I love it on Malz. You level up your E first and at level 9 with blackfire torch you are literally doing 25% of the enemies health with one dot.

Since it's 5% of CURRENT hp, you don't really need to reapply, as the effect becomes very weak.

Still, it's best on Swain (who's also best with rylais, as he has 2 single target spells with a low-ish cd)
Leblanc is pretty also good with it.

Poppy and Elise might work well with it, if it applies fully to their respective single target skills.

I was thinking it might work better if it did 2.5% current health plus 2.5% max health, that way it's strongest against a full health target but not useless against those with less health. Any thoughts?

Theoreticly, it's strong on champion that are going to be harassing from a distance, over time.

In practice, because of it's build path, it's best on champions like Amumu, Singed, and the like. Because it stacks with their damage over time, because the health scales better on them because they'll be building tanky items which synergize with it. It's really a AP-Tank-item, not a Burst AP item.

Additionally, look at it this way: A burst mage takes you to half health in their first volley, then the blackfire proc ticks away for 3 seconds, taking 5% of your current health, equal to roughly 2.5% of your total health. Compare it to Singed, who runs in, poisons you, the proc immediately starts ticking away dealing 2.5% of your current health, which is almost full, and this the damage it deals is actually about the same: 2.5% of your total health for 3 seconds. The difference is that because it's a DoT effect instead of a burst effect, it is reapplied with each poison tick, and lasts an additional 3 seconds after the last tick, and thus the total time it's effect is active is going to be more like 6-10 seconds, depending upon how long you stand in the poison.

Swain...

Either way the item is OP for constant proc champs and worthless for those that do not constantly proc.

If they wanted a fix they would raise the damage and make an internal CD on the item. Make the drain over a longer period of time and viola! You have a viable item!

Try it on Ahri, she makes that thing amazing with how her W and ult work, not to mention her taunt is single target.