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Navidea Biopharmaceuticals (NAVB)

May 01, 2013 8:30 am ET

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

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

Analysts

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

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

Michael G. King - JMP Securities LLC, Research Division

Stephen M. Dunn - LifeTech Capital, Research Division

Reni J. Benjamin - Burrill & Company, Research Division

Spencer Nam - Janney Montgomery Scott LLC, Research Division

Operator

Greetings. Welcome to the Navidea Biopharmaceuticals Lymphoseek Launch Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brent Larson. Thank you, Mr. Larson. You may now begin.

Brent L. Larson

Thank you, Rob. Hello, everyone, and thank you for joining us today on this important announcement. My name is Brent Larson, CFO of Navidea Biopharmaceuticals, and I will be moderating this morning's call. Joining me today on today's call are Dr. Mark Pykett, President and Chief Executive Officer; and Dr. Tom Tulip, Executive Vice President and Chief Business Officer.

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's important to note that such statements about Navidea’s estimated or anticipated future results or other non-historical 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 upon a number of factors affecting Navidea’s business. These factors include, among others, the 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 impacts of competitive products and pricing, patents or other intellectual property rights held by competitors, the availability and pricing of third-sourced products and materials, successful compliance with government regulations, and such other risks and uncertainties detailed in Navidea’s periodic filings on file with the Securities and Exchange Commission.

Now I would like to turn the call over to Dr. Mark Pykett, President and CEO of Navidea. Mark?

Mark Jerome Pykett

Thank you, Brent. It is with great pleasure that we announce, on behalf of Navidea and our partner Cardinal Health, that Lymphoseek has launched, and will be available through Cardinal Health's network of nuclear pharmacies across the U.S. Lymphoseek is the first receptor-targeted lymphatic mapping agent and is our first approved precision diagnostic product.

Today is a very exciting day for Navidea as it [indiscernible] a major inflection point, not only for the company, but also for patients and physicians, who we believe will benefit from this medically effective and efficient approach to lymphatic mapping. The official launch of Lymphoseek is a major step forward in our mission to bring novel radiopharmaceuticals to the market, improving diagnostic accuracy and patient care.

During today's call, we want to walk through more detail on the market opportunity for Lymphoseek, the clinical need for a targeted lymphatic mapping product and most importantly, the status and anticipated path of our commercialization efforts as we move into the launch phase.

Lymphoseek's label allows for its use as a radioactive diagnostic agent, indicated for lymphatic mapping with a hand-held gamma counter to assist in the localization of lymph nodes, draining a primary tumor site in patients with breast cancer or melanoma. With the vast majority of lymphatic mapping procedure performed in breast cancer and melanoma today, we continue to be very happy that this label fully supports access to this large market.

According to the American Cancer Society, there will be an estimated 232,000 new cases of breast cancer and 77,000 new cases of melanoma diagnosed in the U.S. alone in 2013. We estimate that lymphatic mapping is used in approximately 70% of these patients each year and most procedures are done with a radio pharmaceutical. We expect that the application of lymphatic mapping, even within breast cancer and melanoma, will continue to grow in part based on the advent of our new agent. Lymphoseek is specifically designed to reliably identify tumor training lymph nodes, facilitating enhanced diagnostic evaluation of patients with breast cancer and melanoma.

It targets and binds tightly the receptors within lymph nodes, so it accurately maps out those nodes that are most likely to harbor cancer, if it is spread. Physicians can use this accurate diagnostic evaluation of cancer to guide therapy decisions and determine patient prognosis and risk of recurrence. The spread of breast cancers or melanoma follows an orderly progression from the primary tumor site through the lymphatic vessels to the tumor-draining lymph nodes. Survival substantially declines for patients whose cancer has spread to a regional lymph node. In breast cancer, 5-year survival decreases from 99% to 84% in women whose cancer has shown to have spread to regional lymph nodes. In melanoma, 5-year survival drops from 98% to 61% in patients when disease is detected in regional lymph nodes.

Lymphoseek provides physicians treating these patients with a new option in lymphatic mapping. It enables efficient use of resources in the clinical setting due to its design and consistent characteristics. Its small molecular size allows for uniform injection site clearance and convenient transit to lymph nodes. This means that the lymphatic mapping procedure can be conducted any time during a broad window after injection providing the opportunity for scheduling flexibility, efficient workflow in patient management and optimal productivity.

To improve diagnostic accuracy and reinforce the therapeutic decision-making process, which we believe that ultimately leads to improved patient care, guidelines recommend lymph node mapping and resection for most patients with newly diagnosed melanoma and breast cancer. For patients, proper lymph node identification could also mean less surgery and potentially reduce side effects, such as lymphedema or scarring and a shorter recovery time.

The efficacy of Lymphoseek was demonstrated in 2 pivotal Phase III open label multi-center trials of 332 patients with either melanoma or breast cancer. In these trials, diagnostic efficacy was determined by the number of histopathology-confirmed lymph nodes detected by Lymphoseek. Our agent, on average, was present in 97% of resected and histopathology-confirmed lymph nodes. Histopathology is currently considered the gold standard for lymph node staging.

Note that Lymphoseek also has a very clean safety profile. Side effects were minimal and the most common adverse reactions are injection site irritation and/or pain in less than 1% of administrations. At approval, no safety issues were noted and the FDA did not require any additional trials or post-marketing studies.

The approval of Lymphoseek for the diagnostic evaluation of cancer is an example of precision medicine in practice. And development and commercialization of precision radiopharmaceuticals to improve clinical decision-making and patient care essential to Navidea's vision. We anticipate and in fact, are already seeing enthusiasm for Lymphoseek in the radiopharmaceutical and nuclear medicine community, in part, we believe, because it is only one of the handful and innovative product introductions in the field in several years.

With that, Tom is now going to walk through our initiatives at launch.

Thomas H. Tulip

Thank you, Mark, and thank you for joining us this morning on what is certainly a momentous day for Navidea and Lymphoseek. Today, Lymphoseek answers the lymphatic mapping market, characterized by a significant unmet need and a long-standing lack of technological innovation that has gone on for decades.

In addition to being a market ready for change, the size of the lymphatic market is significant as well. As Mark has mentioned, I'd like to spend a few minutes this morning to review how we are planning to launch Lymphoseek as the next steps to realize the potential of this great new agent.

We've described, as part of our partnership with Cardinal Health, they will sell and distribute Lymphoseek in the U.S. and Navidea will play an important role in commercial activities, particularly but not exclusively focused on medical education. Together with Cardinal, we are well positioned to drive adoption among a broad range of the physician community, particularly because of Cardinal Health's significant radiopharmaceutical experience and the clear broadest national sales marketing and distribution reach in the segment.

Just as an example, Cardinal Health can reach 99% of the nuclear medicine customers in the U.S. within 3 hours after having received an order. And that's unparalleled anywhere in the world. The Cardinal Health network currently includes more than 140 nuclear pharmacists -- pharmacies, excuse me, and the largest number of radiopharmacists, more than 400, as well as nuclear technologists in the industry. In terms of getting the product from the pharmacy to the end-user, Cardinal will deploy the largest sales force specialized in nuclear medicine, fully trained and incentivized to drive Lymphoseek adoption. And the most extensive distribution network characterized by, for example, more than 1,300 vehicles. Cardinal Health sales team, along with Navidea's own team of medical science liaison, will be calling on stage to educate physicians and allied health professionals in the community, as well as in academic settings, about how Lymphoseek can address unmet patient and physician needs.

Since the FDA approval in March, Navidea, in conjunction with Cardinal, has been working hard to execute and accelerate our joint commercialization plans. These important initiatives include: Completion of a set of comprehensive sales and pharmacist training materials and activities; customer profile and targeting of existing and attended accounts; advancement of our robust reimbursement strategy; and finalization of sales material and the Lymphoseek formulary kit. These developments, coupled with Cardinal Health's national distribution center, now being stocked with Lymphoseek and having in turn shifted to their pharmacies, where an ample product inventory is on hand to support sales. This has now positioned us to proudly announce the launch of Lymphoseek has, in fact, commenced.

Medical education is a core component of our launch strategy, and our plans include a push to expand awareness of Lymphoseek, as well as a drive for increased interest in lymphatic mapping. We are -- we, at Navidea, are fielding a highly focused extraordinarily experienced group of medical science liaisons, or MSLs, who are able to converse with physicians and clinicians on a peer-to-peer level. As has been repeatedly proven, this type of focus on individualized medical education interaction can be critically important to drive the market development, penetration and expansion. The early MSL activities will be weighted towards education of a clear medicine community to complement Cardinal's promotional activities and to facilitate initial market penetration.

The second wave of education, evolving to address the needs of the surgical oncologist that will rollout as launch progresses, is intended to enable market development, particularly as our head and neck cancer work gains momentum. Navidea will provide peer review of scientific data, protocols and other materials to hospitals and clinics and will sponsor continuing medical education events to expand our reach and impact.

We expect to have a big presence at a set of upcoming medical scientific meetings. Firstly, the joint international oncology congress, which is taking place in San Francisco later this month. This important surgical conference will be sponsored [indiscernible] to bring a symposium on lymphatic mapping and 6 Lymphoseek abstracts have been presented, have been accepted for presentation. We'll also have a large presence at the Society of Nuclear Medicine and Molecular Imaging meeting in June, which will allow us to greatly expand awareness in this key target audience. This is, in turn, supported by 10 Lymphoseek presentations accepted. We're also working with a range of advocacy groups to engage broader audiences such as patients, physicians and private payers.

Radiopharmaceuticals like Lymphoseek requires specialized distribution, and given the radioactive nature of such products, they rely on just-in-time delivery. As with their sales and marketing proficiency, Cardinal is best-in-class in satisfying customers' demanding arena. Every year, Cardinal pharmacies fill orders of more than 10 million patient-specific doses in a highly reliable, high-quality manner. Cardinal's advance systems are highly automated, thereby minimizing error. That said, Cardinal Health radiopharmacists are in active daily conversation with their customers, providing an invaluable resource to the nuclear medicine community and thereby, building trust and customer loyalty.

Lymphoseek will be priced and reimbursed fairly and adequately. With Cardinal Health, we've set a price of $300 per study, which the company believes will provide the best return with the current label by optimizing use in penetration of Lymphoseek. Lymphoseek is -- as Lymphoseek is a first-in-class agent and the first intraoperative lymphatic mapping material approved for 30 years, as such, we believe it will support a premium relative to older competitors. I'd like to remind you of this $300 end-user revenue, Navidea will receive greater than 50% by a well-established revenue reconciliation. In turn, given our very favorable cost of goods and our lean organization, we expect more than 35% of this end-user revenue to drop through to our product EBITDA.

Working with payers and providers, and providing payer coverage to make Lymphoseek accessible is a top priority. We have a solid reimbursement strategy for Lymphoseek and we believe we've made good progress in our path to securing reimbursement, including developing payer-specific support materials.

Navidea expects Lymphoseek procedures will be covered at launch as part of the procedural reimbursement codes already established for lymphatic mapping by Medicare.

In accordance with CMS regulation, we'll all apply for pass-through, unique Lymphoseek-specific C-Code later this month, which should enable separate payment under Medicare for Lymphoseek outside of the procedural reimbursement from October of this year through the end of 2015. This will help ensure favorable and equitable payment to providers. Private payers, in turn, have a variety of policies and contracts with their providers very considerably. But many have new technology provisions that may enable separate payment for Lymphoseek and some private payers track CMS policies and codes as well to influence their policies. Navidea will provide an online reimbursement and as well as formulary kit to ensure that payers, providers and P&T, pharmacy and therapy committees, have the information they need to ensure appropriate listing, coding, payment and uptake for Lymphoseek. These kits will be a useful resource to the Cardinal sales team.

In keeping with well-established industry practice, we'll be rolling out a limited-scope, carefully designed and managed from a compliance point of view, a voucher program commencing in early June. This will enable customers to directly experience the benefits of the drug. We firmly believe that this will be an especially potent tool to accelerate adoption, given our confidence that the features and benefits of Lymphoseek will be readily evident to both the nuclear medicine as well as surgeons.

Cardinal Health will offer the program to the accounts that they call on during the weeks following product launch. We will have more updates on this entire process as the launch progresses. With that, I'd like to turn the call back over to Brent.

Brent L. Larson

Thanks, Tom. I'd like to spend a few minutes outlining a few key points about the launch, including its impact on our financial position and how we think about the rest of the year.

We are not currently giving any revenue guidance, but as we gain more experience in the quarters following the launch, we will strive to provide a more concrete guidance for you. In the meantime, we, in Cardinal Health, plan to track a number of important metrics to assess the performance regarding market penetration and usage, which will allow us to develop that guidance.

To the extent that such information does not violate any confidentiality or compromise our competitive position, we will, of course, provide you with such information as we are able.

We are also in the progress of developing these metrics, which although they may not translate directly into assessing things like market share, the ones which are planning to help to communicate on a regular basis to give you some perspective as to the adoption progress for Lymphoseek during the early stages of launch. For example, we plan to track a number of product trials, professional -- excuse me, promotional medical education events and numbers of participants, physician awareness activities and formulary acceptance. As for the revenue recognition process with Cardinal Health, it is relatively straightforward and in principle, involves 3 primary components: A provision on the transfer price we receive upon the shipment of Lymphoseek from Cardinal's National Distribution Center or NDC to their pharmacies; a share for each procedural revenue, which Lymphoseek is used; and milestone payments, which we will receive as Cardinal Health achieves those sales milestones.

Navidea essentially stores or consigns our inventory at the NDC, and Cardinal Health, in turn, supplies their nuclear pharmacies in smaller quantities through frequent, regular shipments, so the pharmacies need only hold a very limited supply. And now -- Navidea recognizes revenue at the time Cardinal Health ships the products from the NDC to the pharmacies, and we would expect to record revenue on that basis this month.

Provisional transfer price we receive is initially about half of what we expect to generate from a procedural dose. However, as the provisional transfer prices for doses used in patient procedures is subtracted from the procedural revenue we receive during the monthly reconciliation, the recognition of this provisional transfer price is only going to be important in the initial month, as Cardinal Health stocks their pharmacies. Based on their ability to supply quickly, their stocking quantity is not expected to be even material in the long run.

On a monthly basis, Cardinal will report revenue to us for Lymphoseek, along with the number of procedures in which Lymphoseek is administered and the number of vials used. Based on that information, we will calculate the revenue share based on the contractual formula, but generally, about 50% or so of the revenue Cardinal generates will be transferred to -- regarding Lymphoseek to Navidea. We will book this revenue monthly and receive payments from Cardinal Health 45 days after the end of each quarter related to those monthly sales during the quarter. As they achieve certain sales levels, likely during the first 2 years following product launch, we will receive a total of $3 million in additional milestone payments, which will be recognized when earned. With respect to costs related to Lymphoseek, this is also fairly straightforward. Cardinal Health bears the primary costs related to marketing, sales and distribution, including the headcount costs to support their field sales force and cadre of nuclear pharmacists and technicians. Navidea bears the costs of the manufactured product. We estimate our contribution on Lymphoseek sales will be similar, approaching 75% on a long-term basis, although we do expense -- expect some levels of marketing support in medical education costs as a part of our structure during the initial stages following the launch.

For 2012, we recorded approximately 3 -- reported approximately $3.1 million in marketing and medical science liaison-related costs to support Lymphoseek commercial education. We expect that cost to be approximately doubled for 2013 as a whole. However, we continue to expect Lymphoseek to be a very profitable contributor to Navidea's bottom line for years to come based on those economics.

Now let me turn the call back over to Mark.

Mark Jerome Pykett

Thanks, Brent. We believe that this is really just the beginning of realizing Lymphoseek's true real market potential, which we believe is substantial. We plan to further grow the product by capitalizing on the global market outside the U.S., broadening into additional and even larger patient populations and potentially enhancing the Lymphoseek brand through a label extension into Sentinel Lymph Node Biopsy.

We have filed an MAA, seeking approval of Lymphoseek in the EU for use in intraoperative lymphatic mapping, not specific to any particular solid tumor type, and could receive a positive CHMP opinion as early as the fourth quarter of this year.

Our day 120 feedback has been targeted by EMA for later this quarter. Depending on the feedback we get from the EMA, it is possible that the Lymphoseek MMA could be approved by the end of this year. We are, therefore, preparing for commercialization in the EU and have already had several successful pre-submission manufacturing audits as part of the MAA process. In terms of potential distribution partnerships in Europe, we have had numerous dialogues covering most major markets and are hopeful that we will be in a position to announce an agreement for the EU soon. Beyond this filing, we plan to focus on those countries that allow marketing based on U.S. or EU approval. Such countries include, but are not limited to, Mexico, Israel, Singapore, Saudi Arabia, the Philippines and others. And we are evaluating the merit and process of pursuing sales in those markets.

We are also rapidly advancing the investigation of Lymphoseek in additional indications. We recently reported encouraging top line data from a study intended to demonstrate Lymphoseek [indiscernible] and seeks performance as a sentinel lymph node detection agent against the pathology standard of care for lymph node dissection. Results showed Lymphoseek identify pathology-positive lymph nodes with 97.5% sensitivity and a false negative rate of just 2.5%.

On the basis of the data to date, the Data and Safety Monitoring Committee has recommended the trial to be closed. We are presently evaluating the full data set and the committee's guidance. Based on our current understanding, we believe we may follow the DSMC's guidance and close the trial in the near future. If we close the trial, we plan to talk to the FDA about our desire to file a supplemental NDA for label expansion into head and neck cancer and to potentially seek a Sentinel Lymph Node Biopsy claim.

The potential market of an expanded indication for Lymphoseek includes not only the head and neck cancer indication, but also other important cancers, such as colorectal cancer, prostate cancer, ovarian cancer and lung cancer, where current lymphatic mapping agents have not proven to be effective. In colorectal cancer, for example, we announced an investigator-initiated collaboration earlier this year. Collaboration such as this, with innovative investigators at leading medical institutions, are part of our strategy to maximize the potential for Lymphoseek in promising new patient populations. These additional indications would expand the market 3x to 4x to an incidence of over 1.25 million people in the U.S. annually and over 8.6 million people worldwide.

So we still have a lot to do and a lot to be excited about. We have tremendous confidence in the potential of Lymphoseek and we trust that the current label, proven safety and efficacy profile and our partnership with Cardinal Health will allow for a successful launch in providing physicians with a more accurate identification of tumor-draining lymph nodes and with the potential to facilitate better diagnostic evaluation and treatment for patients.

So I want to sincerely thank everyone who has contributed towards the commercialization of Lymphoseek. Now let's open the call up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from the line of Kevin DeGeeter of Ladenburg Thalmann.

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

Have you done assessment to, at this point, get a feel for what portion of hospitals will have P&T committee requirement, specifically requirements that you go through and have actually the formal P&T committee meet and even vote on reimbursement for Lymphoseek? Give us a feel for the landscape there?

Thomas H. Tulip

Sure, thank you, Kevin. Because this is a nuclear medicine product, P&T gets involved, although in a growing fashion, probably in less than 50% of the situation. Recognize, it's really not about reimbursement. It's about the ability to move a product into their system. Obviously, that's the first step. So that's part of the profiling that the Cardinal sales reps are continuing to do. But again, our belief is, while important, it isn't -- not a majority of the situation.

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

Okay, great. And on a similar note, do you have any data to give assessment of what portion of the breast cancer and melanoma patients would be covered by Medicare and be directly affected by the issuance of a pass-through code versus both -- the portion of the market where you'll need to go to private payers and the work that out on a more direct basis?

Thomas H. Tulip

Sure. There are sort of 3 segments here. Relative to Medicare and Medicaid, those patients covered by CMS is 25% to 30% of breast cancer and melanoma surgeries, lymphatic mapping procedures is currently practiced. Then there's another portion that may be somewhere in the 50% of the residual on the private side, that actually take the lead from CMS. And then there's the remaining group that have quite an array of, as we pointed out, contracts and processes. Many of these actually have new product adoption methodology. So in summary, some of them may actually get out front at CMS, but that's all part of the targeting component. And so as I said, as of now, we've started to reach out to these private payers, as well as working with CMS.

Operator

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

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

I'll just ask one question, no follow-up. Mark, you basically outlined the fact that this will now apply to solid tumors such as prostate cancer. Can you tell us why? And looking at the market, why you can address solid tumors everywhere and any competitor to not do that? Can you -- and if you can be as specific as possible and what this means for the -- your ability to go out there and hit the other markets?

Mark Jerome Pykett

Sure, Steve, thanks. I think you have to circle back to answer that question to the underlying mechanism of action and the design by which Lymphoseek was engineered. It is a purpose-built molecule that specifically engages a receptor that is found in high concentrations within lymph nodes. And so by injecting Lymphoseek to primary tumor site, allowing you to drain to the nearest lymph nodes, the so-called sentinel lymph nodes, the ones that are most likely to harbor cancer if cancer has spread from the primary tumor site. Lymphoseek will clear very quickly and then reside within those lymph nodes for many hours. And so it not only targets the lymph nodes, but it allows from a procedure standpoint the effective localization of those lymph nodes during the surgical procedure. The ability to engage a specific receptor by Lymphoseek stands apart from any other agents that has been used to date, which tend to be more non-specific agents that don't engage a specific receptor and travel through and migrate through the lymph nodes in a time-dependent manner. With that, as sort of the premise of how Lymphoseek works that, of course, it is, from a mechanistic standpoint, applicable to a range of solid tumors potentially, which do drain through the lymphatic system in the manner that I described.

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

And on that, the ability for you to go at prostate cancer, which obviously is almost ubiquitous in men, how come other products can't do the same thing?

Mark Jerome Pykett

Well, again, it's a combination of the underlying mechanistic features, but also the practical features and performance characteristics of other agents. It's simply, in many cases, not practical to inject an agent and have to wait 3 hours, 2 hours for it to clear the injection site while the patient is undergoing surgery. It doesn't work efficiently for the physicians. It's also not in the patient's interest to be in the surgery for that long. So from a practical standpoint, it doesn't -- it's not aligned with how these surgeries tend to be conducted. On a mechanistic level, of course, it doesn't necessarily localize to the key predictive lymph nodes in a reliable particular [ph] manner, and therefore the false negative rate that is, does it wish the key lymph nodes would be missed, can be quite high. For those reasons and others, the field has tended to evolve away from the use of these other agents in many solid tumor settings, aside from breast cancer and melanoma. And we think this is a great opportunity for Lymphoseek to be able to move into those cancers and really expand the value and utilization of lymphatic mapping for solid tumors where lymphatic mapping might be helpful, but is not widely conducted today.

Operator

Our next question is coming from the line of Mike King of JMP Securities.

Michael G. King - JMP Securities LLC, Research Division

I have -- if you don't mind, I wanted to ask one question in multiple parts, again trying to just get a little more granularity on the sort of the kinetics of the launch curve, if you want to call it that. And just sort of following up on the earlier question regarding P&T committee. I'm just wondering if you can give us some color on sort of what types of turnaround times are normal in nuclear medicine with respect to additions to P&T? Do you believe that any kind of demonstration project or head-to-head institution, conducted head-to-head studies that will determine whether you'll get on formulary or not? Are those kind of things contemplated in the launch?

Thomas H. Tulip

Mike, thanks for the question. First of all, again, the formulary in the setting of radiology drug tends to be a mixed situation, wherein the process needs to be engaged. Frequently, the P&T folks rely on the nuclear medicine radiology clinicians to drive a good deal of the discussion. From that point of view, our sense is as soon as we're able to drive awareness, and particularly using this [indiscernible] program to actually put the product at the hands of the nuclear medicine physicians, that will then experience a very positive -- we're very confident about the positive experience that they will get from this. And that we are going back to P&T. Frequently, our belief is will be sufficient to hold sway. So while we certainly have materials, we don't see the P&T and formulary acceptance as a significant to the uptake of the product.

Michael G. King - JMP Securities LLC, Research Division

And what about this concept of any kind of comparison testing or either initiated out of [indiscernible] in order to provide greater insight into the value proposition?

Thomas H. Tulip

As I think you may realize, we've announced and in fact published a number of meta-analysis against the colloidal materials that are available, both here and in Europe. That will be one element, I'm sure. It's pretty hard to do the head-to-head study against the existing materials. Certainly, the existing radio-colloid, so it would be experiential sort of situation and thus, if -- as folks start to use Lymphoseek, I think they will very quickly see the advantages of consistently reliability, efficiency, maybe some pain reduction as is both patients and the caregivers around them obviously. So I think that's how the process is likely to unfold.

Mark Jerome Pykett

And Mike, I'll just add, we believe that the data developed to date in our head and neck cancer study, which is comparing Lymphoseek to the true gold standard, which is a full pathology assessment, showing very, very high levels of detection of the key sentinel lymph nodes in that study of design, will be very persuasive to the clinical community as well.

Michael G. King - JMP Securities LLC, Research Division

I wonder, under DDMAC, is it permissible for you to distribute the publications, the meta-analysis that Tom referred to?

Thomas H. Tulip

So our medical affairs group, both through the MSLs and in response to clinician request can, in fact, do that. That's not something that Cardinal salespeople would be doing, however. There are mechanisms that again through our call center, there are mechanisms that enable those materials to get out to the physician community.

Operator

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

Stephen M. Dunn - LifeTech Capital, Research Division

I guess we spoke a little bit about the mechanism of action for Lymphoseek about why it would be applicable to all solid tumors. I want to get a little bit more granularity on how you get the label to say that. Right now, the label is breast and melanoma. Are you intending on using the head and neck data on the SMDA filing to then try to get a broader label for all solid tumors? Is that the plan?

Mark Jerome Pykett

We intend to use the head and neck study in potentially, several ways. First and foremost, just starting with adding head and neck cancer to the repertoire of cancers that can be -- that -- for which Lymphoseek can be used is point 1. Point 2 is that each cancer that we're able to provide data for adds to the performance reliability of Lymphoseek and eventually, we believe is persuasive to the agency that just because of its common underlying mechanism of action, is broadly applicable to a broad range of tumors. But the real thrust of the NEO3-06 study in the head and neck cancer is to seek the sentinel lymph node claim which correlates Lymphoseek performance with a pathology dissection. And based upon guidance from the agency, it's that type of correlation, that type of study, which needs to be done to seek a sentinel lymph node biopsy claim or a sentinel lymph node mapping claim. That's very important because that then relates to the ability to detect the key predictive lymph nodes that are important to assess, by pathology, to determine if cancer has spread. That study is unique in many regards, certainly from a company-sponsored standpoint, by comparing to a full nodal dissection. Head and neck cancer is one of the cancers, among a few, where that kind of procedure is still done. And so we're very pleased with the data that we've been developed to date and believe we can use that to go seek a general sentinel lymph node claim from the agency as well. So there's sort of 3 points to the head and neck study that we think we can play forward that will be to Lymphoseek's advantage.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay. And one follow-up for Tom. In your prepared remarks, I may have missed it, I think you said you're going after Lymphoseek, some Medicare dedicated pass-through. It sounded like you were anticipating getting it through Medicare starting on the October 1 government cycle of this year? Is that correct?

Thomas H. Tulip

That's correct. We will make the application, the next window, after our approval was this month, which we'll make, and that would lead to a product-specific C code for Lymphoseek on or about October 1 of this year.

Operator

Our next question is from the line of Reni Benjamin of Burrill & Company.

Reni J. Benjamin - Burrill & Company, Research Division

Could we just dig in a little bit more into the numbers? Tom, you mentioned that 99% of the nuclear medicine docs can be serviced in the U.S. in 3 hours from an order. Could we break it down, by chance, to how many accounts is that? Or how many hospitals is that in the U.S.? Do you have a sense as to how many hospitals or how many accounts per salesperson Cardinal has? And is there a geographic concentration, East Coast, West Coast? And at the start of the launch, is it all salespeople hitting every single account that they have at one time? Or is there more of a measured launch going forward?

Thomas H. Tulip

Sure. Let me try to get all of those and you'll remind me if I miss any along the way. So there are about already 4,400 hospitals and clinics in the U.S. that practice nuclear medicine. Perhaps 2,000, 2,200 of those practice lymphatic mapping today for breast cancer, melanoma and a smattering of other uses. As you pointed out, Cardinal has the reach to get to all of these folks. The entire Cardinal sales force will, in fact, be fully trained, incentivized and targeted at about a quartile. So working schedule, we've identified the high-volume, most likely fastest-adopting high-volume accounts and that quartile will be the target for the initial period. We haven't set the window for how long that period will be, depending on uptake. We'd like to think it will be very quickly, with great confidence as this is Cardinal of that happening. And then after that early adoptive segment is targeted, we'll step it out in the usual fashion and beyond that. So it is quite a measured circumstance, not only in terms of accounts, but actually in terms of education as well. But as we've said before, now there's sort of, from my point of view, 3 phases to this process. The first 2 of which focus on market penetration and the last on market expansion of the sort that Mark has described. So we, together with Cardinal, will go to the nuclear medicine community first to drive awareness, make sure they're comfortable and confident about the features and benefits of the product. And then we'll turn our attention more to the surgical community to drive demand and pull through. The nuclear medicine folks, being fully armed, will facilitate that as well. And then finally, having driven the market penetration piece of this, using head and neck and other data we will move beyond breast cancer and melanoma towards market expansion. So that's sort of how we are envisioning the launch rolling out. I'm sure I missed one of those questions, but hopefully that touches most of them.

Reni J. Benjamin - Burrill & Company, Research Division

Yes. No, that touches most of them. Then just as a follow-up, as far as convincing the nuclear medicine docs, right, is this a problem where they acknowledge that there is an issue with the current standard of care and Lymphoseek solves that current issue? Or is this more like Henry Ford when he's asked if we do what the customer wanted, we'd make faster horses. Is this more of an issue where you have a product that brings a lot of conveniences and better diagnostic ability and it's convincing the docs that this is something that they should use?

Thomas H. Tulip

I think the community recognizes some of the unmet need that exists out there. They don't always believe it's in their particular hospital. I think that's the nature of any medical sales. So it's kind of a mixed bag, a mixed approach. I think that it's important for us to leverage the awareness of the shortcomings of the current technology, get the material in our hands and at that point, it -- I think it will become readily evident that, oh, this really does perform a lot better in ways that I like, and my surgeon in turn is going to like, and my hospital administration interns is going to like. So it's kind of a mixed situation. It's beautiful.

Operator

Our next question is coming from the line of Spencer Nam of Janney Capital.

Spencer Nam - Janney Montgomery Scott LLC, Research Division

Just couple of quick questions. Just following up on the Cardinal Health sales dynamics, I'm just curious if you guys could tell us what the current -- the modalities in terms of the lymph node mapping, how much of the -- what percentage of the mapping is using the visual blue dye versus sulfur colloid and the -- whether Cardinal guys are probably pushing to either of those products and how they would condition away from that to start pushing Lymphoseek to their prospective customers?

Thomas H. Tulip

Sure. Thanks, Spencer. I appreciate the question. Well, the market right now, as Mark had suggested, there's something north of 200,000 lymphatic mapping procedures focused on breast cancer and melanoma. The vast majority of them use both sulfur colloid and dye. A much smaller percentage use either singularly. Cardinal doesn't, as far as I know, not the nuclear pharmacy services business of Cardinal doesn't provide the dye. That's usually a surgical operating theater product that's administered in the OR. They do, however, provide the sulfur colloid. And as we've said been said before that there are a number of reasons that Cardinal's incentivized to move Lymphoseek. Strategically, because they want to prove to the community that they can move an exclusive product and woo the next round of innovators. From a operational point of view, there's both radiation exposure and labor costs benefits to them. And there's incentive for the salespeople, both in enhancing their credibility by bringing in an important new product, but also financially. So they will be working to switch out the sulfur colloid that they already sell for Lymphoseek on the basis -- on the various basis that I've just described.

Spencer Nam - Janney Montgomery Scott LLC, Research Division

Okay, that's helpful. And then just a quick follow-up on the labeling and usage. Is there an expectation from your end that there could be, assuming that initial -- the feedback is positive on Lymphoseek that there could be some early off-label usage of Lymphoseek in other indications prior to you guys receiving the FDA expansion indications?

Thomas H. Tulip

Well, certainly, as the head and neck data that we've started to describe becomes more broadly known and I think the implications that Mark described that if on the basis of pathology against complete nodal dissection, Lymphoseek behaves as well as it obviously does, then that will undoubtedly engender some off-label use and the market will start to expand almost on that basis, recognizing that there's not a lot we can do from a direct promotional point of view until we get a different label. Having said that, that's also the beauty of medical education and medical affairs because that is a dialogue, that is a conversation that medical affairs professionals, such as our MSLs, will be able to have with the expanded surgical community.

Operator

Our final question for today is a follow-up from the line of Mike King of JMP Securities.

Michael G. King - JMP Securities LLC, Research Division

I wonder -- again, sorry to be so granular on these kinds of things, but I think these kind of issues could be very important when launching a new product such as this. Is there a single point of contact between the institution and Cardinal? I mean -- maybe you can help us understand how the interaction happens. Is there someone that hospital XYZ can turn to, to talk about coding, to talk about disposal, just kind of the nuts and bolts aspects of it. Sometimes, what hinders uptake is just a potential user not knowing who to turn to for key questions and I'm just wondering if you can help us understand how Cardinal is going to help you manage that day-to-day interaction with the customers so that Lymphoseek uptake is optimized?

Thomas H. Tulip

Thanks, Mike. That's a great question. What you just described is a big piece of why we are so happy. So Cardinal has a number of points of contact within radiology, within nuclear medicines, within hospital administration. As we've said, their salespeople call on and promote into the nuclear medicine community, into the nuclear medicine customer, the lab. They also go to administration. They do P&T if necessary. And, in fact, both Cardinal and ourselves have sources of information about coding payment coverage, that sort of thing. But maybe the special sauce in all of this is the very intimate, active relationship between the Cardinal Health pharmacists, the nuclear technologists and the customers. The nature of this sales distribution process is they're actually very much relationship-oriented. Frequently, one of the Cardinal pharmacists will be talking to someone within the customer committee 2 or 3 times a day. So that very broad band of communication, the existing frequency, factors that pharmacists, our clinicians and can provide clinical information, clinical guidance. I think is going to really jumpstart the product uptake. So the situation you've described is the best reason to be working with Cardinal.

Operator

At this time, I will turn the floor back over to management for closing comments.

Mark Jerome Pykett

Great. Thank you to everyone for your time on the call this morning. We truly appreciate your participation. This week is obviously a very exciting time for Navidea to embark on Lymphoseek launch and commercialization, and we look forward to keeping you updated as we progress with Lymphoseek launch, with the progress as we get into the marketplace, the developments outside the U.S. for the product, as well as the progress with other elements of our pipeline programs. Thank you very much.

Operator

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

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