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Navidea Biopharmaceuticals Inc. (NYSEMKT:NAVB)

Q1 2014 Results Earnings Conference Call

May 7, 2014; 08:30 a.m. ET


Dr. Mark Pykett - Chief Executive Officer

Brent Larson - Chief Financial Officer

Sharon Correia - Associate Director of Corporate Communications


Kevin DeGeeter - Ladenburg

Stephen Dunn - Life Tech Capital


Welcome to the Navidea Biopharmaceuticals, first quarter 2014 earnings call. My name is Marissa and I'll be your operator for today's call.

At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session. Please note, this conference is being recorded.

I’ll now turn the call over to Sharon Correia. Sharon, you may begin.

Sharon Correia

Thank you, Marissa. Hello everyone and thank you for joining us today. Me name is Sharon Correia, and I’m Navidea’s Associate Director of Corporate Communications. On today's call are Mark Pykett, Chief Executive Officer; and Brent Larson, Chief Financial Officer. Tom Tulip will not be joining us today as he is presently out of country on business. At the end of the call we will hold a brief question-and-answer period.

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

Actual results may differ materially from Navidea's current expectations depending 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 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 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 would like to turn the call over to Dr. Mark Pykett, Chief Executive Officer of Navidea.

Dr. Mark Pykett

Thank you, Sharon. And thanks to everyone on today’s call for your time. Welcome!

On our last call we did a comprehensive review of the company’s strategy, progress and value drivers. So we’ll keep today’s call to the point and combine our comments primarily to activities during this quarter. But before Brent reviews the financial results, I want to cover some of the key highlights that may not be immediately evident in the numbers.

First and foremost on everyone’s minds is how Lymphoseek is doing. I’m pleased to say it continues to experience a very successful launch. Sales are increasing robustly. In the first quarter we realized net revenue to Navidea from Lymphoseek that represented an increase of more than 80% from the prior quarter and to look beyond Q1 a bit, April was again a record month for the product.

We’re also continuing to see strong month on month growth in accounts. Just since our last call in March, we’ve seen an increase of about 25% in accounts purchasing to-date. Customer retention remains very strong, with a high frequency of repeat orders in excess of 80%. We estimate Lymphoseek has about a 30% market share of the radiopharmaceutical lymphatic mapping market.

We’ve learnt a lot in introducing our first product and we’ve incorporated that learning into increasingly rigorous commercial activities. For instance, to augment the activities of our partner Cardinal Health, we fielded our own team’s medical science liaison to drive medical education. That education process has now extended from nuclear medicine to the surgical oncology audience, which we believe is having a very positive effect and will continue expanding Lymphoseek’s opportunities. We’ve had a strong presence at several major surgical oncology medical meetings already this year.

We are also seeing to drive our opportunities by brining Lymphoseek to additional cancer types and now have two sNDAs under review at the FDA. The first sNDA focus is on head and neck cancer and Lymphoseek’s ability to act as a sentinel lymph node detection agent. This filing was granted both Fast Track Designation and Priority Review by FDA with a PDUFA date of June 16, just a little over a month away.

If approved, Lymphoseek will be the first agent improved in the U.S. for use in patients with head and neck cancer, as well as the only agent who is setting a lymph node detection language in the package insert.

Second sNDA focuses primarily on expanding the label to support broader and more flexible use in imaging and lymphatic mapping procedures, with the PDUFA date set for October 16. So we have two potential approvals on deck for the U.S. in the next half-year along. Needless to say, we are very excited about both of these sNDAs.

Collectively the revenue indicators continue to demonstrate that Lymphoseek traction is building in the U.S. as we seek to expand the market potential for the product in the States.

With an excellent revenue base as we near the end of the first year of launch, we believe that we are well positioned for expanded growth, particularly in light of our watershed (ph) sNDA pending for the FDA presently.

We believe the expanded label, potentially arising from these sNDAs, will resonate with the Surgical Oncology and Nuclear Medicine Community and afford the opportunity to advance Lymphoseek’s positioning as the standard of care and in that light and based on current data, we are reiterating our guidance for 2014 full year revenue to Navidea of $5 million to $6 million, in our previously stated expectation that Lymphoseek will become the market leader in the U.S. by mid-2015.

We are also advancing Lymphoseek outside the U.S., including moving our marketing authorization application forward in Europe. In March, we held a meeting with the CHMP as part of the MAA review and received additional questions, which we’re now in the process of addressing.

The CHMP has indicated they anticipate holding a scientific advisory group meeting to discuss how elements of our NEO3-06 study may support improved care for patients with head and neck cancer. Although the SAG meeting has not yet been formally scheduled, we believe this meeting may be held in the third quarter.

The SAG meeting as I said will focus on the head and neck data. We view the SAG meeting as a positive activity, as we will have an opportunity to get in front of oncology focused experts from the CHMP, including surgeons, to discuss how Lymphoseek can enhance lymphatic mapping in head and neck cancer. We also feel encouraged that the CHMP continues to view the data in breast cancer and melanoma as satisfactory.

Now, recall that the NEO3-06 study was completed last year while the MAA was already under review and as is required, we filed the safety data from the completed study to the MAA. The EMA reviewers also advised us to submit the efficacy data, guidance which we of course followed when we submitted our day 120 update.

The 06 study is important not only with regard to head and neck cancer, but also for the integrated safety and utilization data filed in the MAA, which is instrumental for the overall success of the MAA, as well as the broader market opportunity. Our partnership activities continue in line with the MAA progress, consistent with our expectation to generate material revenue in the EU in 2015.

And beyond Europe, we’re pursuing expansion activities for product commercialization worldwide in Q1, highlighted by our sales and distribution agreement in Taiwan, adding to our prior progress in Canada, as well as the ongoing shipment of Lymphoseek to medical centers in the Middle East.

We also continue to push pipeline programs. NAV4694, our priority development program continues to make progress in its pivotal Phase III registration study and to generate strong data. In a blinded read of over 160 cases NAV4694 showed sensitivity and specificity, both in excess of 95%, which is about 10 percentage points higher than other agents.

Equally exciting, positive results were also reported from our Phase IIb trail in subjects with Mild Cognitive Impairment, showing the agents ability to identity beta amyloid with a high degree of confidence in diagnosis in these early stage patients for who diagnostic uncertainty would not be significant.

These data build on prior work, showing that NAV4694 can separate MCI patients who have high beta amyloids from those who do not. We continue to believe that the most compelling driver for differentiation of NAV4694 from the prior first generation amyloid traces. We’ll see it’s ability to detect and measure lower levels of beta amyloid in patients with Mild Cognitive Impairment and emerging disease, thereby enabling earlier diagnoses.

In this perspective we are continuing our efforts to position 4694 as an innovative market leader. We believe ultimately this is what patients and physicians want and what payers will reimburse.

We also continue to advance NAV5001, where we have started Phase III and are enrolling patients under two special protocol assessments with the FDA and we presented results from Manocept platform studies in both rheumatoid arthritis and Kaposi sarcoma at several major scientific forums. The Manocept platform is garnering a lot of attention and we’re seeing new opportunities with in fact interested parties that may provide creative avenues to advance these programs. So we are quite excited about the developments with Manocept.

There is a lot of activity that’s becoming increasingly visible. Collectively these programs impress important medical needs with best-in-class products having strong differentiation characteristic, and in an asset class pursuing radiotracers that has many attractive characteristics, including validation of efficacy signals early in development as well as high safety margin as administered in single low doses. We think this creates an attractive, risk adjusted return profile.

And yet there is a still a lot of look forward to. In just the next couple of quarters we have a number of catalyst that we are very excited about, including the upcoming June 16 PDUFA date for our first sNDA, the PDUFA date for our second sNDA, the CHMP opinion on our MAA, growing up to seek sales, progress with partnership activities, both for the EU and other territories, data from studies with 4694, including additional cycle reports and new development for our Manocept platform, just to name a few.

So with that overview, I’d like to turn the call now over to Brent to review the financial performance for Q1.

Brent Larson

Thank you, Mark. As I begin I’m going to start with revenues and work my way down the income statement.

For the first quarter of 2014 total revenues were $752,000 compared to no revenue for the same period in 2013. More importantly from a comparative standpoint though, product revenues from the sale of Lymphoseek during the first quarter of 2014 were $627,000 compared to $343,000 in the fourth quarter of 2013, representing as Mark said, an increase of approximately 83%. On a run rate as believe as he mentioned that we are now at about 13% penetration right into the market, up about 9% from our last call.

As Tom noted in our March call, however in comparisons with the few innovative premium price drugs in the recent years, which has started in the hospitals and thus experienced some of the same administrative hurdles like formula replacement as Lymphoseek is, the very best of these did not exceed a 10% market share until after the full year in the market. So we believe Lymphoseek compares well and will certainly get beyond the 12% to 13% range more in our first year.

Also as Tom pointed out, even the best example in the radiodiagnostic space that we’ve noted so far, Cardiolite reached a market share of only about 10% in its first year. This is also in a market that’s clearly dissatisfied with the current product, radiothallium, which is a lower price predecessor drug. The end market was also much complacent as ours is as well, and as such we continue to believe that Lymphoseek has the ability to become the market leader by mid-year next year.

Based on the sales trend we observed from the launch to April of 2014, we are reiterating our full year 2014 revenue expectation of between $5 million and $6 million of Lymphoseek sales based on our revenue sharing agreement with our U.S. marketing and distribution partner Cardinal Health. We also believe this outlook is generally consistent with the overall range of estimates from analyst covering Navidea, who provided updated estimates following the product launch.

Moving on, first quarter 2014 operating expenses were $9.1 million compared to $7 million for the first quarter of 2013. Research and development expenses were $5.2 million for the first quarter of 2014 compared to $3.6 million for the same period in 2013. The net increase is primarily a result of net increases in NAV4694, NAV5001 and Manocept platform product development costs, compensation and other product development support costs.

Selling, general and administrative expenses for the first quarter of 2014 were $3.9 million compared to $3.4 million for same period in 2013, due to primarily increased marketing and analytic education related expenses.

Navidea's first quarter 2014 net loss attributable to common shareholders was $11.7 million or $0.08 per share, compared to a common loss attributable to common stock holders of $7.3 million or $0.06 per share in the first quarter of 2013. Contributing to the net loss and in addition to the operating expenses discussed above, the company recorded approximately $2.6 million in the loss on extinguishment of debt, related to the refinancing of our debt facilities during the first quarter of 2014.

Before I end, I do want to note one other corporate housekeeping matter, which I had mentioned previously in our year-end earnings call. The company's current shelf registration statement was originally filed in 2011 and is now expiring. As we have outstanding financial instruments which contracts to the acquirers to have an active registration statement, we will be filing in the next few days a shelf registration statement in order to continue to meet our obligations and abide by prudent corporate governance.

That is for all intention and purposes, a replacement shelf that will have the same original amount and cover the same basic types of instruments as the expiring shelf, basically a replacement to the previous instrument. However based on the financial strength recorded by our recent financing with Oxford finance and our existing line of credit with platinum, coupled with our growing revenue, we have no current plans to utilize this shelf.

And finally we’d like to let investors know that we have scheduled our annual meeting. It will be held on Thursday, July 17 at 09:00 a.m. in Dublin, Ohio. Proxy materials related to that meeting will be filed in the coming weeks and distributed to shareholders as appropriate.

We’d now like to open the lines for questioning. Marissa.

Question-and-Answer Session


Thank you. (Operator Instructions) The first question is from Kevin DeGeeter from Ladenburg.

Kevin DeGeeter – Ladenburg

Hey, good morning guys. Congratulations on the progress. Two questions; can you provide a little bit more of regularity with regard to the message to the surgical oncologists, particularly in the absence of, at this point head-to-head data with a sort of alkaloid based regiment.

Then just secondarily for me and then I’ll get back to the queue, can you talk a little bit about a timeline strategy for additional clinical trials and other indications beyond melanoma, breast cancer and head and neck. Thanks a lot.

Dr. Mark Pykett

Great, thanks very much Kevin. Certainly if Tom were on the call, he’d be able to define quite extensively on the approach to the surgical oncology community. This obviously represents Stage II of Tier II of our commercialization activity, Stage I being a focus on the nuclear medicine audience to make sure they understood the product, knew how to use it, knew how to administer it and had success in there hand with the entry of the product into the marketplace.

Now its Stage II and focusing more on the surgical oncology audience, it’s partly a rollout driven in some regard by our medical science liaison team, but it’s building on a lot of the same messages that are intrinsic delinquency product. The ability at the first receptor targeted lymph node, lymphatic mapping agent to reliably target lymph nodes efficiently and to produce good lymph node localization during the surgical procedure, the surgical biopsy procedure and in fact we are, because of some of the market feedback we’re seeing, embarking on head to head studies now to support the messages that are baked into the overall Lymphoseek launch plan.

I think that what we witnessed in the very short period of time is actually a lot of encouraging feedback from the surgical oncology community. We do express a lot of dissatisfaction with the predecessor agents, localization rates, the ability to detect them reliably, the ability to not only limit the number of lymph nodes that are removed, which makes their procedure efficient and their clinics more productive, but also to not only do that but remove the right lymph nodes, which is really part of the overall purpose built design of Lymphoseek, to identify the key predictive lymph nodes that help to position us where the cancer has spread from the primary tumor site into the lymphatic system.

So all that is going according to plan. We’re seeing great support from Cardinal Health in helping us continue to drive that message into the marketplace, both from the nuclear medicine community as well as the surgical oncology community.

As far as other trials, I believe that was your second question, we have an expectation that we will continue to work with investigators to identify areas of unmet medical need where Lymphoseek could be successful in enhancing lymphatic mapping or even in some cases enabling lymphatic mapping for groups of cancer patients where its not feasible today with the current agents. We started that process in colorectal cancer. We’ve seen some interest in identifying a possible tumor spread in Kaposi sarcoma and we have a list of other cancer types, which largely fall in line with where the opportunity exists.

For example, in ovarian cancer or gynecological cancers in general, other types of skin cancers and so forth and in a very judicious but deliberate way, we expect to be able to continue to advance those kinds of studies, often times through very cost effective but robust investigator initiated studies, where the merits of Lymphoseek can be brought into these other kinds of cancers as well.

Kevin DeGeeter – Ladenburg

Right. Thanks so much.

Dr. Mark Pykett

Thank you Kevin.


Thank you. The next question comes from Stephen Dunn from Life Tech Capital.

Stephen Dunn - Life Tech Capital

Hi, good morning guys. Thanks for taking my questions here. I’d like to start off with some of the events with the CHMP review. Does it feel like that they are on the head and neck review, that they are calling an advisory board? Is it a bit because they were actually waiting for the FDA PDUFA date of June 16 to get some clarity on the FDA side.

Dr. Mark Pykett

Stephen no, in a word no, that doesn’t seem to be the case. That is not a trigger for their process.

Stephen Dunn - Life Tech Capital

So can you give us a little bit of color on exactly what it is that they are not confident about, that they feel that they have to go to get another advisory board or is it the usage or do you know where it is that they are not comfortable with their own expertise.

Dr. Mark Pykett

Sure, sure and you realize the CHMP is a broadly comprised group of regulatory experts, who look at regulatory filings for each of their jurisdictions, but as a composite group through the EMA, with a regulators lens and also with their own personal expertise.

The utilization of lymphatic mapping is perhaps not broadly understood in general, in the EMA and the cost and benefit equation and the potential benefits for patients with head and neck cancer are also not necessarily particularly apparent with the standing body of the CHMP and so as they often do, when they are keeping additional expertise they will call on specialty advisory groups.

We do have that experience and the capability of making an assessment on a somewhat detailed filing. In this case we think it’s a great opportunity to in fact get in front of those independent experts who are involved in head and neck cancer surgery and who have the right experience to understand why Lymphoseek will improve care for patients with head and neck cancer in Europe.

So we think this is an opportunity to drill down just one more layer and carry the message forward that is in EMA, but speak to an audience that is informed and technically qualify to help render the decision here in the EMA review.

Stephen Dunn - Life Tech Capital

But you did say that for breast and melanoma they were basically satisfied in those oncology indications. Is that correct?

Dr. Mark Pykett

Yes, the feedback that we’ve had from the CHMP is that they find the data submitted for breast cancer and melanoma satisfactory.

Stephen Dunn - Life Tech Capital

Okay. Regarding the timing is it still possible that you’ll get an EMA authorization by the year-end.

Dr. Mark Pykett

We believe the year-end is very realistic, yes. We do believe that an important gate will be the Scientific Advisory Group meeting, which has not yet been formally scheduled, but which we believe may be held during the third quarter. Based upon that the rest of the review appears to be set up well in terms of the CHMPs process, so we are confident that a decision in the third or fourth quarter still remains very realistic.

Stephen Dunn - Life Tech Capital

And you obviously you’ll be submitting the FDA review materials from the June 16 date, on which is that board, correct.

Dr. Mark Pykett

Well, the data in our filing have already included as I said in my remarks, the data from the NEO3-06 study, as well as other data which are filed or had been filed in the MAA and so we are not envisioning additional data from the process that we’re engaging with the FDA on the sNDAs, making its way into the MAA review at this point. This is all about evaluation of the existing data already on file, although as you know, it appears very likely that the FDA, sNDAs, PDUFA date of June 16 would precede in MAA, CHMP opinion.

Stephen Dunn - Life Tech Capital

Okay. Lets move over to 4694. You were mentioning the importance of Mild Cognitive Impairment in this particular market as reimbursable. Could you give us a little bit more color? Is that because most of those, the MCI patients are like early onset under 60. I mean, could you give us a little color on why that reimbursement landscape would be better than Alzheimer’s in general.

Dr. Mark Pykett

Sure. Well, its certainly where there’s emerging medical need, in the sense that by the time one has more advanced Alzheimer’s disease, where the accumulation of the amyloid and the other elements of brain deterioration are significant, its very, very challenging to envision how you could reverse that process and deliver therapeutic benefit to patients. In fact, I think that’s been one of the main impediments in drug development to-date, by focusing on the wrong subset of patients who have advanced disease, where it would be quite honestly heroic to envision trying to introduce a drug therapy to them that would reverse the course of that disease.

And in fact in prior calls we’ve like in this to, the efforts to try and treat stage four cancer or to treat end stage heart failure, which obviously earlier in the course of the disease that you can recognize those conditions and the better chance you have of making some inroads therapeutical. And so it’s the focus on mild cognitive impairment patients today where both we as well as pharma believe that significant inroads can be made.

In that sense the ability to achieve a therapeutic benefit, to effect in a positive manner, the course of disease by making an accurate diagnosis and not only being able to rule in emerging Alzheimer’s disease or mild cognitive impairment due to beta amyloid accumulation or associated with beta amyloid accumulation, but also to rule out Alzheimer’s disease and focus on other diseases where mild cognitive impairment is also associated and we’ve in the past reviewed many of the different types of dementias that present with similar symptoms to Alzheimer’s disease.

So its part I think of the evolution of the field that’s not terribly surprising to us that this is happening, that people are getting a much better understanding of which patients to focus on. Drug development efforts are certainly headed in that direction and we think that in many ways diagnostics are going and the people at 4694 are going to be instrumental in realizing the benefits of those therapeutic inroads and even in drug development itself.

So I think in that regard we think 4694 continues to be well positioned and we remain more excited than ever that’s its ability to identify amyloid deposition early in the course of the disease and its just with an early diagnosis its going to be very important.

Stephen Dunn - Life Tech Capital

Okay, great. Good answer, thanks. A last housekeeping question and this one’s for Brent. The R&D expense of $5.2 million was the lowest we’ve seen in half a year, two quarters. Is that going to look like the trend going forward or should we expect to see R&D expenses start to creep up a little bit during the year.

Brent Larson

I’d expect Steve, against some of the guidance we gave in the K that the expenses will probably go up over the course of the year to I think in total for the year we gave guidance of 25 to 30 or so in that range, so…

Stephen Dunn - Life Tech Capital

Okay, great. Well congratulations on a good quarter and looking forward to the rest of the year. Thanks.


Thank you. We have no further questions at this time. I’ll now turn the call over to Dr. Pykett.

Dr. Mark Pykett

Excellent. Thank you very much everyone for your time on today’s call. Just one remainder as we speak about the Lymphoseek revenue numbers and the various projection and guidance for 2014; bear in mind that that is the revenue to Navidea. Its not a top line revenue to the overall product realized through Cardinal expense.

So in the coming months and quarters we anticipate a number of catalysts that we feel people should be paying attention to. These catalysts, they include as I mentioned the upcoming PDUFA dates for our two sNDAs, the EMA opinion for the Lymphoseek MAA, advances in Lymphoseek sales and partnering activities and advances in our pipeline programs, including 4694 and Manocept.

So we look forward to keeping you updated on our progress to the next steps with Lymphoseek as it moves forward and to achievements in other areas of our business and thank you very much for you time on today’s call.


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

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