By Jake King
On Wednesday, Navidea Biopharmaceuticals (NYSEMKT:NAVB) announced that two institutional investors, including J.P. Morgan Asset Management, purchased $4.8M shares of its common stock in an overnight transaction. Impressively, the deal was done "at market" (price of $3.10) with no options or warrants, and added some fresh capital to the business. While only J.P. Morgan asset management, a high quality healthcare investor, was named as a buyer, sources say the other party is a sophisticated healthcare mutual fund or hedge fund. Given that the company had no plans to raise money ahead of the potential Lymphoseek approval (anticipated in late April), no warrants or options were included in the transaction, and that the deal was done at market prices, we believe that the investors actually approached the company to get into the deal in one large purchase. This is known as a "reverse inquiry" in the market, and helps to validate the company's story with sophisticated investors doing deep due diligence. As a result, we see this announcement as a major positive for the company. Lymphoseek is a radiopharmaceutical agent being developed for use in intra-operative lymphatic mapping and lymph node imaging. The FDA will decide on Lymphoseek's approval by April 30, which we consider a high probability event based on Navidea's quick turnaround on a manufacturing-related Complete Response Letter (NYSE:CRL). Lymphoseek has a shot at a large and lucrative market if it can demonstrate lymphatic mapping capabilities in a broad array of oncology indications (read PropThink's full report here).
More validation that Lymphoseek has a high likelihood of FDA approval. NAVB reacted favorably to the equity sale and climbed 3% in the early part of the trading session. However, we believe that this news will continue to push the stock higher, as new investors gain a better understanding of the transaction and realize that the vote of confidence from these major healthcare funds indicates FDA approval for Lympohseek is a high probability event. On the technical side, after breaking through key resistance early this week, shares are set to continue an up-trend.
PropThink's initial NAVB report put eyes on the stock on January 17th, and daily trading volume soared. This was met by strong turnover in the share base over the following few trading days, which, we believe, "cleared out" any remaining sellers. After breaking through some major near-term resistance, NAVB has shed selling pressure and is now on an upward climb into the FDA decision date on Lymphoseek in April. The next key level for the stock is $3.25, with a break out above that level opening up a move to $3.50. Ultimately, we believe NAVB could again hit its 52-week high before the April 30 PDUFA, as the stock reached the $4.77 level in front of Navidea's original PDUFA. That was September 10th of last year, when FDA issued a complete response letter in relation to Lymphoseek's New Drug Application, citing third-party contract manufacturing issues, not safety or efficacy, as reason for the temporary rejection.
Nevertheless, NAVB has remained in the dog house since. But with just three months until the FDA makes an approval decision, we expect the stock to continue climbing.
Disclosure: I am long NAVB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Jake King. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein.You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. Our full disclaimer is available at www.propthink.com/disclaimer.