Navidea Biopharmaceuticals, Inc Management Discusses Q3 2013 Results - Earnings Call Transcript

Navidea Biopharmaceuticals, Inc (NYSEMKT:NAVB)

Q3 2013 Earnings Call

November 06, 2013 8:30 am ET

Executives

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

Mark Jerome Pykett - Chief Executive Officer and Director

Thomas H. Tulip - President and Chief Business Officer

Analysts

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

Stephen M. Dunn - LifeTech Capital, Research Division

Charles C. Duncan - JMP Securities LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to your Navidea Biopharmaceuticals Third Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Brent Larson, Executive Vice President and Chief Financial Officer. Please proceed.

Brent L. Larson

Thank you, Khanti. Hello, everyone, and thank you for joining us today. Joining me on today's call are Mark Pykett, Chief Executive Officer; and Tom Tulip, President and Chief Business Officer. At the end of the call, we will hold a brief question-and-answer period.

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 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, 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 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 source 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, Chief Executive Officer of Navidea. Mark?

Mark Jerome Pykett

Thanks, Brent, and thanks to everyone who has joined us for this call today. Before we begin the review of the third quarter results, I want to provide an update on a few key topics including the Lymphoseek launch, our partnering activities outside the U.S., for which we have some exciting news and our financial position. First and foremost, let me say this is a company that has a lot going for it. We have an approved product now commercialized in the U.S., Lymphoseek. We continue to facilitate the Lymphoseek review process for approval in Europe. We have not one, but 2 Phase III level programs with promising neuro imaging agents addressing large potential markets. And we have a deep pipeline, including a promising technology platform that has the potential to create new derivative products.

So first up is Lymphoseek. Let me start by saying we continue to be very pleased with the Lymphoseek launch progress in the U.S. with our partner, Cardinal Health. Having now completed our first full quarter of sales, it's important to note that we're really just getting started and that all sales reported to date have preceded the separate reimbursement from Lymphoseek under the pass-through C-code from CMS, which became effective on October 1. And yet metrics to date are very encouraging, especially in areas of repeat orders and multi-dose ordering.

For example, the number of units sold increased approximately sevenfold quarter-over-quarter from Q2 to Q3. Nearly 90% of customers ordering in May to August placed a repeat order, a very encouraging frequency of reordering. 1 in 4 orders in September was from first-time accounts, indicating strong growth in new users.

Also in September, about 75% of customers ordered multiple doses, so customers are ordering in quantity, supporting the notion that Lymphoseek is well on its way to displacing the previous generation radiopharmaceutical and becoming the accepted standard in these accounts.

Also, the number of accounts ordering in the final month of Q3 was 2.5x greater than in the final month of Q2. Major medical institutions utilizing Lymphoseek continue to grow in the third quarter, and formulary placements continue to expand at an encouraging rate. So all of this is very positive news and indicative of encouraging trends.

Now, with the separate CMS reimbursement under the pass-through C-code, Lymphoseek will be paid for outside of and in addition to the procedure codes that cover the lymph node mapping and biopsy procedures. We believe this will further catalyze utilization. And in fact, the initial assessments of October performance suggest that the promising growth trends we have seen to date are now accelerating post availability of this Lymphoseek-specific code.

In many regards, these and other performance parameters are exceeding expectations. As we've noted previously, given the somewhat complicated sales cycle, the nature of the field and the reimbursement situation, we felt that the first quarters of launch would be measured primarily by important qualitative evidence of Lymphoseek adoption. We think we're seeing that play out effectively, with good momentum building and resulting in period-on-period growth, as anticipated.

As we said on our Q2 call, our plan is to be able to provide more guidance on revenue, earnings and the outlook for this promising product in early 2014. In the coming year, therefore, we believe we will provide increasing focus on financial guidance. We believe this should enhance clarity for investors and analysts in their modeling and valuation of the company.

In terms of trajectory, we continue to believe that Lymphoseek will become the standard of care in lymphatic mapping. First, based on our current models, we believe that it can be the market leader within 12 to 18 months. This outlook does not include market expansion into use in cancers beyond breast melanoma and head and neck cancer, enabled by our market and label expansion efforts.

Second, we're advancing our global initiatives for Lymphoseek into new markets, which we believe are integral to Navidea's growth strategy. Today, we're very pleased on this call to announce that our selected partner for Europe and other select territories is Norgine BV, a leading European specialty pharmaceutical company. Though headquartered in Europe, Norgine has affiliates in territories beyond Europe where we will also partner with them.

Norgine's sales and marketing expertise, combined with its well-established infrastructure and strong presence in their marketplaces, make it an ideal commercialization partner to drive Lymphoseek adoption in the chosen regions. Tom will provide details in a few moments.

Our progress with Norgine has moved in concert with ongoing feedback from the EMA on our Marketing Authorization Application, which continues to move progressively through the review process. We believe that with international partnerships complementing our position in the U.S., we will establish Navidea and Lymphoseek as a global leader in lymphatic mapping, and that we are not aware of any other company in this space with this global geographic range. We continue to work on a series of partnerships for other territories to fully realize this goal, some of which will follow in the near term.

We're also encouraged about the expanding commercial outlook for Lymphoseek. In the context of growing Lymphoseek traction and expanding markets, we recently completed a financing to enhance several initiatives underway, including commercial opportunities for Lymphoseek outside the U.S., the continued development of our neurodegenerative portfolio, imaging portfolio and further evaluation of the promising initiatives deriving from our recently unveiled Manocept platform. We believe the Manocept platform has the opportunity to deliver multiple new products for a range of indications associated with inflammation and activated macrophages targeted by Manocept compounds. These diseases include diseases such as rheumatoid arthritis, tuberculosis, lupus, Crohn's disease, Kaposi's sarcoma, vulnerable plaque and others.

As disclosed in prior public filings, we completed a debt financing with GE Capital, the terms of which has covenants requiring a minimum working cash balance and an amount on the balance sheet. The completed equity financing augments our available working capital as Lymphoseek revenues continue to grow. Above the share price of $3.83, investor can exercise 30% warrant coverage. This amounts to approximately 3.2 million shares at a strike price of $3.83, a 35% premium to the offering price. The financing also provides for a potential exchange of warrants to Navidea common stock at prices below $3.83. Including the shares purchased from the principal investment at $2.84, and depending on where this potential exchange is enacted between a ceiling price of $3.83 and the floor price of $2, the total number of shares potentially issued under the exchange, if it occurs, would be between 12.5 million and 14.3 million shares.

Empirically, the 12.5 million to 14.3 million shares represents approximately 7.4% to 8.4% of our fully diluted share capital. And by completing this financing, we did not take market risks tied to in market or deal pricing periods or execution risk in completing the transaction, meaning there was a high degree of certainty that the deal would be completed. However, the market reaction to the transaction has been far more negative than we would have ever anticipated. And with the current position of the stock, the financing clearly hasn't played out as intended, which we find deeply regrettable. And so we're committed to continuing to work very hard to regain ground that has been lost.

Now with that, brief overview, I'm also very pleased to announce that Dr. Michael Goldberg, principal at Montaur -- Platinum-Montaur will be joining the Navidea Board of Directors. Michael brings a wealth of experience as an investor -- as an investor and a biotech executive, and we're very much looking forward to his appointment in the near future, following completion of the customary governance requirements and agreements. With that introduction, I would now like to turn the call over to Tom to discuss activities outside the U.S.

Thomas H. Tulip

Thanks, Mark, and thank you, all, for joining us this morning and for your ongoing interest in Navidea. As Mark mentioned, we believe that the implementation of international partnerships to complement our position in the U.S. will establish Lymphoseek, and in turn Navidea, as the unchallenged global leaders in lymphatic mapping and sentinel node detection in that particular space. As many of you know, we've been working on a series of partnerships for Europe and beyond to realize this vision.

In recent conversations, we've described our preference to find a partner or partners in Europe and elsewhere who share our view that Lymphoseek will become the standard of care, and thus should command a value-supported price premium. Realizing such a price premium and the resulting economic benefit to Navidea and our partners will demand clear demonstration of the products' advantages to a range of stakeholders, and must be based on education of these stakeholders with robust evidence. This approach is consistent with that which we and Cardinal Health are taking in the states. We previously disclosed that we've identified a specialty pharma company who meets our criteria, and we've been developing a relationship with them. Mark's already shared with you in fact it's Norgine BV, which, predicated on a positive CHMP opinion later this year, will allow us to initiate our launch activities in early next year.

Norgine will be our partner for not only Europe, but for regions beyond as well. Norgine is an independent European specialty pharma company established for over 100 years with an extensive presence in all major Euro markets and an impressive array of affiliates around the world. The partnership we've designed will combine Navidea's capabilities in radiopharmaceuticals and clinical development with Norgine extensive sales and marketing expertise and infrastructure to make Lymphoseek a success in Europe, supported by European experience and incontrovertible evidence demonstrating the clinical and economic benefits of the product.

Unlike in the U.S., where institutions rely -- typically rely on receiving the radiopharmaceuticals, which are compounded and delivered by specialized radiopharmacy distributors. Like Cardinal Health, hospitals in Europe purchase non-radiolabeled materials and compound the final radioactive products on site. As a specialty pharmaceutical company with extensive hospital connections, Norgine, with its robust knowledge of global healthcare practice and established access to clinicians, is optimally positioned to interface directly with Lymphoseek's target audiences.

In 2012, Norgine's net product sales were approximately EUR 250 million, and the company employs more than 1,000 people. It's focus is on development and marketing of pharmaceutical products that address significant unmet needs in a variety of therapeutic areas. In the last 15 years, Norgine is focused on expanding its pan-European infrastructure and has established the vision to become the ideal partner of choice for companies seeking entry in the development and commercialization of innovative pharmaceutical products across Europe. We look forward to signing a definitive agreement in the coming weeks, based upon which we will start our market development activities early next year.

Our confidence in our chosen approach is bolstered by a very successful scientific form, which we held at last month's European Association of Nuclear Medicine meeting, which took place in Lyon, France. The gathered thought leaders expressed great optimism about Lymphoseek's prospects and appear to be eagerly awaiting its introduction.

As I've indicated, Norgine as a specialty pharma partner with broad affiliations in multiple regions, and thus, the partnership expands beyond Europe. We are working to fully define the expanded terms for engagements in Eastern Europe, Australasia and Africa, as well as in the EU. The timing of this global partnership is well aligned with our commercialization plans, as well as with a review of the Lymphoseek MAA, so that we're effectively in position to execute the commercialization plans that this partnership encompasses.

As we've stated previously, our intention is to retain a long-term -- is to retain long-term economic value and returns, not focused on near-term compensation. So we're not overly intent on upfront payments, preferring to position our efforts with our partner to secure an optimum long-term return for the product and our stakeholders. Our interest in this build upon and leveraging the underlying interest in the product and its advantages, as were evident at the recent European thought leader meet. I hope that is evident to you that we are staying intent -- that we are intent on staying true to the vision that we've shared with you before. By working closely with our partners, be they Cardinal Health or Norgine, we believe that we can best develop the Lymphoseek opportunity. In these arrangements, we are leveraging the clinical and medical investments we've already made to the best advantage of the product, our stakeholders and our partners.

A great example of this is our medical science liaison team, who are actively working today in the U.S. with key opinion leaders to assure that the Lymphoseek story is effectively appreciated. We believe that we are already seeing significant impact from these medical affairs activities, both the MSL, medical science liaisons, in the field and our online continuing medical education activity. This impact on customers' appreciation of the product and its distinguishing attributes is undoubtedly contributing to the upward momentum of the product. We fully intend to apply a similar model with Norgine in Europe and elsewhere, and I would expect that we would take a comparable approach as we commercialize NAV4694 and NAV5001.

As Mark mentioned, we're also in the process of executing a number of other smaller partnerships to serve patients in the Americas and Asia. We will be announcing the specific of these -- specifics of these deals as they unfold. So all told, we are well positioned to advance our stated goal of expanding Lymphoseek's footprint geographically as well as through new indications. Thank you and now back to Mark.

Mark Jerome Pykett

Thanks, Tom. Continuing on with the progress on other programs, for NAV4694, our imaging agent for the diagnosis of dementia and cognitive impairment, we are now underway with our Phase III registration trial. We announced in July that NAV4694 had been selected to replace super Compound-B in the Australian imaging, biomarker and lifestyle flagship study of agent, international trial in dementia and cognitive impairment. We view the selection of NAV4694 in such a highly regarded national study as an outstanding endorsement of the capabilities of the agent.

In August, we disclosed that we had entered into agreement with Siemens' PETNET for a clinical supply of NAV4694. We also announced that we have been awarded 2 SBIR grants from the NIH for 4694, one for our Phase IIb study in mild cognitive impairment, and the second for the Phase III registration study.

We're also continuing to advance NAV5001, noting in August that we had received 2 Special Protocol Assessments, or SPAs, from the FDA for the Phase III program, which is expected to commence this quarter. And for RIGS, we reported that we have developed the trial protocol to reinitiate clinical study of the human eye monoclonal antibody and had identified collaborators with whom to work.

These announcements preceded some very exciting news for our Manocept platform, which we first reported on in September and unveiled formally in a special supplement of the journal Nature, entitled Nature Outlook: Medical Imaging. This journal, published in October, included a Navidea white paper providing new insights into the use of a fluorescently labeled tilmanocept compound for optical imaging, derived from the same platform underlying our Lymphoseek radiopharmaceutical product. So this gives us great leverage. The online edition also includes peer-reviewed articles that reinforce the principle of CD206 mannose receptor targeting, using Manocept compounds to identify macrophages, supporting the potential broad application of the novel Manocept agents for diagnosis and staging across a range of disease states noted earlier. We believe we can leverage Manocept platform to catalyze value by developing new opportunities. So look for new announcements about applications of the Manocept platform in the near future.

And now, I'll turn the call over to Brent to provide a brief financial review.

Brent L. Larson

Thank you, Mark. Good morning, again, everyone. This morning, I'll be discussing some of the key drivers from our third quarter and year-to-date performance. Revenues for the third quarter was over $400,000 with no revenue being reported for the same period in 2012. For the 9 months ended September 30, 2013, our revenue was $596,000 compared to $72,000 for the same period in 2012. Revenue for the third quarter of 2013 included approximately $144,000 from the sale of Lymphoseek, approximately 90% of which was driven by procedures performed, with the remaining 10% coming from restocking of our partners' radiopharmacies. As Mark noted, the increase in procedure revenue is due to an increase in unit dose sales of over 600% during the third quarter as compared to the second quarter, which resulted in part from a high repeat order rate of 90%, coupled with increased multidose ordering.

The procedural stocking split was essentially the opposite in the $128,000 in Lymphoseek revenue recorded in the second quarter of 2013. We believe this change reflects the overall positive metrics Mark has previously mentioned. Our expectations for gross margins on more typical run rate sales and volumes are still expected to exceed 70%.

Moving on. Research and development expenses were $6.3 million for the quarter ended September 30, 2013 compared to $6.2 million for the same period in 2012. R&D expenses were $14.3 million for the 9 months ended compared to $12.5 million for the comparable period in 2012. In general, the changes in our R&D expenditures reflect the commensurate changes in the development programs, as Mark has discussed. As discussed, required to develop Lymphoseek have decreased. Following approval and launch, we are seeing corresponding increases in our other areas, such as NAV4694 and our Manocept platform.

Selling, general and administrative expenses increased for both the quarterly and year-to-date periods from the prior year, primarily due to increased medical education costs, coupled with investor relations and professional services cost, but offset by decreases in out-of-pocket Lymphoseek marketing costs.

For the third quarter of 2013, Navidea reported net loss attributable to common stockholders of $11.3 million or $0.09 per share compared with $9.1 million or $0.09 per share for the same period in 2012. For the 9 months ended September 30, 2013, Navidea's net loss to common stockholders was $28.9 million, or $0.25 per share, compared to $22 million or $0.23 per share for the same period in 2012. As of September 30, 2013, Navidea had cash and cash equivalents totaling approximately $44.6 million on our balance sheet. Our recently completed equity transaction, coupled with the debt financing from GE Capital Corporation in the second quarter, provide us with a stronger balance sheet position than we've had in several years. The strength in balance sheet, our available line of credit, our ability to control expenses and other financial tools at our disposal continue to provide a great deal of financial flexibility and strength during the ramp up of the expected revenue from Lymphoseek. We also recognize, however, that as we work through these initial quarters following commercial launch and move towards more substantial and sustainable cash flow generation from Lymphoseek, that we must demonstrate a degree of fiscal conservatism through control of our expenses. We are mindful of our available resources and the need to meter our outflows in a manner consistent with those resources. With that, I'll give the line back to Mark.

Mark Jerome Pykett

Thanks, Brent. With the sum total of the topics we've covered, we view the third quarter as continuing on the track towards success that we've envisioned for several years now and we have a number of upcoming catalyst in the near term. For Lymphoseek, these include advancing adoption in sales, submission of the SMDA to FDA by year end, completion of the MAA review, and marketing and distribution agreements for other countries as well.

For NAV5001, we look forward to initiating our Phase III program of this promising neuro imaging agent in the coming weeks. We remain very enthusiastic about NAV4694 both in its Phase IIb trial, and in the accelerating site recruitment and enrollment in the Phase III trial in Alzheimer's disease, as well as the data stemming from the Phase IIb study in mild cognitive impairment.

We also remain optimistic about our clinical collaboration for RIGS and getting it back into clinical development.

And for our Manocept platform, we look forward to advancing certain indications of this promising technology and continuing to advance its capabilities as a potential diagnostic agent for a range of disorders. And of course, we anticipate new data development and scientific and medical publications and presentations on an ongoing basis, including our Analyst Day on December 5th in New York, at which these topics and more will be addressed. With that overview, we'll now open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And that comes our from Stephen Brozak from WBB Securities.

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

I'm sure everybody really wants to know about sales, and I know that there's difficulty in terms of trying to get as much, as they call on Wall Street, granularity from sales. But what can you tell us about specifically physician uptake, I know that now that you've got reimbursement it's a completely different paradigm, but what can you tell us about the specific, even if it's anecdotal information, and what can you tell us in terms of the prescribing that you've seen? And I've got one follow-up after that.

Mark Jerome Pykett

Steve, I'll sort of repeat some of the things that were conveyed in the early part of the call because I think they're important. They are very important trends that speak to the principles that you've asked about. And then I'll turn it over to Tom to talk about some more anecdotes from the field that we're hearing that reinforce the positive metrics and qualitative feedback that we've already conveyed. But we view a sevenfold increase quarter-over-quarter from the initial launch in Q2 to Q3 as very attractive. We see a very, very high percentage of customers, 90%-plus who have -- who order in the initial period replacing -- placing a repeat order. We're also seeing a high percentage of customers over the course of the month order multiple doses. So for us, the traction we're seeing in repeat ordering and multidose utilization as well as significant growth in new accounts, all reinforce the idea that, yes, we're just getting started. But we are seeing the right uptake and the right adoption curves in these early stages. Now of course, as we've said for a number of quarters, we view that that momentum will be carried forward now in an enhanced way with the separate reimbursement in place under the pass-through C-code for Lymphoseek, which will allow it to be reimbursed outside of and in addition to the codes that cover the procedure for lymph node mapping and biopsy. We think that's only going to continue to catalyze growth of utilization for Lymphoseek, and so still view these first 2 quarters, the launch quarter in Q3, as very early days for the product and yet supported by very encouraging trends as we now head into a point where Lymphoseek is reimbursed separately. Tom, can you maybe opine on some of the the qualitative feedback?

Thomas H. Tulip

Sure. I think one element that I find particularly encouraging is that we are now starting to see significant uptake by tertiary care, major medical centers. These are the organizations that tend to move a little more slowly because they have very extensive TNT formulary committees and health technology assessment committees, working with Cardinal and our medical science liaisons. Those processes are well engaged, and we're beginning to see some of the major institutions around the country beginning to not only try but adopt Lymphoseek. There's a lot of volume that comes from these hospitals, but there's also the knock-on effect that their centers of excellence and smaller institutions in their respective areas frequently look to these major medical centers for their cues as to the adoption of new products. So I think, there's a springboard effect that we're going to start to see from major medicals center adoption.

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

Okay, that actually lead me into the next question. I'm not -- there are limitations you have in terms of talking about your SMDA into the future, but what you obviously can talk about, what you can look at is the fact that this is not a product that is the product you're replacing been limited in terms of what indications. What indications, theoretically, would you be able to look at and what market size are we talking about to those particular indications? And again, I know that you can't go over and describe in a detailed fashion, but give us an order of magnitude size by indication what you're looking at?

Mark Jerome Pykett

Sure, Steve. The approach to the SMDA, as we've described previously, really relies on 3 or 4 principles, all of which we believe would be beneficial to the label. Therefore beneficial to the market opportunities and to the utilization of Lymphoseek and lymphatic mapping today. For quite some time, we focused on the ability to embed in the label sentinel lymph node detection language that will allow us to use that term of hard [ph] to speak to the ability of Lymphoseek, for the first time among any other agent that's been developed previously, to identify that key predictive lymph node or lymph nodes which are important to biopsy in determining if the cancer has spread from the primary tumor site into the lymphatic system. That in and of itself is an important objective. If we get language like that into the label, we would be very pleased because it would be the only label with that kind of language in it. Secondly, we are looking to extend, with the data we have on hand, the language speaking generally to lymphatic mapping. And this would open up an opportunity to use Lymphoseek certainly beyond breast cancer and melanoma into head and neck cancer. And possibly, depending upon discussions with the agency, into other cancers as well. And as we've said for some time, lymphatic mapping has typically been restricted to breast cancer and melanoma not because it's not useful in other kinds of cancers, but because agents developed to date really are not effective in performing in cancers outside of breast cancer and melanoma. So if we're successful in achieving general lymphatic mapping language in the label, we could potentially see the utilization of Lymphoseek in cancer such as colorectal cancer, where we're doing an investigator-initiated study currently, into prostate cancer, lung cancer, ovarian cancer and so on. And when one looks at the comparative opportunity with those cancers, alongside breast cancer melanoma, which comprise the largest -- the lion's share of the market today. The market in the U.S. grows roughly fourfold from about 300,000 cases annually, or 320,000 cases annually, up to 1.2 million up to 1.3 million cases annually. And so it's a significant opportunity to then bring lymphatic mapping to patients who could benefit from using it in these other kinds of cancers as well. And then beyond that, there's still other things we're going to be trying to achieve in lymphatic mapping, which -- for Lymphoseek, rather, which include some language around possible imaging opportunities for the agent, as well as utilization of the agents. Although it's a multiple pronged approach we're taking with this SMDA.

Operator

Now the next question and it comes from the line of Stephen Dunn, LifeTech Capital.

Stephen M. Dunn - LifeTech Capital, Research Division

I have 3 quick questions, I hope. I guess, could you give us some color around the found impact of the voucher program going forward for Lymphoseek sales in the U.S.? Are you tapering that off now that there's the C-code that went into effect? Or I guess give us a little color on how the voucher program's going to work going forward?

Thomas H. Tulip

Sure, Steve. We've rolled out the voucher program, it is overlapping the availability of the C-code. I think, taken together, they are beginning to have an impact, based on what we've seen already in October, early days. We'll continue that through the course that we've previously described and reevaluate with Cardinal in due course. At this point, it's not clear that we'll need to continue that voucher program, but we will assess it over the course of next couple of months when it reaches its natural conclusion.

Stephen M. Dunn - LifeTech Capital, Research Division

So for investors, we should expect to see what in sales for Q4 for Lymphoseek, it sounds like the voucher program will still be in effect for all of Q4?

Thomas H. Tulip

It will not run through the -- at this point, we aren't planning to let it run through the end of Q4. We've initially anticipated it would be rolling off over the course of the next month. Again, we're reevaluating that as we go. But at this point, I think, the voucher is having -- while it's having an impact on uptake and adoption of the product, it will have a diminishing impact on overall sales in terms of reducing that revenue.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay. Next question on Norgine, there are not -- they are really known for the radiopharmaceutical space at all. So it sounds to me like the strategy of partnering with Norgine is strictly a sales force decision. And that said, how do you see their sales force getting into the decision-makers and the health care professionals that would be using Lymphoseek?

Mark Jerome Pykett

So I think, the decision, it's less about the sales organization. They clearly have a potent, well-developed sales infrastructure across Europe. A great deal of the attraction, I think, came from the fact that they take -- they have a similar mindset to ours that is, one, launches a sustainable, preferred product on the basis of development and medical education around both clinical and economic evidence. And put together, that becomes a potent marketing instrument to put in the hands of an astute sales force. So I think, it's a matter of putting those 2 elements together. They have -- do not have a history with radiology and nuclear medicine, but they have a strong history in hospital practice. And particularly in Europe, the healthcare practice and the economics in hospital setting are critically important. They're different than they are here in the U.S. So I think their understanding, appreciation, their ability to navigate hospital infrastructure, radiology and otherwise, in Europe will provide the product a real stimulus and a real good basis for success going forward.

Stephen M. Dunn - LifeTech Capital, Research Division

I guess they are planning on adding additional specialists just for Navidea's Lymphoseek? Or they are going to try to ramp it into their existing teamwork -- framework?

Thomas H. Tulip

I hesitate at this point to tell you what they're going to do. We will -- we've been planning jointly about a strong medical education, medical affairs rollout. And I think, you'll see that -- I look forward to being able to describe much more of the details of this when we close the deal, when we execute the deal over the coming weeks.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay. One final question. I want to talk about RIGScan just a little bit here. It's your monoclonal antibody program. And it's had a lot of investors ask about it and what the real intentions are. And now that you have a very strong balance sheet, I was wondering is that going to be devoted to speeding up the RIGScan or we're looking to partner out RIGScan development? Or what exactly should investors expect from this asset?

Mark Jerome Pykett

One of the good pieces of news about RIGScan is that we have funding from an NIH/SBIR grant that can be used to advance that program through the period just before clinical studies begin and then into clinical studies, so we're effectively utilizing non-dilutive money in accordance with a program that was developed for clinical study some time ago. And now, with collaborators, we are looking to get that, the antibody position to actually begin the clinical studies and to unfold that, the clinical trial. The clinical trial, obviously for RIGScan, having not been in humans for over 15 years, and also being now a humanized antibody as opposed to the previously utilized murine antibody, needs to be done with a lot of prudence and with a lot of focus to build the data using the humanized antibody and supporting its use potentially for imaging purposes, as well as potentially down the road for intraoperative detection purposes. The first foray for this agent will be looking at imaging to make sure that we can identify areas of localization of the antibody to tumor sites, and possibly, to metastatic sites. So our guidance on that would be that the initial program will be somewhat modest. We will keep our feet on ground in terms of the objectives for that study and what we're seeking to accomplish in the first-time-in-man study for the humanized antibody. And then with data in hand, we'll be better able to predict how the next stages of clinical development will unfold.

Operator

And we have the next question and it comes from the line of Charles Cuncan.

Charles C. Duncan - JMP Securities LLC, Research Division

My first question is around Lymphoseek. The first is that you mentioned in your prepared remarks it being a complicated sale. I'm wondering if that's a function of the radiology and the oncology touch points, or is there something new in that statement?

Mark Jerome Pykett

No, it really is the fact that the procedure and the pathway that the management of the patient involves nuclear medicine as one department and oncology, surgical oncology is another department, therefore, speaking to 2 stakeholders. And that has to be coordinated on an institution-by-institution basis. so that's something we referred to in the past. It's not more complicated than that, but that's the crux of the challenge there.

Charles C. Duncan - JMP Securities LLC, Research Division

Yes, it's been well-embedded by most investors. So my second question is, it looks like you're getting a traction, or at least early traction, and I appreciate you focusing on qualitative metrics right now. But relative to the multiple doses that are being ordered and call it 1 in 4 new users, I'm wondering what your goal is in terms of, in the next 6 months, how would you define success with regard to those 2 qualitative metrics?

Mark Jerome Pykett

Well, I think, Charles, what we've seen in the first 2 quarters, and particularly, the quarter-on-quarter growth is encouraging. But you have to remember that all of that preceded the implementation of the pass-through C-code. So we're kind of in a new day here where the C-code is now available and we think, based upon some early insights into the October data, that the trends we reported on are going to be enhanced and in some ways accelerated. I think probably the most telling segment that we'll make at this point was that we believe, based on our current models and an understanding of what we've seen to data and the projections, that this can be that the lead agent, the standard of care within the next 12 to 18 months, just to give you a sense of what that trajectory would look like. We view that as very encouraging for an agent like Lymphoseek. And of course, as I said also in the remarks, that doesn't include expansion into other kinds of cancers, which are still untouched with respect to the role that lymphatic mapping place in those cancers, so there's further market expansion that could occur beyond sort of the intrinsic growth and breast cancer melanoma and then coming up head and neck cancer.

Charles C. Duncan - JMP Securities LLC, Research Division

Okay, makes sense. And then moving onto you European commercial strategy, first of all, congratulations on the new interaction with Norgine. But kind of following onto the last set of questions, I'm wondering if Norgine has any kind of minimum, call it, commercial activity requirements in terms of number of details or whatever way that you would measure how they are executing on that launch?

Thomas H. Tulip

Sure. Charles. I think that, as we perfect and execute [ph] use of the agreement is not inked yet, it will be shortly. We will be able to provide you a lot more color about the specifics of the agreement at that time. But it seems probably it won't be able to do so until we complete the agreement. But I would certainly expect us to have metrics, whether that which you described or others. So we'll share some of those at the appropriate time.

Charles C. Duncan - JMP Securities LLC, Research Division

Okay. That will be helpful. My last question is regarded financing and only because really you brought it up. In terms of the market reaction, I'm just kind of wondering why a more traditional, call it, regular way financing wasn't pursued? It seems like getting out to visit what institutional investors would have been much more straightforward than in a way to help them understand fundamentals and the real market inefficiency that exists possibly for Navidea?

Mark Jerome Pykett

Sure, Charles. I think, first and foremost, once they move we want to make clear is that we have no intention of returning to the equity capital markets in completing any offerings that would be dilutive to our current shareholders. But with respect to the transaction that was completed, obviously, we were looking to provide capital to enable some of the initiatives we spoke about, including some of the Lymphoseek initiatives, the neurology programs, the Manocept platform. And also to abide by the terms and conditions of the GE note that's in place and remains in place. So the board carefully considered a range of options, including a broader marketed transaction. And collectively, we were very interested in mitigating and minimizing market risk, mitigating pricing risk. A stock as volatile as Navidea's in the market can experience, in some cases, significant declines just by being in the market, and then it further experiencing declines during pricing as well. And then we also wanted to mitigate the execution risk, to do a transaction that we could -- we knew it would get done. So collectively, we thought that this was the deal to do to fulfill those objectives and to provide us with an enhanced balance sheet in the context of growing Lymphoseek revenue that will allow us to continue to meet the objectives that we've set out in the call today and otherwise.

Operator

I will hand the call back to management team for the closing remarks. Please proceed.

Mark Jerome Pykett

Right, thank you, and thanks to everybody who joined on today's call. We appreciate your time hearing the Navidea story and your interest in Navidea. Certainly, in the coming weeks and quarters, we'll continue to report on the milestones and the progress that we're making, including growing Lymphoseek revenue, our activities in Europe, as well as with other programs that have been underway for some time or we believe will get underway in the near future. So we look forward to continuing to update you on our progress. The next steps for Lymphoseek is that it moves forward in other areas of business advance. Thank you.

Operator

This concludes your presentation. You may now disconnect. Thank you.

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