Navidea Biopharmaceuticals, Inc.
Q2 2013 Earnings Call Transcript

Published: 8 Aug 2013

[Operator:]

Greetings, and welcome to the Navidea Biopharmaceuticals, Inc. Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brent Larson, Chief Financial Officer for Navidea. Thank you, sir, you may begin.

[Brent L. Larson:]

Thank you, Donna. Good morning, everyone. My name is Brent Larson, CFO of Navidea Biopharmaceuticals, and I will be moderating this morning's call. With me on the call this morning are Dr. Mark Pykett, Navidea's Chief Executive Officer; Dr. Tom Tulip, Chief Business Officer; and Dr. Connie Reininger, Chief Medical Officer. Before we get started, we'd like to remind you that during the course of this call, management may make projections or other forward-looking remarks regarding future events or the future financial performance of the company. It's important to note that such statements about Navidea's estimated or anticipated future results or other nonhistorical facts are forward-looking statements and reflect Navidea's current perspective on existing trends and information. Navidea disclaims any intent or obligation to update these forward-looking statements. Actual results may differ materially from Navidea's current expectations depending 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; the difficulty of predicting the timing or outcome of product development efforts; NFDA or other regulatory approvals or actions; market acceptance and continued demand for Navidea's products; clinical and regulatory pathways; the impact of competitive products and pricing; patents or other intellectual property rights held by competitors; the availability of and pricing of third-party source products and materials; successful compliances with government regulations; and such other risks and uncertainties detailed in Navidea's periodic public filings on file with the Securities and Exchange Commission. Now I'd like to turn the call over to Dr. Mark Pykett, President -- excuse me, Chief Executive Officer of Navidea.

[Mark Jerome Pykett:]

Thanks, Brent, and thanks to everyone who has joined us for this call today. It's great to be holding this first conference call following the launch of Lymphoseek. We're really pleased with the first steps Lymphoseek is taking commercially. We have a lot of great information and feedback to pass along today about how the early stages of launch are going. I also want to provide updates on Lymphoseek progress outside the U.S. and on our other programs. I'll begin by summarizing what we consider to be the key take-home points for Lymphoseek adoption, and then Tom will go into more specifics about the commercialization efforts. Tom will also discuss the status of our efforts for Lymphoseek in Europe. Connie will then provide updates on our NAV4694 and NAV5001 neuroimaging programs. And Brent will review the second quarter financials. We'll conclude by taking questions. So first, Lymphoseek. What we've seen and heard in the initial weeks of launch reinforces our belief that the plan we're executing with our partner is on target and that we are focusing on the key drivers of commercial success. Given the mid-quarter launch, coupled with a relatively complex sales process, our ability to draw many conclusions regarding sales trends is limited. And yet, in many ways, what we have learned and observed is quite telling and encouraging. We believe the early signals are positive and indicative of a successful launch that is building momentum to position Lymphoseek as the standard of care. As Tom will review in more detail, our initial strategy is to target the top quarter of hospitals that perform lymphatic mapping. Most encouraging are some key empirical observations. Let me repeat, most encouraging are some key empirical observations. We are seeing repeat orders from significant numbers of accounts. A majority of institutions ordering Lymphoseek are purchasing multiple doses. We've witnessed good conversion to formulary placement, and we're seeing good period-on-period growth. I was fortunate to be able to spend a number of days in the field with customers and sales reps. And I'm pleased to report that what I saw and heard was extremely encouraging. We're actively selling the product, people are buying it and procedures are being conducted effectively and efficiently. The feedback has been outstanding, especially in those measures that are critically important when launching a novel product like Lymphoseek, such as recognition of differential product performance, customer satisfaction and positive physician and institutional endorsements. We've also seen positive trends in formulary placement. It's important to note that formulary placement for nuclear medicine products is not necessary at many institutions. Approval of new nuclear medicine products is typically handled outside of the central hospital pharmacy channels. But in institutions where formulary placement is required, we're seeing good conversion. At least a half dozen top-tier institutions in key markets in New York, California, Texas and Ohio have already put Lymphoseek on formulary. And 2 premier academic institutions have already made the decision to switch exclusively to Lymphoseek as their radiopharmaceutical of choice. And this is all in just a few -- first few weeks of launch. Good experiences are also being reported on a number of fronts for Lymphoseek. For lymph node localization and sensitivity, customers are commenting that Lymphoseek's rapid injection site clearance and lymph node retention are resulting in scheduling efficiency and productivity gains. We believe these are very strong elements of Lymphoseek's product positioning that will continue to drive utilization and conversion. Likewise, we're hearing importantly positive reviews about patients experiencing little, if any, pain on injection, thereby avoiding the need for the use of local anesthetics. While I was in the field, I was struck by how critical an accurate lymphatic mapping agent and biopsy procedure is for patients, as it remains utterly essential to the diagnostic process -- able to assess the right lymph nodes to see if cancer has spread. Without this, you run the risk of misdiagnosing or misstaging the patient. So to me, having now witnessed the dynamics in the field, Lymphoseek's value proposition has never been clearer or more compelling. Now on to reimbursement. We believe another driver for Lymphoseek conversion will be the expected award of the pass-through reimbursement C-code for Medicare early in the fourth quarter of this year. We're hearing firsthand about how separate reimbursement should aid Lymphoseek adoption. Lymphoseek is currently covered under the existing CPT codes, the paper lymph node procedures, but like most departments these days, nuclear medicine physicians across the country are on tight budgets, and full coverage of all components is important. The passthrough C-code enables Lymphoseek to be paid for outside of and in addition to the CPT code, which will alleviate a constraint a number of hospitals have told us about. But the economics can already make sense for some institutions in advance of the availability of the C-code. We've heard from the field that the cost of the branded blue dye has recently increased significantly and that pricing for sulfur colloid can vary [indiscernible] between institutions. This can create situations where current pricing for these competitor products is beyond what the current CPT code reimbursement covers. We've also learned that some private payers are already paying for Lymphoseek under current codes and that their pricing payment policy can differ from CMS. Given that only about 1/3 of the patients undergoing lymphatic mapping are Medicare or Medicaid-eligible, this is good news as well. Moving on to other drivers for Lymphoseek. I'm pleased to report that based on a recent constructive meeting with FDA, regarding the NEO3-06 study in head and neck cancer patients, we will formally close the trial and plan to submit a supplemental NDA based on data from the trial, as well as other available information. We believe the Lymphoseek opportunity will also continue to [indiscernible] globally. We've previously announced positive day 120 feedback from the EMA on our MAA filing in Europe. And we anticipate that we may have a positive CHMP opinion by yearend, facilitating commercialization in the EU upon pricing approval on a country-by-country basis. And there are other countries where our U.S. and our European approval could lead to direct commercialization opportunities. Tom will elaborate on these activities in a moment. We believe we're building a lot of momentum and that the product is well positioned for long-term success. We're pleased with the progress we're making, which we believe will only get stronger with more data and the potential label extension through the expected SMDA filing we're targeting by yearend. We believe that Lymphoseek can become the standard of care in lymphatic mapping. And we expect to be able to provide guidance on revenue, earnings and the outlook for this promising product in early 2014. With that, I'll turn it over to Tom to discuss details of Lymphoseek commercialization and an update on our efforts in Europe.

[Thomas H. Tulip:]

Thanks, Mark, and to you, again, for joining us this morning. It is an exciting time here at Navidea. I'm pretty confident it's going to continue to get even more exciting. Let me start this morning by providing you some context around Lymphoseek and lymphatic mapping, both as a refresher for those who have been with us before and a guide for those of us who might be new to the Navidea story. Lymphoseek was approved in March in the U.S. by the FDA for use in lymphatic mapping for breast cancer and melanoma patients, entering a lymphatic mapping marketplace characterized by unmet need and a decade-old absence of technological innovation. This is clearly a market ready for a change, and it's sizable, with over 300,000 new U.S. patients presenting each year in our initial indications. Of these 3,000 (sic) [ 300, 000 ] patients, approximately 210,000 undergo lymphatic mapping procedures today, with a potential label extension, and the number of possible patients could grow to greater than 1.2 million in the U.S. alone. And globally, the number of new solid tumor patients, who might benefit from accurate lymphatic mapping as provided by Lymphoseek, reaches almost 9 million patients each year. Following our approval, we rapidly launched Lymphoseek in May and began moving inventory through our partner's distribution system. As we've discussed previously, we are working with the best possible partner for radiopharmaceutical distribution in the U.S. This partner, Cardinal Health, markets and distributes Lymphoseek in the U.S., while we play an important role in commercial activities as well, particularly, but not exclusively, focused on medical education. We, together, are well-positioned to drive adoption among a broad physician community because of our partner's unparalleled radiopharmaceutical experience and the broadest national sales, marketing and distribution network. With more than 135 nuclear pharmacies across the U.S., Cardinal Health's network is extensive. They are, as I've said before, able to reach more than 99% of customers within 3 hours after having received a script. In terms of their direct interactions with end users, Cardinal Health Nuclear Pharmacy Services deploys a very substantial sales force specialized and dedicated to nuclear medicine. And now, they're fully trained and adequately incentivized to drive Lymphoseek adoption. As Mark mentioned, the Lymphoseek sales process is fairly complex, with multiple points of contact and numerous potential stakeholders, including nuclear medicine physicians, technologists, hospital and radiology administration and, in some cases, procurement, accounting and formulary committees, and these are just the gatekeepers. Clearly, cancer surgeons also figure influentially in the ultimate adoption decision. So even for early adopters, our expectation for the decision process may -- our expectation as the decision process could exceed 6 to 8 weeks. Our initial focus is on high-value accounts and early-adopting customers, that is, those who are conducting high-procedural volumes and where influential opinion leaders in nuclear medicine are well-known. These early successes will establish Centers of Excellence, which are essential to drive broader adoption. Let me explain our sense of the conversion process and sequence. There are 5 steps

[Cornelia B. Reininger:]

Thank you, Tom. Today I'd like to provide an update on Navidea's potentially best-in-class imaging agents targeted towards the growing neurodegenerative disease market and discuss why we believe that these products will play a crucial role in patients' diagnosis and treatment. Now differentiating neurodegenerative diseases correctly can be quite challenging in clinical practice, as there is a substantial overlap both in the cardinal symptoms and in the clinical presentation between diseases, such Alzheimer's disease, Parkinson's disease and other neurodegenerative disorders. At a recent Alzheimer's Association International Conference, several noted speakers presented data that spoke to the consequences of the misdiagnosis of Alzheimer's disease in patients who actually have, for example, Parkinson's disease, vascular dementia or dementia with Lewy bodies. These misdiagnoses can lead to unnecessary morbidity and even death, depriving patients of proper treatment and optimal outcome, as well as impacting the cost of medical care. Now we believe that our precision neurodiagnostic agents have the potential to play an increasingly important role in clinical practice, allowing for earlier diagnosis and appropriate therapeutic intervention. In addition, as drug developers seek therapeutic options to modify disease progression or search for a cure for these devastating diseases, the importance of focusing on a truly targeted patient population that actually has the disease becomes critical to clinical trial success. Data presented by the California Pacific Medical Center and a major pharmaceutical company reported that 46% of subjects initially considered to qualify for entry into the study were subsequently excluded based on the result of the brain scans. They believe the study data, in this case, for a PET amyloid imaging agent, support the utility of amyloid scans to accurately screen out amyloid-negative patients from enrollment into therapeutic trials in AD. PET amyloid imaging can be an effective and feasible tool to enrich AD clinical trials with amyloid PET-positive patients and in particular, to those patients at earlier stages of the disease process, thus facilitating a pivotal trial's success. Now on to our products. We are making excellent progress in our NAV4694 PET amyloid agent program. Earlier this year, we've begun evaluating the efficacy of the product for monitoring a progression of mild cognitive impairment to Alzheimer's disease as part of the Phase IIb trial. At the end of June, we were thrilled to begin the pivotal Phase II autopsy-based trial for this program, NAV4694, that will ultimately lead to our NDA filing. Both of these trials are currently proceeding extremely well. We are further encouraged by our -- the recent decision of AIBL, a leading Australian-based neurodegenerative disease and national imaging research consortium, to convert to imaging -- to NAV4694 from the gold standard [indiscernible] compound in its comprehensive research initiative in Alzheimer's disease and mild cognitive impairment. Recent results from researchers at McGill in Montréal also showed that NAV4694 better differentiated amyloid deposition in crucial areas of the brain associated with AD in postmortem brains than PiB, or Pittsburgh Compound, and continue to support our conviction of the outstanding performance characteristics of this imaging biomarker. We are also happy to report that [indiscernible] on our clinical program to investigate NAV5001 SPECT imaging of the tool to evaluate dementia with Lewy bodies, with the first patient enrolled in an investigator-initiated Phase II study in April. And we continue to anticipate the initiation of our NAV5001 Phase II program in the differential diagnosis of Parkinson's disease from other movement disorders later on this year. So while we continue to execute well -- extremely well on the Lymphoseek launch in the U.S., we're making great progress in both of our neuroimaging programs. I'm really proud of our team's outstanding work on multiple fronts that has led to important clinical, regulatory and CMC progress in a number of clinical trials being performed around the globe. These programs have propelled Navidea to the forefront of the international dialogue on neurodegenerative diseases. With that very brief overview, I would now like to turn over to Brent to discuss the financial performance.

[Brent L. Larson:]

Thank you, Connie. For the quarter ended June 30, 2013, Navidea reported a net loss attributable to common shareholders of $10.3 million or $0.09 per share compared to the net loss attributable to common stockholders of $5.9 million or $0.06 per share for the same period in 2012. For the 6 months ended June 30, 2013, Navidea's net loss attributable to common stockholders was $17.6 million or $0.15 per share compared to the net loss attributable to common stockholders of $12.9 million or $0.14 per share for the same period in 2012. Revenue for the quarter ended June 30, 2013 was $195,000 compared to revenue of $60,000 for the same period in 2012. For the 6 months ended June 30, 2013, Navidea's revenue was $195,000 compared to revenue of $72,000 for the same period in 2012. Revenue for the second quarter of 2013 included approximately $128,000 during the second quarter from the sale of Lymphoseek, including initial stocking of our partner's radiopharmacy. Other revenues beyond this and now during the quarter ended June 30, 2013 for the 3 and 6 months period ended June 30, 2012 were related to research grants. During the second quarter of 2013, margins on Lymphoseek sales were negatively impacted during its initial launch quarter by 2 primary factors

[Mark Jerome Pykett:]

Thanks, Brent. In summary, we continue to be highly focused and very optimistic about the launch of Lymphoseek. We will continue to be vigilant in our value-enhancing efforts to build commercial momentum and support long-term growth by expanding the product reach, indication area and label. I'm confident we have the best team and partners in place to execute our plan. Pipeline programs targeting the growing neurodegenerative disease markets remain firmly on track, with ongoing late-stage trials. We remain well capitalized with an ability to control costs while we advance these programs. All in all, the future for Navidea looks brighter than ever. At this point, we'd like to turn the call -- open the call for questions now.

[Operator:]

[Operator Instructions] Our first question is coming from Steve Brozak of WBB Securities.

[Stephen G. Brozak:]

Mark, can you tell us what the trajectory looks like and what we should be paying attention to? Because obviously, this is one where a lot of people are looking for data and frankly, I'd rather have you give us an idea of what we should look for as far as paying attention to the most important keys on the Lymphoseek launch.

[Mark Jerome Pykett:]

Steve, thanks very much. Yes, Brent and I both highlighted we'll be able to provide increasing levels of guidance and, in particular, revenue and financial forecast guidance as we get more quarters of experience under our belts, as we get into the early part of 2014. But certainly, in these early days, we're very encouraged by those empirical measures, which we have reported on, which we think are signaling the successful launch and good traction in the early stages of adoption. And those metrics include things like repeat orders, the multiple -- use of multiple doses in a given institution, good significant conversion to formula replacement, and then as we mentioned, ongoing successive period-on-period growth. So even in the early days, we're seeing some very good signals about the trajectory of the launch, and some of the measurements that we are able to assess. All of that happening, of course, in the context of a mid-quarter launch, it being summertime, in terms of the actual utilization and activity within the clinics, our presence, as well as key opinion leaders in the medical communities present [indiscernible] particularly in the May and June time frame. The fact that we don't yet have separate reimbursement, but of course, we'll be looking forward to that in the -- early in the fourth quarter. And then on top of that, we went in with the voucher program early to stimulate early use among users and positive experiences. So with all of that taken together, we're very pleased with this initial period of launch and what we're seeing in terms of both the qualitative and quantitative performance of the product.

[Operator:]

Our next question is coming from Kevin DeGeeter of Ladenburg Thalmann.

[Kevin DeGeeter:]

I actually want to follow up on the previous line of questioning. I've actually received a lot of feedback from clients this morning, trying to better understand the voucher program and just -- yes, more specifically, how we should think about it in terms of revenue [indiscernible] recognition over the next several quarters. So can you kind of parse out, at least, in qualitative terms, is the majority of volumes currently tied to the voucher program? Is less than 50%? How do we sort of think about that? How do we think about a duration of time for that program? Does it begin to wind down after -- pass-through code comes into play, so should we think about it as a material contributor to overall volumes for a defined period of time?

[Mark Jerome Pykett:]

Sure. Thanks, Kevin. But I think the best person to handle that is probably Tom.

[Thomas H. Tulip:]

So Kevin, thanks for the question. Yes, we just really initiated this voucher program over the course of the last week or so. It does not -- it has not contributed significant volume to this point. It is a closed-end program. We envision it happening throughout the course of this third calendar quarter, ending more or less consistent with the availability of the pass-through code on October 1. Again, the reason for this is we believe so strongly that when people get firsthand experience, they get their hands and eyes on the product. They will become believers, and we've seen a couple of strong examples of how that's, even this early, working in practice. I mentioned that very large midwestern institution. So while some of our volume during this quarter will flow through that voucher channel, if you will, we've put a limit on the number of vouchers available. And it is in a closed-end circumstance. So it is not going to proceed significantly into the fourth calendar quarter. Does that answer your question?

[Kevin DeGeeter:]

It does. That's very helpful. And then -- and maybe one follow-up question for me, then I'll get back in the queue. You commented with regard to the supplemental filing for head and neck. That -- the filing is based on the clinical data plus other information. Can you provide just a little more clarity on -- with regard to other components, and specifically, this pertains to other data that Navidea has already generated? Or is there additional, whether it be CMC or [indiscernible]? How should we think about additional things on the checklist that you'll need to complete prior to actually submitting that the head and neck application?

[Mark Jerome Pykett:]

Yes. As I said, Kevin, the data that we would be using in the sNDA are already available. So we're in effect using data that have been previously generated to try and seek ways of extending the label in a manner that would, we believe, support its further clinical and commercial utilization. So it's not as if we're embarking on new studies that need to be completed. The sNDA will rely, of course, on the very, very promising data that we have from the 06 study in patients with head and neck cancer, but then we will augment that with data already generated that we think can provide other advantages as we go through the sNDA and label-extension process.

[Operator:]

Our next question is coming from Stephen Dunn of LifeTech capital.

[Stephen M. Dunn:]

I guess just to put a finer point on the follow-up on Lymphoseek launch in the United States, in essence, you're really priming the pump. And then when the C code goes into effect on October 1, that's the point when it becomes economically favorable for the majority of the client customers, is that correct?

[Mark Jerome Pykett:]

We believe that, of course, the C code will enable separate reimbursement of Lymphoseek outside of the CPT code. All of this is driven at the fair and equitable reimbursement of agents from the end-user standpoint. But of course, from our standpoint, we will be happy to have a separate C code that covers Lymphoseek.

[Stephen M. Dunn:]

Right. So that said, investors should expect really a meaningful, full-fledged launch in the United States some time in -- starting in Q4 but really, it's a 2014 event, is that a fair statement?

[Mark Jerome Pykett:]

I think that's a reasonable outlook insofar as we think the fourth quarter is the beginning of real returns and real data for the product that represents a true inflection point. Of course, that would then build momentum through the fourth quarter and we think in 2014, we'll see the fruits of that inflection point. And that's one reason we feel comfortable forecasting that we will be able to give better guidance for revenue and the overall financial picture for Lymphoseek in early 2014.

[Stephen M. Dunn:]

Okay, great. And my follow-up, switching gears, I want to talk about NAV4694. You guys are always telling me that it's kind of bit in the news as CMS, their coverage with evidence development decision. I wondered since what NAV4694 is really going after right now is early-onset Alzheimer's, which, to me, would be where the initial demand would be. Since most of early-onset Alzheimer's patients are under the age of 65, Medicare doesn't really impact that. And in addition, if we look at a lot of the -- there's over 200 comments on the [indiscernible] with CMS decision already. And it looks like the demand is out there. There's a lot of disagreement with CMS. But on your initial target market for 4694, wouldn't it be really under 65-year-old patients?

[Mark Jerome Pykett:]

Steve, I'll let Tom address in a moment the CMS feedback and how we think this could play into the Alzheimer's and dementia markets in general. But you're correct in highlighting that the positioning of this product that we're pursuing for 4694 is really aimed at where the market is headed. And that is towards the earlier diagnosis of earlier stage patients. I wouldn't necessarily categorize them as only early-onset but even people who are older who have emerging mild cognitive impairment where diagnostic uncertainty is very, very high. So it stratifies a fairly broad range of people and ages. But it's clearly aimed at where the medical value is today, so those patients who have an emerging disease where you really want to be able to discern whether it's due to Alzheimer's disease or some other form of dementia. And as Connie noted, as people are now studying this area in a very focused way, we're seeing a lot of evidence demonstrating that, that diagnostic uncertainty in those emerging cases is having all kinds of consequences for patients, for therapeutic drug trials, for healthcare economics. And so we think it's really the place to focus in. And in doing so, 4694 has some very good characteristics in terms of differentiating the early stages of cognitive impairment. So we think that it will play out over time. I think we have a specific response in terms of the outlook for CMS and evidence development.

[Thomas H. Tulip:]

Sure. Thanks, Mark. And Steve, thanks for the question. For those of you who might not be totally familiar with us, on July 2 -- on July 3, excuse me, CMS issued a proposed rule in large measure declining payment in most cases for Lilly's florbetapir, the pioneer beta-amyloid F18 PET tracer. That caused more than a little turmoil in the Alzheimer's and imaging communities. It was a central topic at the recent Alzheimer's Association International Meeting. As you suggested, there are in excess of 200 responses -- comments on CMS's website. That comment process closed on October 3. As I -- by my counting, over 198 of the 200 were taking issue with CMS's position, both about initial coverage, because this is a coverage decision, and about the application of coverage with evidence development. We've -- we certainly joined -- are standing shoulder to shoulder with the community of Alzheimer's Association, the Society of Nuclear Medicine and Molecular Imaging, the other nascent providers of imaging biomarkers working closely with the Medical Imaging Technology Association. So there's a lot of pushback. We don't think this proposed rule, I want to emphasize it's proposed, will actually stand as written. I think the community won't get everything it wants, but we will be a significant step closer to a broader coverage. And I think we will continue to support Lilly, GE and Piramal as they invest in this early phase, and we would expect to take some advantage of those market development and investment -- leverage those market development leverage activity -- investment activities that we see coming from the pioneers with our potentially best-in-class, second-generation agent.

[Operator:]

Our next question is coming from Charles Duncan of Piper Jaffray. [Operator Instructions]

[Charles C. Duncan:]

My first question was regarding the sNDA for Lymphoseek. And Mark, I'm kind of wondering if you could provide a little bit more color on -- you characterized it as a constructive meeting with the agency. And if you could provide on a timeline to what I'll assume is going to be an approval on a label expansion for the product.

[Mark Jerome Pykett:]

Sure, Charles. Thank you. Yes, as we had previously disclosed, based upon the successful data generated in the '06 study, our data safety monitoring committee had recommended closing the '06 study. And of course, we believe that we would abide by their recommendation. But prior to doing so, I think it's just good practice to check with the regulatory authorities to make sure they're seeing things the same way and that your view of the data would be consistent with what they would do in terms of their foreclosing or their then closing the study. And so the meeting we had with the FDA confirmed that and, I think, reiterated the fact that the data as generated would be supportive of filing a supplemental NDA. We think we can file that supplemental NDA by the end of the year. That sNDA would be subject to a customary 10-month review for label extension. So we think that 2014 would be the timeframe for potentially augmenting the label.

[Charles C. Duncan:]

Okay. And then my follow-up is regarding 4694. I'm not sure that I -- if I missed it or if it wasn't provided. You guys provided a lot of great details in the earlier part of your call, but regarding 4694, the timelines to a data for that product.

[Mark Jerome Pykett:]

So we have a Phase IIb study in patients with mild cognitive impairment that's ongoing now. That will run for several years but will produce data on an ongoing basis as the investigators and sites are able to report their experiences at the institutions. That's a very important study, because I said that's where the interest level for the community really lies insofar as it's the mild cognitive impairment patients in the early-stage cases, where the highest diagnostic uncertainty exists and where we think 4694 can have particular advantages in picking up low levels of amyloid, indicative of early-stage AD. And so that's the trial that we think we'll continue to provide ongoing data. The Phase III registration study has already started as Connie mentioned. That study is going well. We think that study will probably enroll patients through the end of 2014. There will be some follow-up through 2015, but we believe we'll be in a position to file an NDA on 4694 at the end of 2000 -- by the end of 2015, which will include, of course, the pivotable results from the Phase III registration study, as well as data we collect from the MCI study and all prior data gathered. And I'll let Tom add a little bit here.

[Thomas H. Tulip:]

One additional -- and thanks, again, for the question, Charles. So Mark mentioned that we'll have news flow coming from the ongoing Phase II study that Connie is conducting. But externally, consistent with the Australian news we had last month, the Montréal news, any number of very high profile institutions, thought leaders around the world are asking for and now using 4694, and so these investigator-sponsored studies will be generating lots of data, lots of news flow for us going forward. And we clearly believe they will add to the differentiated story for 4694.

[Operator:]

Our next question is a follow-up from Kevin DeGeeter of Ladenburg Thalmann.

[Kevin DeGeeter:]

I had 2 points of clarification. On the issuance of the C code, how should we just think about the timing of revenue recognition into the company subsequently? Should we think about a transition aspect? I'm wondering if you could put a little finer point on when in the October timeframe you might expect the issuance of the code. I'm just trying to get a little more granularity as to how to think about the fourth quarter.

[Mark Jerome Pykett:]

Yes. In terms of the C code, it will be very early in October. This is a regular cycle that CMS runs. And so, we're expecting that first week in October in fact. In terms of revenue recognition, Brent, why don't you take that one?

[Brent L. Larson:]

Yes. I mean, Kevin, I think we've talked about the revenue cycle a bit already. Obviously, given the initial stocking effect that is in the market already, the revenue in the fourth quarter is going to be procedural-based and Cardinal reports that on a monthly basis to us and the cash comes in 45 days after the end of the quarter. So that's pretty typical cycle, and we're looking forward to that growing as we move forward.

[Kevin DeGeeter:]

Okay. And just secondarily, you actually gave a pretty detailed update with regard to strategy for Lymphoseek in EU. Can you walk through maybe in a little bit more detail in terms of the inputs that caused the company to let strategy evolve here and talk a little bit more about the characteristics of the specialty pharma partners. It sounds like we've broadened out the landscape of partners beyond the traditional radiopharmaceutical partners. Just talk a little bit more about the attributes that are most important in light of the evolution of the commercial strategy.

[Thomas H. Tulip:]

Sure. Thanks, Kevin. The -- I think we've learned a lot as we've prepared for and started the launch of Lymphoseek in the U.S. Come to understand how important it is to be able to provide ongoing high-quality medical education to really speak to the clinical attributes and benefits of a product. And those things -- and evolving strategy, which envisions us participating and being recompensed for participation in clinical -- the commercial phase, led us to reconsider the approach in Europe. That was, I think, supported by a stronger recognition of the impact of this different supply chain that exists there and its ramifications for revenue and earnings. So as we look for partners, we came to understand that while the traditional radiopharmaceutical distributors are really very, very skilled, they got great customer access, other partners parties might be able to grow into that role and at the same time provide this incremental clinical -- the ability to discuss the product clinically in ways that might be a challenge for the traditional distribution networks in Europe. And as such, a specialty pharma company would welcome our engagement and involvement, much like Cardinal is here in this country. So they really drive differentiation and the ultimate improved economics we would see there from. So those are the factors that led to our stepping back. Reconsidering the approach and now coming to believe that it's specific, that is specialty pharma company is the best partner for us.

[Mark Jerome Pykett:]

And I will add that I think if we really engaged the potential parties who are interested in working with us, it became apparent that to optimize the long-term success of the product, that we really needed to think about it in this manner. And I think we've identified the partner that we think can deliver the best commercial and medical value for this product in the European setting as Tom mentioned, in addition to allowing Navidea to grow as an organization, both in terms of our capabilities, our activities and focus, as well as our reputation outside the U.S. So we think that a strategic joint approach to what we're trying to achieve in Europe and as well as other countries is really in the best interest of Navidea in the long run.

[Thomas H. Tulip:]

And again, as Mark mentioned, the partners that we've identified is likely to be able to help us move the product, not only in Europe, but in other geographies around the world, with the same mindset, the same mechanism, the same attention to economics.

[Operator:]

Our next question is coming from Stephen Brozak of WBB Securities.

[Stephen G. Brozak:]

And I don't mean to beat a dead horse, but I actually would like to go back into -- on the European focus and -- not just on European focus, but obviously, since you're spending this much time in deliberation in terms of making sure that you've got something that's ideal, can you give us an idea of what the Europe focus will do overall for, let's say, the United States and also the rest of the world? Because obviously, this is one where it's obviously critical that the perception and everything else is the same and what you want it to be. So could you -- I hate the word granularity, but it is applicable here. Could you go into that now? And I will hop back in.

[Mark Jerome Pykett:]

Sure. Steve, thank you. The -- our, I think, frequently increasingly articulated strategy as a business is to focus on clinical development, bringing technical risk out of late-stage programs and optimizing the value of an asset there from and then further optimizing the value by leveraging that which we learn in clinical development, that medical technical expertise that we gained in carrying that expertise into the commercial phase. We're doing that with Lymphoseek and Cardinal in this country. The MSLs are a great example of that, so a focus on medical education. But we're -- we have also thoroughly trained the Cardinal salespeople and radiopharmacists, so they are able to move that same clinical differentiation message. We're not about making consumable products, about making generic-like products. We're all about developing highly differentiated, high-value end-use products that meet unmet needs in significant areas. And so I think carrying that same mindset to Europe and elsewhere is what's driven our decision. So again, I think that this approach promises, and we've got examples elsewhere, which I'm happy to tell you about, we're in the top line. The overall volume is driven by this approach. And because we are delivering more into the mix, we're actually taking a better piece of those overall economics. So volume, price and earnings all are consistent and gains in all of those areas about this overall approach.

[Operator:]

Ladies and gentlemen, at this time, I will turn it over to Dr. Pykett for any additional or closing comments.

[Mark Jerome Pykett:]

Thank you. As always, we thank you for your time on today's call and for your interest in Navidea. We hope you are pleased as we are with the company's progress, and we look forward to keeping you updated on our programs and activities as we continue forward. Thank you.

[Operator:]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect at -- disconnect your lines at this time, and have a wonderful day.