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Sometimes when investing in the pharmaceutical space, it is better to identify an up-and-coming company than one that already has established drugs. It is not that companies with established drugs lack value. Rather it is that there oft seems to be high value placed on potential. If you time an investment correctly, it can be quite rewarding.

Navidea (NYSEMKT:NAVB) is an up-and-coming player with a pipeline of potential at critical stages of trials. If the company has successful results, the stock could appreciate substantially. The trick here is trying to gauge the likelihood of success, and when various results might become available.

The Pipeline - Lymphoseek

On March 13, 2013, the Navidea drug Lymphoseek garnered FDA approval for use in lymphatic mapping procedures to assist in the localization of lymph nodes draining a primary tumor in patients with breast cancer or melanoma.

Lymphoseek (Technetium Tc99m Tilmanocept) Injection is a first-in-class mannose receptor (CD206) binding radiopharmaceutical agent developed for use in external lymph node imaging.

The initial FDA approval is simply the beginning for Lymphoseek. Navidea is conducting an additional Phase 3 clinical trial in patients with head and neck cancer. This trial reached a pre-planned interim analysis point in 2013. The company reports positive topline results which it says demonstrates that Lymphoseek meets the primary efficacy endpoint of accurately identifying sentinel lymph nodes (SLNs) in subjects with squamous cell carcinoma of the head or in the mouth, as compared to the removal of all lymph nodes during multiple level nodal dissection surgery of the head and neck.

Navidea, after final assessment of the data will evaluate the possibility of filing a Supplemental New Drug Application (SNDA) late in 2013. Navidea is also considering additional studies of Lymphoseek in other cancer types.

With an FDA approval under its belt, and positive studies in other areas, Navidea took the additional step of submitting a Marketing Authorization Application (MAA) for Lymphoseek® to the European Medicines Agency (EMA) in December 2012. The company and investors alike await word on the European front.

The driving concept of Lymphoseek is the theory that a better diagnostic and better mapping can help doctors focus on the most critical areas of need and avoid unnecessary surgical complications.

Lymphoseek, a radioactive tracing agent, is injected at the site of the primary tumor and follows the drainage path of the tumor to the nearest lymph node or nodes. After injection of the radioactive agent, external gamma detection-based imaging can be performed to assist in the pre-operative localization of nodes. A gamma detection device is then used to track the pathway of the tracing agent. Lymph nodes in the potential drainage path are identified using the radioactive tracing agent. Essentially the doctor is presented with a virtual road-map identifying areas of higher risk. Nodes that are not on the path have, in general, a tendency to be free of disease.

NAV4694 - Alzheimer's

NAV4694 is a Fluorine-18 labeled precision radiopharmaceutical candidate for use in the imaging and evaluation of patients with signs or symptoms of cognitive impairment such as Alzheimer's. NAV4694 helps to identify amyloid plaque in the brain. Amlyoid plaque is present in all patients with Alzheimer's Disease. The ability to diagnose early allows for more treatment options. One difficulty with current options is that the contrast in images is not easy to read. NAV4694 offers higher contrast imaging, which, in theory, helps assist in earlier detection.

NAV4694 is currently being evaluated in Phase 2b and Phase 3 registration clinical trials.

Last week Navidea announced that it is the recipient of a Small Business Innovation Research grant from the National Institute On Aging regarding this drug.

NAV5001 - Parkinson's

NAV5001 is investigational small molecule radiopharmaceutical imaging agent being developed as an aid in the differential diagnosis of Parkinsonian syndromes, including Parkinson's disease (PD) and other movement disorders, as well as Dementia with Lewy Bodies (DLB). Similar to NAV4694, the biggest feature is the quality of imaging for doctors to read, and the ability to gather an early diagnosis. As with many conditions, early diagnosis presents more treatment options for doctors and patients to consider.

NAV5001 has been administered to more than 600 subjects in multi-phase clinical trials to date. During 2013, Navidea initiated the Company-sponsored Phase 2b program for NAV5001 in DLB and anticipate the start of pivotal, parallel Phase 3 registration studies of NAV5001 as an aid in the differential diagnosis of Parkinsonian syndromes.

Last week Navidea announced an agreement with the FDA regarding this drug and future studies.

RIGScan

The concept with RIGScan is that it is an agent that binds itself to specific cancer types. A patient is injected with RIGScan and the agent goes through the body. When surgery occurs, the doctor can seek out the identifiers via a scan to identify tissues that need removal. RIGScan can identify target tissues that traditional scans can miss. Used successfully, it can have the potential of increasing the survival rate of cancer patients and serve to reduce the use of further surgeries.

Essentially surgery is guided by the radioimmuno agent and the process is called RadioImmunoGuided Surgery (RGS), RIGScan has completed clinical studies for enhanced detection of occult cancer in stage IV primary or recurrent colorectal cancer.

The Fundamental Story

Make no mistake. This company is a speculative play. That means the stock price will be driven more on perceived potential rather than the fundamental story. Do not look for profits soon, but do pay attention to the cash burn. In its most recent quarter, Navidea lost 9 cents per share, 2 cents worse than analysts' expectations. This quarter the company is expected to lose 8 cents per share and deliver revenues just under $1 million. The company has about $26 million in cash that can take it a few more quarters, but as a spec play investors will want to monitor this. Essentially we are looking at a balance between potential and the time that potential will take to get to the bottom line vs. whether or not debt, refinancing, or dilution need to come into play.

Navidea has about 30% upside to re-test 52 week highs. A stock driven by decent news can achieve this with relative ease. On the downside, the equity is a 30% haircut away from 52 week lows. That can happen easily as well. The potential may be worth a bet, but I would be more of a player at a price about 10% lower than current levels. Watch closely, as Navidea is speculative.

Source: Navidea - Worth A Look?