant: provide a drug that is affordable and effective in treating solid tumor cancers and keep that company in East Tennessee.
Sounds simple, doesn’t it? That’s not been the case.
I first me Pershing less than 18 months after he co-founded PYA, the power behind teknovation.biz, and have worked fairly closely with him since joining the firm in January 2012. During the ensuing years, we have heard him decry the high cost of many drugs, putting them out of reach of all but wealthy countries.
Initially as simply shareholders in Provectus, Pershing and Rodrigues formed a strong bond after meeting in 2010 and began reading as much as they could about the development and commercialization of new cancer drugs. They shared their thoughts in regular calls to each other as they analyzed and assessed the biopharmaceutical industry and the competitive landscape that Provectus faced.
“The more we learned, the more skeptical we became about the impact and pricing of new drugs,” Pershing said, with Rodrigues adding, “The industry has evolved into drugs affordable to the few and accessible to even fewer.”
That was clearly not their vision for PV-10, the inaugural drug that Provectus hoped to commercialize after successful clinical trials. They wanted a drug that could be offered to treat anyone, from those in impoverished areas like Africa to places like Appalachia in their own country.
What they saw in PV-10 was a drug that sparked an individual’s immune system to literally fight the cancer using his or her body. The basis of the drug is something called Rose Bengal, a sodium salt that was commonly used in eye drops to stain damaged conjunctival and corneal cells to identify damage to the eye. PV-10 is a purified formulation developed by Provectus.
Skepticism about big pharma also began to extend to the executive leadership at the Knoxville biotech start-over. In the view of Pershing and Rodrigues, top management was simply not using resources wisely, thereby missing important milestones that face any drug being poised for eventual approval by the U.S. Food and Drug Administration.
The start of D-Day for the old Provectus occurred on June 14, 2016.
“I decided I had to confront the Board of Directors, executive management team, and their attorneys,” Pershing said. By then, there was an investigation underway by the U.S. Securities and Exchange Commission (SEC), and the company’s former Chief Executive Officer (CEO) had been accused of embezzlement three months earlier.
Pershing headed to the annual shareholder meeting in New York City where he says that “I voiced they were on a path to destroy the company, go into bankruptcy, and lose the drug to the ash heap of history. I went back to New York City on July 18 to meet with the Board Chair and another independent Director who also chaired the Audit Committee. I was quite vocal about how they were raising additional funds in a foolish and irresponsible manner and how those actions were destroying the capital structure of the company.”
It took several months, but at 4:07 p.m. on December 27, Pershing received a call from the Board Chair informing him that the Interim CEO, who was the former Chief Financial Officer, had been fired for cause and the Board wanted Pershing to become a member.
“That (joining the Board then) was not a viable solution for me due to the past conduct of the Board members and the looming outcome by the SEC in the investigation of the company,” Pershing explained. What followed in early 2017 were many lengthy discussions with Rodrigues at the same time the Board had engaged a consulting executive who had pharmaceutical expertise to advise them and also a search firm to find a new CEO.
“I had a number of conversations with the consulting executive,” Pershing said. When the search proved unsuccessful, Pershing and Rodrigues, along with Bruce Horowitz, were well-positioned with a plan to save the company and avoid bankruptcy that would have wiped-out existing shareholders. Rodrigues had introduced Pershing to Horowitz, a former Managing Director of Capital Strategists LLC and a trained lawyer experienced in capital markets and turnaround situations.
“We got control in early April 2017,” Pershing said. The trio informally created the PRH Group and structured an investment vehicle with the three letters representing the first letter of their last names.
Because of his leadership role at PYA, Pershing could not join the Board while Provectus was under SEC investigation. Rodrigues and Horowitz joined the Board with the former becoming Board Chair and Audit Committee Chair.
“We fully cooperated with the SEC, requesting that they not fine the company in order to save the promise of the drugs, but go after the bad actors,” Pershing said.
Eight months after gaining control of Provectus, PRH received the news the Principals had hoped to hear from the SEC. In the SEC’s announcement, Jeff Peikin, the federal agency’s Co-Director of its Enforcement Division, made the following statement: “The SEC’s settlement with Provectus – which does not include any penalty – takes into account the proactive remediation and cooperation by the company’s new leadership. Provectus fired wrongdoers, took other steps to remedy its controls, and provided SEC staff with critical information regarding its former executives’ expense reimbursement abuses.”
The full-report also noted the following: “In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondent (Provectus now under PRH leadership) and cooperation afforded the Commission staff. Specifically, Provectus undertook remedial efforts, including (i) through its Audit Committee, retaining independent outside counsel and a forensic accounting firm to conduct an investigation; (ii) replacing its Chief Financial Officer and Interim Chief Executive Officer; (iii) instituting legal action or other steps to collect repayments from its Chief Executive Officer and Chief Financial Officer; (iv) hiring a Chief Operations Consultant and a Controller, both new positions; (v) replacing the firms that provided or assisted with bookkeeping and internal audit and controls testing; and (vi) implementing new internal control procedures and policies concerning travel and expense reimbursement. Further, following its investigation of Dees’ travel expenses, a Special Committee of Provectus’ Board, utilizing independent counsel and a forensic accounting firm, reviewed executive expenses in general, and then devoted several months to investigate Culpepper’s travel expenses. Provectus voluntarily shared the results and details of the Audit Committee’s and Special Committee’s investigations, which reduced the time and resources necessary for the Commission staff to conclude the investigation.”
Grateful to the SEC, Pershing assumed the Board Chair slot in April 2018, and PRH set about continuing to execute the strategy they had to save the company and commercialize what they describe as its very impactful medical science and cancer drug.
NEXT: Where does PV-10 stand? What are the near-term plans?