Navidea Biopharmaceuticals, Inc.
Q1 2018 Earnings Call Transcript

Published: 9 May 2018

[Operator:]

Good day and welcome to Navidea Q1 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Jed Latkin. Please go ahead.

[Jed Latkin:]

Thank you. And welcome everyone to this morning's earnings conference call. This call will cover Navidea's financial and operating results for the first quarter ended March 31, 2018, along with the discussion of our goals and milestones for the upcoming part of 2018. Following our prepared remarks, we will open up the conference call to a question-and-answer session. Our call today will be led by our Chief Executive Officer, Dr. Michael Goldberg. But before we begin our formal remarks, I would like to remind everyone that some of the statements on this conference call may be considered forward-looking statements within the meaning of Section 27A of Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. That concern matters that involve risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in the forward-looking statements. Words such as expects, anticipates, intends, plans, aims, targets, believes, seeks, estimates, optimizing, potential, goals, suggests and similar expressions identify forward-looking statements. These forward-looking statements relate to the effectiveness of the company's bodily-fluid-based diagnostic tests as well as the company's ability to develop and successfully commercialize such test platforms for early detection of cancer and other various indications. The company's actual results may differ materially from those indicated in these forward-looking statements due to numerous risks and uncertainties. For instance, if we fail to develop and commercialize diagnostic products, we may be unable to execute our plan of operations. Other risks and uncertainties include the company's failure to obtain necessary regulatory clearances or approvals to distribute and market future products in the clinical IBD market; a failure by the marketplace to accept the products in the company's development pipeline or any other diagnostic products the company might develop; the company will face fierce competition and the company's intended products may become obsolete due to the highly competitive nature of the diagnostics market and its rapid technological change; and other risks identified in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q as well as other documents that the company files with the Securities and Exchange Commission. These statements are based on current expectations, estimates and projections about the company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are made as of the date of this conference call and except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances. I’d now like to turn the call over to Dr. Goldberg to discuss our first results and clinical activity, as well as our key clinical and operational objectives into 2018. Michael?

[Michael Goldberg:]

Thank you, Jed and thanks to all of you for joining our Q1 earnings call. Today's prepared remarks will be brief as we just had an update call a few weeks ago. Since that call we have spoken with many shareholders who have contacted us to get more detail regarding the strategic direction of the company. As discussed on all the calls since the announcement of the sale of Lymphoseek North American rights to Cardinal, the strategy has been built on exploiting the aspects of the imaging technology that are globally unique, and as a result provide Navidea with the ability to develop proprietary and commercially valuable assets. Since our last call, we have had the opportunity to share some of the data we've been able to generate in humans that highlight certain of these capabilities of the technology. At the recent NASH Summit we presented images demonstrating the first quantitative and qualitative image based data of the NASH liver from the sole perspective of active inflammation. Thematically, these images address the largest problem facing developers of therapeutics to treat this disease that is projected to continue to grow alongside heart disease and diabetes as a direct result of the obesity epidemic. The problem our product addresses is there is no safe, effective, and commercially acceptable way to diagnose and monitor this disease. Liver biopsy is currently the gold standard, but it is invasive, it requires specialized skills to develop and read and represents only 1/50,000 of the liver. So it is less accurate, the earlier the disease the procedure is done. Data presented at the conference suggests that approximately 50% of the time a biopsy is done in clinically diagnosed NASH, the biopsy is read as negative. Another group estimated that the cost for recruiting patients to NASH studies is approximately $52,000 per enrolled patient. Phase 3 studies in NASH average 2,000 patients per study. This means that recruiting cost alone for a typical Phase 3 study is over $100 million. Our product can help in improving the yield in recruiting patients as well as enabling better and quicker dose selection due to the continual monitoring of efficacy in Phase 2 studies leading to better patient selection in Phase 3 studies and improving a likelihood of success based on better dose selection from Phase 2. Our work in NASH in RA and what we're planning to do in Phase 3 in RA, in cardiovascular disease at Mass General Hospital in Boston and inflammatory bowel disease significantly enriches our database. These data are the primary marketing tools to support our efforts to commercialize this powerful agent for pharmaceutical developers and clinical research organizations who are our target markets for using our agent in their drug development efforts. In the cancer space, we have ongoing NIH-funded work in Kaposi’s Sarcoma and colorectal cancer with metastasis to the liver. This should open up doors to interested companies developing new cancer therapeutics, especially the combination studies that are driving immuno-oncology therapy development. We continue to make progress with our preparations for the end of Phase 2 pre-Phase 3 meeting with the FDA, the approval of using our imaging agents clinically to image activated macrophages. The goal there is different than the use of our agent as a biomarker in clinical studies. The objective of the Phase 3 is to get approval from physicians to use this agent in clinical practice to image inflammation as they see fit. This will require obtaining insurance reimbursement et cetera, which is not required for the biomarker use in clinical studies. Obviously having an approved imaging agent to diagnose and monitor disease progression by imaging active inflammation enables access to tens of millions of annual images with our agents. Finally, we are advancing our therapeutics as we generate additional data, additional collaborations, and move closer to obtaining the level of financing that can enable the IND-enabling studies that will drive valuation as we progress on a number of major therapeutic opportunities, all of which will use Navidea’s imaging agents in their clinical development and post approval in their clinical use. I’ll now turn the call back over to Jed, who’ll review the financials and when I look forward to addressing questions and comments from investors and potential investors. Jed?

[Jed Latkin:]

Thank you, Michael. Our consolidated balance sheet and statements of operations have been reclassified as required by current accounting standards for all periods presented to reflect the line of business sold to Cardinal Health 414 as a discontinued operation. Accordingly, this discussion focuses on describing results of our operations, as if we had not operated the discontinued operation during the periods being disclosed. Total revenues for the first quarter of 2018 were $276,000 compared to $580,000 in the first quarter of 2017. These revenues were primarily grant related in both periods. Research and development expenses for the first quarter of 2018 were $999,000 compared to $705,000 in the first quarter of 2017. The net increase was primarily a result of increased NAV4694 development costs due to the 2017 reversal previously accrued expenses offset by decreased Tc99m Tilmanocept Manocept therapeutic development costs coupled with decreased net compensation costs. Selling, general and administrative expenses for the first quarter of 2018 were $1.8 million compared to $3 million in the first quarter of 2017. The net decrease was primarily due to decreases in legal and professional services, general office expenses such as insurance, depreciation, rent, and travel and investor relation services. Navidea's net loss attributable to common stockholders for the quarter ended March 31, 2018 was $6.7 million or $0.04 per share compared to a net income attributable to common stockholders of $85.6 million or $0.53 per share for the same period in 2017. Navidea ended the quarter with $2.2 million in cash and investments, not including the accelerated earn-out payment of $6 million from Cardinal Health 414, which was received after the quarter ended. Management feels that at the current burn rate cash is sufficient to carry us to the completion of the Phase 3 trial next year. Before, turning the call over to Q&A, I want to address the lingering issue of the reverse split. I want to reiterate to all our shareholders on this call that we’re seeking approval of the reverse split only to have it as an asset to use at a later date if and only if certain requirements are met. These would include a significant outside investment that require both a non-pending [ph] stock qualification and ongoing street research, both of which can’t currently be achieved with today’s stock price. A reverse split will not be done in a vacuum, I want to say that again, the reverse split will not be effectuated unless those qualifications are met, and we have significant news items to report in conjunction with those other qualifications. I urge all shareholders to vote affirmatively for the reverse split and give us that arrow to keep in our quiver should it be needed in the future. Thank you all for dialing in today and I would like to now turn the call over to Q&A. Operator?

[Operator:]

Absolutely. [Operator Instructions] And we’ll take our first question in the queue from Mr. Joe Pellicant [ph]. Please go ahead.

[Unidentified Analyst:]

Good morning, guys. My question is about a potential investor, which I guess would be into the Macrophage Therapeutics platform. Can you give us a little light on where we might be in the process, how the deal will be structured and MT will be valued, and when such a deal might happen?

[Michael Goldberg:]

Thanks, Joe. So, yes you are correct. In the first assumption that most likely any direct investment into the company based on valuation would be going into Macrophage not into Navidea. As Jed had indicated with the recent restructuring of our deal with Cardinal, we have adequate cash in order to continue to advance the Phase 3 program and all the various data collection Phase 2 studies that we have ongoing and that we’re looking to initiate. So from the Navidea perspective, we’re in a reasonably good shape in terms of being able to generate, what I think are critically important data to further validate the commercial strategy that we have in place for Navidea. And on the Macrophage side, we do need substantial additional capital in order to aggressively move those programs forward. As we've indicated many times, we believe we have some blockbuster potential therapeutics that we've collected to-date sufficient data to attract what we believe are significant investors to take it the next level, which is through the regulatory pre-IND phase, which requires scale up, which requires development of assays, stability, toxicology et cetera. There are no shortcuts when it comes to developing therapeutics, when it comes to developing any pharmaceutical products. And this is a process that we'd like to initiate sooner rather than later. So, we've had a very aggressive effort ongoing talking to investors. Unfortunately we don't write the check for the other side, so I am not going to handicap from a time prospective or a structure prospective exactly what the terms are, but we believe we're very, very far down the path. And as soon as we have a signed cheque from the other side, of course we'll announce it and have a conference call and update you to all the details. But we're not going to disclose or negotiate publicly, that’s something that has been going on, it’s been going on for a while and what we can say is stay tuned, and we look forward very soon to updating the market on where we stand.

[Unidentified Analyst:]

Okay. One quick follow-up on that Mike, when originally MT was funded, a combination of yourself and [indiscernible] like I think it was a valuation of around $500 million. Is that about where we are with the current investors or has that changed either upwards or downwards with regards to the valuation?

[Michael Goldberg:]

I would say that it is -- that's not a market valuation, and you're not going to expect a new investor, someone who doesn't have a significant equity stake in Navidea to put in anything close to those levels. So, I would urge you if you want to handicap the valuation, there have been many, many, many deals done in the space. It’s a very, very hot area and I would look to those kinds of valuations, not something that was done three years ago at a different time by investors, myself and the Platinum folks who obviously had a very, very significant stake in Navidea and we're looking to turbocharge the initiation of an effort and get it off the ground. I think at this stage, we're dealing with -- in an arm’s length transaction with very, very sophisticated investors and both fortunately and unfortunately, the amount of money involved is significantly higher and the valuation is going to be market based, not going to be based on the fact that we had such a significant investment in the company already.

[Unidentified Analyst:]

Okay, alright. Thank you. And then one quick question for Jed. On the last call, you had mentioned with the accelerated payout from Cardinal that the company would have enough cash to get us to the second half of 2019. And I think today you said something in the effect of we've cash to get us through the Phase 3 next year. So, can you clarify that because I know there is a lot of speculation as far as any other cash items that might come up with the CRG lawsuit or other things that would force the company to be out of cash before the second half of 2019? So any clarity on that would be helpful.

[Jed Latkin:]

The main aspects of the CRG lawsuit are pretty much finished, we have ongoing -- we just have an ongoing appeal, which will not require as much in terms of capital as the trial did. And then we have the action in Ohio, which hopefully will be fairly straight forward. In terms of cash, the position is exactly as I reiterated in the last call, this will carry us into the middle to the end of next year.

[Unidentified Analyst:]

Okay, thank you.

[Operator:]

And we'll take our next question on the queue from Mr. Robert Isler. Please go ahead.

[Unidentified Analyst:]

Few questions for Jed. First of all, recently there have been filings responses in both Texas and Ohio regarding the CRG case, can you briefly give us some color on key rulings and the potential outlook?

[Jed Latkin:]

The rulings that we’ve had so far was we got the Ohio judge preliminary in reading [ph] the record established that he feel that he has jurisdiction to validate that the terms of the global settlement agreement were adhered to. CRG filed a very, I would say, esoteric-type of lawsuit that is called an anti-suit, lawsuit seeking to get the judge to do a quick ruling in Texas that we would not be able to sue or appeal in any other forums. That suit was overturned. So they were seeking a restraining order, and they did not get it. So right now there is -- the procedure we’re continuing to move forward on the appeal in Texas, which as we’ve said in the past could take quite a while because the Appeals Court do not move that quickly. And in Ohio, we have paper work to do both from CRG and Navidea sometime in the middle of June.

[Unidentified Analyst:]

Okay, thanks.

[Operator:]

And it appears we have no more questions in the queue I would like to turn the conference over to Mr. Latkin for any additional or closing remarks.

[Jed Latkin:]

I just want to thank everybody for calling in today and we look forward to having another investor Q&A call update in the very near future. We appreciate all your ongoing support.

[Operator:]

And this concludes today’s call. Thank you for your participation. You may now disconnect.