Navidea Biopharmaceuticals, Inc.
Q4 2018 Earnings Call Transcript

Published: 8 Mar 2019

[Operator:]

Greetings. And welcome to Navidea Biopharmaceuticals' Fourth Quarter 2018 Earnings Conference Call and Business Update. At this time all participants are in a listen-only-mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Jed Latkin.

[Jed Latkin:]

Thank you, Dana. Good afternoon and welcome everyone to Navidea's fourth quarter 2018 earnings call. I am Jed Latkin, Chief Executive Officer of Navidea Biopharmaceuticals. This call will cover Navidea's financial and operating results for the fourth quarter 2018, which ended on December 31, 2018, along with a discussion of goals and milestones for 2018. Following our prepared remarks, we will open up the conference call to question-and-answer session. With me on our call today is our Director of Finance and Administration, Erika Gibson and our Chief Medical Officer, Dr. Mike Rosol. But before we begin the 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 the 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, optimistic, potential, goal, 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 the diagnosis and monitoring of rheumatoid arthritis. 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 clearance or approvals to distribute and market future products in the clinical IVD 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 ability to maintain our listing with the NYSE American Stock Exchange, inability to maintain effective internal control over financial reporting, the outcome of any pending litigation, 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 expectation, 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 want to start by saying that our comments this quarter once again will be relatively brief in comparison to previous quarters to allow for more time for Q&A at the end of the call. Now, I would like to turn to a recap of the quarter. Navidea had a productive fourth quarter, but not as productive as the company would have liked. We advanced the business in our novel imaging pipeline by comparing to launch our critical Phase 2b and Phase 3 trials for our rheumatoid arthritis diagnostic product. We feel confident that the trials that we have designed should they be successful could make this a go-to-diagnostic in the $15 billion rheumatoid arthritis market. Rheumatoid arthritis is a chronic disease affecting over 1.3 million Americans and as much as 1% of the worldwide population. If the product is successfully developed, approved and commercialized, we expect to play a major role in the management of rheumatoid arthritis patients worldwide. As we've said before, five of the top 10 selling drugs in the world are biologics used to treat RA and related diseases. These drugs are often not very effective or extremely costly and have many toxic side effects. Several companies have reached out to us and we have had multiple partnership discussions regarding the potential use of tilmanocept in their trials to assist in predicting the effectiveness of available treatments. This past quarter we engage in continuing dialogue with the FDA about the proposed trials. Unfortunately, the government shutdown slowed that process down. We expect to have some guidance from them very soon. We are working with the FDA on the exact trial design in order to maximize utility of the label that we can achieve upon completion of the trials. It's of the utmost importance that we seek to maximize the value of the data generated in the upcoming trials so that we can get a robust approval that will not only be easy - and easily accepted by rheumatologists, but will also gain critical acceptance by insurance companies for their diagnostic product is reimbursed. Furthermore, this data that we generate will help us in our discussions with potential partners and collaborators on the biomarker side. The stability data, as well as the pathology data is crucial for us as we have never done these sorts of trials before. Our accomplishments this quarter reflect the strength of our team and the potential of our pipeline of innovative diagnostics. I want to focus a bit on the previous point. The strength of our team. This past quarter the company did three key things on that front. We appointed two new independent members to the board, Kathy Rouan, a 30 year Glaxo veteran who has been a very active participant in helping us plan our future trials and making introduction to other industry veterans. And Adam Cutler, an experienced CFO in the industry and an individual that has been working to assist me on the financial planning side. With these two members, Navidea has an active and majority independent board for the first time in many, many years. Claudine, Michael, Adam and Cathy have all been key contributors to our planning over the past several months. I am truly grateful for each of their contributions, hard work and dedication to seeing Navidea succeed. What is also important to note is that we have really listened to what the shareholders had to say and for 2019 our corporate goals are clear, get at least one partnership, one research collaboration and get all three parts of the RA trial started. I am pleased to announce that we are ready to launch the 331 trial as all the sites have been qualified and the imaging center has been engaged and the database is formed and ready to go. Now we just need to hear back from the FDA so we can launch the trial. On the management side, we are so pleased that Dr. Michael Rosol decided to join the team from Novartis. He brings a fresh perspective to the company and as an imaging expert we now have an individual whose whole career has been focused on imaging, which is something that the company has not had before. In fact, let me turn the call over to Dr. Rosol now so he can give a brief overview of his experience and his plans for the team. Michael?

[Michael Rosol:]

Thanks, Jed. Hello, everyone. I'm happy to participate in today's call. I'm a longtime biomedical imaging scientist with experience in both academia and industry. I received training at the Boston University School of Medicine MGH Harvard and Mayo. I then went on to serve as faculty and research imaging center director at Children's Hospital Los Angeles, USC and the Medical University of South Carolina. Most recently I was at Novartis where I was first head of their translational Imaging Group and ran imaging in both preclinical and clinical trials in a variety of disease areas. I joined Navidea in December of 2018 because I believe in the technology and the people. I do of course know about Lymphoseek already and therefore had some knowledge of the company's IP. I spent time face to face with Jed and on the phone with a board member and senior management and became convinced the company was headed in the right direction and was under the right leadership. As for the technology the tilmanocept platform offers great opportunities in both the diagnostic and therapeutic spaces. As you know, evidence continues to mount demonstrating the critical roles macrophages play in human disease. And our IP and agents give us the ability to address these diseases to help in diagnosis, stratification and therapy. And so I'm excited to be here. I can also say that I found the team members here to be dedicated and passionate about the company, their work and the opportunity to help people. As you've heard, we are ramping up to begin all three of our trials in RA this year, including the definitive Phase 3 and we're optimistic that these will lead us to FDA approval. We are also in discussions with possible partners and collaborators in not only the RA space but in other disease areas as well. Now I would like to turn the call back over to Jed. Jed, Jed?

[Jed Latkin:]

Okay. Before I hand the call over to Erika, I also want to take a moment to address the current disputes with Dr. Goldberg. As we previously disclosed, Navidea, Macrophage Therapeutics and Dr. Goldberg entered into an agreement related to Dr. Goldberg's resignation from Navidea which provided for payments and share issuances to Dr. Goldberg in Navidea and Super Voting Stock in MT. Before definitive agreements were entered into, Dr. Goldberg represented that he had without board or shareholder approval created a wholly owned subsidiary of MT, transferred all of the assets of MT into that subsidiary and then issued himself stock in the subsidiary. Based on these actions, the board of Macrophage Therapeutics terminated Dr. Goldberg as CEO. On February 20th Macrophage commenced litigation in Delaware against Dr. Goldberg seeking damages and a declaration that purported transaction conducted by Dr. Goldberg is void. On March 1st 2019 the Delaware Court indicated at a hearing that would enter a status quo order which would preserve the status quo, meaning that all operations of MT and the newly created subsidiary would be conducted at the direction of the MT board. Also on February 19th, Navidea commenced an action in the Southern District of New York alleging claims against Dr. Goldberg under the August agreement and seeking a declaration that Navidea's performance under the August agreement exists [ph] accused and that Navidea entitled to terminate the August agreement as a result of Goldberg's actions. Due to the current procedural status of these cases, we will not comment further on the pending litigations with Dr. Goldberg. I would now like to turn the call over to Erika to go through some of the financial updates. Erika?

[Erika Gibson:]

Thank you, Jed. Our consolidated balance sheets 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 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 fourth quarter of 2018 were $119,000, compared to $395,000 in the same period of 2017. The decrease was primarily due to a reduction in grant revenue related to SBIR grants from the NIH supporting Manocept development. Total revenues for the full year of 2018 were $1.2 million, compared to $1.8 million in 2017. The decrease was primarily due to a reduction in grant revenue, offset by increased license revenue related to the sublicense of NAV4694 to Meilleur. Revenue in both years included other revenue from our marketing partners in Europe and China related to development work performed at their request. Research and development expenses for the fourth quarter of 2018 were $854,000, compared to $1.7 million in the same period of 2017. R&D expenses for the full year of 2018 were $4.2 million, compared to $4.5 million in 2017. The decrease in both periods was primarily due to net decreases in Manocept development costs for clinical trials, coupled with decreased compensation costs resulting from headcount reduction. Selling, general and administrative expenses for the fourth quarter of 2018 were $1.4 million, compared to $2.2 million in the same period of 2017. SG&A expenses for the full year of 2018 were $7.7 million, compared to $11.2 million during 2017. The net decrease in both periods was primarily due to decreased legal and professional services, as well as decreased general office, insurance, depreciation, rent, and travel expenses, offset by termination costs associated with the resignation of our former CEO in 2018. Navidea's net loss attributable to common stockholders for the fourth quarter of 2018 was $3.2 million or $0.02 per share, compared to a net loss attributable to common stockholders of $4.1 million or $0.03 per share for the same period in 2017. Navidea's net loss attributable to common stockholders for the full year of 2018 was $16.1 million or $0.09 per share, compared to net income attributable to common stockholders of $74.9 million or $0.47 per share, in 2017. Navidea ended the fourth quarter of 2018 with $4.3 million in cash and investments. With that, I'll turn the call back to Jed.

[Jed Latkin:]

Thank you, Erika. I just want to thank everybody for joining us this afternoon. And now I would like to open up the line for questions please.

[Operator:]

[Operator Instructions] Our first question comes from the line of Caroline Palomeque with Maxim Group. Please proceed with your question.

[Caroline Palomeque:]

Hi, good afternoon. Thanks for taking the question. I was just wondering if you could add any color to the ongoing discussion on partnering your programs. And are you speaking mainly to large pharma or other biotech? And then I have a follow up after.

[Jed Latkin:]

Thank you, Caroline. So we are having discussions with both large pharmas and other companies within our industry, the diagnostics space and we are also actually having several discussions with universities as well. So there are many different fronts that we're looking at. Different companies are potentially looking to our product to use for different things, some in their trial development, other in initial stage developments to see the effectiveness of a molecule and then obviously in terms of RA you know, the potential to partner as we go forward with the trials.

[Caroline Palomeque:]

Okay. And is that RA a Phase 3 trial still on track to initiate in the first quarter?

[Jed Latkin:]

We will also - the idea is that the first part, so there are going be three - three parts to the trial. The first part is on track to begin in the first quarter, yes.

[Caroline Palomeque:]

Okay, great. And then my last question is, can you talk about the data that you're generating in the neurodegenerative CNS space. Are these certain biomarkers that we're looking for?

[Jed Latkin:]

Well, currently part of the - what we're looking at on the therapeutic side is actually in individual that already have a diminished blood brain barrier, so that's where we're looking out for is - the project with crabs disease, for instance that was being done at the University of Connecticut. In terms of the diagnostic side we are waiting to see if we have any transport through the blood brain barrier and we're going to get more of that data from the cardiovascular trial that we're running at Mass General Harvard with Dr. Grinspoon.

[Caroline Palomeque:]

Great. Thank you. That's helpful.

[Jed Latkin:]

Thank you.

[Operator:]

Our next question comes from the line of Jacob Notowitz, a Private Investor. Please proceed with your question.

[Jacob Notowitz:]

Yeah, hi. Regarding the New York Stock Exchange continue listing requirement, I was dosing [ph] on those report you just came out. It says March 31 it was extended to, what can you tell me about our plan for that.

[Jed Latkin:]

So we need to - prior to March 31 get the 20 day average trading volume of the stock above $0.20 or we would have to do a reverse split prior to that date.

[Jacob Notowitz:]

Okay. And then my second question relates to the cash burn rate. So if we had $4.3 million as of December 31 and according to the fourth quarter we spent about $2.2 million you spent $851,000 R&D and $1.4 million in SG&A. How are we going to - how much longer can we survive on the cash that we have left?

[Jed Latkin:]

So we do have - we still have runway for the next several quarters, I would say and what we are looking at is other potential financing options and also in discussions with potential partners to be able to bring in upfront payments on that as well. So we are exploring all options with that right now.

[Jacob Notowitz:]

All right. End of my questions.

[Jed Latkin:]

Thank you, Jacob.

[Operator:]

[Operator Instructions] Our next question comes from the line of Mike Russell, a Private Investor. Please proceed with your question.

[Mike Russell:]

Thanks, Jed. Appreciate you taking my call and I do appreciate your dedication. I don't think there's anybody who doesn't understand how dedicated you are. So speaking for myself I hope many, we do appreciate your dedication. I have several questions here. The financial ones were already answered, so I will try to stick with it [ph]. So I'll be focusing on the more technical ones. You mentioned that you had applied for several clinical studies, but grant [ph], do you got any update on that yet?

[Mike Rosol:]

. Yeah. So this is Mike Rosol. We have a grant currently under review with collaborators and academia in the cardiovascular space. So that's the - that's the current one. There will be a couple more that will be submitted in the next couple of quarters, I can say.

[Mike Russell:]

So right now you have one grant funding proposal working as I understand?

[Mike Rosol:]

Well, we currently have two grants.

[Jed Latkin:]

It's in the chaos space…

[Mike Rosol:]

Right.

[Jed Latkin:]

And then we've submitted a number of grants and we are working on some more to submit for the next deadline.

[Mike Russell:]

Okay. On biomarkers you had two separate initiatives going on. One was with the FDA to get qualified and the other one was trying to pursue biomarkers with clinical studies in the commercial environment. You've talked a little bit about RA, there were any others that are progressing, particularly the FDA qualification?

[Jed Latkin:]

We've continued with that FDA program and you know, it got to wait a little bit because of the shutdown, but we've had those calls and we are continue along that path. So it is a regular, I would say every few weeks to a month we have that. We continue to move that ball across the goal line. And I would expect that we will have more visibility on that over the next upcoming quarters. In terms of using it in other areas, we had several meetings at the end of last quarter, at the beginning of this quarter, potentially for using this in other indications, other than an RA, mainly imaging the tumor micro environment is something that people seem to be very interested in. So that is an area that we'd like to focus on.

[Mike Russell:]

Okay. On the Gavi [ph] and the twitcher mouse stated you were expecting some results on the twitcher mouse state. Have you received any of those yet?

[Jed Latkin:]

When - as soon as we received that data and we can sort of evaluate it, we'll make that known to the street. That is still pending. I mean, that's a very intricate - you know, the mice have to breed. You have to get one that live when they're born. So it's not that easy. So we are still working on that. We continue to move forward and we're hoping to get some more data. We've had some good data so far, but we'd like to get more. So we need to have it in a more robust setting, not just a few mice, but we'd like to have from quite a few. So that way we could decide whether or not to take the next step or not. But the early indications are positive.

[Mike Russell:]

Okay, that's great. Can you give a little more update on both case studies, the imaging clinical study and the preclinical study - the preclinical therapeutic study?

[Jed Latkin:]

Yeah. So both these studies are still ongoing. The - in the imaging we've had some early results that we're evaluating and we've done a slight modification to the protocol to take advantage of some of the learning's early on. So we're pushing forward with that, similarly in the preclinical space where progress is being made on that grant as well.

[Mike Russell:]

Originally you were targeting end of this year, next year, have the preclinical work done, so you could file an IND. Is that with - I know you have cash burn issues. Are you still progressing towards a target this year or next year on the preclinical Gavi [ph] therapeutic?

[Jed Latkin:]

So, that was a - you're throwing the Gavi at the end there…

[Mike Russell:]

I am sorry…

[Jed Latkin:]

Yeah, we're on track with that in the preclinical space. I think that's a reasonable - it's reasonable still, absolutely, yeah.

[Mike Russell:]

All right. On cardiovascular with Dr. Grinspoon and the Massachusetts General, you have the - you have two ongoing studies there. Last time you mentioned they were making some progress. Is the progress accelerated on those two studies or still at the same pace?

[Jed Latkin:]

Yeah. So just to clarify, it's one it's one study ongoing. Now there was a Phase 1 study that was completed and that set up the Phase 2 study that is currently ongoing. And so there has been progress made even in the last - in this quarter and we are - we're actually hoping to speak with him soon to get further update on what's been happening more recently. I can't say that that we have seen progress there as well.

[Mike Russell:]

What is the Phase 2 study on exactly there? I mean…

[Jed Latkin:]

So…

[Mike Russell:]

He had two ongoing studies there, one on amputation - for imaging macrophage specific information then he had one using managed anything arterial in patients, which one is in Phase 2?

[Michael Rosol:]

Yeah. So right now it's - so originally that Phase 1 kind of proof-of-concept was sub-Q and what we're doing now is an IV study, right. So the idea behind why you would do that is we have FDA approval for Lymphoseek to be subcutaneously injected. So that's our first proof-of-concept typically. What we've done is we've gotten permission from the FDA to do human studies in a variety of disease indications where we use the IV route of administration and so why would you do that? So you might - maybe it's transparent to most of you, but if you do an IV and route of administration you can kind of get bolus of back right. You could do a fast injection right into the bloodstream and your stuff and go where it needs to go more rapidly, with a general idea that you will - you hope to see a similar distribution and you know there's no reason why we'd expect a different one overall, but the localization may be greater because it got this kind of bolus effect. So that is - that's the general principle and now we're starting - we're not starting we are doing these IV studies with - he's doing them and we're getting updates from him.

[Mike Russell:]

And that's essentially a Phase 2 you said?

[Michael Rosol:]

Yeah.

[Mike Russell:]

Okay. That was the very original when he started it couple years - a year or so ago, is that one?

[Michael Rosol:]

It depends on what you mean. So the first one again, with the sub-Q and then there's the IV. And so that one, the IV one went - yeah, I mean, it's ongoing, yeah.

[Mike Russell:]

Okay. The other one he was doing with the one that was called the application of compounded step for imaging macrophage specific inflammation? Are they still progressing on that…

[Michael Rosol:]

Yeah, that was the Sub-Q one. [indiscernible] titles get so kind of lofty that you have to dive into the - end of the detail to see what they are.

[Mike Russell:]

Okay. So it's fair to say that there is one ongoing now just looking…

[Michael Rosol:]

Yeah..

[Mike Russell:]

Add inflammation and both are or it's rolled into one now that's IV injection?

[Michael Rosol:]

Yeah, it's a natural progression, right. So we started with the SC subcutaneous injection proof of concept and that's the Phase 1. And now if you look at that you see if there's any promise, you see if anything bad happens and nothing did and it showed promising, you move into the IV. So that's where we are.

[Mike Russell:]

Okay. And one question, this one may be for you Jed, in the agreement that you had with Michael Goldberg in the MT, you were spending several people in MT and one was a lady name I'm going to read this. I'm sure Nice Hayang [ph] what is she working on or he?

[Jed Latkin:]

Nice Hayang [ph] is a he and he was working on various tests for RA and other inflammatory conditions on the therapeutic side.

[Mike Russell:]

Okay. So it wasn't oral or anything like that?

[Jed Latkin:]

Oral was part of that, but that is - that was part of it. But the testing so far has been in other areas RA and other inflammatory indicators an auto immune.

[Mike Russell:]

Okay. Well, thanks for taking my call, I won't take any more time. Appreciate it.

[Jed Latkin:]

Thank you, Michael.

[Operator:]

Our next question comes from the line Joe Ski, a Private Investor. Please proceed with your question.

[Joe Ski:]

Hello. Jed, I was wondering where are we with CRJ and…

[Jed Latkin:]

It's a good question. So we have a conference in front of the Ohio judge on March 29. And at that conference both sides are going to produce documents related to our allegation that they took $4.2 million too much. We presented to the judge. Judge Engelhart in Texasas decision, which in our opinion clearly shows that they over drew on the letter of credit by $4.2 million. And so we are seeking at that - at that conference on the 29th to see where the money has gone, so we can further buttress our case against them and get our $4.2 million back.

[Joe Ski:]

Are they trying to mediate with you?

[Jed Latkin:]

They have not responded to repeated attempts for mediation.

[Joe Ski:]

Right. Right. Okay. And anything going on in Lymphoseek and Cardinal, any payments?

[Jed Latkin:]

Well, the payments have ceased because we settled with them at - in the middle of last year to get the advancement of the final bunch of guarantee payments and they have not tripped any of the milestones yet which would get more payments, but none of those milestones have been crossed yet.

[Joe Ski:]

Right. All right. Thanks for your time. Jed I really appreciate what you're doing for the company I appreciate you. Thank you.

[Jed Latkin:]

Thank you, Joe.

[Operator:]

Our next question comes from the line of Chris Moretti with OE [ph] Please proceed with your question.

[Unidentified Analyst:]

Yes. Hi, everybody and thanks for the update. I just - I wanted to see if you might go into a little bit more detail on what the plan is with regards to the New York Stock - their thought coming up on the 31. If there's any plan, anything that's going to offset or disrupt this or I mean are we basically heading for a reverse split?

[Jed Latkin:]

Chris, that's a very good question. I mean, I think given that we have to get the average price above the $0.20 level, we are probably headed toward the reverse split. The board has to meet on that in the next several days to set a potential date for that. But we are also still waiting to hear if we get earlier news from the FDA then make that announcement and see what would happen to the stock. But the plan is probably to trend back the reverse split prior to the end of the month, yeah.

[Unidentified Analyst:]

And do we know what that number is or what the proposal is?

[Jed Latkin:]

The proposal was approved - last year was for a minimum of 5 to 1 and a maximum of 20 to 1. So it'd be somewhere in between those two.

[Unidentified Analyst:]

Thanks, Jed. Keep up the good work.

[Jed Latkin:]

Thank you, Chris.

[Operator:]

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Jed Latkin for closing remarks.

[Jed Latkin:]

I just wanted to thank everybody for tuning into the call today. I really am looking forward to the next several quarters. We have a lot of exciting things going on and hopefully we will be speaking again very soon. Thanks a lot.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.