Navidea Biopharmaceuticals (NAVB) Q2 2016 Results - Earnings Call Transcript

Navidea Biopharmaceuticals, Inc. (NYSEMKT:NAVB)

Q2 2016 Earnings Conference Call

August 4, 2016 8:30 AM ET

Executives

Sharon Correia - Senior Director of Corporate Communications

Jed Latkin - Interim Chief Operating Officer and Chief Financial Officer

Thomas Klima - Senior Vice President and Chief Commercial Officer

Michael Goldberg - Chairman

Analysts

Brian Brennan - National Securities Corporation

Operator

Welcome to Navidea Biopharmaceuticals’ Second Quarter 2016 Earnings Conference Call. My name is Tiara and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Following Navidea’s remarks, we will conduct a short question-and-answer session.

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

Sharon Correia

Thank you, Tiara. Hello, everyone, and thank you for joining us today. I’m Sharon Correia, and I’m the Senior Director of Corporate Communications for Navidea. On today’s call are Dr. Michael Goldberg, Navidea’s Chairman of the Board; Tom Klima, Chief Commercial Officer; and Jed Latkin, Interim Chief Operating Officer and Chief Financial Officer.

At the end of the call, we’ll 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, our ability to repay our debt, the outcome of the CRG litigation, 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’s products, clinical and regulatory pathways, the impact of competitive products and pricing, patents or other intellectual property 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 Jed Latkin, Interim Chief Operating Officer and Chief Financial Officer.

Jed Latkin

Thank you, Sharon, and good morning, everyone and thank you for participating in this morning’s conference call. Before I hand the call over to Tom Klima, our Chief Commercial Officer, to go through the sales performance in the second quarter and how we are measuring up on the execution of our Lymphoseek commercial strategy, I want to spend a few minutes to review and update you on the changes that we spoke of in Q1 and also recent events regarding our litigation with CRG.

I’d like to start by commenting on my first few months on the job. I’m truly amazed at several things. First off, the dedication of the staff that toil day-in and day-out and continue to work hard, despite the continual distraction caused by the ongoing litigation with CRG. Secondly, the attentive and committed shareholders, many of whom I speak with on a weekly and sometimes daily basis. And finally, our partners, patients and clinical staff involved with all the ongoing trial across the country, who continue to produce amazing results that validate how important Lymphoseek and its successor product are and will be to the market.

The quarter represented one of continued growth for Navidea. Penetration across the country of our products continues, albeit at slower pace than expected. As we discussed in previous call, and Tom will elaborate further, when he discusses with sales efforts, we have focused our growth effort on larger hospital chains and gaining penetration takes time.

We have had significant sales into those large institutions, and while we anticipate signing long-term contracts there are still hurdles that we need to overcome. For example, when discussing pricing with a large hospital chain, we need not only come to an agreement with a hospital, but also we need our partner involved in discussions as well.

This then leads to a multiple level discussion, not just on price, but on guaranteed volume. The best part about this tough is that once an agreement is signed, we will have guaranteed volume level that will make for more accurate future forecasting.

On the clinical side, there have been many exciting developments and while they will be elaborated later on in the call by Dr. Goldberg, I just wanted to address a few of them now, as these represent the future of Navidea and the reason why most of you invest in the company in the first place.

Number one, we finally received WIRB and IRB approval for the RA trial. The first patients are ready to be dosed and we will look to receive the images on a real-time basis. Due to the delay in the original IRB approval and our aim to garner data at a faster clip, we are opening up the trial to a second site in LA and have identified patients to fully enroll the trial.

Two, the cardiovascular trial reached full enrollment, and we already have promising data, which has been prepared for publication. Three, as this is a very topical subject, we are aggressively pursuing a demonstration of utility of our targeted therapeutic for Zika virus.

We are developing a plan to discover if our targeted molecule can interfere with virus infiltration, replication and kill infected cells. Cell culture work has begun with promising initial results. Additional work is in progress, we look forward to reporting results as it become available.

Four, we continue with our progress on the cervical trial, which now has 10 patients enrolled and we’ve had some very positive data up to this point. Five, we have received encouraging data on leishmaniasis trial and anticipate moving that into the therapeutic setting. And sixth, we have observed very positive data on the Macrophage Therapeutic NASH, which Michael will discuss in more detail later on in the call.

As discussed on the previous quarterly call, there are few changes to the board in Q1. And I would like to report that the newly constituted board has been much more proactive and engaged. The breadth and depth of scientific knowledge of the board has been a real boon to Navidea and has aided it, as we strive to develop our innovative immuno targeting technology and become a leading biotech company.

This past several months has unfortunately also witnessed a heating up of the litigation between CRG and the company, and has now involved two fronts, as we have enforced to address their unsubstantiated claim in the Houston Court and repel an attempt to seize our revenues from our sole-distributor Cardinal Health.

In Houston, we appeared in court and attempted mediation. Unfortunately, CRG is recalcitrant, despite numerous equitable offers from our side, resulted in no outcome from the mediation. And in another turn of events, the original Judge recused herself from the case on Friday. A new Judge has been appointed and we expect have a new schedule soon.

In Ohio, CRG attempted to seize our revenues. Luckily, Cardinal went to the courthouse in Ohio to file an interpleader, which is a civil procedure that allows a plaintiff like Cardinal to initiate a lawsuit in order to compel two or more other parties to litigate a dispute. This interpleader action originates when the plaintiff holds property on behalf of another, but does not know to whom the property should be transferred.

We received a temporary restraining order from the Ohio Court, and are now receiving our Lymphoseek revenues once again. It is also important to note that once we’ve reached $1 million bond level with the Court, we will be receiving 100% of revenues with the $1 remaining in escrow.

We anticipate that we will receive the escrow funds back once we prevail on the Houston Court. And we have stated previously, once refinanced within the next several quarters, we intend to vigorously pursue our numerous or suited counterclaims against CRG.

On the refinancing front, we continue to have discussions with multiple investors and industry participants and remain optimistic that we will be able to refinance the debt. It is important to remember that we do not believe that we are obligated to refinance this loan at this point. Therefore, we will not enter into any arrangement that is not attractive to Navidea.

That being said, we believe that given our significantly enhanced financial position and continually improving financial performance, we are well-positioned to refinance this debt on attractive term.

Moving forward, the importance to the organization of staying focus and not getting distracted by the sideshow of the CRG shenanigan is our number one goal. Every day in Navidea, we strive to achieve amazing breakthroughs in diagnostic and therapeutic science. And we will not lose sight of the end game.

I would like to turn the call over to Tom Klima now, to provide our Lymphoseek commercial update. Tom?

Thomas Klima

Hey, good morning and thank you, Jed. Good morning, everyone and thank you for joining the call today. Over the last year-and-a-half, we have successfully transformed our business by overhauling Navidea’s commercial strategy.

In 2015, we recruited hired, trained and deployed 10 Navidea sales-reps to target the broader oncology treatment team ultimately reaching to surgical oncology. We also completed updated branding and messaging to leverage our broader label into more effectively reach our new target audience.

We broadened our customer access to important clinical data and we’ve implemented innovative access programs to help customers gain experience with Lymphoseek.

As we came into 2016, we recognized our efforts were starting to pay off and we continue to make our financial strategy, including our target, how we approach the, quote unquote, lumpy selling process and we continue to evolve the message to our customers.

Importantly, we also expanded our sales force again from 10 to 14 territories and to 16 sales professionals. This allows us to both targets more new accounts and also allows us to spend more time trying to increase utilization in existing accounts.

We were also faced with the expiration of our pass-through code in the changing reimbursement landscape, which we have successfully navigated. Today, the sales force has already penetrated more than 20% of the targeted hospital with high to medium and we have been able to consistently maintain high pre-order rates. We have made a lot of progress, but I will tell you, significant opportunities still exists moving forward.

As I have mentioned in previous calls it is clear that the sales cycle is on average closer to six months, because physician tablets are very entrenched and the hospital sales process is very complex or what we’re calling, quote unquote, lump. In a given account there are multiple decision-makers which include nuclear medicine, radiology, surgery and administrators that all are going to play a key role in making a decision or in some cases resisting change.

We also learned that our strategy to communicate directly with these decision makers as a treatment team has a broader impact. But again, the process is lengthy and can be slow. The price of Lymphoseek has also not had a significant negative impact, but it can add to the lengthy selling process.

To help increase the rate of adoption and penetration we have expanded our sales force and are working to focus their efforts. And as I previously mentioned, this is not only opening up new territories and new accounts for us, and it gives us greater access to key customers, but it also allows us to increase our call frequency with existing accounts.

Our expanded sales force is focused on three things: number one, delivering the right message, in that a promotional message that reinforces the clinical value message and the business value proposition of Lymphoseek; number two, they continue to focus on opening new accounts, specifically targeting higher opportunity accounts; and number three, they’re focused on increasing utilization in existing accounts where Lymphoseek has been tried, but has not been widely adopted.

The expansion of our sales force also allow us to work on additional access programs, which will be aimed at increasing rate of adoption and full conversion to Lymphoseek across our entire business. These programs include existing programs, such as the Lymphoseek trial voucher program and the Vial Consignment program, which we are continuing to see a positive impact from.

We are also making great progress with new innovative programs which I am extremely excited about. These initiatives are aimed at the largest opportunity cancer centers and multi-hospital systems, which we expect to have a significant impact on our business in the second-half of this year and leading into 2017.

We are also increasing our promotional activity through non-sales force efforts, including having a presence at targeted national and regional medical conventions where we have access to many of our key customers; we are expanding our physician peer-to-peer educational and promotional efforts in the second-half of this year and leading into 2017; and we will continue to work with advocacy groups to expand awareness of Lymphoseek among patients.

Let me now give you a brief update on Europe.

Our partner for commercialization in Europe, Norgine is still reporting and the launch of Lymphoseek is expected to begin in Q4 2016. European commercialization for the surgical market includes sentinel lymph node biopsy for breast cancer, melanoma and oral cavity cancer.

Norgine has also been collaboratively spearheading market-access activities and they have the infrastructure resources and the expertise to effectively launch Lymphoseek throughout Europe.

We have previously noted the need to tailor the Lymphoseek product packaging for the European market prior to commercialization in order to better support the European distribution model and to achieve premium pricing for Lymphoseek throughout each target country. To attain this we have been working diligently over the last year on the development of the single dose file adapted to this market.

The single dose file required a technical qualification at a European facility and pan-EU approval for this activity. Approval for the single dose file by the EMA is expected in Q3 2016, which coincides with the commercial launch of Lymphoseek planned for Q4. These efforts could also eventually support the distribution of cold kits for Lymphoseek in the U.S. in the future.

Finally, I would like to update you on our efforts to support expansion to the market of Lymphoseek’s existing U.S. label. We remain enabling medical adaption of Lymphoseek to the broader imaging market a priority to unlock future value for Lymphoseek brand. We’ve previously reported conducting post marketing trials to optimize surgical protocols and along with our surgeon investigator’s self-generated guiding principles for Lymphoseek utilization in a spectrum of solid tumors.

The goal of the study is to support and accelerate the adoption of lymphatic mapping and SLNB using Lymphoseek this includes lymphatic mapping with an initial further assessment of Kaposi sarcoma colorectal, cervical, anal and endometrial cancers in which the American Cancer Society 2016 report notes that there are approximately 227 newly diagnosed cases per year combined.

This market opportunity in the U.S. alone for applicable tumor types is greater than 800,000 new cases per year, which far exceeds that of just the disease incidents for breast cancer, melanoma and oral cancer surgical market at the most recent ACS 2016 cancer facts and figures reports.

As a brief update on our activities our pediatric study is open and enrolling patients in four or five sites. The cervical study is now open in four sites and has enrolled 10 patients to-date. The investigator initiated endometrial trials also open in enrolling patients and we have received IRB approval for anal cancer study and we expect to begin enrollment in the anorectal trial in the second-half of this year.

Nearly, all of our related studies are funded by NIH grants, substantially covering cost of what could otherwise be a cost in endeavor.

In summary, we’re seeing a positive impact from the new strategy and from our commercial efforts. And we are rapidly building a strong foundation for future commercial success. With our reorganization plans and growing our sales force in number of territories, we did see a minor destruction that was anticipated in Q2 and also in light of very-public external challenges in the ongoing situational CRG we have seen some distraction in our core focus. And we have experienced sales force turn over and recruiting into Navidea has been more challenging.

Our team will remain dedicate to expanding and growing Lymphoseek key accounts bringing on large integrated health systems and hospitals and expanding utilization in existing account. Keeping the patient and the customer at the center of everything we do ultimately creates value for everyone in the Navidea community.

I would now like to turn the call to Mike.

Michael Goldberg

Thank you Tom. Now, I would like to take a few minutes providing updates on our Manocept immunodiagnostic and immunotherapeutic programs. Activated Macrophage targeting ability of the Manocept platform is a key to our immunodiagnostic pipeline and a broad range of disease areas such as rheumatoid arthritis, cardiovascular disease and Kaposi’s Sarcoma.

Our immunodiagnostic programs will enable us to further expand the Lymphoseek label and open new market opportunities in much larger patient populations. On our last call, I spent considerable time discussing the reasoning behind our focus in our RA rheumatoid arthritis, including the unmet medical need and a market analysis.

I’ll now go through it briefly again. There are approximately 10 million patients in economically advantage countries alone, diagnose of RA of which approximately half are misdiagnosed due in large part to a lack of an accurate and cost-effective means, early detection and differential diagnosis.

We believe from a primary market research that early detection alone in the U.S. could up to 300,000 procedures per year and these monitoring could add up to another 700,000 procedures per year. Our strategy is to focus on three goals for the use of Lymphoseek and RA: one, reliable diagnosis of RA by imaging; two, early differential diagnosis of RA; and three, use and monitoring patient response to RA treatments.

Based on our preliminary work, we believe we can achieve all three diagnostic and disease managing elements with Lymphoseek. As you know, we receive the grant to study the use of our product in rheumatoid arthritis from the NIH, NIADDK. We had previously received the funding for part one of the grant. And just this past week we’re notified that we are awarded part 2 funding of $1.1 million to help support both the subcutaneous trial, as well as the IV clinical trial.

We received the institutional review board or IRB approval of the RA subcutaneous administration protocol from UCSF San Francisco General Hospital, as well as IRB approval from the western institutional review board or WIRB, which is an independent clinical trial review board is close to provide human subject protection in research for many institutions.

This will allow us to begin subcutaneous dosing of Lymphoseek in the small Phase 1/2 of up to 18 RA patients in control. This study is posted on ClinicalTrials.gov for review and for following the progress. Well, the numbers in the study are small. We expect that there will be a lot of valuable data from every patient. Since we know that 14 of the 18 patients in this study are scheduled to be RA positive and we know which joints are clinically involved. We should be up to get a very definitive result, especially as we will image both positive joints and joints with less to no clinical findings in the same patients.

We expect results in this study will guide design and execution of our expected Phase 2 of up to 50 patients utilizing both subcu and IV administration find for the second half of this year. We’ve received work protocol to go for the second largest study as well. Our plans remain to initiate definitive Phase 3 studies in RA next year has regulatory discussions from it.

The importance of these results cannot be understated. We expect this application will set the stage for many other studies to expand a number of indications for Lymphoseek and will be instrumental into churn grants for their study, just like we’ve seen with Lymphoseek in cancer and RA to date.

As a quick update to probably remember that I spoke about the results to date of a pilot study of Lymphoseek to detect vulnerable plaque, we provide strong encouragement to the utility of Lymphoseek in imaging and detecting vulnerable plaque. That study conducted with Massachusetts General Hospital is now complete including an additional cohort of healthy subjects provides a complete data set of the imaging result. These results are currently being drafted into manuscripts for submission into several publications expected later this year.

We also continue to anticipate to start of an additional Kaposi Sarcoma study with IV-administered Lymphoseek in the second half of this year, supported as well by grants in the National Cancer Institute.

Moving on to Macrophage Therapeutics, and our Manocept immunotherapeutic platform development programs. We are successfully completed in eight week preclinical NASH study in arthritis NASH model with a Manocept anti-inflammatory targeted therapeutics product. MT2002 with initial results reporting clear statistically significant anti-inflammatory activity with no apparent significant clinical science.

We completed an animal study in an asthma model that measured the ability of MT2002 to decrease all three markers of pro-inflammatory activity secreted by disease causing macrophages that successfully demonstrates an anti-inflammatory effect.

We completed dosing in an animal model of NASH are nonalcoholic steatohepatitis. According to the side that conducted the study, we have evaluated about 350 agents in the NASH model on behalf of academic and corporate entities, and they claim therefore have more experience in the field and anyone else in the world. That is why we went with them.

Their conclusion from the results, they generate with our material in the animals, because our compound was the most effective agent they ever tested. Only one other agent was comparable. It is important to recognize that we achieved this remarkable result with iteration of our product, so we were successful even though we’re reducing a non-optimization and the non-optimized dosing regimen.

Also it was very important demonstrate that we achieve the efficacy goal without any evidence of damage to the non-involve resident liver macrophages called Kupffer cells.

All previous attempts target macrophages using other technologies by proven to be limited by the fact that that approaches pursued put in discriminate between activated or disease causing macrophages and inactivated macrophages. Kupffer cells are liver-resident macrophages make up to about 30% of the liver cells. So even in disease, like, NASH, which is a disease resulting from inflammation caused by macrophages that are activated by ingesting excess fat that they cannot adequately clear. One must be careful to only target the small percentage of sales that are causing disease and not damage to the rest of the organ or other organs that also contains large populations or non-disease causing macrophages.

We carefully analyze the livers of these animals and we thought no evidence of clinical or histopathological damage. This is a promising result as we continue to develop the scientific data necessary to attract partners to help in the development and ultimate commercialization of this technology. Based on these findings the outside investors and MC have agreed to fund a larger and longer term study to advance the development of the dataset in NASH to improve the likelihood and terms of a potential partnership for this significant market opportunity.

The completed dosing in neuro-inflammation model, and this study we confirmed that our anti-inflammatory construct very effectively crosses the blood-brain barrier. We have previously demonstrate that Lymphoseek can cross the blood-brain barrier in units. The MT2000 class molecules differs from Lymphoseek and that has a number of linker molecules added, which we attach a number of molecules of our therapeutic agent.

Therefore, the molecular weight and other physical chemical properties are very different from Lymphoseek. In addition, Lymphoseek’s ability to cross the blood-brain barrier in humans was demonstrated by visualizing the Technetium-99 isotope. So it’s hard to gauge the efficiency of a transport across the blood-brain barrier.

In this study, we dose an equal amount of free anti-inflammatory agent plus conjugated agent to two groups of animals. We saw significantly greater activity with our material as compared to the free agents on its own, suggesting that we significantly enhance the percentage of a dose that causes the blood-brain barrier as to character the free drug.

This is important for a number of reasons. One, it says the addition of the drug conjugate to the targeting back bone does not eliminate the ability to cross the blood-brain barrier. Two, due to the inefficiency in crossing the blood-brain barrier many drugs cannot find a safe dose that delivers an effective dose across the barrier that does not cause systemic facticity as a result. Three, due to the strong anti-inflammatory activity of this particular agent and those with average targeted delivery system that has very significant toxicity due to the broad off-target effects.

By targeting this potent anti-inflammatory disease causing cells, we can create potentially, we targeted the safer product. As a result of this ability to cross the blood-brain barrier, one can recently expect that we can achieve therapeutic levels in the central nervous system, while reducing systemic exposure which would reduce side effects.

This is why we continue to explore the use of our system to treat CNF diseases that has activated macrophages as an important component of disease and require crossing the blood-brain barrier to be effective. These include Alzheimer’s, multiple sclerosis, Parkinson’s, ALF, retinal diseases like wet and even dry macular degeneration and even stroke.

We have also completed two studies evaluating the performance of our compound from the MT1000 class of compounds designed to deplete tumor associated macrophages or TAMs in a number of different cancer models. In both models, we saw an immediate fact on the rate of tumor growth and the slower grown tumor we saw that the inhibition in tumor growth rate remained throughout the duration of the study.

We are now evaluating histology of the tumor to determine what effect we had on the tumor itself. We will look to explore whether we replace cancer cells with inflammatory cells as we open the tumor micro environment to the animals on immune system or whether replaced with fluid as it may have caused damage to the blood supply as a result of reduction in VEG-F reduction resulting from the M2 macrophage depletion.

We won’t know what effect we had until we fully assess the histology. The next step which is already underway is to combine our TAM depleting agent with an anti-cancer agent to demonstrate the core concept which is MC technology removes critical defenses put up by the cancer but in and itself has no direct anti-cancer activity.

We hope to demonstrate that we can make the existing therapies more effective. TAM depletion has made standard chemotherapy more effective to same as radiation and immunotherapy. Stay tuned, we expect results on the next phase in the not too distant future.

So to summarize our MT data so far, we have created two classes of therapeutic molecules that very importantly target a receptor found almost exclusively on activated macrophages. We have shown that we can take advantage of the fact that the receptor internalizes when bound to a ligand so we can get rapid delivery into the cells and then the linker we use releases the drug into the cell.

We see the desired clinical effect from dosing in whole live animals as you would expect based on cell culture data. Regardless of disease targeted, we see the expected results based on the mechanism of targeting activated or disease causing macrophages. Cancer, autoimmune disease, lipid storage diseases and viral diseases have all been targeted with the same agent dosed in an unoptimized fashion and yet we saw meaningful activity in every study.

We have seen positive Lymphoseek performance in cardiovascular disease imaging. We are in the process of generating similar data in RA. Based on the therapeutic results seem to date, we are very, very confident that if we can image a disease, we can treat the disease. That is if we can image emerging arterial plaque, which is a massive diagnostic market in its own, we believe we can treat emerging arterial plaque, thus completely bending the curve on the progression of cardiovascular disease.

Others have shown that targeting foam cells which are arterial macrophages that have absorbed too much fat and cholesterol, results in clearing the atherosclerotic plaque. Their problem was in order to achieve that result one has to nonspecifically knockout all macrophages, so they would knock-out key components of the liver spleen and other non-involved organs, organs which contain non-disease closing macrophages.

We believe Phase 1 data we will be publishing along with our Mass General collaborators. And the results we have seen to-date with our targeted therapeutics, that our technology has potential to achieve the necessary selectivity to be a viable option.

A foam cell in an artery, a microbial cell in Alzheimer’s, a balloon cell in NASH and HIV containing cell in Kaposi Sarcoma, all disease involved focal areas, look exactly the small to our agents.

Finally, as mentioned by Jed, because of topical, I want to add Zika and Dengue containing macrophages to our list of targets. On this topic, we have been approached to explore the utility of our agents in these diseases with the help of Tower-ZB [ph] we have been elevated to access the best models in the country. As Jed already mentioned, we have begun study design and testing of these molecules in these indications.

Before, I hand the call back to Jed, I’d just like to highlight one of the potential indication, I already spoke about, which represent a series unmet medical need. They had significant market size and urgent need for therapeutic intervention. Going forward, as we continue to update the market on progress that macrophage therapeutics, our second indications are highlight in each call.

I’d like to speak briefly about recent report in Newsweek about nonalcoholic steatohepatitis for NASH. As many as 25 million of those in the United States suffer from some form of NASH and most don’t know they have a disease. According to expert side in the article, it is under diagnosed primarily, because primary care providers are largely unaware of the disease and because confirming it requires an invasive biopsy. Recent study looking at the prevalence disease published in gastroenterology, 400 volunteers were look that, who didn’t know that they had NASH, and had no reason to suspect they had NASH.

And after careful analysis 12% ended up with the positive diagnosis, if this holds true more broadly, this will make the disease more prevalent in diabetes. Typically symptoms in NASH do not appear until patients are in the edge of liver failure and fighting for their life. According to liver experts, NASH have massive impacts on our healthcare system and healthcare cost, with becoming on the leading prices of hospital admission.

By 2020, it’s expected to equip Hepatitis C as the leading reason for liver transplant. There is currently no treatment or cure for NASH, more than a dozen pharmaceutical and biotech companies aren’t clinical development for this indication.

According to the Newsweek article analysts predict that the market for NASH drug could reach $35 billion or more by 2025. I know I have said this before but these are all early stage studies designed to review of the potential of the macrophage therapeutic agents. Much more remains to be done, not only to identify the candidate optimize our agents and dosing, but also the fundamental preclinical studies that will be required by the FDA to move these programs forward into clinical trial. That is why we are continued to invest this baseline transitional studies in an effort to attract both corporate partners and continued funding including non-diluted brand, so we can advance this program as expeditiously as possible.

I’d now like to turn the call back to Jed Latkin to provide an overview of our Q2 financial results.

Jed Latkin

Thanks, Mike. Before I continue I want to give special thanks to my finance team who work 24-hours a day to get everything ready and filed on time. Without them, we really couldn’t be continuing forward.

I’ll now speak to the second quarter 2016 results, second quarter total revenue was $5.4 million compared to $2.9 million in the second quarter of last year, which denotes an 88% increase year-over-year. Total Q2 revenues include Lymphoseek product revenues of $4.2 million compared to $2 million in the second quarter of last year, a 116% increase. This demonstrates the continued update of the product across the country as more and more surgeons realize the benefit of using Lymphoseek, the only FDA proved diagnostic for sentinel lymph node detection.

Other Q2 revenue included $1.2 million in grant licensing and other revenue compared to $900,000 in 2015. For the six months ended June 30, 2016, Navidea’s total revenue was $10.1 million compared to $5 million in the same period last year, and increase of 103% year-to-date. Lymphoseek product revenues were $8 million compared to $3.8 million in the first half of last year, an increase of 111% year-over-year. The primary driver of this increase is a growth of Lymphoseek sales revenue. Gross margin of Lymphoseek product sale grew to 87% from the second quarter of 2016, a 4% improvement year-over-year primarily due to inventory written offs in 2015 related to our production issue.

We have detailed the expenses in the earnings release, but why like to draw your attention into the reduction in total operating expenses from $6.3 million in the second quarter of last year to $5.4 million in the second quarter of this year and from $15.8 million in the first-half of last year down to $12.2 million in the first half of this year.

Of equal importance, our net loss from operations was only 580,000 for the quarter ended June 30, 2016 and $3.1 million for the six months ended June 30, 2016. A decrease of 85% and 73% compared to the respective periods in 2015. This decrease in net loss is due to growing revenues and importantly, reduced operating expenses which reflect additional operating efficiencies that we have implemented.

Here, it is important to note that on a pure operational basis, the company add a positive cash flow. To clarify if the company did not have the additional legal expenses incurred, due to the CRG litigation we would be substantially cash flow positive. Our net loss attributable to common shareholders was $6.7 million or $0.04 per share for the quarter ended June 30, 2016 and $10.4 million or $0.07 a share for the six months ended June 30, 2016.

Net loss is attributed - attributable to common shareholders include fees paid to CRG, the interest expense on our outstanding debt, as well as significant non-cash charges. Without the $2.9 million extraordinary expense paid to CRG the net loss would have been reduced to $3.8 million or $0.02 a share.

For the six months ended June 30, 2016 net loss attributable to common shareholders included $7.2 million in interest, debt-related fees and changes in the fair value of financial instruments. We ended the quarter with $1.7 million in cash, $501,000 of which was restricted related to the CRG debt.

To provide context for financial performance, growth in Lymphoseek sales combined with funding from brands and our continued efforts to contain cost are contributed to an ongoing trend of reduction in our quarterly cash burn. This unfortunately has been counterbalanced by the increasing legal cost related to our ongoing battle with CRG.

We are very cost-conscious of the legal side and continue to push for fee reductions as well as cost caps in order to contain the legal bill. On the sales side, while we are experiencing some turnovers, we will be proactive and aggressive in filling the gap, engaging persuasive negotiations with large hospital chains to obtain chain-wide Lymphoseek utilization and continued dialogue with Cardinal Health as we look to the negotiation for a new contract in 2018.

We will also continue our broad cost reduction measures for 2016 as we streamline operation and focus to sales efforts on a highest return region. We are empowering our management team and staff to build a corporate culture for the organization to accomplish more with less, as we look to develop the next immunodiagnostic immunotherapeutic product candidate.

These are trend that we fully expect to continue and we look forward to updating you again on our third quarter call. We believe that these measures combined with the continued growth of Lymphoseek should lead us on a clear path to sustain quarterly operational cash flow breakeven in the second half of this year.

To conclude, the company remains laser focused on execution based on the sales side on the clinical side, every member of this organization is focused on the ultimate goal of continuing to make Navidea a world-class biotech company.

Thank you. And I would now like to open the floor to Q&A. Operator, can we please open the call to Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from the line of Brian Brennan from National Securities. Your line is open.

Brian Brennan

Thank you, guys, for taking my question here. Dr. Goldberg, you had mentioned I think in one of your updates about you had given some of our material for a battery of tests to a company that we’re going to undertake, I guess, our material for further internal testing. Has that progressed to a point where may be or in near future there is potential for some partnership that you had originally discussed about.

Michael Goldberg

Sure, thanks, Brian. Yes, so we have given our materials to at least one company right now. That company has actually shared at the recent bio-meetings their initial findings which were, to use their terms, very, very encouraging. They are completing additional work as we speak. I can’t tell you with any specificity whether or not the follow-on work will be as good as the previous work and whether or not that would lead to a partnership.

But every indication we have is that not only are they excited, but the efforts we made at the bio-meeting this year to offer other companies the option of testing our material, now that we’ve been able to produce it at reasonable levels and reproducibly with good quality control et cetera, that there are other companies that have expressed significant interest in doing the same thing.

Although, now that we have generated our own data, there are other companies that we’re talking with that have an interest potentially without having to test the material directly themself. So that’s a very active area and as I indicated in my prepared remarks it’s an area that we will pursue, because there are so many applications for this technologies and these studies, are expensive and time-consuming.

And the amount of work it takes to takes these to commercial acceptability is beyond our capability and beyond our capabilities. If we went out with Macrophage and created a new entity and raised money for it, is a very, very expensive program. So we believe that the proper approach is to partner. We are excited by the progress we’re making, both with that company as well as other companies. And partnership is absolutely our top priority with the whole therapeutic side of the business.

Brian Brennan

Excellent, just one follow-up to whatever extent you guys can comment. Seeing that the hearing has been passed on to another judge, do we have any sense of that timeline, maybe through your attorneys whether it’s going to be this quarter, this month? I think the suffocation of CRG is clearly evident in the stock price. And we were hoping to get some sort of decision last week. But now we’re sort of, I guess, going back to square one with this new judge.

Can you give us any direction if at all on maybe when that hearing might take place?

Michael Goldberg

We’re not going to - as I’m sure you can understand we can’t really get too involved in discussing or projecting anything with respect to the litigation, except to say that based on what Jed had indicated with respect to our ability to access the funds from our sole source of revenues of Cardinal, that success and the basis by which we believe that not only have we not violated any of the covenants, the agreements. But because we now have an opportunity and had an opportunity to look back, we think we found some significant, significant issues with respect to how CRG behaved. That predated any of their alleged breaches on our behalf.

So we believe that we are positioning ourselves very well for the ultimate trial on that. And as Jed indicated, we would expect by the time that trial comes around we will have refinanced this debt and CRG will no longer be a thorn in our side, but ultimately could be a source of significant revenue for us. But that will be sometime well into the future, because unfortunately the wheels of justice grinds slowly.

And our job and objective, as Jed indicated, is to manage this business to develop great diagnostics and therapeutics. And we’ll work our lawyers to handle what we believe are right. But that’s not our focus; our focus is on the core business. And we think right now we are well-positioned to do that. And hopefully whenever the Houston Court’s get around to reviewing this matter; they will concur and allow things to stay as they are.

And at that point, we think we’re in a very, very strong position to deliver on the promise of our technology. And ultimately to get the judgment that we expect, which would be a payment by CRG to us for damages that they’ve caused.

Brian Brennan

Great, thanks for the update, Mike.

Operator

Thank you. And at this time, I’m showing no further questions in the queue. I would like to turn the call back over to Michael Goldberg for closing remarks.

Michael Goldberg

Well, thank you. I appreciate, I know everyone wants to get on to the work they have today. We appreciate taking the time today. We will be having our annual meeting next Thursday in New Jersey at 9:00 AM, August 11. And as indicated we have some very exciting on the way, which we would look to update the market about the results of those in advance over the next quarterly conference call. So thank you all and have a great day.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a great day.

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