Navidea Biopharmaceuticals, Inc's (NAVB) CEO Michael Goldberg on Q2 2014 Results - Earnings Call Transcript

Navidea Biopharmaceuticals, Inc (NYSEMKT:NAVB)

Q2 2014 Earnings Call

August 06, 2014 8:30 am ET

Executives

Sharon Correia - Associate Director of Corporate Communications

Michael M. Goldberg - Interim Chief Executive Officer and Director

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

Thomas H. Tulip - President and Chief Business Officer

Analysts

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

Stephen M. Dunn - LifeTech Capital, Research Division

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

Operator

Welcome to the Navidea Biopharmaceuticals Second Quarter 2014 earnings call. My name is Larissa, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded. And I'd like to turn the call over to Sharon Correia. Sharon, you may begin.

Sharon Correia

Thank you, Larissa. Hello, everyone, and thank you for joining us today. I'm Sharon Correia, and I'm the Associate Director of Corporate Communications for Navidea. On today's call are Dr. Michael Goldberg, Interim Chief Executive Officer; Tom Tulip, President and Chief Business Officer; and Brent Larson, Chief Financial Officer. 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 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 and 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 sourced 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. Michael Goldberg, Interim Chief Executive Officer of Navidea.

Michael M. Goldberg

Thank you, Sharon, and welcome, everyone, to our second quarter financial results conference call. Navidea has developed and is now commercializing an important new product called Lymphoseek, which can help guide surgeons to select pertinent sentinel lymph node's for pathological assessment and staging of treatment for breast cancer, melanoma and certain head and neck cancers. This product can potentially spare patients from unnecessary surgery and potentially debilitating side effects associated with surgeries to remove all lymph nodes, which we believe offers intuitive benefits to hospitals, surgeons and patients.

During the second quarter of this year, we continued making tremendous progress with the Lymphoseek business. Most notably, we expanded the Lymphoseek label, making it the first and only FDA-approved diagnostic agent indicated for use in sentinel lymph node biopsy procedures, specifically for clinically node-negative squamous cell carcinoma of the oral cavity. With our partner, Cardinal Health, Lymphoseek generated approximately $2 million in sales, of which just over $1 million was recognized by Navidea, representing the fifth consecutive quarter of record revenues since our launch in the second quarter of 2013.

We fulfilled approximately 8,700 doses of Lymphoseek in the first half of the year, compared to approximately 2,500 in the second half of 2013. Based on sales trends observed, we reiterate our full 2014 revenue expectations of $5 million to $6 million to Navidea. The revenue growth is being driven by several factors which include: CMS coverage that was received at the end of last year; greater physician visibility in the market amongst nuclear medicine physicians; positive experience at customer cites, creating strong account growth; and the aforementioned label expansion in head and neck cancers which we anticipate will result in new hospital and cancer center customers.

To date, Lymphoseek has been ordered in more than 350 hospitals throughout the U.S. since its launch a year ago and, of those, 120 came in the second quarter of this year alone. These trends, along with the higher reorder rate are very, very encouraging.

So what is it that is attracting physicians and hospitals to Lymphoseek? First, the product has a unique mechanism compared to alternative mapping agents in that it specifically targets macrophages that accumulate in the lymph nodes of nearby tumors. This acts as a flag in conjunction with pathology analysis to tell the doctor where and to what extent the tumor may have begun spreading in lymphatics and thus can be vitally important to informing decision-making and tailoring a treatment regimen.

Second, our FDA label differentiates Lymphoseek for several reasons included in the data that we collected as part of our clinical development. Lastly, sales data from customers along with the physician feedback signifies that the product is being well received by the medical community and has the potential to become the standard mapping agent. While we are encouraged by the growth we have achieved, we believe the product can achieve much greater penetration across hospitals and, with more data and/or approvals, be applied to more forms of cancer further benefiting patients.

Our plan to grow sales include the following 5 initiatives: medical education efforts to further increase awareness of a relatively new product in an area that has, until now, been dominated by entrenched 30-year-old agents that are primarily used off-label; two, expanding the focus of our sales efforts, which heretofore have focused on nuclear medicine physicians to now include surgeons who also play an important role in the decision-making process; three, continued expansion of our U.S. label. The recent head and neck approval came at the end of the second quarter, so its impact on sales has not yet been realized. In addition, we have an upcoming PDUFA date on October 16 to support broader and more flexible use of the product. We believe both of these label expansions will further support the sales of growth of Lymphoseek. Implementation of our international strategy, which is four, to seek approval and launch of Lymphoseek outside the U.S. We expect the nearest-term approval to come from Europe sometime this year and we are currently evaluating partnering opportunities to commercialize the product in additional regions. And five, working with academic centers to explore the application of Lymphoseek in other solid cancers through research grant funding such as cervical cancer, prostate cancer, colorectal cancer and Kaposi sarcoma. We expect to announce these investigator-initiated studies on an ongoing basis over the next several months and have been encouraged by the progress of grant proposals currently under consideration by our academic collaborators.

Turning now to our pipeline. We have sharpened our R&D focus to emphasize the Manocept platform. This is a highly scalable endeavor, given that Manocept uses the same backbone as Lymphoseek. By changing out the reporter from technetium to another radio label or active agent, we can apply the same core molecule to new applications while capitalizing on the knowledge, manufacturing and safety profile established with the Lymphoseek development and commercialization.

Within the last month, we transformed the Manocept pipeline by adding a potential therapeutic application through our partnership with Essex Woodlands' Rheumco, to co-develop a product to not only detect but also to treat rheumatoid arthritis and other arthritic conditions. The rationale behind this partnership is that Manocept is able to effectively seek out macrophages which are implicated in the development of rheumatoid arthritis and accumulate in arthritic joints. By pairing Manocept with Rheumco's proprietary Tin radioisotope, we now are able to deliver a payload that will selectively knock out the deleterious macrophages without harming healthy surrounding cells or tissues.

Similarly, because macrophages are implicated in several other diseases, we will look to partner or seek grant funding to explore other potential diagnostic and therapeutic applications for Manocept. For example, this can include cardiovascular disease where macrophages have been associated with the buildup of vulnerable plaque. Also at the end of the second quarter, we announced a restructuring of our spending priorities. Our objective is to extend our cash runway to enable the achievement of profitability without having to access the equity markets. We remain focus on continuing the growth in Lymphoseek sales and Manocept development.

We anticipate we will begin realizing the full effect on the cost side in the fourth quarter of this year. As part of these cost reductions, we are actively pursuing development and commercialization partnerships to enable rapid completion of the ongoing Phase III studies of our neurodegenerative disease detection agents rather than investing directly in these programs on our own. This allows us to more efficiently invest in Lymphoseek and Manocept platform opportunities while retaining financial upside in the form of potential royalty payments should the neurodegenerative assets gain approval.

We believe that based on the extensive clinical, regulatory and manufacturing process -- progress we have achieved to date and the clinical need for agents to detect neurological conditions sooner, there will be demand from potential partners for these valuable assets. With that, I'll turn the call over to Brent to review the financial performance of the second quarter and first half.

Brent L. Larson

Thank you, Michael. Navidea's total revenues for the second quarter of 2014 were $1.1 million, compared to $195,000 for the same period in 2013. Product revenue is recognized by Navidea from sales of Lymphoseek in the second quarter or $1.05 million, compared to $627,000 for the first quarter of 2014, representing a quarter-on-quarter increase of 67%. The product revenues from the sale of Lymphoseek in the first half of 2014 were $1.7 million, compared to $128,000 in the first half of 2014 when the product was launched.

Based on these sales trends, we continue to believe that Lymphoseek has the ability to become the standard of care in lymphatic mapping and central node detection and, as Michael had mentioned, reiterate our 2014 guidance of between $5 million to $6 million in sales from Lymphoseek. We also believe this outlook continues to be generally consistent with the overall range of estimates from analysts covering Navidea who provided update estimates since the product launch. Our second quarter 2014 expenses were $10 million, compared to $8.5 million for the same period in 2013. Research and development expenses were $5.1 million in the second quarter of 2014, compared to $4.4 million in the same period of 2013.

Total operating expenses were $19.1 million for the first half of 2014, compared to $15.6 million for the same period in 2013. Research and development expenses were $10.3 million for the first half of 2014, compared to $8 million for the same period in 2013. These net increases were primarily the result of increases in development for NAV4694 and NAV5001, which we are actively seeking one or more partners to complete development and registration and assume those costs going forward, and to a lesser extent, in the Manocept platform product development cost. Selling and general administrative expenses for the second quarter of 2014 were $4.9 million, compared to $4.2 million in the same period of 2013. SG&A expenses for the first half of 2014 were $8.8 million, compared to $7.5 million for the same period in 2013. These net increases were primarily due to the onetime separation costs with the company's former CEO, coupled with cost to support Lymphoseek medical education efforts.

Navidea's second quarter 2014 net loss attributable to common stockholders was $10.2 million or $0.07 per share compared to a net loss attributable to common stockholders of $10.3 million or $0.09 per share in the second quarter of 2013. Navidea's net loss attributable to common stockholders for the first half of 2014 was $22 million or $0.15 per share, compared to net loss attributable to common stockholders of $17.6 million or $0.15 per share for the same period of 2014. Contributing to the net losses in 2014 in addition to the changes in operating expenses reported above, the company recorded a $2.6 million loss on the extinguishment of debt related to the refinancing of its debt facilities during the first quarter of 2014. As we move forward, I believe most investors are aware of the pipeline development or reprioritization we announced in May.

As we have stated, supporting a broader adoption of Lymphoseek is our #1 priority followed by a cost-efficient advancement of our Manocept platform. However, in order to better manage our cash burn, we find it beneficial to at least temporarily pull back or slow down on our 2 neuro programs, NAV4694 and 5001, while we actively seek a partner to support these programs, both of which are in the midst of Phase III clinical trials for registration. Though let me be clear, we view both of these programs as highly attractive and very partner-able. And while there's expenditures for these programs over the next few quarters, we do not plan to end either Phase III programs while we seek to secure such a partner.

In focusing our partnering efforts, we've already taken steps to reduce the pace of spending on both programs. While it can take time to ramp down while still fulfilling our contractual obligations, we do expect to start to see cash savings during the third quarter, which will grow more prominent during the fourth quarter and going forward. As Dr. Goldberg has stated, our goal is to work towards living within our means and reach cash flow breakeven as early in 2015 as possible. For concluding remarks, I will now turn the call back over to Dr. Michael Goldberg.

Michael M. Goldberg

Thank you, Brent. This has been a very active year marked by tremendous progress by the company and its employees. So far this year, we have achieved several critical milestones as an organization which include the following: continued sequential growth in Lymphoseek revenues for the fifth quarter in a row; realized attractive gross margins on Lymphoseek revenue of nearly 75% for the second quarter and first half of 2014. As previously mentioned, we received FDA approval for guiding sentinel lymph node biopsy in certain head and neck cancers, making Lymphoseek the first and only FDA-approved radiopharmaceutical for sentinel lymph node detection. We presented encouraging positive data and results from Lymphoseek studies in breast cancer, melanoma and head and neck cancer and Manocept studies in rheumatoid arthritis and Kaposi sarcoma at the Society of Nuclear Medicine and Molecular Imaging annual meeting. And we formed a joint venture, R-NAV, with Essex Woodlands' Rheumco to develop and commercialize radiolabeled diagnostics and therapeutics for rheumatological and arthritic diseases using Navidea's Manocept macrophage targeting platform and Rheumco's Tin isotope. Looking ahead, we expect to achieve additional milestones that will create further value in the business. Most notably, they include: continued Lymphoseek revenue growth and achievement of $5 million to $6 million in product sales to Navidea or over $10 million in total lymphatics -- in Lymphoseek sales and product sales for 2014; FDA label expansion to support broader and more flexible use of Lymphoseek, which is of critical importance to our customers and would be a key differentiator from competitive products that are more limited; approval in Europe for Lymphoseek and the subsequent product launch; commercialization agreements for Lymphoseek in countries and regions outside of the United States; developments and commercialization partnerships for our late stage neurodegenerative products; the initiation of additional investigator-sponsored funded studies for Lymphoseek in additional solid tumors; the initiation of investigator-sponsored and funded studies of Manocept for detection and treatment of arthritic conditions; and the hiring of a permanent CEO.

As a long-term investor in the company and as a physician, I have the greatest appreciation for Lymphoseek and the Manocept platform. This is a product that, in my opinion, should become standard of care over time and, as more data comes out, across multiple cancer types. Beyond this, we are extremely encouraged by the potential development of Manocept not only as a protection agent but also as a therapeutic.

Over the past 2 months, since I assumed the interim CEO position, I've had the opportunity to meet with physicians who both use Lymphoseek and many who have never heard of Lymphoseek. In all cases, as the physicians get familiar with what Lymphoseek can do, they had interest in the product. That is why I'm so confident in the commercial prospects for Lymphoseek. Clearly, there's a lot of work to do to fully penetrate the surgical oncology marketplace. I am confident we have the product attributes and the wherewithal to make Lymphoseek the standard of care. We now have the runway and resources to accomplish this goal.

As for the share price, I've also had the opportunity to meet with and discuss this with many existing investors and numerous potential institutional investors. Most are pleased with the plan to focus on Lymphoseek, but the vast majority is unwilling to commit until they see the evidence that the cash burn is declining and the sales growth targets are achieved. Navidea is now in the "show me" state. Investors want to see the results before they invest. That's fine as we are confident that we'll achieve the required results. I am confident that we have the product, the pipeline and the people and resources to make Navidea a major success for patients and for investors. We look forward to keeping you updated on our progress, and I would now like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Kevin DeGeeter from Ladenburg.

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

I actually have a few questions. So Brent, can you quantify the separation expense with the former CEO that was incurred in the quarter?

Brent L. Larson

I think it was a little over $1.2 million.

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

Okay, great. And in your comments, you noted that cash burn should begin to come down in the third quarter, but really step down potentially beginning in the fourth quarter. Should we take that, read into that in part to suggest that that's a targeted window for potential out-licensing of 4694 or 5001? Or are there other factors that would cause the fourth quarter to be in an inflection point on the reduction in cash burn?

Brent L. Larson

Michael, do you want to take that or do you want me to go?

Michael M. Goldberg

Go ahead, Brent.

Brent L. Larson

Yes. I think, Kevin, it's obviously as quickly as possible. Certainly though these types of situations take a little bit of time, so our rough target is near the end of the year. But we're pretty comfortable that even if that doesn't happen, that we've got the resources available to us to continue to do what we need to do.

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

Okay, great. And then maybe two more quick ones for me. You know that with regard to the label expansion for head and neck, there's an opportunity here to really expand Lymphoseek into facilities and hospitals that currently aren't using the product. Could you comment with regard to -- for customers that are already ordering Lymphoseek, how we should think about additional penetrations of those accounts potentially being driven by the expanded label indication?

Michael M. Goldberg

Well, I think you got to look at it from two perspectives. One obviously is just the incremental opportunity relating to head and neck. But much more broadly, the fact that we have a sentinel label, which no one else has. Remember, people have been using various lymphatic mapping agents for years not just in breast, melanoma and head and neck, but as well for all solid tumors. And there's ample literature of people using agents because it's so important and so valuable to get that data as to how far the tumor has spread and if has spread, in fact, to lymphatics. So now that we have the first ever sentinel node label. It puts us in a unique position. It puts us in a position to say that we've been able to demonstrate not just in peer-review publications, which we've done, but through the regulatory process to prove that we, in fact, have found the sentinel node. And that's very important because no other agent can make that claim. And based on mechanism, there's actual reason to believe that many of the agents being used may not be identifying the sentinel node because they don't have any ability to get to a lymph node and stick there, that you may be measuring, if you measure too late or too early, something other than the sentinel node. So getting the sentinel node label gives us a tremendous advantage in terms of our ability to talk about the mechanism which, as we're looking to expand beyond breast, melanoma and head and neck, and make physicians aware that a product now exists that was purposely designed and works towards finding the sentinel node, physicians who are using off [indiscernible] in colorectal cancer, in prostate cancer, in gynecological tumors, in head -- in lung cancer tumors, there -- many, many physicians are using agents that are not specifically built for this purpose and, for reasons of mechanism and how they work, are not likely to be as good as Lymphoseek, which is why we're looking to expand the label and expand the use through publications, studies and hopefully even potentially regulatory expansions to get this product for all solid tumors.

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

Okay. Maybe in kind of taking that question from a slightly different angle, if I may. For customers that are already ordering Lymphoseek, what do you envision as being the most important factor for driving deeper penetration into those accounts? Is it label expansion? Is it additional indications? Or is it just a [indiscernible] program for the surgeons?

Michael M. Goldberg

It's unfortunately -- it's all three. For example, I recently met with the head of nuclear medicine at a leading teaching hospital in New York City, who claims that his entire institution is now using Lymphoseek. And we talked about how we would get broader use of the product within his institution, and he indicated to us that it's this function of just making these people aware, that even though you may all have the same institution on your ID label, it doesn't mean that you're aware. So there's grand rounds, there is communication, there's teaching. So if you're the head of nuclear medicine, you have the ability to sit down and talk with the various people within your organization and make them aware that there's a product and explain to them why this product is superior. It's interesting. This head of nuclear medicine went further to say that, on every level, he thinks that Lymphoseek is better than the available products. It's better for the patients. It's less painful. It's better for the physician. It gives much better quality data, and it's much better for the nuclear medicine department, this person's department, because it's easier to use. Patients get in and out much quicker. And in fact he makes money every time a physician uses this product, where they lose money, when they use the other products as those products are not reimbursed. So it's getting people like that. It's obviously getting the medical oncologists who refers the patient to the surgeon, and the medical oncologist needs to get the best information. They want their patient to have the best experience. So they're going to want the best agent. And we believe it's a matter of education, educating the surgeons, educating the medical oncologists and getting, like we have at this one New York hospital, getting the head of nuclear medicine to be an advocate and proponent because from his perspective, it's the best agent and it's commercially the best agent for him.

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

Okay, very helpful. Now maybe one last question for me, and I'll get back in the queue. Can you provide an update on a timeline for the search for a permanent CEO? And a little more granularity on that would be great.

Michael M. Goldberg

Sure. So we've engaged an executive search firm a couple of months ago. We've identified, I believe, roughly a dozen, who we think are highly qualified candidates who had strong interest in the position. And we're in the process now of winnowing that down to come up with the person who'll have the great honor and pleasure of taking this company to the great heights we expect for it.

Operator

The next question comes from Stephen Dunn from LifeTech Capital.

Stephen M. Dunn - LifeTech Capital, Research Division

Brent, a little more housekeeping. I guess in the quarter, were there other, I'll say, onetime or rarely-recurring expenses? You said $1.2 million for the separation. I think there was $333,000 of cash for the R-NAV investment. Were there any other unusual cash items during Q2?

Brent L. Larson

No. But recognize, Steve, that within the neuro programs, we were still in a little bit of the startup phase of some of the manufacturing efforts. So I guess I would term some of those onetime and probably in excess of $500,000 of that, that I wouldn't expect to recur. But I think the broader program is still being supported, but pare it down, I think, as we've talked about, temporarily until the partner is identified.

Stephen M. Dunn - LifeTech Capital, Research Division

All right. So would it be fair to say that during Q2, about $2 million of cash was onetime things or unusual items?

Brent L. Larson

Yes. Including all those 3 items, that's probably not an unfair number.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay. Michael, turning to the upcoming sNDA in October, could you remind investors exactly what that sNDA, what you mean by additional utility? I mean I understand that's a 24-hour pre-op injection. Could you give a little bit of color on the -- of the impact of that sNDA label expansion?

Michael M. Goldberg

Tom, would you want to take that question, please?

Thomas H. Tulip

Sure. Thanks, Michael. Thanks, Steve. So the October 16 second sNDA is focused on a lot of the practical elements that nuclear medicine and subsequently surgeons can recognize practical benefits that nuclear medicine physicians and surgeons can benefit from Lymphoseek versus their standard existing practice. There are clear-cut indications for imaging, which is not in any of the current labels. That will be a boon to the nuclear medicine folks. There is the clear-cut opportunity to do either a same-day or next-day injection administration, imaging and surgery. And that differentiate -- that's another differentiation that many nuclear medicine physicians, surgeons tell us is important to them. So a lot of it is focused around better routine practice, which furthers our arguments about the consistent routine, reliable performance that customers should expect from Lymphoseek.

Stephen M. Dunn - LifeTech Capital, Research Division

So would it be safe to say that this sNDA, combined with all the head and neck that you just received, those sNDAs give you indications that nothing on the market currently is approved for?

Thomas H. Tulip

That's entirely true.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay, great. A follow-up question, and I'll jump back in the queue. A little update on the EU regulatory pathway. Anything back from the Scientific Advisory Group on Oncology? Can you give us a little bit -- an update on the inner workings and the timing there?

Michael M. Goldberg

Tom will take that again, and then I'll have a little follow-up comment.

Thomas H. Tulip

Sure. I think we can say, as we have said, that we continue to work closely with the European regulators seemingly on a daily basis, although maybe not during the midst of the summer given European proclivities. We continue to be confident that -- and expect a positive decision over the course of the coming months, certainly before the end of the year. And we are marshaling that which we need to do to optimize the likelihood that, that in fact happens. So I think we're on the path we've described before.

Michael M. Goldberg

And I just want to add one comment, Steve, to the previous question and that is, one of the things that I've learned as I've begun to talk to physicians and talking -- speaking with nuclear medicine people is that one of the limitations that we've seen to getting full penetration in some hospitals relates to something as mundane as the time and date, day of the week that the surgeon does their cases. So for example, in certain cases, if a physician works on Mondays, they don't want to bring in the nuclear medicine people on Sundays if they don't have to, and then that costs extra money and there's time issues, et cetera. Same thing with certain doctors who work during the week, they don't want to bring the nuclear medicine people in at 4 in the morning if they're operating at 7 to do the injection for lymphatic agents. So having this flexibility to dose, either the day before or the morning of, and do it right before surgery versus having to wait depending on the agent that they were customarily using, makes everyone's life that's much easier and that much better. So this is tremendous flexibility not only for making sure that we get access into all the surgeons so that we can capture 100% of each market that we're in, but as well as we begin to explore the use of Lymphoseek in other indications, for other uses. Again, it becomes very important to provide the physician with the flexibility so that we can get them to experiment or try this agent and get comfortable because our view is, once someone tries this, whether it's the nuclear medicine department or the surgeon, they like it, they see the benefits very clearly and then they become a devoted user of the product. So having this flexibility, I think, will help both capture all of the surgical patients in the currently approved indications and as we're looking to expand the knowledge and interest of this product beyond the current 3 indications, providing this kind of flexibility, I think, will be very helpful to get people to realize that this agent is worth trying. And as I said, our experience so far is, once you've tried it, you stick with it.

Stephen M. Dunn - LifeTech Capital, Research Division

Okay, great. One more question on the neuro programs. Do you anticipate the Parkinson's and Alzheimer's programs to be partnered out to the same partner? Is that how things seem to be going? Or you're looking at different partners for each program?

Michael M. Goldberg

We're agnostic. We're open to the best and quickest deal. Our perspective, the #1 objective, we have tremendous, tremendous confidence in the value of these products. The data that we've generated, we've taken these products into Phase III, we've gotten some really good Phase II results that really showed the differentiation and the, what we think, is superiority of these products to the available products, make us very, very confident and comfortable that these could be very significant products. So most important for us is to find a partner who will continue or hopefully even accelerate the pace of development of these programs so that we get these programs approved and commercialized. And we believe that, that way, we will get the best return for us. So we have a double benefit by getting a partner to move quickly. One is we reduce our expenses, and two, we generate commercial revenues that much sooner. If it's the same partner, that's great. But most likely, for each of these programs, there is some overlap. But there are also some people who have interest only in one or the other. And we're not going to require that they take both. But if somebody wants both and it's the right partner and the right deal, of course, we're open to that.

Operator

Our next question comes from Stephen Brozak from WBB Securities.

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

Seems like most of the [indiscernible] questions have been asked. I do want to go into something that you started to talk about, specifically the clinicians, because obviously there's a lot of routine items. There's a lot of things that are in keeping with how they practice. But one of the things that I'm very, very curious about is, what are the clinicians saying as far as the patient receptivity and the contrast between what they're currently using and the benefits of Lymphoseek. How are the patients responding to that? And how are the clinicians benefiting from that? And I've got one more follow-up after that, and I'll jump back in.

Michael M. Goldberg

I'd give you 1 anecdote and it's just an anecdote. But when I was sitting down with that head of nuclear medicine at the teaching hospital, he's used -- occasionally, what he does as part of his practice is he does some lymphatic mapping, just general lymphatic mapping in certain patients with conditions that require it, where it requires an injection of the lymphatic mapping agent in the web between the toes. And basically, he says his biggest problem is getting the patients to come back after they've had the first dose when they were using sulfur colloid. And once he switched -- and the reason is the pain is so significant that the patient says they won't do it again. But once he's tried, and he's done this now a few times, Lymphoseek, the patient is absolutely transformed by saying, "Gee, this was practically painless," versus the excruciating pain. We've also heard the same thing in certain breast cancer patients where the patient, presurgery, gets this product that is just so painful that it brings tears to their eyes and cause all kinds of consternation for the physician. So even for that reason alone, many of the physicians and the nuclear medicine people are pushing Lymphoseek because of the -- just that one element. In fact, we've been approached by another leading academic, who wants to do a study on this, because the -- actually, the regulatory agencies are very interested in doing things or seeing things that can reduce pain in patient treatments. So that in and of itself, I think is fantastic. But additionally, we've just spoken to an oncologist whose view is they want to get the best data possible. And they need to make, with all these very expensive but some of them very powerful new cancer agents that are available, it's critically important that they get the right information, the best information to enable them to make the right decisions with respect to the types of toxic but efficacious products that are available. And they want to make sure that the right patients are getting the right therapy. And clearly, they believe that getting a product like Lymphoseek and getting the really much more precise data on the status of the lymphatic involvement is critical. And the feedback again, we're getting is, from a user perspective, from a data perspective and from a simple economic perspective, this product is superior from the physician's perspective to any available product that's being used off label today.

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

All right. So to paraphrase, what you're pretty much saying is that right now you've got just a function of time with the current practitioners that are going out there. And as they start to become familiar with the benefits of Lymphoseek, you start to see conversions. Now that brings me to the follow-up question and the next item. There are lots of other indications. There are lots of other markets for which this obviously is ideally suited versus what the competitors are, if they even existed, which in most cases, they don't. What size, what type of markets are you talking about for other indications which Lymphoseek is uniquely suited? And I'll jump back in.

Michael M. Goldberg

Well, thanks, Steve. If you look at our slide presentation that we've been using, we indicate that the worldwide oncology market, and this is in the -- not the entire world, but the world that actually pays for medication, we estimate that there are roughly 8 million surgical cases a year that would benefit from Lymphoseek. And this is not going out and creating new markets. I've really studied the literature over the last few months, and it's very clear to me that, around the world, physicians are using all sorts of off-label products to try to get at the lymphatic involvement. It's recommended, for example, by colorectal surgeons that they -- in all colorectal surgery, that you have to remove at least 12 lymph nodes in order to provide some guidance as to what the lymphatic involvement is. And that's not assuming you're identifying the sentinel node, it's just you want to get 12 lymph nodes. But colorectal tumors don't all drain from the same place. And the question is, how many potential tumor beds are there? So using an agent like Lymphoseek or any lymphatic agents, you may find lymph nodes but you may not find -- if it's moving quickly, you may not find all of the lymphatic drainage beds and you may not be sampling the right places. In gynecological surgery, they clearly demonstrated a need for a sentinel node mapping. But there really are no good agents, but people are using the best that they have. So I strongly believe that when we're talking about a $5 million to $6 million, $10-plus million for Lymphoseek sales in the U.S. at the end of this year, we're just scratching the surface. We're just at the very, very early stages. And our job is twofold, making sure that physicians at the hospitals that currently have Lymphoseek on formulary, know about it, so that if they're doing a lymphatic mapping procedure, and they want to use the best agents, they're aware that Lymphoseek is available; and two, obviously, expanding to many more hospitals where, if you're not using the appropriate lymphatic mapping agent, the best lymphatic mapping agent, you're not providing the best care. So we think that this will dramatically expand and the market will -- it takes time and it takes effort. And we've got, as we said, a 5 process -- a 5-step plan to get there. But we're seeing nice growth, we're seeing nice uptake by hospitals. And as we say, once we're in a hospital, we think there's a lot of room to increase within a hospital. And we believe once we've made progress within the hospital in a community, that helps us get all the other hospitals in the community. And we think we should see an acceleration of growth. But as I indicated, even at the $10-plus million that we're forecasting for Lymphoseek sales by year-end, that's just scratching the surface. And we're very confident that those numbers will grow and continue to grow and all of our effort and all of our objectives primarily are focused on achieving those increased sales.

Operator

Thank you. Our next question is from private investor Carl Aschinger.

Carl J. Aschinger

I'm really excited about the growth in Lymphoseek. That is something that we have all watched over many, many years, and it really feels great. Michael, if you could answer one question for me, then I want to ask Brent question, if that's possible. My question is on the CEO search, what is the name of the search firm that we are using?

Michael M. Goldberg

I don't know why -- I don't know if they care or don't care what -- that their name is disclosed. But I prefer to ask them first. Is there any specific reason you need to know that?

Carl J. Aschinger

The reason I'm asking is I get asked from time to time on different situations to suggest who's doing good jobs with searches. I was just going to add it to my book of wisdom here. I guess that's all -- if you want to respond to me sometime later, that's fine.

Michael M. Goldberg

Yes. Look, I'd say, it's a firm that I personally have used before and have wonderful guys with lots of experience in the space. Again, not having asked them if they mind, they probably prefer to have the advertising. I actually think that they've done a great job. But before I disclose it publicly, I'd rather just get their permission. And if I get their permission, I'd be happy to let you know.

Carl J. Aschinger

And Brent, if I could ask you a question. This is kind of a little, kind of like -- let me ask the question first. In Dublin and in Boston, we have people, headcount people. I'm curious to know what the headcount was at the end of 2013 for both areas and what we had at the end of the second quarter for both areas and what our projections are for the end of the fourth quarter for both locations. Is that something that you have on the top of your head?

Brent L. Larson

Well, the specific numbers, Carl, no. And if this is relevant, I guess I'll let Michael speak to you. I think our projections right now certainly are for additional cost reductions during the year. But I don't think we're projecting any additional headcount reductions as a part of that given the Manocept efforts and some of the other things and some of the other funding and grants and so forth that we're expecting. So I certainly don't expect any further headcount. I think that's probably the most important message to get out there. Secondarily, I don't think the ratio of -- certainly at the end of the year versus the end of the second quarter. Dublin probably felt a little bit more of the pensions, of their cost reductions, just because of the nature of the program reductions that we implemented. But I don't -- again, I don't see any further cuts, and certainly you are aware that there is some local concern on that. But I think from an overall investment perspective, I think we're managing the costs and taking the program costs as effectively as we can.

Michael M. Goldberg

And the only thing that I would add to that, Carl, is that obviously, with the partnering of the neuro products, there could be some expenses that currently reside at Navidea that will be taken up by the partner. We have some great people working on those projects. They're not working 100% on those programs. But part of any partnership would potentially be that they would pick up some of the cost. And it's very important that we maintain the team on those products because I think any prospective partner would want to get this Phase III in a turnkey situation or position so that they can continue to and hopefully, as I said, accelerate the programs so we can get quicker commercialization. So there'll be some people and there'll be some overlap, but I think that's an asset, that's a valuable asset that's part of the actual agents that we're out-licensing is our ability to move these products through the clinical and regulatory process. So I think as we get further down in the negotiations, we'll have a better sense of how we reallocate those expenses through both partnerships and to the Lymphoseek programs.

Carl J. Aschinger

Well, I applaud you for that, for great thinking in that area. I hadn't really thought about it in those terms, but it does make sense.

Operator

Thank you. We have no further questions at this time.

Michael M. Goldberg

So I guess I want to thank all of you for your participation in this call. As I hope you realize, Navidea is really just at the tip of its -- what we hope is a relatively rapid expansion as we expand Lymphoseek sales. We believe that this is a tremendous potential. I believe we've proven unequivocally that this is an agent that is of interest commercially and has significant medical promise. The label expansion that we got and the label expansion that we're expecting to get in October, on the October 16 PDUFA date, we think will help accelerate sales. We're very, very pleased with the constant and what we think is impressive uptake of this product in a very sort of unaware market, unaware in terms of how to launch new products and how to absorb new products. We think our partner, Cardinal, and our own sales efforts are demonstrating real progress. As you see, the number of institutions that are signing up is increasing. And we believe that as we make head roads and inroads into new cities and get new institutions involved and new leading academic centers involved, that will accelerate in that community the use of this product more broadly. So we think we've got the right pieces in place. We are looking for them, and we believe we've identified great candidates to really put a strong marketing and sales effort going forward. We expect, from a regulatory perspective, to get multiple national, international approvals. And we'll have the ability to generate data from use of this product in new indications as physicians become aware of and then familiar with using this product. And we're very confident, based on our experience, that the product will essentially sell itself as physicians get comfortable using it. And finally, with the addition of the rheumatoid arthritis program and our first foray into therapeutics, it generates tremendous excitement in the industry. There are a lot of very, very exciting opportunities for the ability to target macrophages, which are critical in autoimmune diseases, a variety of inflammatory conditions, infectious disease indications, cardiovascular indications. Having the ability to have that precise targeting is critically important. And we believe that there'll be a lot, a lot of potential commercial opportunities that we'll be able to discuss with you in upcoming calls as this program gets better penetrated into the minds of potential users. So we thank you very much, and we look forward to updating you in the near term with progress we're making at Navidea. Thank you very much.

Operator

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

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