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Executives

Brent L. Larson - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Treasurer and Secretary

Mark Jerome Pykett - Chief Executive Officer, President and Director

Frederick O. Cope - Senior Vice President of Pharmaceutical Research and Clinical Development

Thomas H. Tulip - Chief Business Officer and Executive Vice President

Analysts

Reni J. Benjamin - Burrill & Company, Research Division

Stephen M. Dunn - LifeTech Capital, Research Division

Jason N. Butler - JMP Securities LLC, Research Division

Raghuram Selvaraju - Morgan Joseph TriArtisan LLC, Research Division

Kevin DeGeeter - Ladenburg Thalmann & Co. Inc., Research Division

Stephen G. Brozak - WBB Securities, LLC, Research Division

Charles C. Duncan - Piper Jaffray Companies, Research Division

David Brian Musket - ProMed Management, Inc.

Navidea Biopharmaceuticals, Inc (NAVB) Q4 2012 Earnings Call March 7, 2013 8:30 AM ET

Operator

Greetings and welcome to the Navidea Biopharmaceuticals Fourth Quarter Earnings -- 2012 Earnings Call.[Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brent Larson, CFO for Navidea Biopharmaceuticals. Thank you. Mr. Larson, you may begin.

Brent L. Larson

Good morning, everyone. My name is Brent Larson and, as Melissa said, CFO of Navidea Biopharmaceuticals and I will be moderating this morning's call.

Before we get started, we would like to remind you that during the course of this call, management may make projections or other forward-looking remarks regarding future events or the future financial performance of the company. It is important to note that such statements about Navidea’s estimated or anticipated future results or other nonhistorical facts are forward-looking statements and reflect Navidea’s current perspective on existing trends and information. Navidea disclaims any intent or obligation to update these forward-looking statements.

Actual results may differ materially from Navidea’s current expectations depending on a number of factors affecting Navidea’s business. These factors include, among others, inherent uncertainty associated with financial projections, timely and successful implementation of strategic initiatives, the difficulty of predicting the timing or outcome of product development efforts and FDA or other regulatory agency approvals or actions, market acceptance of and continued demand for Navidea’s products, clinical and regulatory pathways, the impact of competitive products and pricing, patents or other intellectual property rights held by competitors, the availability and pricing of third-party sourced products and materials, successful compliance with government regulations, and such other risks and uncertainties detailed in Navidea’s periodic public filings on file with the Securities and Exchange Commission.

Now I'd like to turn the call over to Dr. Mark Pykett, President and Chief Executive Officer of Navidea. Mark?

Mark Jerome Pykett

Thank you, Brent. We appreciate the participation of everyone on today's call and look forward to sharing a business update and quarterly financial results. We have a number of important topics to discuss today. With me on the call are Tom Tulip, Executive Vice President and Chief Business Officer; Brent Larson, Senior Vice President and CFO; and Fred Cope, Senior Vice President of Pharmaceutical Research and Clinical Development.

First then, let me note that the review of the Lymphoseek NDA is continuing in a manner consistent with our prior communications, moving towards its PDUFA date of April 30, 2013. Although given the focused nature of the current review, it is possible approval could come before the PDUFA date. We have continued to support the FDA's review and believe we have made very good progress to date. The process, by our account, is proceeding in a very customary manner and we remain highly confident that the Lymphoseek NDA is moving to approval as the agency completes its final steps.

Upon Lymphoseek approval, we remain well positioned to move forward to commercialization with our US partner, Cardinal Health. As we have previously communicated, we believe Lymphoseek holds significant promise to improve the lives of patients who undergo lymphatic mapping procedures. And the fundamental commercial opportunity for Lymphoseek remains very strong. We believe Lymphoseek is well suited for use in lymphatic mapping procedures that are already well established in surgical oncology and that it has attractive market potential which we are well positioned to realize.

Our relationship with Cardinal Health provides solid economics for both organizations through our revenue sharing agreement on Lymphoseek sales, further supported by very attractive gross margins which we believe will facilitate excellent net cash flows to Navidea. We currently estimate that the gross margin on our portion of Lymphoseek revenue will be between 75% and 80%, meaning that about 35% to 40% of NDUs [ph] or revenue generated by Cardinal Health is expected to drop to Navidea's EBITDA and encouraging pretax return. And there are clear avenues to reimbursement for Lymphoseek in the U.S., initially through a pass-through code, meaning that there are established Medicare and Medicaid procedures for payment for the agent that should result in economic benefits for hospitals and support adoption.

While this ongoing progress is advancing in the U.S., we have also now submitted the Marketing Authorization Application for Lymphoseek to the EMA. We are looking forward to progress this year in the review of the application by the European regulators. In parallel with this effort, we continued to advance discussions with potential commercial partners in Europe and other territories outside the U.S, with the objective of concluding one or more partnerships in the coming months. Tom will provide an update on partnering activities outside the U.S. in a moment.

We are also continuing the NEO3-06 study in patients with head and neck cancer and, as disclosed in January, have reached an interim analysis point. Additionally, we have recently embarked on a collaboration on an investigator-initiated study examining the use of Lymphoseek in colorectal cancer. For updates on those activities, I will now turn the call over to Dr. Fred Cope.

Frederick O. Cope

Thanks, Mark. I would like to cover 2 major items regarding Lymphoseek. These are the NEO3-06 Phase III study in head and neck cancer, and the investigator-initiated study in colon cancer. Some information on these topics, as Mark indicated, has already been shared in prior disclosures.

As we recently announced, we have reached the prospectively established, disease-positive patient accrual point in the NEO3-06 study in head and neck squamous cell carcinoma. Under the study design rule, reaching this milestone allows us to conduct an interim, statistical analysis with a primary efficacy endpoint. As a reminder to those listening, this endpoint is a per patient review comparing the pathology status of lymph nodes identified by Lymphoseek versus the pathology of all the nodes removed during the full regional lymph node dissection of the head and neck. This is a pathology gold standard of Lymphoseek's ability to correctly predict the nodal stage of disease in the patients. We are truly excited to have reached the interim analysis point of this study. We are now conducting a 100% source document audit of all data points. This audit will include all primary, secondary and safety data entries for this study. We are currently in the process of validating these data on a site by site basis. We anticipate that these audits will take some time, and we have some 14 participating centers that will undergo this detailed review.

In the interim, it is important to note that several of our principal investigators participating in this study have made presentations at key international meetings. They have presented their clinical trial site experiences and results. These include a presentation in February by Dr. Francisco Civantos at the 6th International Symposium on Metastasis and Head and Neck Cancer. Dr. Civantos is from the University of Miami and he presented a compilation of findings of 3 joint centers, which include the University of Miami, The Ohio State University with Dr. Amit Agrawal, and MD Anderson Center with Dr. Steven Lai. Their experiences to date are highly positive with regard to the performance of Lymphoseek. Dr. Civantos reported that the combined false negative rate in approximately 50 subjects enrolled at these institutions was 0.

Additionally, Dr. Steven Lai from MD Anderson initiated a presentation of his experiences at the 4th International Conference on Innovative Approaches In Head and Neck Oncology in Barcelona, Spain. Dr. Lai presented a number of cases employing Lymphoseek as the sole agent for intraoperative lymphatic mapping, all of which provided key aspects -- positive aspects of the receptor-driven utility of Lymphoseek in both cutaneous and intraoral squamous cell carcinoma.

Now, I would like to present one additional update with regard to Lymphoseek clinical efforts. On February 4, we announced that we have established an investigator-initiated collaboration with Dr. Danny Sherwinter at Maimonides Medical Center in Brooklyn, New York. This collaboration is an initiative that begins in evaluation of Lymphoseek for lymphatic mapping for colon cancer patients. I'm happy to announce that Dr. Sherwinter has completed protocol development and received IRB approval on February 28 for this investigator program. We anticipate that this study may begin in the coming weeks.

The study design in many ways resembles a combination of the breast study that we have completed and the head and neck study. In fact, like the head and neck study, it includes a gold standard complete dissection pathology review for false negative rates. We anticipate that this study will evaluate about 40 patients.

We believe that the receptor recognition and key molecular elements of Lymphoseek provide an excellent clinical performance basis for extending significant potential benefit to patients with solid tumors beyond those we have already validated. Colon cancer is an excellent opportunity to expand these possibilities of Lymphoseek's performance in lymphatic mapping. We anticipate additional future clinical study reviews regarding the application of Lymphoseek in lymphatic mapping in solid tumors. I would now like to turn the discussion back to Tom.

Thomas H. Tulip

Thanks, Fred. And thank you -- and thanks to you and your team for advancing these important initiatives. As we demonstrate Lymphoseek's utility outside breast cancer in melanoma, we will be providing millions of cancer sufferers worldwide with the potential benefits of lymphatic mapping and sentinel node biopsy, which are largely unavailable today.

So today, I'd like to reinforce Mark's comments about our eagerly anticipated U.S. launch of Lymphoseek with Cardinal Health. We've continued to work closely with Cardinal to assure that the launch will be flawless. We've already conducted fundamental product training with their sales force and their extensive set of radio pharmacists and are planning even more extensive educational activity shortly after approval. Important reimbursement and formulary acceptance support mechanisms are in place. Additionally, we've initiated medical education activities for both nuclear medicine and the surgical audiences, and are preparing to deploy a field-based medical affairs team to bolster these efforts. Continuing medical education activities are also planned.

With Cardinal, we are pointed to -- we are pointing to 2 seminal scientific meetings, one focused on nuclear medicine and one on surgical oncology in the second quarter, to formally introduce Lymphoseek at the national level. Events at these meetings will complement the local introduction of the product by Cardinal salespeople and pharmacy teams and our own local and regional medical education activities. The bottom line here, both we and Cardinal are more than ready, in fact, we are eager, to launch this important product which will be of such benefits to cancer patients.

As we've previously indicated, we now believe that Lymphoseek will be labeled for both breast cancer and melanoma at the point of approval. This matches the current practice of lymphatic mapping. These 2 cancers account for the vast majority of lymphatic mapping procedures conducted today, and it is consistent with our submitted clinical data. That said, we very much look forward to expanding the application of lymphatic mapping to other solid tumor presentations, such as in head and neck and colorectal disease, as Fred's discussed earlier. While breast cancer melanoma constitute a very attractive initial market of more than 300,000 annual cases in the U.S., up to 3x as many additional solid tumor patients could benefit from lymphatic mapping with Lymphoseek, which Lymphoseek will enable.

So while we seek significant market expansion opportunity to build on the pioneer breast cancer melanoma platform, we're also excited about another dimension of market growth, to patients in territories outside the U.S. There is actually an almost 30-fold multiple in adenocarcinoma incidence worldwide versus the current U.S. breast cancer melanoma market. Mark's reminded us of the recent submission of our MAA to the European Medical Authorities, and which, by the way, has now been accepted. And we expect that EMA review will proceed towards a potential approval late this year or early in 2014.

Many of you expressed strong interest, to say the least, in the status of our international partnership negotiations. Today, I can report that we've moved to the final -- to finalizing terms with our selected partner in Europe and I'm confident that we'll execute this -- execute and announce this agreement in the very near future in accord with our previous disclosures. This will provide ample time to roll out in-country, target-market development activities prior to approval. We are in similar stage with other international partners in certain key markets and plan to execute these -- execute and announce these agreements at or about the time of FDA approval.

So from U.S. launch and market expansion, as well as international partnering points of view, we are increasingly bullish about the Lymphoseek opportunity to enhance critical patient care and to deliver excellent business results to Navidea. I'd now like to turn the mic back over to Mark.

Mark Jerome Pykett

Thank you, Tom. As we move forward with Lymphoseek, we have also continued to make strong progress with our other pipeline programs. During the fourth quarter, we continued with our Phase IIb study of NAV4694 for detection of amyloid plaque in subjects diagnosed with probable Alzheimer's disease. This study is comparing images from subjects with probable AD with age-matched and healthy young volunteers. Additionally, we continue to target the initiation of our Phase III clinical trial for 4694 by the middle of this year.

We believe that 4694 is a potential best-in-class second-generation agent to aid in the diagnosis of Alzheimer's disease and dementia. 4694 has demonstrated strong specificity and sensitivity in detecting amyloid, while exhibiting low uptake in background white matter tissue. It's improved contrast and enhanced uptake in target regions lead to better signal-to-noise ratios and clearer images, resulting in improved contrast that may facilitate detection of lower levels of amyloid and may, therefore, enable earlier identification of disease. This may enable it to assist with differential diagnoses associated with mild cognitive impairment, a direction that the dementia field is clearly headed.

In this regard, we announced recently that we will be initiating another Phase IIb study of 4694. This time in patients who have mild cognitive impairment. We expect this study to start within the next few months. This study is important because it is aimed at a target patient population of critical importance: those in whom dementia is just emerging and for whom it is believed the best prospects for therapeutic intervention exist. As such, this study may hold commercial significance for our agent. We believe we are the first company to embark on a multi-center, multinational clinical trial in this area, a strategy that is born from our confidence in both 4694 and in our team, and we are very excited about this study.

Likewise, we continue to make progress on NAV5001, our spec imaging agent being developed as an aid, not only in the diagnosis of Parkinson's disease and movement disorders, but also in a form of dementia called Dementia with Lewy Bodies. We anticipate initiating our pivotal Phase III registration studies in Parkinson's disease this year, and beginning the Phase IIb study in DLB within the next quarter. Both of these studies are very exciting trials, which we believe will drive further product differentiation among alternative first-generation agents.

5001 is a high-affinity agent that can generate clean images quickly, beginning within about 20 minutes after injection, as opposed to waiting periods of 4 to 6 hours and up to 24 hours as required with other agents. It is also a fully synthetic molecule, unlike agents which are derivatives of coco leaves or related to cocaine, and are therefore, subject to listing as scheduled to controlled substances by the DEA. 5001 can also be sterilized, whereas other agents are provided aseptically. In this regard, 5001 could have important practical convenience and handling advantages.

In addition to potentially being useful, as I said, as an aid in the diagnosis of Parkinson's disease and movement disorders, 5001 may also be used for the diagnosis of Dementia with Lewy Bodies or DLB, one of the most common forms of dementia after Alzheimer's disease. Alongside 4694 in the diagnosis of Alzheimer's disease, 5001 offers a complimentary late-stage precision diagnostic radiopharmaceutical in, not only at another leading neurodegenerative disorder, Parkinson's disease, but also this common form of dementia, DLB. I would now like to turn the call over to Brent for a discussion of our financial performance.

Brent L. Larson

Thank you, Mark. Good morning, everyone. Before I discuss our quarterly financial results, I'd like to briefly review the strength of our financial position. As we have stated previously, we believe the funding available to us under the credit facility we have in place with our largest investor, Platinum-Montaur Life Sciences, provides us with the resources as well as a great deal of flexibility to grow our business. Management remains confident that the Montaur facility, in combination with the other financial resources at our disposal, allow us to continue to adequately support our drug development and commercialization programs to the point where we began to generate positive cash flow from Lymphoseek. We also believe that our need to draw on the Montaur facility will be substantially mitigated over time as cash flows from Lymphoseek are realized.

Montaur remains very supportive of our business plan. To date, we have drawn only $4 million under the debt facility. But as further evidence of their support, late last week, Montaur exercised warrants not due to expire until this coming year-end, generating an approximately $1.4 million in proceeds to cash to the company. We still have over $11 million of the initial $15 million available under the line, with another $20 million available expected on approval. We currently expect, as we have shared with Montaur, to draw on the facility periodically in order to maintain an adequate cash balance, rather than draw the full amount available at one time and incur debt-interest expense unnecessarily.

Flexibility afforded us by the Montaur facility allows us to be prudent and selective in how we fund our business plan. As an example of this selective funding strategy, we raised approximately $4.5 million through an aftermarket transaction in late January, led by J.P. Morgan Asset Management. We believe this transaction is an excellent example of achieving our goals of expanding our institutional shareholder base, with our terms attractive to the company and our existing shareholders. We plan to continually monitor our financial position and access resources available as needed to maintain our ability to execute our business plan, while also remaining cognizant of interest expense and dilution. We believe this approach is the most prudent management of our finances as we drive towards Lymphoseek launch and revenue generation.

Now I'd like to walk you through our financial results for the fourth quarter and full year of 2012. Navidea's revenues for 2012 and 2011 relate to reimbursement of certain pre-commercialization costs by our U.S. marketing partner for Lymphoseek, Cardinal Health, and grants received in support of the company's drug development activities. Revenues for 2012 were $79,000 compared to $598,000 for 2011. Cost related to these reimbursements and grants received or in support of development activities were recorded in operating expenses.

Navidea's R&D expenses for the fourth quarter of 2012 decreased 38% to $4.3 million from $7.0 million for the same period in 2011. The net decrease in R&D expenses for the fourth quarter was attributable to the following primary factors: one, the $3.9-million decrease in expenses related to 4694, as the $5 million in licensing fees incurred in 2011 more than offset development costs in 2012 related to manufacturing, startup and clinical trial activities; two, decreased rate scan development costs of $234,000 primarily related to manufacturing activities. These decreases were offset by: one, increased development of headcounts -- increased development of headcount-related expenses to support these efforts of $760,000; two, a net increase in Lymphoseek development cost of $689,000, overall, and costs to support our response to the September CRL, manufacturing-related support costs, and costs related to filing the MAA in the EU; and finally, three, the increased NAV5001 development cost of $76,000 related primarily to manufacturing startup.

Navidea's R&D expenses for 2012 increased 11% to $16.9 million from $15.2 million for 2011. The increase in R&D expenses for 2012 was attributable to several primary factors, again, including: one, NAV5001 development cost of $2.2 million comprised primarily of $1.8 million in sub-license fees, inclusive of the $1.1 million in noncash charges related to stock issued in the transaction, coupled with diligence and other product startup costs; two, increased development related to expenses totaling $1.1 million -- $1.8 million to support these development efforts; and three, out-of-pocket costs related to Lymphoseek and other pipeline product development activities of $538,000. These increases were partially offset by a 1 -- $1.7-million net increase -- excuse me, net decrease in expenses that are related to 4694, again, related to the license fee matter in 2011, which more than offset the cost in 2012 related to manufacturing startup and clinical trial activities. And two, decreased rate scan development cost of $1 million primarily related to decreased manufacturing activities again.

Selling and general administrative expenses for the fourth quarter of 2012 increased 31% to $2.7 million from $2.0 million for the same period in 2011. The increase was a result of higher marketing costs related to the pending commercial launch of Lymphoseek coupled with $378,000 in increased share registration fees and higher insurance costs. Selling and general administrative expenses increased 17% to $11.2 million for 2012 as a whole and from $9.5 million for the same period in 2011. Net increase was primarily due to the arc formation of the marketing and business development team during the second half of 2011, contributing to increased marketing costs related to the pending commercial launch of Lymphoseek of $2.5 million, increased compensation cost of $1.2 million related to headcount and support expenses of $538,000. These were offset by separation costs of $2.7 million related to our former President and CEO, which were recorded during 2011.

Other expenses for the fourth quarter of 2012 were $222,000 composed primarily of $236,000 in net interest expense on our outstanding debt, offset by $25,000 in noncash income from the impact of the change in value of derivative liabilities on the company's balance sheet. It compared to other income of $5,000 for the same period in 2011, which consisted of $12,000 of interest income and $5,000 of noncash income from the impact of the change in value of derivative liabilities, but which were offset by $10,000 in interest expense on our outstanding debt. Other expenses for 2012 as a whole were $1.1 million, comprised primarily of $1.2 million in net interest expense on our outstanding debt. This compares to other expenses of $943,000 for the same period in 2011, which consisted almost entirely of the impact of the noncash change in value of the company's derivative liabilities.

Net loss attributable to common shareholders for the fourth quarter of 2012 was $7.2 million or $0.07 per share, compared to a net loss attributable to common shareholders of $7.6 million or $0.08 per share for the same period in 2011. Net loss attributable to common shares of stockholders for 2012 was $29.2 million or $0.29 per share, compared to net income attributable to common share of stockholders of $5.5 million or $0.06 per share for 2011. As a reminder, net income for 2011 included approximately $30 million from the sale of our GDS business to Devicor.

We ended the year with $9.1 million in cash. Management remains confident of these various resources available to us to continue to adequately support the active development programs and reach positive cash flow generation from Lymphoseek, our first radiopharmaceutical product. Now, I'd like to, I guess, open the floor up for questions and answers.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Reni Benjamin with Burrill & Company.

Reni J. Benjamin - Burrill & Company, Research Division

I'm sorry, I had jumped on to the call a little bit late, so you may have mentioned this, but can you talk a little bit about the partnering efforts that are going on in Europe right now? I think Tom mentioned that the application, you would probably hear back regarding the application by the end of the year or early next year, but I'm more interested in what the partnering discussions are. What sort of partnering discussions are there? And then the other question I would have is, are there any plans to do any types of pharmacodynamic benefit studies going forward?

Thomas H. Tulip

Yes, so to reiterate, we did make the MAA application in December, which has now been accepted. That then, provided us with a more sustainable platform to advance our discussions with potential partners. We've arrived at -- as I said, we are in the final stages of negotiating the agreement for Europe with our selected partner. That should happen over the very near future, as we've disclosed before, certainly in the first half. That permits ourselves and the partner ample time to do the local country-level market development, market conditioning activities that will be required. So that's the situation relative to the European partnering. We have, I think, similar activities poised, largely predicated on the FDA approval, that we'd be able to announce for other key markets.

In terms of, I think, you probably mean pharmacoeconomic studies? And yes, indeed, there are both less focused on outcome, although I think our clinical results already demonstrate differential outcome. More in terms of reliability, convenience, efficiency because we believe Lymphoseek provides dramatic efficiency benefits both in the nuclear medicine suite but also in the operating room. So those are, in fact, planned and we look forward to getting those underway shortly after approval.

Operator

Our next question comes from the line of Stephen Dunn with LifeTech Capital.

Stephen M. Dunn - LifeTech Capital, Research Division

Two questions. First question, again, to follow up a little bit on Ren's question, the European partnership talks. Tom, would you characterize these as strictly Lymphoseek-oriented or do the agreements contemplate rolling in, like first rights refusal of the Alzheimer's imaging? Are you looking at just the Lymphoseek? Or does it contemplate a larger partnership?

Thomas H. Tulip

Sure. Initially, we've focused these discussions on Lymphoseek, focused on the single-photon supply chain that exists within Europe. I can say that there is a tremendous amount of interest on the high energy pet [ph] production, Psychotron [ph] pharmacy side. Some of the players are effectively in common, but that's not universally true. So our initial discussions are in fact, focusing on Lymphoseek.

Operator

Our next question comes from the line of Jason Butler with JMP Securities.

Jason N. Butler - JMP Securities LLC, Research Division

Just wanted to ask about the head and neck trial. Can you give us any more color on when exactly in 2013 you think you'll be completed with the order efforts? And just give us a little bit more color on exactly what data we should be expecting to see from the interim results?

Frederick O. Cope

Sure. This is Fred. Yes. We anticipate that it will be some months before we complete the audit. The primary outcome is the false negative rate. That's what we're focused on. Clearly, that is the gold standard as it is viewed, that is the pathology standard, as it is viewed in the clinical realm. So both regulatorily and in terms of clinical practice, it will be the primary focus of the study.

With regard to the other endpoints, sensitivity, negative predictive value, a few others, we will be auditing those as well. And as we complete, again, as I indicated, as we complete the audit, it will be probably in the coming months, certainly, we will provide an update at that time.

Operator

Our next question comes from the line of Raghuram Selvaraju with Aegis Capital.

Raghuram Selvaraju - Morgan Joseph TriArtisan LLC, Research Division

Could you comment a little bit about the nature of the sales and marketing campaign that you expect to put in place for Lymphoseek if it is approved in a timely fashion? And what you think would be the most crucial ingredients of that sales and marketing campaign that would differentiate Lymphoseek from what is currently available to do lymphatic mapping?

Thomas H. Tulip

Sure. So as we stated, we are poised to make this launch happen as soon as the approval comes our way, working closely with Cardinal Health to make that happen. And in fact, to jump ahead, I think Cardinal Health may well be the special sauce in this rollout. I remind you that Cardinal Health, their nuclear pharmacy services division is by far the largest, most effective player in the nuclear medicine supply-chain market. They have greater than 60% share and their reach is essentially every hospital and clinic in the U.S. They have an extensive sales organization that calls on nuclear medicine department, both -- this is the element within the hospital and clinic who will actually be buying Lymphoseek. And they have a very large array of radio pharmacists in their 150-odd stores that speak to nuclear medicine clinicians on a daily basis. So I think that the effectiveness, the competency of the Cardinal organization may well be a huge differentiating factor beyond the obvious clinical differentiating elements that we've demonstrated for Lymphoseek. I think that's -- that is what's going to make it happen for us.

As we've also stated, we are augmenting those, perhaps you could say, transactionally oriented conversations with the Cardinal sales and pharmacy, folks with our own medical education activities. As we spoke earlier, I think it demonstrated we've got a very good clinical story to tell. That's why we're rolling out our own medical education activities, which we think will be well received and drive early adoption. So I think it's -- that's the sort of mix that we have in mind.

Operator

Our next question comes from the line of Kevin DeGeeter with Ladenburg Thalmann.

Kevin DeGeeter - Ladenburg Thalmann & Co. Inc., Research Division

Can you provide a little more color to how we should think about the commercial impact beyond the labeling expansion for a potential supplemental approval for head and neck, which, it could be, if I guess, potentially 12 months or so behind the upcoming PDUFA date. How should we think about that kind of current penetration of lymphatic mapping within the head and neck community? And how do you see that potentially changing, given the profiled entry of Lymphoseek?

Mark Jerome Pykett

Clearly, the existing market is in breast cancer and melanoma. So it's logical, I think, to consider the first phase, the first step, is -- as rapidly as possible penetrating that market, while at the same time, in the other dimension, to open up other lymphatic mapping opportunities. The current technologies just don't work very well for not breast, not melanoma. And so as Fred and his team, working with outside collaborators as in the head and neck study, are able to demonstrate that in effect, unlike the current array of -- the current standard of care in lymphatic mapping, Lymphoseek actually works and works extraordinarily well. We just believe that's going to open up dramatic new dimensions. And so that would -- becomes the next wave of penetration of adoption.

Operator

Our next question comes from the line of Stephen Brozak with WBB Securities.

Stephen G. Brozak - WBB Securities, LLC, Research Division

I'm not going to go and ask a question about Lymphoseek, because frankly, everything's been asked. I'm going to ask a question though, because Mark, you said something at the beginning of the call or in the middle of the call, on 5001 that actually drew my interest. Because -- can you give us clarity on where you stand with the agency on the special protocol assessment. Because obviously, that's a critical point and I'd like to know more about that because it looks like this is something that people aren't factoring in. And I'll ask how you're you doing, if you don't consider that a second question, okay?

Mark Jerome Pykett

Absolutely. Yes, it is a potentially important part of that program and we have several meetings planned with the agency to discuss the prospects of a special protocol assessment for that, which would be an update to a special protocol assessment that had been put in place -- placed previously with the prior developer of 5001. Those meetings and our general engagement with the agency about the clinical regulatory requirements for registration for 5001 will be very informative, determining if a special protocol assessment will in fact be required or advantageous. And so that set of discussions will evolve over the coming months, but will allow us to move forward with our manufacturing plans in parallel for a supply of Iodine-123 for the product so that later this year, we'll be in a position, as we've said, to launch the pivotal Phase III registration studies, either with or without a special protocol assessment, with considerable understanding of the requirements for approval under our belt.

Operator

Our next question comes from the line of Charles Duncan with Piper Jaffray.

Charles C. Duncan - Piper Jaffray Companies, Research Division

My question is regarding Lymphoseek approval and the confidence that you have in terms of timing of that approval with the PDUFA date coming up. It seems to me that you are probably having final label discussions. I'm wondering if those are occurring and if it is clear that they are going to limit to breast cancer and melanoma patients, or are they going to approve for a broader ILM label?

Mark Jerome Pykett

We, essentially, we filed our response. We have remained engaged with the agency on multiple fronts, and as I said at the beginning of the call, we've made outstanding progress working with the agency on all manner of the review of the NDA. Those discussions are still evolving. We think that we're making the right progress toward the April 30 PDUFA date. But as I also said, there's a possibility that the agency will approve Lymphoseek in advance of the PDUFA date. And that would be great news for us. It would allow us to get to the market earlier, launch with Cardinal Health and start realizing revenue earlier.

As we've said in recent conferences, while nothing can be concluded right now, our discussions with the agency would seem to indicate that they are relying primarily on the completed studies in breast cancer and melanoma to complete their review. Those data, as we've said all along, are very, very strong, provide clear evidence for support of Lymphoseek in those 2 indications, which also comprise the vast majority of the market, both in the U.S. and internationally today. And so we believe that through the remaining discussions that we have with the agency, we'll finalize the label. But the indications are now that the initial approval could be directed at breast cancer melanoma, and then subsequently from there, will move on with studies like the head and neck cancer study, the colorectal cancer study, and others that we plan to start, not only to demonstrate the utility of Lymphoseek in those cancers, but also to potentially augment the label in some manner, such as through a sentinel lymph node biopsy claim, which would create further strong differentiation in the marketplace for that agent, not only in breast cancer melanoma, but other cancers as well.

Operator

Our next question comes from the line of John Scott [ph] with Tunisia [ph] Health.

Unknown Analyst

I have a quick question about loss carryforwards as of the end of the year.

Brent L. Larson

What's your -- specifically, your question what's the amount of the loss carryforwards?

Unknown Analyst

Yes, sir.

Brent L. Larson

We haven't filed a 10-K yet. We're filing the 10-K in the next few months. I think the number on the -- the overall number is probably somewhere in the $75 million to $80 million range, which I don't think will be surprising when you look at last year's carryforward and what the loss for this year is. But obviously, that has a great deal of intrinsic value to us as we look forward to revenue coming in over the course of next year from Lymphoseek and so forth.

Operator

Our next question from the line of Rick Drew, Private Investor.

Unknown Attendee

Brent, this question is to you relevant to Devicor and royalties. Hoping that you can give us some color when, how much, et cetera, what does management expect?

Brent L. Larson

Well, at this point, you'll notice in the lines that we announced in the revenue lines, that we only announce revenue related to grant revenue and so forth it's related to 2012. So we haven't accrued any revenue for 2012 related to that. I'd remind you, Rick, that in looking at the -- in setting up the original Devicor transaction, the level that was set for the sales milestone was set at what Lymphoseek -- excuse me, what the GDS business was achieving when we owned it, and that was kind of the milestone. And the royalties were intended to be remuneration to us for growing that business as a result of Lymphoseek getting approved. And as Lymphoseek was not approved in 2012, it certainly wasn't able to drive any additional device placements for 2012. So I think as is probably clear, although not specifically spelled out in there, there are no revenues in 2012 that we've accrued for that particular fashion.

Now we do believe certainly, again, that Lymphoseek will drive additional device placements. And as we get approval in 2013, that will be a number that we'll continue to monitor and move forward with as our evaluations of quarterly results come out.

Operator

Our next question is a follow-up from Stephen Dunn with LifeTech Capital.

Stephen M. Dunn - LifeTech Capital, Research Division

Mark, as you know, yesterday there was a big issue out there on Pharmalucence orphan drug marketing exclusivity for sulfur colloid in melanoma. For the benefit of the investors that weren't in the loop yesterday that are on the call, or that will be listening on the call, could you go over what you feel the situation for orphan drug marketing exclusivity in melanoma versus Lymphoseek?

Mark Jerome Pykett

Sure, sure. Yes, I think it's an important point to clarify. The simplest answer is that in this case, it does not apply. Orphan drug exclusivity only applies to the same compound, that is a compound that has the same active moeity, or the same active region. In this case, that's clearly not the case. Lymphoseek is very distinct from colloid in virtually every manner of the product, as well as having demonstrated clinical superiority in terms of false negative rates and things like that. So we don't think that applies. In any case, even if it did apply, orphan drug exclusivity is for a period of 7 years, not 17 years. But again, that's not an issue for Lymphoseek going forward, we don't believe.

Operator

Our last question for today is a follow-up from Ren Benjamin with Burrill & Company.

Reni J. Benjamin - Burrill & Company, Research Division

Just going back to the pharmacoeconomic benefit data studies that you are conducting. Can you talk us through a little bit of: a, the timing; and b, what do you do with those -- with that data, with those results? How can we think about those results potentially impacting pricing discussions at a later date?

Thomas H. Tulip

Sure. Let me give you a little more depth in our thinking about these. As I said, I would expect that we will commence these activities shortly after the launch. I think they will focus on efficiencies which drive economic benefit within the hospital setting. And certainly, a very important premise will derive from the consistent reliable performance of Lymphoseek. We know that because of its receptor target in nature and the fact that it's a consistent small molecule preparation, that one is able to inject the material and have it very quickly accumulate in the first echelon of draining nodes, those nodes that are of most interest in the surgical pathology analysis. In fact, I think that it's clear that within 15 minutes, one can either go to imaging or to the surgical suite. And so that's very efficient.

I think one can -- what we would do is plan to contrast that efficient, consistent, reliable performance versus the current performance. And that is where in the injection of a colloidal material may take place. And because of the variable particle size distribution on any given day, and because of variability in any given patient, and for example, the size of their lymphatic capillaries, that migration away from the primary injection site can take quite some time. Frequently, anecdotally, we hear from nuclear medicine who will report that they're waiting for that clearance to take place so they can do -- either do the imaging or frequently, they have to do the imaging to find that sufficient migration hasn't taken place, and so they wait. The patient waits. And unfortunately, frequently, the operating room also waits for delivery of that patient. So you can see that, again, that consistent, reliable performance is very likely to lead to efficiency and savings in the hospital setting. I think that's an important basis of differentiation.

The other is, of course, the prolonged retention of Lymphoseek in those, that first echelon of draining nodes. As we've demonstrated in both the '05 and '06 and now in the '09 trials, it's possible to inject on day 1 and actually take the patient to surgery the next day with no erosion and no loss of signal from those primary draining nodes. That's quite different from either -- well, from the current colloidal circumstance, where that doesn't really work. In the case of next day surgery then, that enables perhaps 2 or 3 additional surgical slots to open up in the morning, which wouldn't now be available.

So I think there are a couple of dimensions that will be of real interest from the pharmacoeconomic point of view and these are the ones in which we're going to focus. I hope that addresses your question.

Operator

We have time for one final question from David Musket with ProMed.

David Brian Musket - ProMed Management, Inc.

I just wanted a little clarification on the very robust data you've already reported from the head and neck trial and the very significant audits that you're now doing. Does that mean that you might actually be filing off of the interim data?

Mark Jerome Pykett

Of course, the interim analysis and the end points that we will be driving for were prospectively specified. And so the degree to which we make decisions off of those data will depend upon the strength of the data. Because the interim analysis, which structured with a high hurdle, if the data remains strong, the overall data set would be strong and we may be in a position then, to make decisions about moving forward with some supplement at that point. That's premature right now to conclude, if in fact, that would be the case, and as Fred laid out, there is a very rigorous process that we have to undertake to get there to know exactly how the data stack up. So that's probably premature to specify anything right now, although we'll be keeping that in mind as we move forward.

Operator

Dr. Pykett, there are no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Mark Jerome Pykett

Great. Thank you very much. Thank you very much for your time on today's call and for your interest in Navidea. In the coming months and quarters, we anticipate positive outcomes for a number of milestones, many of which were discussed on today's call. We look forward to continuing to keep you updated on our progress on the next steps with Lymphoseek as it moves forward, and on the advances in other areas of our business. Thank you very much.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. We thank you for your participation.

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