Navidea Biopharmaceuticals, Inc Management Discusses Q4 2013 Results - Earnings Call Transcript

Navidea Biopharmaceuticals, Inc (NYSEMKT:NAVB)

Q4 2013 Earnings Call

March 06, 2014 8:30 am ET


Sharon Correia - Associate Director of Corporate Communications

Mark Jerome Pykett - Chief Executive Officer and Director

Thomas H. Tulip - President and Chief Business Officer

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


Stephen M. Dunn - LifeTech Capital, Research Division

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

Yi Chen - Aegis Capital Corporation, Research Division


Welcome to the Navidea Fourth Quarter and Full Year 2013 Financial Results Conference Call. My name is Vivian, and I'll be your operator for today's call. [Operator Instructions] I would now like to turn the call over to Ms. Sharon Correia.

Sharon Correia

Thank you, Vivian. Hello, everyone, and thank you for joining us. I'm Sharon Correia, Associate Director of Corporate Communications at Navidea. On today's call are Mark Pykett, Chief Executive Officer; Tom Tulip, President and Chief Business Officer; and Brent Larson, Chief Financial Officer. As Vivian mentioned, 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 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 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 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 any continued demand for Navidea products; clinical and regulatory pathways; the impact of competitive products and pricing; patents or other intellectual property rights held by competitors; the availability of 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 would like to turn the call over to Mark Pykett, Chief Executive Officer of Navidea.

Mark Jerome Pykett

Thanks, Sharon. Greetings to all, and thank you for your time on today's year end 2013 review call. We appreciate your time and interest in Navidea.

Moving on to Slide 3. As you can see, we're going to do this call a little bit differently than in the past by holding this webcast. We look forward to covering a range of topics, to discussing revenue and to providing revenue guidance for the first time, and we want you to be able to easily follow along with the discussion and the numbers.

Before I go on to the presentation, I would like to begin by welcoming 2 new Directors to the Navidea board, Michael Goldberg and Perry Karsen. Both men have tremendous experience in the health care space. Michael, as an Investor, and Biotech CEO; and Perry, as an Executive with Human Genome Sciences, Bristol-Myers, Genentech, Abbott, and of course, Celgene, one of the most successful biotechs to date. We very much look forward to the contribution of these outstanding individuals.

So let me start by saying that as CEO, I have never been more excited about Navidea's position and potential. I believe this is a promising and critical time for us, an inflection point for the company. A position from which we believe we can build considerable value. We are a leader in the precision diagnostic space with an approved best-in-class product generating growing revenue, an industry-leading pipeline populated by second-generation innovative products, and a team consisting of some of the best people in the field. We have outstanding partners to assist us with realizing our maximum potential. And we have a low risk, high-efficiency business model that can generate high probability returns. So we have a lot going for us, and I feel there is a lot to be excited about at Navidea.

Moving on to the next slide. At the outset, I want to review some of these value drivers that we think need to be clearly communicated to, and digested by, investors. Many of the advantages we have at Navidea are arguably under-recognized, and yet they contribute to Navidea value proposition that we believe is very compelling. First, we have carved out a true leadership position within our chosen field of precision diagnostics. This is not an easy thing to achieve in any field, and yet within just about 2.5 years since our repositioning in the space, we are setting the pace and defining a field that is pulled by the demand from patients and physicians seeking more accurate diagnosis and better care. And by health care systems, driving for better efficiency and cost-effectiveness.

Part of our progress has been achieved on the basis of the approval of our first product, Lymphoseek. As we'll review, we believe this is a product that really helps patients. It's realizing excellent growth, and utilization and penetration in its early stages of launch and it has a bright outlook. Behind Lymphoseek, we have an extraordinarily robust pipeline of late-stage product candidates, which we believe are the best in their fields across a number of therapeutic areas. The diverse assets in our portfolio markedly diversify our risk, and I'm not sure that's fully baked into the investment calculus to date yet.

So that pipeline, as represented here on Slide 5, has a scope that now spans 3 therapeutic areas: oncology; neurology; and inflammation. We could advance to Slide 5, please. Collectively, these programs address important medical needs in a range of indications by deploying best-in-class and first-in-class technologies and products, with strong clinical and marketplace differentiation. We believe the opportunities afforded by these programs will be important value drivers for the company for years to come.

Next slide please. Now, even with a broad and deep pipeline of best-in-class programs, we've been able to keep risks low and cost very efficient. I don't think many recognize these attributes of our business model. The asset class we focus on, radiotracers, has a high safety margin. They're given at single injections and low doses so they aren't likely to have any safety issues. They also produce verifiable efficacy signals early in development, so you know you have something that works before you really start to invest. This is a really good cost-benefit equation. We're seeing that, for example, with our Manocept platform. This overall creates a good risk profile that we feel is advantageous for a company like Navidea. And we augment these advantages with a very efficient, outsource-oriented business model. We are very effective with our cost structure, and we are able to access existing external capacity in distribution, manufacturing and development to drive high rates of return for our products. And we drive success by leveraging the investments made in multiple adjacent dimensions of the healthcare space. Our business is also backed by partnerships with world-leading organizations that assist us in realizing commercial success. Cardinal Health, AstraZeneca, Siemens, Nordion, these are some of the best partners in our field.

In parallel with this, we keep an eye on maintaining capital strength and modulating expenses as witnessed by our debt recapitalization announced this morning. This non-dilutive refinance of our existing debt, lowered the interest rate, enhanced the working capital access and deferred principal payments at an overall attractive cost of capital.

Moving on to the next slide, Slide 7. What we have in store for 2014 and beyond is built on our successes to date, including a very strong 2013. We've made a lot of progress throughout the year, as noted here on Slide 7. Of course, the highlight was the approval of Lymphoseek in Q1 and its rapid commercial launch in the U.S. This launch has resulted in the strong growth and penetration trends that Tom will review in a few minutes. We also realize very strong progress on Lymphoseek reimbursement with the achievement of both the pass-through C-code and the permanent A-code from CMS, which keeps Lymphoseek well positioned for ongoing coverage in the U.S. We have seen private payers fall in line with CMS and cover Lymphoseek as well, boding well for broad-based reimbursement.

So moving onto the next slide, Slide 8. We have also submitted new Lymphoseek data to FDA, derived from the very successful Phase III study in patients with head and neck cancer, as well as additional data from other studies. This data-rich filing was subsequently split by FDA into 2 supplemental NDAs, both of which have now been accepted. The first sNDA relates to the head and neck cancer data and Lymphoseek's ability to act as a sentinel lymph node detection agent. This filing was granted both fast track designation and priority review in addressing important unmet medical need in this patient population, and it has a PDUFA date of June 16, just about 3 months away. If approved, Lymphoseek would be the first agent approved in the U.S. for use in patients with head and neck cancer, and also the only agent with sentinel lymph node detection language in the package insert.

Consistent with seeking to broaden the label, the second sNDA, now accepted, is also an important filing focused on expanding the label to support broader and more flexible use in imaging and lymphatic mapping procedures in general, with potential for other cancers as well. The PDUFA date for the second sNDA is October 16 of this year. So we have 2 supplemental filings on deck for this year alone. Label expansion for these sNDAs, if approved, may enable broader cancer type use and more consistent standardized procedures, which we believe will be very helpful in promoting the full potential of the product in the marketplace.

Next slide, please. Now we appreciated going into it, that the Lymphoseek launch was not going to be a trivial matter. To the contrary, we expected that, like many launches, it would take a lot of effort, resources, education and time. And we deployed activities in advance to address and accelerate adoption penetration. This is a product that continues to have an outstanding outlook, and which we feel is having a tremendously positive impact on patient care. But we've witnessed that it is a complex selling process for product being launched into a somewhat complacent marketplace. There are multiple touch points in the selling process, making access more time-consuming and resulting in a multi-stakeholder, multi-month sales cycle. Thankfully, we have the leading partner in the space alongside us to assist with driving the process. So we believe our positioning is only getting better and better, and we think that some of this is very beneficial to our organization as we incorporate this learning going forward with other efforts as well.

And so with moving on to Slide 10 now, I just like to round out this background and turn the call over to Tom, who will review Lymphoseek's launch, it's performance to date and its outlook. Tom?

Thomas H. Tulip

Thanks, Mark, and good morning. I want to begin my comments by reviewing certain aspects of the early days for our Lymphoseek commercialization in the U.S. To cut to the chase, we've had a successful launch for Lymphoseek, with numbers of ordering accounts and dispense doses growing robustly, particularly in the fourth quarter and that was trends continue into this year. I think it's critical to recognize 3 important elements, which came together starting in October that are driving this strong growth pattern. First and foremost, the sales process, which, as Mark suggested, is in fact, complex, began to yield results in October. The complexity of this process is part of what we've continued to learn and expect to be able to apply to our ongoing decisions for other products. Secondly, we've worked hard with CMS after the approval to secure appropriate coverage, coding and payment for Lymphoseek. And this work has resulted in a product being granted both a transitional C-code and a permanent A-code the former coming early in October. It's clear that this October C-code award serves as an important trigger to drive product demand and we've certainly seen that. And finally, we also believe that coherent medical education and -- in an outreach form to the various communities we are addressing is a critically important element for the ongoing success of Lymphoseek.

As a somewhat satisfied set of audiences didn't perhaps recognize the benefits that Lymphoseek might derive, this educational activity is clearly, critically important. To that end, we've developed a significant array of medical education instruments, including those supported by CME, and we've deployed our own MSLT. I'm now convinced these efforts, particularly the field-based MSL sitting in their stride were major contributing factors to the upper inflection of performance that we started to see in October, and they continue to make a major difference for the product, today, and going forward, where they can play a critical role after the approval of our head and neck cancer sNDA, now undergoing priority review by the FDA.

Could we advance to the next slide, please? I'd next like to build on Mark's comments, covering some of the bases -- basis of 2013. Going back to March, not even a year ago, Lymphoseek was approved by the FDA for use in lymphatic mapping in patients with breast cancer melanoma based on a very successful set of Phase III studies. As FDA noted, Lymphoseek was the first product approved in the lymphatic mapping space in over 30 years. Such prolonged familiarity with the past generation product like this can lead to uncertainty that the advantages of an innovation, such as the Lymphoseek, in essence, one doesn't know what one doesn't know. It's thus, the critical need to apply concerted attention to education.

Within 2 months, after approval, we had the product on the market earning revenue with our partner, Cardinal Health. Since that time, we witnessed solid month, on record month sales growth, with virtually every week meeting out the prior week's performance. We're encouraged by these trends, clearly, which I'll share with you momentarily.

Next slide, please. Before we take a look at performance, I want to review Lymphoseek's market opportunity today and in the future. With the initial approval in breast cancer melanoma, we are addressing an annual U.S. incidence population of approximately 300,000, about 2/3 of which undergo lymphatic mapping procedures. And these procedures, roughly 80 -- and of these procedures, roughly 80% use a radiopharmaceutical agent. Thus, our initial U.S. market opportunity is approximately 160,000 studies per year, as we've noted previously. But that's just the initial indications limited to the U.S. There's exciting upside potential here, not only from other geographies, but in other cancer types as well. The benefits of expanded lymphatic mapping have largely gone unrecognized and unrealized due to the fact that existing technology had proved ineffective.

Included in such potential cancer types are head and neck disease, again, the subject of our ongoing priority review at the FDA, as well as other cancers, such as colorectal disease, the subject of a fascinating investor-initiated study we previously disclosed, and include, but are not limited to, gynecologic, prostate, bladder and upper G.I. cancers, all of which we plan to explore in one fashion or another going forward. The collective incidents in the U.S. multiplies the overall potential population from 300,000 by as much as 4x to reach potential targets of 1.3 million. These numbers are further multiplied by opportunities in Europe and around the world, where the total incidence of adenocarcinoma patients reaches almost 12 million per year, even helping to provide better care to a fraction of these patients will make a huge difference and fuel growth of the product in turn.

Now let's consider our approach to the market on the next slide, please. As we'll recall, we partnered with the Cardinal Health, a leading radiopharmacy network in the U.S., to provide the product with great reach as they are able to access well in excess of 95% of hospital customers within 3 hours after receiving a script. They provide broad sales coverage and perhaps most importantly, they provide this spaces largest group of knowledgeable, highly respected customer-oriented pharmacies -- pharmacists who frequently speak to their customers -- our customers multiple times in a single day. To augment Cardinal's transactional prowess, we fielded that our own MSL team to assure that our imperative medical education messages are expertly delivered to select influential customers, be they nuclear medicine or surgery. As I mentioned earlier, we believe that this team has been instrumental in building awareness, interest, and eventually, appetite in, and for the product, in the face of initially relatively unmated -- unmotivated clinical audience. As we've stated previously, our approach from the beginning is to engage our market in 2 phases: first, concentrating on nuclear medicine radiology who buy and administer the product, and then moving our focus upstream to the referring surgeon. This penetrate-and-then-expand strategy as unfolding as we planned, as we further secure our position with nuclear medicine and move on to educate the surgical community on the benefits Lymphoseek can provide their patients and their practices. The MSLs are now augmenting their calls on radiology to include tumor board and oncology grand rounds, excellent venues to reach our target surgeon audiences. The head and neck sNDA and much-anticipated label expansion will fuel this -- these conversations in both radiology and surgery and should contribute significantly to the ongoing successes of according to our medical marketing plans.

Before I leave this slide, I want to reiterate result of our business model and commercial relationship with Cardinal, which I think is frequently overlooked. We received a substantial share of venues revenue, for which we have limited cost of goods and staff expenses, per Mark's earlier comments, even when we roll in the cost of these MSLs. Thus, our product EBITA is solid, driven by greater than 75% gross margin. Because of this strong cash flow yield, we firmly believe that Lymphoseek is most appropriately valued on its product level EBITDA contribution. Well, that's the opportunity and how we're approaching the market. Finally, what about this performance. On the next slide, please.

Here, I'm showing our penetration of customer institutions practicing lymphatic mapping. You'll note the strong growth in excess of 200 accounts purchasing today. This is about 11% of the total, more than 2,000 accounts performing lymphatic mapping today. Of the 600 target accounts we initially identified, penetration is in excess of 12%. Purchasing by these accounts has led to greater than 9% market share on a unit study basis, a metric to which I will return shortly. Account penetration increased from third to fourth quarter by a factor of approximately 3.5% and this trend continues strongly into 2014. We've previously disclosed excellent reorder rates in excess of 80%, and this trend has been maintained and strengthened. It appears that once a customer experiences the benefits of Lymphoseek, he or she is increasingly likely to reorder. This is utterly consistent with our intention to drive adoption by generating awareness and interest, followed by trial and subsequent adoption.

Consistent with this adoption process, we find that customers replacing multiple orders per month in excess of 75% of the time. This apparent customer satisfaction is translating into strong unit growth as is evident on the next slide, please.

This graphic shows the number of doses dispensed since last May. We have now reached 1,200 doses per month with no evidence that this trend is slackening, and we expect it to remain robust, thanks to the impact of our ongoing activities and new indications expected later this year. Note not only the continued growth, but also the October inflection point -- turning point that I mentioned earlier. I prefer to consider the data on a day sales basis, which normalizes monthly fluctuations.

We can move to the next slide, please. I show this day sales basis. Here, one can really see the accelerating performance that we are talking about. This growth represents consistent month-on-month growth, an average of -- with an average of approximately 30% since the October inflection. This is clearly a solid metric. Data through February, consistent with greater than 9% -- excuse me, 9% penetration, as I mentioned earlier. A few thoughts on this penetration and progress into -- to put them into context. I've looked for comparison and found a few innovative premium price therapeutics launched in recent years, which have started in the hospitals and thus, experienced some of the same administrative hurdles like formulary placement and other health technology assessment, through which we've been -- with which we've been confronted. The very best disease launches leading to very substantive sales of well-known product did not exceed 10% market share after the first year on the market. So Lymphoseek compares well as we will certainly get beyond the 10% penetration in the first year.

Turning our attention to comps in the medical imaging and radiopharmaceutical space, 1 finds few from which to choose. The best example I can come up is Cardiolite, a drug with which a number of us had the good fortune to be involved at DuPont. In its initial year of sales, Cardiolite reached the market share of approximately 10%. This was into a market that was clearly satisfied with the predecessor lower-priced drug radio value. The market was complacent just as ours was. Cardiolite went on to become, by far, the best-selling radiopharmaceutical in history. Its franchise was built by building penetration into an existing, apparently satisfied market, and that building that modest space by careful attention to lifecycle management and indication expansion. This is exactly the proven strategy that we're following with Lymphoseek.

Lymphoseek revenue to Navidea more than doubled from third to fourth quarters, growing to approximately $342,000 -- $343,000. In 2014 through February, we are already well ahead of this number and it continues to grow. We remain convinced that fourth quarter '13 revenue, and that's which we are booking in the first quarter of '14, our steps along the path we previously articulate. We may not -- we maintained our projection that Lymphoseek will reach a majority market share in the next 10 to 14 months.

In summary, we see solid growth in accounts and share, and a clear indication that our continued growth trajectory will lead to a strong increase in product income. As such, we are providing guidance that Lymphoseek revenues to Navidea will reach $5 million to $6 million in 2014, numbers consistent with the range of analysts estimate. So that's the Lymphoseek story to date in the U.S. It's one of sustained penetration with the beginnings of growth beginning to emerge, the latter coming from a range of expansion opportunities, both in new indications and new markets.

On the next slides, we turn our attention to these non-U.S. growth opportunities. The first of these is in Europe. Europe has solid tumor instances, in excess of those which we find in the U.S., and the sentinel node biopsy thesis is even more advanced and applied there. Thus, we've continued to focus on the review of our MAA in Europe. After extension of our 180-day clock stop in December, we've been -- we've maintained close interaction with EMA, responding to their questions in a timely manner, and now expect that CHMP will continue to -- will consider the Lymphoseek MAA at their March meetings, though EMA does reserve the right to further extend the review. The remaining areas of interest to do with its -- have to do with supplemental products specification data and NEO3-06 Phase III study in head and neck cancer. The 06 study is important, not only with regard to its dramatic potential impact on the care of head and neck cancer patients, but also those applies to additional safety and utilization data, supportive of the primary MAA. Including -- excuse me, inclusion of even elements of these data could be very valuable commercially given the advanced state of lymphatic mapping in Europe.

As we've indicated, the review continues to proceed and we are interacting regularly with the EMA regulatory group to see that the MAA -- to see the MAA through to a positive outcome. Although we cannot provide assurance about the timing or scope of approval until the review is complete, we remain optimistic that this is an important diagnostic agent for cancer patients in Europe who undergo lymphatic mapping, and about the prospects of the approval of the MAA.

The next slide, please. From a business partnering point of view, work is ongoing to make the product available in many corners of the world where diverse patient populations may benefit from the attributes of lymphatic mapping, which Lymphoseek enables. Today, the products are available for sale in the Middle East and we've executed market development agreements in Canada and Taiwan. Note that in these latter 2 cases, registration activities will be needed to make the product available for broad commercial sale. Unlike our development in Europe, we expect our partners to drive these regulatory efforts with support coming from Navidea.

As we look beyond our existing partnerships, we expect and anticipate agreements in the geographies indicated. Our EU partner will be formalized consistent with the MAA timing that I indicated earlier, and this MAA, as well as our NDA and ongoing sNDAs will enable accelerating commercialization around the world.

Next slide, please. With that review of Lymphoseek, metrics and markets, I'd like to turn the call over to Brent for a review of our financial performance. Brent?

Brent L. Larson

Thank you, Tom. For those of you following on the webcast, I'll be starting with the review of our financial results for the full year on Slide 20.

Revenues for the year ended December 31, 2013 were $1.1 million compared to $79,000 for 2012. Navidea's revenues for 2013 consisted of $614,000 in sales of Lymphoseek, following its approval in the first quarter of 2013 and an initial launch in the second quarter of 2013, and $516,000 from various federal and state grants.

Moving onto our operating expenses. Research and development expenses were $23.7 million during 2013 compared to $16.9 million during 2012. The net increase from 2012 to 2013 was primarily a result of net increases in NAV4694, NAV5001 and Manocept platform product development cost, and compensation and other support cost-related increased headcount, offset by decreases in Lymphoseek development cost and potential pipeline expansion activities.

Selling, general and administrative expenses were $15.5 million for 2013 compared to $11.2 million for 2012. A net increase in SG&A from 2012 to 2013 was primarily a result of increased medical education efforts, compensation and other support cost related to increase headcount, legal and professional services cost, offset by decreased out-of-pocket marketing cost to support the commercial launch of Lymphoseek.

Navidea's net loss from operations for the year ended December 31, 2013, was $38.4 million compared to $28.0 million for the same period in 2012. For the year ended December 31, 2013, Navidea reported a loss attributable to common shareholders of $42.7 million or $0.35 per share compared to a loss attributable to common shareholders of $29.2 million or $0.29 per share for the same period in 2012. As Tom has already discussed, with the Lymphoseek sales performance we have experienced in our expected trajectory, we are projecting that Lymphoseek will realize between $5 million and $6 million in revenue to Navidea this year, an outlook we believe is generally consistent with the overall range of estimates from analysts covering Navidea, and who have provided updates of their estimates since product launch.

Moving on to Slide 21 and the fourth quarter numbers. Revenues for the fourth quarter of 2013 were $535,000 compared to $7,000 for the same period in 2012. Revenues from sales of Lymphoseek for the fourth quarter of 2013 were $343,000 compared to $144,000 in the third quarter of 2013 and no revenue from Lymphoseek in 2012. We would like to remind everybody that the fourth quarter of 2013 represented the first quarter of Lymphoseek sales under the CMS reimbursement codes. We also believe our revenue for the fourth quarter is generally consistent with the range of estimates from those analysts covering Navidea and who have provided, updated us and was following product launch, and thus, who are providing quarterly estimates of their revenue.

Fourth quarter of 2013 operating expenses were $13.4 million compared to $7 million for the fourth quarter of 2012. Research and development expenses were $9.4 million during the fourth quarter of 2013 compared to $4.3 million during the fourth quarter of 2012. The net increase from 2012 to 2013 was primarily a result of net increases in NAV4694, NAV5001, Lymphoseek and Manocept platform product development cost, compensation and other support cost-related increased head count.

Selling, general and administrative expenses were $4 million for 2013 compared to $2.7 million for 2012. The net increase from 2012 to 2013 was attributable to the same primary factors noted for the full year comparison.

Navidea's loss from operations for the fourth quarter of 2013 was $13.1 million compared to $7 million for the fourth quarter of 2012. For the fourth quarter of 2013, Navidea reported a loss attributable to common shareholders of $13.8 million or $0.10 per share compared to a loss attributable to common shareholders of $7.2 million or $0.07 per share for the fourth quarter of 2012.

Moving on to Slide 22. This slide summarizes the key terms of the non-dilutive financing with Oxford Finance that we announced earlier today. The lower coupon rate of 8.5% was certainly an important factor in our decision to refinance our outstanding debt, but perhaps more important was the elimination of the financial covenants which restricted our ability to access the cash already on our balance sheet. We believe the elimination of these covenants, coupled with the ability to extend the one -- initial 1 year interest-only period on the achievement of certain milestones and the continued availability to us of over $30 million under our line of credit with Platinum, that we are well positioned from a balance sheet perspective as revenue from Lymphoseek, continues to grow. Overall, we believe we continue to maintain a great deal of financial flexibility at this critical period in our growth.

Before I turn the call back over to Mark though, I do want to note one other corporate housekeeping matter just to give everyone a heads up. The company's current shelf registration statement was originally filed in 2011 and expires under its terms in April of this year. Having just solidified our balance sheet with the Oxford financing and having no current intent to access the equity capital markets, we expect to exercise prudent corporate governance in the near future by refreshing the shelf after the filing of our 10-K. Now let me turn the call back over to Mark.

Mark Jerome Pykett

Okay, great. Thanks, Brent. Onto the next slide, please. So lots of good progress that we've reviewed and we'll cover a few other points in a minute. But just to be clear, to circle back to the statements that Brent and Tom made, our 2014 guidance -- revenue guidance of $5 million to $6 million is revenue to Navidea, so just bear that in mind. So to conclude, I'd just like to spend a few minutes on some of the recent developments of our pipeline programs and we won't take very much time. But as noted earlier, our pipeline has a scope that now spans 3 therapeutics areas: Oncology; Neurology; and inflammation. We've made nice progress across many of our programs including the Phase III programs for our neuro tracers NAV4694 and NAV5001. But I want to focus on 2 other dimensions of the pipe, which, as we've said, are part of the reason for completing the debt refinancing. These include the NAV4694 Phase IIb study in Mild Cognitive Impairment and our Manocept platform. Next slide, please.

So NAV4694 has continued to make good progress in its pivotal Phase III registration study with pet manufacturing sites and a significant number of clinical sites now up and running. It has also continued to generate very strong data. For example, as shown here on the top left of this slide, in a blinded read of more than 160 cases, 4694 showed sensitivity and specificity both in excess of 95%, which is about 10 percentage points higher than other agents. 4694 has also made nice strides in the Phase IIb study of patients with Mild Cognitive Impairment who have emerging disease in its early stages. As many people now realize, this is the patient population where intervention makes the most sense. Before the disease progresses to advanced stages and gets increasingly difficult to treat, this is the area of the dementia field where many clinicians and pharma companies are really now focused, and where we and others believe the market will ultimately be for both therapeutics and diagnostics. Though this is the logical place to intervene, MCI remains very difficult to diagnose. As reported in February, we've had some outstanding results in our Phase IIb study so far, and developed data that reinforced those published by our collaborators in Australia, shown in the graph here on Slide 25, which indicates that NAV4694 can separate MCI patients with high beta amyloid who are likely to progress to AD from those who do not have high amyloid, and likely to have MCI from other causes not AD. The initial cohort read from our Phase IIb study showed strong inter-reader agreement and a very high confidence of diagnosis, despite the fact that these are early stage patients for whom there is typically high diagnostic uncertainty. Based on these types of data, and also on its outstanding performance characteristics, we believe that NAV4694 may be the only agent that can effectively assist with the diagnosis of MCI. In fact, the MCI results to date are so encouraging that we've elected to accelerate the MCI study and focus on creating additional differentiation for the agent, as well as addressing important potential requirements for reimbursement early. Of course, we'll continue with our Phase III study for registration purposes. MCI, I remind you, represents a target patient population that is even larger than the incidence of Alzheimer's disease itself.

Next slide, please. We've also made startling progress with our Manocept platform in a very short time, having obtained proof of concept data in tuberculosis, Kaposi sarcoma and rheumatoid arthritis or RA. Just focusing on RA for this call, we've shown that in a gold standard animal model of RA, we can clearly detect the underlying inflammatory component of the disease using a fluorescent Manocept agent. These so-called manobodies for nanobodies directed against the mannose receptor, are injected systemically by intravenous administration and home to affected joints. Not only that, but in human tissue samples, by detecting microphage inflammation, we are able to identify RA via standard laboratory SA, and differentiated not just from healthy individuals, but also from the differential diagnosis of osteoarthritis with high statistical significance as shown here on the graph on Slide 26.

Given that an estimated 1/3 of the 1.6 million new RA patients annually in the U.S. alone present with atypical signs that lead to diagnostic uncertainty, the ability to enhance early-stage diagnostic accuracy could represent an outstanding product in marketplace opportunity for us to pursue. So if you're excited about the use of Lymphoseek and lymphatic mapping, you also have to be bullish about the platform's potential in inflammatory-based disorders, such as rheumatoid arthritis, lupus, Crohn's disease, multiple sclerosis and others, which collectively represent patient populations many times greater than the lymphatic mapping patient population.

Moving on to the next slide, Slide 27. So we continue to build the business. As I said at the beginning of the call, we have a lot going on and there's a lot to be encouraged about. Even in just the interested the near term, we're looking for a number of drivers to continue to build value, including growing Lymphoseek sales in the U.S., the review of the Lymphoseek sNDAs, the EMA opinion on the Lymphoseek MAA, and growing partnerships, advances in our Phase II and Phase III studies for our neuro tracers and progress in many other areas. So as I said, there's a lot to be excited about at Navidea today. With that, I'd like now to open the call to questions for about 15 minutes.

Question-and-Answer Session


[Operator Instructions] And our first question comes from Stephen Dunn.

Stephen M. Dunn - LifeTech Capital, Research Division

I'm going to let others talk about Lymphoseek. I think what I would do want to skip ahead to is what's not really in the numbers. And Mark, you alluded to on NAV4694, it sound like you are going to maybe file for an accelerated approval of MCI. Did I understand that, right?

Mark Jerome Pykett

No. I think Steve, what we're doing is we are accelerating the study execution as we had originally laid it out. That is a longitudinal study, and we had expected it to sort of align well with our registration efforts. But given the fact that, that study in the data we have today, we believe can great strong early differentiation for the product, we're going to accelerate the enrollment for that study so that we can generate more complete data and use that to help position the product more broadly. That study is designed as a Phase IIb study, it's not a registration level study, so we would not be seeking to use it for any sort of accelerated approval on that basis.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay, and my one follow-up question. Is the Manocept platform, which you unveiled in December, was very interesting and multifaceted. It hits pretty much any inflammatory macrophages disease, I guess. But could you help investors understand how that can be commercialized and converted into a sellable product? Or what you're -- what Navidea's thoughts are on how that would commercialize?

Mark Jerome Pykett

Absolutely, Steve. That -- the platform is really an exquisitely targeted approach that we feel can have tremendous value across a range of indications. And what you've seen from us our indications in data developing in rheumatoid arthritis, Kaposi sarcoma, tuberculosis, but there's a whole suite, a whole spectrum of disorders where inflammation plays a fundamental role. Cardiovascular disease, neurodegenerative diseases, MS, Crohn's disease, lupus, in fact, there's been this resurgence, in the understanding of the innate immune system and macrophages in particular, and their role in the pathology of these very, very large patient populations and disorders. So this program has really taken off from us, and stemming from its unveiling and the publication in the nature supplement last fall, we witnessed very strong project in terms of those areas of proof of concept. This is a technology that is very flexible. We're leveraging a lot of the investment we made from Lymphoseek. Recall, this is build off of the Lymphoseek chassis, so it's a very elegant way of delivering value without having to go back to square one. And yet, we can deploy this is, for example, an imaging technology, for in vivo imaging. We can look for the ability to identify atypical or early sites of disease to be able to improve early-stage diagnosis. We can look at it in the sense of being able to understand the extensiveness of disease. And we can even think about these agents as being deployed for therapeutic monitoring and to track disease progression as imaging agents. There are also possibilities that one could use these in a more clear, laboratory-oriented approach where you can deploy the manobodies to be able to do more standardized laboratory screening tests. And so we're really now in the early stages of working with this platform, and quite frankly, there's so much to work with, we have to be very clear about our priorities and the use of our resources. But as we said back in the fall, this has really turned into a very powerful and exciting engine that we think can drive new product development in a very streamlined and effective way for this company. As I mentioned, a lot of the products were focusing on tend to have low risk profiles because you know early in development whether you have a signal or not like we've now seen with rheumatoid arthritis, and you also are pretty sure that these are going to have strong safety profiles, given that the agents are applied as single doses typically, and at low levels.


And our next question comes from Steve Brozak from the WBB securities.

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

I wanted to look at one number, the 98% number. And Tom or -- if you want to hop in here, can you explain why it's 98%? Because candidly, it's one of those things where you're probably starting to get color on reordering and usage. And I want to know, clinicians that are using it, obviously. Can you tell us if there's any reason why they would go back to sulfur colloid and blue dye? And what you're significant advantage? And I've got one follow-up after that.

Brent L. Larson

Sure. Just to clarify, the reorder rate that I've mentioned, if I misstated, I apologize, it's greater than 80%. And we think that less than 20% that aren't included in that largely comes from a timing question. We think about the total market. That's really only 80 procedures per institution per year. The bulk of the 160,000 are undoubtedly coming from the larger account. So there are many small accounts that actually practice this infrequently. And that's probably the major contributing factor to the reorder rates not getting towards 98% as you suggest. Reasons why they would go back? Again, we haven't seen very many. There is a -- that once institutions and physicians, surgeons begin to use Lymphoseek. I think they understand and appreciate it's benefits, attributes, and become increasingly committed to it.

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

Tom, you're absolutely right. I'm only an analyst, so 80% to 98%. What's the difference there?

Thomas H. Tulip

It's something to look forward to that. Isn't it? Yes

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

All right. And so what you're basically saying is that the only reason why you're not seeing the -- a right away fill in orders is because these institutions just simply don't use it enough so that they would fill in that month or the next month, it might be a situation where they just wait a couple of months until they actually do get to that kind of product turn over. Is that in a nutshell, what you just -- what you're looking at?

Thomas H. Tulip

Exactly. It's less around the product than it is around procedure frequency.

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

Okay. Next question is for you, Mark. On the new applications here, you've often explained the benefits and the fact that Lymphoseek is pH neutral, so that you can basically just shoot it and no one can feel it. That pretty much would prohibit any other product that, for instance sulfur colloid even if it could be applied, from being used in any kind of a diagnostic mechanism like the one you're looking at, is that also correct? I mean, it looks like you won't just have a -- an advantage in terms of what you're looking at, but the technology itself is so superior that not only will you be taking away all the diagnostics on the oncology side, but there wouldn't be any competition on the other side that you're looking at as well. Is that a fair statement? And I'll hop back in the queue.

Mark Jerome Pykett

Well Steve, I think as we've said for a long time, we believe in many dimensions, Lymphoseek has a number of advantages relative to the current environment, current products and the state-of-the-art. And we think that's one reason it is -- has a strong possibility of really advancing the state-of-the-art. The applications that I believe you're referring to are the sNDA applications, which we think will collectively build on the differentiation of Lymphoseek in the marketplace, we think that we've embedded into these sNDAs a number of points that we can use to speak to the benefits of Lymphoseek utilization, relative to existing practices. But also then be able to promote to them in a way that we are not able to do today because the label doesn't support that. So it's -- it is not infrequent at all that companies come on with supplemental filings to provide additional data, create additional differentiation that improves the market positioning, all of which reinforce your statement, yes, Steve, that we are still very confident that Lymphoseek is a best-in-class agent overall in lymphatic mapping, a first-in-class agent as a receptor targeted lymphatic mapping agent that will continue to penetrate into the existing market, but also grow the market because of its performance characteristics to enable lymphatic mapping in other key entries where it's not typically perform today.

Thomas H. Tulip

Lymphoseek is redefining the standard of care.


Last question comes from Yi Chen from Aegis Capital.

Yi Chen - Aegis Capital Corporation, Research Division

I'd like to know, are there any strategic changes at Cardinal Health regarding how they view the future for Lymphoseek in the U.S.? And if you could, could you give us some more color on the current status of Lymphoseek in Europe?

Thomas H. Tulip

Sure. So I can start, hardly speak to the strategic intentions of Cardinal. Generally, relative to Lymphoseek, my understanding is that they remain committed strategically intention -- tactically and economically to the advancement of the product, and that's continued unchanged. Relative to Europe, we've spoken about the progress around the MAA and the closure of an arrangement with the Europe, potentially the European partner will evolve consistent with that, MAA unfolding. So I'm not sure I can be more specific than that.

Yi Chen - Aegis Capital Corporation, Research Division

Okay. Do you plan to increase the price at all in the future?

Thomas H. Tulip

Well, in the U.S., Cardinal controls the pricing of the product. Clearly, there's -- there would appear to be an opportunity as standard of care evolves and we expand the label and the application beyond breast cancer melanoma, head and neck disease to others. So that's an ongoing consideration, but no decisions have been made on that front today.

Mark Jerome Pykett

Okay. Very good. I think that brings our session to a close this morning. We really want to thank you for your time on today's call and for your overall interest in Navidea. We started out by talking about the excitement at the company, and we hope you can see why we are excited about things going on within Navidea. In the coming months and quarters, we anticipate positive advances for a number of milestones. We look forward to keeping you updated on our progress to the next steps with Lymphoseek as it continues to grow and move forward, and to achievements in other areas of the business. So thank you again for your time and interest. Take care.


Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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