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Executives

Mark Pykett - President & CEO

Brent Larson - SVP & CFO

Analysts

Navidea Biopharmaceuticals, Inc. (NAVB) Citi 2013 Global Healthcare Conference Call February 26, 2013 11:05 AM ET

Unidentified Analyst

Navidea Biopharmaceuticals, we've got with us today Mark Pykett who is the CEO, and Brent Larson who is the CFO. We are going to go into a short presentation from Mark and then we are going to turn over to Q&A. So Mark, thank you for attending.

Mark Pykett

Thanks very much [Matt]. It’s a great pleasure to be here today and we thank you for the invitation to this great conference. Its very nice to be welcomed among larger companies to be able to tell them Navidea story and we hope that during the course of today's presentation we will be able to make a suitable introduction about Navidea, so that the participants in today's conference can have an introduction to the company and lots of emerging companies in the precision diagnostics space.

Before I begin, I'll remind you that today's presentation will contain forward-looking statements and I encourage you to read our public filings and disclosures.

So Navidea develops and commercializes targeted precision diagnostic agents that can identify the presence and status of disease to improve diagnostic accuracy, clinical decision making and ultimately patient care. So our business is very much about identifying the right patient at the right time so they can get the right therapy, the right intervention and ideally the right outcome. This is a very important and emerging area of medicine we believe in healthcare given the increasing focus not only on healthcare effectiveness, but also on healthcare efficiency and we think this is a great area for Navidea to be growing the business and to be potentially successful and given the emergence of precision diagnostics and precision medicine in the healthcare landscape and its actually a gateway to the delivery of more personalized healthcare in the coming decade. So we are very excited to be in this space. We think it’s a very fertile ground to be working in.

Over the last few years we've taken great measure to position ourselves within the precision diagnostic space as a leader in the development of agents that can help to pinpoint disease to be able to determine the presence and status of disease across a range of therapeutics areas. And today, we are developing and are working in two therapeutic areas, neurology and oncology. In the oncology space we are developing Lymphoseek which is our radio pharmaceutical for intra operative lymphatic mapping. It’s an agent that has completed a series of well controlled clinical studies very successfully including two Phase 3 studies in patients with breast cancer and melanoma. And on the basis of those Phase 3 studies of the breast cancer melanoma, we filed our NDA with USFDA and have a PDUFA date of April 30th this year. Following approval, we believe we are very well positioned with our partner Cardinal Health to commercialize the agent in the United States.

We believe one the basis of the date that we filed that we will get a very strong label for Lymphoseek in the areas of breast cancer melanoma initially and then be able to move that into other cancers as we move forward. And for that reason in part, we've also been working in the head and neck in colorectal cancer spaces and I'll talk about those cancers in just a few minutes.

Like the filing with the USFDA, we also filed our marketing authorization application with the European regulators for Lymphoseek last December and are looking forward to moving that review forward in order to gain approval in Europe as well. As I mentioned, we are working in the head and neck cancer space. Our NEO3-06 Phase 3 clinical study in head and neck cancer has arrived at an interim analysis point and we believe we will be developing data in the head and neck cancer trial later this year. And lastly, about a month ago we announced that we had begun an investigator initiated study in colorectal cancer.

In the oncology space, we are also working with another technology called RIGScan which we hope to bring forward into the clinic this year after completing some manufacturing activities.

Switching over to the neurology space, we have in license two very promising Phase 3 ready agents. The NAV4694, which we believe is a best-in-class agent for the detection of Amyloid deposits in the brains of patients suspected of having Alzheimer’s disease and NAV5001 which we believe is the best-in-class spec-imaging agent to be able to help diagnose Parkinson’s disease and movement disorders.

In the NAV4694 space, we believe we will begin our pivotal Phase 3 registration study this year in patients who have Alzheimer’s disease and will undergo an autopsy based trial. In the mild cognitive impairment space, we will be beginning a Phase 2b study early this year to access patients who have earlier stage cognitive impairment. This is a very important study because this is clearly the direction that the field is moving, to be able to diagnose dementia and cognitive impairment earlier and earlier. This will be a very nice adjunct study alongside the Phase 3 registration study.

In NAV5001, we're moving forward with our registration plans for that agent as well and expect to start Phase 3 registration studies for U.S. and European approval this year, but we'll also be pursuing a second Phase 2b study with that agent as well in patients with Dementia with Lewy Bodies. Another form of dementia alongside Alzheimer’s Disease that is one of the leading forms of dementia and represents a very nice adjunct to the 4694 diagnostic agent.

So let me talk about Lymphoseek now for a few minutes. Lymphoseek is a radio pharmaceutical that is used and has been designed for intra-operative lymphatic mapping. This is an agent that consists of a dextran backbone shown in black at the top, a series of Dtpa side shown in blue. Those Dtpa sides bind with a radioisotope technetium 99m which is the radio signal for this molecule and then a series of (inaudible) shown in green, which engage a receptor called the CD206 receptor which is found on the surface of the immune cells called macrophage and dendritic cells which reside in high concentration in lymph cells. And this ability to target that receptor that allows Lymphoseek to home to and bind within the key productive lymph that need to be biopsy to determine if cancer have spread in the lymphatic system from a primary tumour. So in this regard Lymphoseek is really the first and only receptor targeted agent that’s been develop for intra-operable lymphatic mapping to-date.

Now we have completed a series as I said of well controlled and successful studies and have arrived at a point where we believe that this will be a very successful commercial product both in the United States and Europe. Not only because of this receptor targeting principle which allows Lymphoseek to identify and stay within the key predictive lymph nodes, but also because of a very strong safety profile. Lymphoseek has been administered to over 550 patients and there has not been a single significant drug related adverse event reported to-date. So it has a very clean safety profile in an area where safety is very important.

On top of that Lymphoseek is a uniform small molecule. So it clears the injection site very rapidly after administration. That means that procedures, the lymphatic mapping procedures can be conducted very early on after administration of the agent that could be about 15 minutes. But because Lymphoseek engages that receptor that I mentioned, its sticks within the lymph nodes for up to 30 hours, so physicians have a large windows opportunity in which to conduct their procedures now to provide them a lot of flexibility in terms of manage their clinic.

As I said, we think with these characteristics that we will arrive at a strong label for Lymphoseek in the US and look forward then to positioning this product competitively alongside other agents which have been used for lymphatic mapping for number of years. And in that regard there hasn’t really been innovation in lymphatic mapping in some 30 years, so we think that physicians will be very interested in adopting Lymphoseek for lymphatic mapping applications.

Now I mentioned that we have done a series of very controlled and successful studies. These studies demonstrated the key ability of Lymphoseek to bind to and stick within the key protective lymph, so in that regard Lymphoseek has demonstrated a very high sensitively and specificity for identifying those key productive lymph nodes and not moving downstream to lessen formed lymph nodes. That’s very important because the whole point of lymphatic mapping procedure in the first place is to determine if cancer is present in the lymphatic system, so you want to be able to identify cancer one is present in lymph nodes. In that sense you want to lower the false negatively to a degree to which you lymph nodes that few contained cancer and we have shown in our studies that relative to competitive age Lymphoseek has demonstrated a 20 fold reduction in the degree to which falls negative result, that is the degree to which cancer positive lymph nodes are missed, and that’s very important because using Lymphoseek in our studies we have shown that nearly 10% of the patients in our studies were up stage using Lymphoseek that is they would have been under staged using the competitive agent overall.

I mentioned the very high, the very nice safety profile, the low frequency of adverse events with Lymphoseek; we have not seen anaphylaxis high percent sensitivities and things like that which are a part of the profiles of the other agents, the other agents have anaphylaxis high percent sensitivities pain upon injection. Lymphoseek is a very clean safety profile that as we have discussed it today.

On top of that Lymphoseek because of it’s receptor binding properties can be injected and then the lymphatic mapping procedure can be performed very soon after injection within about 15 minutes, but can go along with 30 hours after injections, that provides a large window of opportunity for physicians to conduct their procedures, if the ability to optimize their clinic to use and their productivity, within that it will be important in the overall efficiency of their clinic going forward.

Lastly, Lymphoseek will be reimbursed upon approval outside of the CPT code that covers the lymphatic mapping procedure. This is important because it means that physicians will get paid more for doing a lymphatic mapping procedure when they use Lymphoseek.

They may also be able to remove costs from the use of other agents that are covered under the CPT code. So not only will their revenue potentially go up, their margins may go up as well. So they will be able to get paid more for doing more procedures using an agent that we believe is safer and has better sensitivity and specificity character.

So we think that's a winning equation. We think this is good news for the patients with breast cancer and melanoma with lymphatic mapping is part of the standard of care in the United States today. That patient population is over 300,000 cases annually in the US alone. But there really are a host of cancers where lymphatic mapping could be useful but effective lymphatic mapping agents have not been developed to-date.

And those cancers include head and neck cancer where we are doing a Phase 3 study that's arrived at its interim analysis, colorectal cancer where we started our investigator initiated study, another cancer such as prostate cancer, lung cancer, cervical cancer and so on.

And we intend to move step wise through these cancers to demonstrate the value and usefulness of Lymphoseek in lymphatic mapping in these other cancers. When you add all those cancers together then there's nearly four times the number of cancers in the US alone beyond just the breast cancer and melanoma patient population.

So over 1.2 million patients in the US and of course lymphatic mapping is part of the standard of care around the world. So there's an opportunity to bring this product overseas and again that's part of our strategy. When you look at that total available population then it’s 25 to 30 times the current market in the United States.

When you think about the opportunity for Lymphoseek, we think its best to think of this as an opportunity in multiple kinds of cancers with truly global potential. So the access to the markets in the United States we think we are ideally positioned with the premier radio pharmaceutical commercialization partner in the US Cardinal Health.

Cardinal Health has over 65% market share and about 95% market reach. So they can get this product to the hands of physicians who want to use it. We have already done sales force training and radio pharmacy training with Cardinal Health. We have prepared the promotional literature to be able to distribute upon approval. We have a launch plan in place. We've actually begun market conditioning activities where we are seeding interest and enthusiasm for the agent to build awareness and to drive adoption of the product in the US after approval.

From an economic perspective, our agreement with Cardinal Health is a very attractive agreement. It’s a revenue sharing agreement in which we receive about 50% of end user revenue. And on that 50% that flows to us we have very good gross margins about 75% to 80%. That 75% to 80% then means that roughly 35% to 40%, 37% to 40% of end user revenue is flowing to Navidea’s EBITDA line.

We think that's a very important pretax yield. In fact, we think that one of the drivers for the valuation of this company will not only be top line revenue but will also be EBITDA yield. We've encouraged people to take a look at that as part of the components for understanding not only Lymphoseek but Navidea as well.

So there's certainly a lot to look forward to for Lymphoseek. We have obviously the pending US approval after which we will launch in the United States with Cardinal Health. We are looking forward to full progress with the EMA on the marketing authorization application that was filed with the Lymphoseek.

We are looking forward to developing partnerships outside the United States for commercialization of Lymphoseek not only in Europe but in other countries and territories around the world as well. And then there will be a lot of data from Lymphoseek we think in the coming months. Data from the interim analysis over head and neck cancer study.

Data from colorectal study that has recently begun but the real reason for showing the slide I think was more to talk about the strategy. Certainly upon approval of Lymphoseek in the US, we believe that we will have a solid position in the breast cancer and melanoma markets and from there we can expand into the other kinds of cancer where lymphatic mapping maybe useful but the current agents have not proven satisfactory such as head and neck cancer, colorectal cancer, prostate cancer and so on. Then we intend to take the product worldwide, develop, register in the US, register in Europe and bring it to other countries around the world.

And lastly, on the basis of studies like the NEO3-06 Phase 3 study, we believe that there are labeled expansion opportunities, where we can begin to get a broader and more persuasive label and one of the ways we can do that is by pursuing a claim for Sentinel Lymph Node Biopsy, which we believe maybe enabled by success in our head and neck Phase 3 study.

The bottom line of this is that we intend to use Lymphoseek revenues to be able to support development of the rest of our pipeline programs. We think that’s an important part of your financial evaluation of Navidea and its current position.

So let me in just a few minutes move on two other pipelines programs very briefly. Then we will move on to the questions and answers. The first is NAV4694, which as I said at the beginning, we believe is a best-in-class PET imaging agent to be help diagnose Alzheimer’s disease and mild cognitive impairment and other forms of dementia.

Now the reason we think this is a true best-in-class second generation agent is because of the exquisite specificity and sensitivity of this agent. From a specificity standpoint, this agent finds very well to Beta-amyloid deposits in the brain and those Beta-amyloid deposits are one of hallmarks of Alzheimer’s disease and used as a biomarker to understand if a patient has, who has cognitive impairment truly does have Alzheimer’s disease or has some other form of impairment.

Not only does it binds very well to Beta-amyloid, it has very low binding to background white matter and this has been the problem with predecessor agents, first generation agents which have a comparatively higher degree of background binding to white matter, that reduces the signal-to-noise ratios and makes it hard to detect amyloid.

With 4694 and its low background binding you get very high signal-to-noise ratios, that means if you get very clean images that are easy to interpret, understand and read. On top of that, because you can see low levels of amyloid, you have the opportunity to potentially diagnose Alzheimer’s disease in cognitive impairment earlier in the course of its progression.

This is clearly where Navidea is heading. If you follow these (inaudible) as the interventional therapeutics using some of the antibodies, (inaudible) and so forth. Understanding emerging from those studies is that it’s important to be able to identify patients with earlier disease to see if you can intervene it earlier and have a better chance of having a therapeutic impact. This is exactly what we believe 4694 can do. They are able to detect lower levels of amyloid and diagnose the disease earlier as well as potentially to monitor disease progression overtime and track the effectiveness of the therapeutics that are being used.

Well this is an agent that is as I said going into pivotal phase Study 3 this year but it has gone through an extensive amount of clinical development so far which is just slide to show you what we are seeing with 4694 in clinical trials. These are for the collaborators of ours in Australia. The first thing to point out is on this graph the binding of our agent in the brains of patients who do not have Alzheimer’s disease so called healthy controls is very low shown in those blue circles whereas the binding in patients with known Alzheimer’s disease shown in the circles in red is very high.

It is a very large separation in that binding potential and it doesn't overlap meaning that there will be a very clear separation between those patients, who have amyloid and Alzheimer’s and those who don't. We have also seen recently some very interesting findings where patients with mild cognitive impairment, so earlier stage disease, there is a separation using 4694 that can be observed in the levels of amyloid in the patients with earlier staged disease, some have higher amounts of amyloid and these are the patients who maybe more likely to move onto full blown Alzheimer’s disease, some have lower levels of amyloid and lower signal of 4694. Those are the patients who may move on to other forms of cognitive impairment dementia.

So very early on, we may be seeing that there is the diligence solution between these patients. Therefore, we will know who to treat with anti-Alzheimer’s and anti-amyloid therapies or who to treat by other means, and that is a very important clinical question on the forefront of everybody’s mind today.

Very briefly on NAV5001. This is an agent that we believe has best-in-class potential as a PET imaging agent to help diagnose Parkinson’s disease and movement disorders but also to dementia with Lewy Bodies.

In this case, this agent binds with something called the dopamine transporter; loss of the dopamine transporter is a hallmark of Parkinson’s disease much as the appearance of amyloid is a hallmark of Alzheimer’s disease. So what are you looking with 5001 is a reduction in the binding potential and signal intensity, when a patient has Parkinson’s disease and that's what shown on these figures. The individual on the left does not have Parkinson’s disease, their region of the brain is intact and they produce a very strong signal and 5001 binds there.

The (inaudible) image on the right on the other hand is from an individual who does have Parkinson’s disease, the region of the brain expressing the dopamine transporter has undergone attrition and the signal is substantially lower.

So this gives physicians an objective visual test they could use to see whether that region of the brain has been affected and if somebody with movement disorders in fact does have Parkinson’s disease or does not.

This is an agent that we think has great competitive advantages against a product that's been on the market for about a decade and in the US for about a year and a half called DaTSCAN marketed by GE Healthcare. Fundamentally 5001 has binding selectivity for the dopamine transporter or DAT that is 14 times greater than the binding selectivity of DaTSCAN. What that means is like with some of the predecessor Alzheimer’s agent, DaTSCAN produces a lot of background noise initially. You have to wait four to six hours for the image to clean up so that you can get resolution and detect what's going on in that particular region of the brain that's affected, whereas with 5001 you can inject and begin imaging within about 15 minutes because it is very clean images that are produced and within about 45 minutes be completely down with the procedure.

That has tremendous implications for the productivity and efficiency of the clinics that we use these DAT binding agents to determine if patients with movement disorders have Parkinson’s disease or not. Very briefly from a financial standpoint, as of our last report, at the end of September we had about $11 million in cash on hand. We do have access to a $50 billion credit facility, through a lead investor of ours and we also were able in January to bring in about $4.5 million through some new investors including JPMorgan Asset Management.

From a capital standpoint, we have about 115 million shares issued in outstanding and about $153 million on a fully diluted basis. So we think we've got a very strong story. As I said we think this is an emerging company in the precision medicine and precision diagnostics landscape. We've accomplished a lot in the last couple of years. We are very proud of where we've taken the company, but we think there is a lot to look forward to. In many ways we are just getting started. We think there are a lot of near term catalysts, the approval of Lymphoseek, its launch, commercialization and the development of revenue.

Moving forward with European review for approval in Europe, data from the head and neck and colorectal cancer studies and then beginning our Phase 2B and Phase 3 studies for both 4694 and 5001. So thank you very much for your attention during this brief introduction and I'll have a seat now as we move to the Q&A.

Question-and-Answer Session

Unidentified Analyst

I've still got a few left, you hit some good topics but to start off the $8.6 million incident rates globally what is the lymphatic mapping market today in dollars and that was a little different because your product I think will be at a premium, but just given an idea of what the current market is today and then we will talk about the geography.

Mark Pykett

Sure. As we mentioned there's tremendous growth potential in lymphatic mapping market because of those cancers which represent large target patient populations, well in excess of what exists for breast cancer melanoma in any territory around the world in cancers like colorectal cancer, breast cancer, lung cancer and so on. So we think there's a lot of growth.

Today the focus is on the 300,000 cases in the United States of breast cancer melanoma where the vast majority of lymphatic mapping procedures are done. But we think because of its enabling characteristics and its strong performance attributes that Lymphoseek can really move lymphatic mapping into those other cancers and satisfy unmet needs that haven't been addressed and then when you look on a worldwide basis as I said something on the order of 25 to 30 times rather the size of the current US market is really the global opportunity that Lymphoseek has in front of it.

Unidentified Analyst

So if we go by region in the US we got April 30 it is the date, we are getting there, when you look at the things the FDA can do, are you still fairly confident, its on the GMP side or is there still a chance they could reexamine all dataset, I mean obviously you never know the FDA but how are you feeling about it now.

Mark Pykett

We are feeling very good. We made a lot of progress early on in addressing the specific questions that came back to us from the agency. Those questions were very circumscribed. We characterized them before. They were related to GMP observations at third-party contract manufacturing facilities. So we knew very early on what the package was that we needed to produce. We filed very quickly and the review at this point is gone to according to very customary timeline for the agencies. So we remain very confident today the problems were addressable that we have now addressed the problem and that we will be moving forward to (inaudible).

Unidentified Analyst

And is it fair to assume that just GMP or it could come before the PDUFA date or last that comes right around the PDUFA date, but my assumptions with GMP there is a chance it could below is that too aggressive or is that --.

Mark Pykett

No, even early on we said that that was possible. Now the PDUFA date is stated as April 30. So we can rely on that. But because of the somewhat small nature of the material that the FDA had to review and that they were manufacturing oriented, there is a possibility yet that they could grew this one quickly and that we could be approved, Lymphoseek could be approved before the PDUFA date.

Unidentified Analyst

And then one other change in the US market that’s relatively recent, (inaudible) finally got in, actually now about a year and a half ago. How has that change the market at all, does it change the opportunity better or worse for Lymphoseek?

Mark Pykett

It doesn’t really change the fundamental market opportunity because the approval of (inaudible) to-date is only in breast cancer melanoma and that agent was primarily being used off label in those cancers as one of the two agents that’s used in Lymphatic mapping. So it was, A, restricted to breast cancer melanoma patients for the most part. B, it was used off-label, and now it can be used on-label. But we think the real driver here are the technical and practical advantages of Lymphoseek will bring in the ways I outlined the sensitivity and specificity, a better safety profile but then also the economic benefits of being able to manage your clinic more efficiently, rise to optimal or peak productivity, schedule more patients and at the end of the day, get paid more for the patients that you are doing because of the reimbursement mechanism is there in place for Lymphoseek.

Unidentified Analyst

And then one more question, Lymphoseek, US, the head and neck trial, the NEO306, that started a while ago, why is that trial hard to in-roll than the breast cancer trial?

Mark Pykett

Well, certainly the target patient population is smaller in head and neck cancer. Our trial design had very tight and robust inclusion and exclusion criteria the one to be able to select patient who met criteria to be able allow them to undergo a full lymph node dissection. That’s a little different in the design of the breast cancer and melanoma studies, which didn’t compare to pathology standard. In this case we are comparing Lymphoseek performance through a true pathology standard. And that’s what gives us confidence that if the results read out well we may have an opportunity to go back to the FDA to augment the Lymphoseek label and seek a case on lymph nodes biopsy claim.

Unidentified Analyst

And then when is this data expected or do have a timeline yet?

Mark Pykett

We haven’t been explicit about the timeline but we think it will be later this year certainly.

Unidentified Analyst

And then switching gears with Europe, the MAA filed December 18th, should I still assume its roughly almost a year process, 10 months is that how you are looking at the timing?

Mark Pykett

That’s the way we are looking at it, yeah.

Unidentified Analyst

And then one different there is that you also did a study against Nanocoll. So why was that done in Europe and not in the US and does it help you, I think in terms of data against (inaudible) in the US?

Mark Pykett

We do, we think it is very helpful certainly that was part of the package that we filed with EMA because Nanocoll was used in lymphatic mapping procedures in Europe. So we are able to perform a literature base analysis using our trial results against a very large body of evidence in the peer review literature to show the Lymphoseek performed better in lymphatic mapping and breast cancer melanoma than Nanocoll. That’s important because colloids has a class to share some very similar attributes and we think that what has been shown now in the met analysis for Lymphoseek verus Nanocoll also applies other colloids as well and in fact we have presented those net analysis against US based colloids as well on both breast cancer and melanoma.

Unidentified Analyst

And then in the US searching that for a second, you just announced the collaboration with Maimonides Medical Center for colon, how is that trail differ has been a work with initial indication you are shooting for?

Mark Pykett

Well, this is an important step much like the head and neck trail and developing data that demonstrate Lymphoseek add value and other kinds of cancers, regardless of what our label is and initially what it might ultimately be physicians will still want to see practically use of the agent and publications on how the agent has been helpful in different setting. So colorectal cancer is a great area of us to move into, the Maimonides is a great medical center to be working with, but we expect to be doing those kinds of studies and other kinds of cancers going forward as well.

Unidentified Analyst

And this is an open label design, so how would we look at this in terms of clinical and getting an indication. Is it sort of attached or is it sort of the actual trail?

Mark Pykett

This will develop data to show the comparative localization rate of Lymphoseek in identifying lymph nodes in patients how had colorectal cancers recession. So it’s a very important study because it will rely on the performance characteristic of Lymphoseek to be able to demonstrate not only, there is a move from to primary tumor side down into lymphatics, but then remains a lymphatic for period of time where the binding can be visualized by imaging but can also be detective with instrumentation during the surgery to be able to remove those lymph nodes and access those lymph nodes which will give the answer about whether cancer has moved beyond the primary.

Unidentified Analyst

And then with this trail when can except this data?

Mark Pykett

As we did for this trail later this year as well.

Unidentified Analyst

And then just one quick question on Cardinal; its pretty obvious why you picked them, is there any need to augment their efforts; I saw you are doing the training already, but is there anything you need to do outside of them or do they, they are so powerful internally that you have full faith in their ability to sell the product?

Mark Pykett

Now we think that Cardinal certainly is the premier choice in the US from a number of different perspectives, but I think we are focusing on their strengths which are in context within nuclear medicine suite within the hospital and I think we are very thrilled to have them marketing in that particular angle. As we've said along we retained co-promotion rights, not necessarily to address breast and melanoma markets that really to help us in medical education and medical science liaison activities to really grow that market beyond that as I think we showed you in the slide, the 300,000 breast and melanoma market I think that's going to be where the Cardinal sweet spot initially is and then we are going to augment that by using medical science liaison activities to address that remaining 900 plus 1000 additional cancers that we think Lymphoseek can be applicable to in the United States and that's certainly a big part of the ongoing growth story for Lymphoseek. We think the initial market as we said is going to be ramped up in trying to address market share. But beyond that, the real growth story of Lymphoseek is really taking it into the other cancers and that's really where we plan to augment Cardinal’s activities.

Unidentified Analyst

And internationally there's I don't think there's a Cardinal type company out there, what is the plan for international distribution, or will you wait for approval or do you plan to have it locked up before potential approval day?

Mark Pykett

We are actively undergoing discussions with different parties within the European Union as well as some of the other Pan-Asian, Pacific-RIM countries as well. I think we can expect to see some things with core approval on that particular regard with respect to European and then the other markets will come on in a little bit more opportunistic fashion probably related to how US approval is augmented and powered in those particular markets.

Unidentified Analyst

And in Europe is there a chance to be more than one or will it be primarily be one?

Mark Pykett

If you were to look at the European market you will probably find that I'd say half a dozen likely candidates with all people that have radio pharmaceutical distribution experience, its one of the things that doesn't make a lot of sense to necessarily duplicate those efforts with brick and mortar, so we've talked to the logical parties within those markets and I think the name will be recognizable once we move forward.

Unidentified Analyst

Okay. And switching to Alzheimer’s; you gave a lot of data on the NAV4694, its clearly superior to the first-generation competition, how would you characterize some of the other competitors, the Amyvid, Flutemetamol and (inaudible) how do I do on those?

Mark Pykett

You did well, they are tranquilizers.

Unidentified Analyst

So would those be considered first-generation, second-generation, how do you frame them against your compound?

Mark Pykett

They are generally recognized as the first-generation agents and as I mentioned they are characterized by having high levels of background behind it and that produces lower signal-to-noise ratios, lower resolution and a difficulty in identifying amyloid especially when the amyloid levels are low. Now there is a gold standard academic agent that's been used called Pittsburgh B which is a carbon-11-labeled that's practically useful because carbon-11 has too short of a half-life. But for long time it’s been used in research settings and it like 4694 has very nice binding potential to amyloid with low background binding.

That as a standard has been compared to the other agents and they've really not passed the test. They haven't produced images that are very close to (inaudible). We've done some studies showing that 4694 is every bit as good as Pittsburgh B and those studies have been presented at other carbons using and scientific meetings, medical meetings. So we think that the underlying attribute here is the ability to produce good strong signals amid lower background that allows for better diagnostic resolution and better diagnostic certainty, that's what will distinguish 4694 from the other agents and therefore allow it to be used in the real emerging areas of interest in mild cognitive impairment and early stage dementia where diagnostic accuracy is proving to be a challenge.

Unidentified Analyst

Okay and this is still on for the first half of ‘13?

Mark Pykett

Yeah, we will dataset. We will have data in the first half of 2013 from our ongoing studies. We will be starting the Phase 2B in mild cognitive impairment probably in the next several months and then by the end of the first half of the year, we will start with our pivotal Phase 3 registration study that will be the autopsy study that other agents have followed.

Unidentified Analyst

Okay, then you also recently licensed two more agents, the AZD2184 and the AZD2995. How would compare in contrast to them to which you already have? Are they additive or they other options in case this one doesn’t work? How they fit in your, now on (inaudible)?

Mark Pykett

These were really acquired as part of our intellectual property strategy as well as to provide research based agents that physicians and scientist could utilize in some of their laboratory based work. They were also part of 11 (inaudible). So they are not clinically useful or commercially useful from a practical standpoint. So they don’t really represent alternatives to 4694 we're extremely pleased with the development of 4694.

So this was really to be able to get broader intellectual property and provide research tools to scientists who want to study other things outside of the clinic area.

Unidentified Analyst

Okay, and then moving on to NAV5001, is there any prior data, I mean what's your enthusiasm for this compound and where does it come from?

Mark Pykett

Like 4694, we believe it has best-in-class characteristics because of some of the physical features that the performance characteristics of the agent, but in this case, 5001 have actually been over 600 people before. So it's got a very strong safety database and very strong image database that we can draw on, (inaudible) so it is an agent that is poised now to complete its registration process beginning with the Phase 3 study so we will launch by the end of the this year. But also looking at patients who have dementia with blue dyes so it stays at it. It can also be characterized by loss of the dopamine transporter besides that make dopamine but it’s a very nice agent in the dementia space alongside 4694.

Unidentified Analyst

So you have the data as part of your clinical currently?

Mark Pykett

We use it to help shape the clinical trial design but more importantly it becomes part of the database that we filed with the FDA for registration so you can have a great one and start by having 600 patients (inaudible) you can use in files.

Unidentified Analyst

Okay and then one last question for you Brent, on the Alzheimer’s effort what do you think the clinical cost of, do you see that program approval?

Brent Larson

We are seeing rough generality since we analyzed the product that it was somewhere in the $25 million plus range, that continues to evolve as we go on and identify their specific protocols that we brought on that. (Inaudible) in the fall who was instrumental in the buyer efforts in the development to help us shape our clinical development so we are still finding that profits but I think they are still thinking about that number is a rough estimate.

Unidentified Analyst

And then last one, is there any update on the RIGScan?

Brent Larson

Sure, as you may know we received a grant from the National Institutes of Health to be able to develop RIGScan and bring it back in the clinics. So we are using that money and are seem to be able to get reposition to start our fecal studies sometime this year.

Unidentified Analyst

(Inaudible)

Brent Larson

That was awarded in the file.

Unidentified Analyst

Yeah, on your flagship product Lymphoseek, we see there is some opportunities to wrap it up quick mainly because of the pivotal midpoint, and if you attack with nuclear pharmacist, what you see driving the market place as we see your initial indication is it the nuclear pharmacist, the robust economics because of the (inaudible) the opportunity reimbursement outside of the CPT code or the surgeons?

Mark Pykett

In terms of the driver factors it's kind of the comprehensive picture which we have been very deliberate about kind laying out but the nuclear pharmacist the ones we were currently ordering the other materials who have now strong relationships with Cardinal unlikely are likely the primary source of early adoption that’s why a lot of our efforts will be focused initially.

But over the long run, we think its very important to have contact with (inaudible) and with the surgeons who can drive the utilization of Lymphoseek into other cancers as well to move up quite expensive when you think about that, but the early process we think we will be relying on Cardinal’s relationships with early adopters key accounts to establish to put all the drive adoption and we think that will be quite meaningful because of the Cardinal’s extensive reach with those nuclear pharmacists.

Unidentified Analyst

And lastly on the in this particular area, when do you plan on announcing pricing where at the important launch Cardinal?

Mark Pykett

Yeah, once we receive the final label upon approval that we can complete the pricing exercise and we will announce that at the time of approval when we make other announcements of that launch part as well.

Unidentified Analyst

Actually, I had a bunch of questions but I will keep it to a couple because I guess we are running out of time, the first have to Lymphoseek in breast cancer, I am not familiar with the term in inside of mapping but I know about Sentinel Lymph Node Biopsy and I know about the side effects of lymph and other things that can result of that? If you come up with the negative scan, does that change the procedure at all? If you come up with a negative scan that's intraoperative, and if you don't biopsy lymph nodes where do you do it anyway?

Mark Pykett

So it would depend upon the reason for the negative scan, if it were not to say you are suggesting there's something such as an equipment failure or something that was about the technical or the images well, that would be one class moving forward. It also depends upon how the imaging was conducted, was it cleaner or imaging or was it SPECT imaging, where was the localization of radio signal sound, because in some cases lymph nodes can be adjacent to the injection area.

That's one of the disadvantages of sulfur colloid because it takes a long time to move out of the injection site and is a heterogeneous composition, some of it moves earlier, some of it moves later to what's called shying through and that's [masked] underlying lymph node which can be difficult to study not only on imaging where there can be overlying signals and this completely but even intraoperatively where you can get a side effect signal from a nearby injection site that could mask a true signal for a lymph node. So it depends upon the situation and what's the cause for a negative image was…

Unidentified Analyst

Currently if people with the current technology come up with a negative signal do they…

Mark Pykett

They typically go to biopsy and in some cases they might rely on the (inaudible) procedure injection of blue dye as the main source for visualizing where the key lymph nodes that they wanted to look at would be.

Unidentified Analyst

And would biopsy still be a part of the process with Lymphoseek or is that a biopsy anyway?

Mark Pykett

Absolutely, because remember what we are identifying are the lymph nodes that you want to assess through a pathology. So that fundamentally requires biopsy.

Unidentified Analyst

Second question was with I think it’s the 4694 you mentioned, have you looked at patients who have been diagnosed without Alzheimer’s disease just as a negative control theoretically they are not beta Amyloid producing this shouldn't light up?

Mark Pykett

But we have and that is the one reason I showed the one data slide where people who are know not to have Amyloid are negative low signals even patients with cognitive impairment are now appearing to stratifying into high Amyloid patients and low Amyloid patients. That’s what very encouraging because it appears that we are getting separation earlier then the development of full blown Alzheimer’s disease which is preciously when you want it to be.

Unidentified Analyst

And in terms of also with the 4694 particularly for the early stage cognitive dysfunction patients, I can see the need in clinical trail but for patients who might be kind of dysfunctional at a very, very early stage and the reason a whole lot of options in terms of therapies, do you think there’s going to be a market that’s going to be significant for you in the near term, is it going to be mostly a clinical market until we have, therapeutics to help this focus?

Mark Pykett

We think ultimately that there is clinical value today but that value will grow and the reason is clinical value today is you have to remember not everybody who has dementia has Alzheimer’s disease, and there are other forms as I mentioned that can treated. So you wouldn’t want to treat somebody who you think has Alzheimer’s disease, treat them incorrectly with things like (inaudible) and so forth, but then miss the opportunity to treat them globally. So even today there is a separation on how these patients with (inaudible).

Unidentified Analyst

And the last questions on the Parkinson’s on [fiber] one, this is a little different because it’s sort of the opposite of what you would expect in the diagnostic and the normal is when it glows, how sensitive is that change. You showed one patient, the differences were obvious. How advance was that patient in terms of its disease or her disease?

Mark Pykett

Those were age matched patients, both elderly and both with no [invasive] disease and so those were examples of how the image process works and what you can expect when you see an image. What we’ll be looking at are patients with earlier stage disease where diagnostic uncertainty is higher. We had some data to show how 5001 does show differentiating scans between those individuals and people who do not have Parkinson’s disease. We have not yet I think, hit on the limit of resolution however. Those would be subsequent studies that we would evolve in to after first getting an indication for the initial diagnostic.

Unidentified Analyst

How variable is for you to have a normal patient population? How variable is the signal that you get?

Mark Pykett

The good news is that imaging of that region of the brain as a dopamine transporter has been done for a long time. So there is very good understanding and technical capability out in the field. What is clear is that somebody who has non-Parkinson’s movement disorder something like essential tremor will show very strong signals that are not only strong in intensity but intact anatomically. They have no irregularities in what those two comma shaped regions of the brains looks like called the [stratum] and yet somebody even with early stage Parkinson’s disease will start to show irregularities. It may not be complete ablation of the signal and the signal in certain areas may still be strong, but you will see differences in the pattern and the uptick because parts of the brain have already started to go undergo attrition and life with Alzheimer’s disease, the underlying brain pathology is thought to start years before the emergence of symptoms especially in the classically recognized Parkinson’s symptom movement disorders and so forth.

Unidentified Analyst

When are you going to start the trials for the Parkinson, how many patients, how long and how much is it cost and how will you going to find it?

Mark Pykett

Sure. Take that the first the timing question. So we expect to start the phase IIb study in patients with dementia with Lewy Bodies. So this is not the targeted classic indication for Parkinson disease, this is the other label in dementia with Lewy Bodies. That will be a phase IIb study and the patients’ number there will be somewhere around 100 patients.

The phase III study that we start, we still have to work out all of our details with the FDA so we are not preparing until we finalize degree with FDA as to what the definitive studies will look like. But those two studies which are able to replicate studies the same kind of studies will be conducted in parallel and both the United States and Europe and will encompass somewhere around 420 to 450 patients total, not each but total. We expect to start that study during the course of 2013 as well.

Unidentified Analyst

(Question Inaudible)

Brent Larson

We haven’t talked about exact cost on that particular trial I would say probably roughly in the range that we talked about in the $25 million plus range at this point in time and that’s going to depend ultimately on what the study protocols turn out to be exactly.

Mark Pykett

And from the financing perspective, we believe we remain very well positioned with accessed to a $50 million line of credit, relatively strong balance sheet that we are tending to by using access to that credit facility on a judicious and prudent basis, but also near term cash flows from (inaudible) as I said in one of my slides we’ll be using to reinvest in our development programs.

Unidentified Analyst

How long will the trials take?

Mark Pykett

I think we will come and that at some point once we know when we are going to start and what the definitive design looks like.

Unidentified Analyst

Mark switching over to NAV4694 is there some Phase IIb data that might come out soon, and I think you did sign a Phase II last year?

Mark Pykett

Yeah, there is the Phase II study that we think will produce data and in fact in some cases the data will be things like side based reports and the images shown at scientific and medical conversation and we’ll let you folks be aware when we arrive those kinds of disclosures as well.

Unidentified Analyst

And do you envision a partnering opportunity downstream for this aging like a cardinal type name that you are going to try?

Mark Pykett

Yes, there is certainly from a distribution to commercial vision side ultimately will be a partner because you have to produce the agent with its pet label [ZAF18] label onsite and have a distribution infrastructure in place, that’s not something we are going to get invested in until the end of (inaudible).

Unidentified Analyst

Okay, we’ll wrap there.

Mark Pykett

Thank you.

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