I have seen a lot of appreciation this year in my stock portfolio because of Navidea Biopharmaceuticals (NYSEMKT:NAVB). I have been watching the Company since before its name change from Neoprobe (NEOP), and thought about investing during last summer. I read the subsequent articles by a certain big money fund guy, along with his public short position and unprecedented 'citizens petition' to the FDA to deny the Company's application for approval of its lead product candidate, Lymphoseek. The timing of these articles and short position was particularly interesting, as it was around the same time that Neoprobe was on the list to join the Russell and everything else I had heard had been positive. While many felt that the Citizen's Petition was an underhanded and odious practice, and long-time shareholders were angry and vocal, these actions appear to have given many an opportunity to buy at a much lower entry point into a stock that had been trading at over $4 just over a year ago.
Other products in Navidea Biopharmaceuticals' pipeline besides Lymphoseek include a radiopharmaceutical candidate for imaging and evaluation of patients with signs or symptoms of Alzheimer's Disease named AZD4694. In many ways, it reminds me of Lymphoseek, the way it binds to parts of the disease to show the presence and location of deposits of amyloid plaque in the brain. Greater sensitivity and contrast may allow detection of smaller amounts of amyloid and may enable earlier detection of the disease. A third indication that NAVB is developing is a monoclonal antibody targeting agent called RIGScan. The idea is that the targeting agent is injected before surgery, and the RIGScan targeting agent will bind specifically to the cancer cell antigens or receptors. The affected tissue would then be detected using a gamma probe, directing the surgeon to the targeted tissue for removal. These are promising candidates, but as I have mentioned before, much of Navidea's story and possible success centers around their lead product candidate, Lymphoseek.
NAVB reached a low of $1.62 in August, following the article, public short position and Citizen's Petition to the FDA to deny approval for Lymphoseek. There were no announcements of dilutive financing or stock issued at a discount that I am aware of in that time period, and the Phase III trial that demonstrated favorable results led me to believe that the precipitous drop left Neoprobe stock grossly undervalued. Examining Lymphoseek and sulfur colloid data in breast cancer patients show that while both are very accurate, Lymphoseek is over 5% more accurate. That may not sound like much, but in the meta-analysis, Lymphoseek's localization rate (LR) was 99.91% compared to sulphur colloid's 94.13%. That alone is a significant improvement, but Lymphoseek also shows a significant improvement on the degree of localization, or the number of nodes in which the agent localized per patent. Lymphoseek's degree of localization in breast cancer patient's studies was 2.1 by meta-analysis compared to 1.6 from peer-reviewed literature for sulphur colloid. The data impressed me, but the trading activity is what made me even more excited, and though I recently enjoyed gains before, I believe there is still a lot of opportunity in the near term with this stock.
Having bought in shortly after the stock hit a low of $1.62, it has gradually climbed back towards mid-2011 levels. NAVB stock has been over $3 for much of 2012. In January, the Company announced that Hercules Technology Growth Capital (NYSE:HTGC), a finance company with a penchant for picking winners, chose to provide up to $10 million in debt financing to Navidea Biopharmaceuticals. The first tranche of $7 million was closed on December 29th 2011, with $3 million more to be made available upon approval for NAVB to market Lymphoseek in the US.
Like the market, NAVB stock has been somewhat volatile, but it has been encouraging to see the stock stay level on some down market days, while on others, the stock even shows strong gains. Before the FDA announced that they would delay their decision on whether to approve Lymphoseek from June 10th to September 10th, the stock closed at $3.29. It slipped to $2.94 the next day, and hit a low of $2.60 a week later. Since then, NAVB stock has been steadily climbing week by week. Some aspects I like about how the stock trades are large block trades in which we see the stock price go up early in the day. I also like how the stock will often close at its high on Friday. Last week it closed at $3.16, and its weekly high (also the high for the last two months) was a penny higher at $3.17. This stock has shown much resilience and could present a rare opportunity. I'm looking for an entry point around $3.00, but would be happy to get in at under $3.25.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NAVB over the next 72 hours.