Navidea Biopharmaceuticals, Inc. (AMEX:NAVB) Q4 2022 Earnings Call Transcript

Navidea Biopharmaceuticals, Inc. (AMEX:NAVB) Q4 2022 Earnings Call Transcript March 21, 2023

Operator: Greetings, and welcome to the Navidea Biopharmaceuticals Fourth Quarter Earnings Call and Business Update. . It is now my pleasure to introduce to you, Dr. Michael Rosol, Chief Medical Officer. Thank you, Mike. You may begin.

Michael Rosol: Thank you, and thank you all for joining us here today for the earnings call and business update. This call is being webcast live on our website, ir.navidea.com, and a replay will be made available. Following prepared remarks, we will be conducting a live Q&A session, as you’ve just heard. Navidea’s Chair of its Board of Directors, Mr. Alex Cappello; the Vice Chair of its Board of Directors, Mr. Kim Scott; its Vice President of Finance and Administration, Ms. Erika Eves; and its controller, Mr. Joe Meyer, are all joining me on the call today. During the course of this conference call, we will be making forward-looking statements regarding future events and the future performance of the company. These events relate to our business plans to develop Navidea’s molecular diagnostics and immunotherapeutics, which include clinical and regulatory developments and timing of clinical data readouts, along with capital resources and strategic matters.

All of these statements are based on the beliefs and expectations of management as of today. These statements involve certain assumptions, risks and uncertainties and could cause actual results to differ materially. We assume no obligation to revise or update forward-looking statements, whether as a result of new information, future events or otherwise. Investors should read carefully the risks and uncertainties described within the safe harbor section of our website as well as the risk factors included in the company’s most recent quarterly and annual filings with the SEC. As we begin our update and look back at events from Q4 to date, I thought it would be helpful to reiterate a few of our key areas of focus in our 2023 planning. One, we will continue RA, rheumatoid arthritis, Phase III trial success to full enrollment, NDA submission and FDA approval.

Two, we’ll fully fund the Phase III trial, and the Board of Directors is actively engaged in discussions with capital providers in support of our mission to identify this full RA trial funding. Our goal is to be fully funded this year. Three, we’ll attract and retain the industry’s top biopharmaceutical talent. As our RA development program success grows, so does the need to grow our team to help support key milestone achievements, identify and support key strategic relationships and initiate new PR IR efforts as a way to share our trial and milestone success. As I mentioned a moment ago, on the financing front, the Board of Directors is actively engaged in our financing effort, and we hope to have news to announce there shortly. In the last quarter, we have advanced our clinical trials in rheumatoid arthritis as well as our pipeline in other diagnostic indications and in therapeutics.

We continue to make solid progress on our Phase IIb trial in rheumatoid arthritis comparing imaging to biopsy. And during Q4, we presented at an international conference our updated promising preliminary results supporting tilmanocept’s ability to distinguish the fibroid pathotype from the nonfibroid in the first 13 participants evaluated by the time of the presentation. These strong early results support our hypotheses and provide excellent data in support of tilmanocept imaging as a biomarker of CD206 expression in joints of patients with RA. We also continue to enroll into the RA Phase III and are actively enrolling in 12 sites. We continue to advance our therapeutics and imaging applications through key existing collaborations with well-known institutions and investigators across the globe as we work to grow the company’s intellectual property.

We are proud of the progress we have made and the planning we are putting in place to benefit our associates and our shareholders here at Navidea. Regarding the CRG and Dr. Goldberg litigation matters, the company has that ruling that essentially bracket its exposure in both. We will continue to minimize exposure. Now I’d like to provide a brief update specific to our clinical results. So I’ll begin with the progress in our rheumatoid arthritis program. In NAV3-33, the Phase III, we continue to have good enrollment into this Phase III trial in RA. The initial indications we are pursuing for FDA approval are: one, early prediction of treatment response to a new or first-time anti-TNF alpha therapy; and two, identify RA patients with low level of localization of tilmanocept, who are less likely to respond to anti-TNF alpha therapy.

As we have discussed previously, there is a large unmet need for a reliable early predictor of whether a therapy is working in a patient with RA. Because if the drug is not working, the patient’s disease is not being treated, and this can lead to long-term health consequences, along with unnecessary high drug costs for ineffective therapies that also bring with them possible side effects. Our Phase III trial will establish the ability of tilmanocept imaging to serve as an early predictor of treatment response in RA patients switching to an anti-TNF alpha therapy, addressing that unmet medical need. In NAV3-32, our comparison study of tilmanocept imaging to joint biopsy, we remain in active recruitment. As we’ve announced and discussed previously, the preliminary results of this trial have been promising.

Our aim is to recruit patients with each of the 3 pathotypes of RA to obtain comparative imaging and pathology results. And the trial is designed so that we enroll a minimum of 4 subjects in each of the 3 subtypes of RA: fibroid, diffuse myeloid and lympho-myeloid. So overall trial size has been expected to range between 12 and 24. To date, we have achieved our enrollment targets in 2 out of those — 3 of those pathotype buckets, with patients having had both their imaging and joint biopsies completed. The primary objective of this study is to assess the relationship between joint-specific tilmanocept uptake values and the pathobiology of the RA-involved joints. Knowledge of an individual RA patient’s pathotype may be clinically important because it may predict to which RA therapy a patient is likely to respond.

There is a growing body of literature suggesting that those patients with the fibroid type of RA are much less responsive to the anti-TNF alpha drugs, and so a means of determining whether or not a patient has this particular pathotype is seen as extremely important to a number of key opinion leaders in rheumatology. As of this time, there is no reliable way of assessing a patient’s pathotype of RA other than by doing a biopsy, and we have hypothesized that tilmanocept could provide this information. So we presented updated preliminary results on the first 13 patients back at November’s American College of Rheumatology meeting. That’s the largest rheumatology conference in the world. These results presented there indicated that tilmanocept uptake in the RA-inflamed joints is able to discretely differentiate patients with the fibroid pathotype, that is patients with low macrophage involvement, from those having either the diffuse myeloid or lympho-myeloid types of RA, that is patients with higher macrophage involvement.

So these data also provides support for one of our indications in the Phase III trial. The ability to predict from a baseline scan alone, whether a patient is likely to receive a meaningful clinical benefit from an anti-TNF alpha therapy. Since, as I mentioned, there is increasing evidence that if a patient has the fibroid type of RA, they are less likely to receive significant clinical benefit from anti-TNF alpha therapy. You might recall that in our previously completed Phase IIb study, NAV3-31, that contained a pilot arm looking at the efficacy of tilmanocept imaging at early prediction of treatment response, those patients who exhibited a low level of tilmanocept uptake in their joints on their baseline scan before they started therapy had an almost 90% nonresponse rate to anti-TNF alpha therapy using a clinical gold standard assessment.

Importantly, these promising early results have opened up conversations with pharmaceutical companies who are developing therapeutics for RA, with the possibility of tilmanocept imaging being used as a biomarker in their drug development pipelines. The key differentiator between now and prior discussions we have had with these kind of companies is that we have this additional promising data in hand. And as we move forward and gather more data towards trial completion, if these current results hold, we will be in an even better position for discussions with companies with which to work. We continue to make very good progress on automating the imaging quantification as well, which will have significant benefit for the commercial product. We are working closely with MIM Software, M-I-M, on a definitive agreement for them to be our commercial partner for image quantification of tilmanocept imaging in RA.

So once again, MIM is a leading medical imaging software company based in Cleveland with a large footprint in the nuclear medicine space. We are currently integrating their existing image analysis workflow into our Phase III trial, and their software should be used for the image analysis for this trial as well as our normative database trial data. The workflow for these trials is extremely well designed. And by integrating them into our trials at this stage, this should be helpful for development and integration of a fully automated workflow that they are developing. Already, they have completed a pilot study using data from our earlier trials, demonstrating that they can develop this fully automated application that should be able to robustly reproduce our quantitative imaging reads using our proprietary algorithm.

This is important for rollout of a commercial product. The ability to perform the quantitative imaging reads rapidly and reproducibly without having to have a bunch of people in the room actually drawing the reference regions of interest will help us go at large scale through this automated method, and that will be critical to large-scale adoption of tilmanocept for RA. Keep in mind that all of this, the image analysis methodology as well as the data upon which it is built, including the normative database you’ve heard us discuss before, is not only critical to driving the most accurate and sensitive objective read of our RA images, but it also serves as a significant barrier to entry to possible competitors in this space. You might have also seen the conversion of a provisional patent application to an A1 patent application earlier this month.

This application involves using clinical and serological markers in combination with our imaging readout to possibly improve our predictive capacity for treatment outcome over using our imaging alone. So we will have IP protection on combinatorial approaches as well if they work and if granted. We have data from the NAV3-31 Phase IIb trial that I just referenced that was completed a while ago that suggests this indeed might work. In the diagnostics pipeline development, we’ve completed preclinical studies on gallium-68 tilmanocept for PET imaging and related next-generation Manocept imaging agents. We work on this in collaboration with researchers at the University of Alabama at Birmingham or UAB. We’ve also completed work on our NIH-funded preclinical studies for evaluating gallium-68 tilmanocept in various new imaging agents similar to tilmanocept in a mouse model of atherosclerosis.

Work on another important set of preclinical studies was completed with our collaborators at UAB. This work explored varying the molecular weights of tilmanocept-like constructs and evaluating their biodistributions, following intravenous injection with and without competitive blocking. Results showed that by varying the molecular weights of these compounds and introducing competitive blocking agents, it was possible to significantly increase localization of tilmanocept-like imaging and therapeutic constructs to target tissues like tumors while concurrently reducing localization to off-target organs such as the liver. These results show a path to improving our diagnostic imaging and to greater and more effective targeted delivery of our therapeutic constructs to tumors and other sites of macrophage and valve pathology.

We presented these results at the Society of Nuclear Medicine and Molecular Imaging meeting last summer, and these were electronically published on March 7 of this year in the Journal Molecular Imaging and Biology, and you can access that online. On the therapeutic assets front, we are advancing our candidates in the oncology and anti-inflammatory spaces in preclinical studies with the goal of filing investigational new drug applications to advance to human trials in 2024. These filings will be significant inflection points and opportunities for licensing and partnering deals for the company. Work on new drug delivery constructs and new targeted payloads has also progressed. These new constructs carry new drug payloads that may be more effective than doxorubicin for beneficially altering the immune status of tumor macrophages, for example.

Results in mouse models have demonstrated that when administered alone or in combination with another cancer drug, these therapeutic constructs significantly reduce the rate of tumor growth by an average of 76%. Some of our results covering new bisphosphonate payload constructs were presented at the Tumor Myeloid-Directed Therapy Summit meeting. More recently, on November 10, the full spectrum of results for the paclitaxel and novel bisphosphonate constructs were presented at the Annual Meeting of the Society for Immunotherapy of Cancer held in Boston. In addition, we completed what’s called a maximum tolerated dose study in mice for our bisphosphonate-carrying construct. The results of this study will facilitate design of studies intended to evaluate anticancer efficacy of this construct in the future.

All of our preclinical work with potential cancer immunotherapy constructs are intended to enable Navidea to choose a lead candidate for macro-type-, phenotype-altering drugs for oncology indications. Preclinical studies are also ongoing in leishmaniasis. Leishmaniasis is a vector-borne chronic disease caused by a protozoan parasite that replicates in CD206-positive macrophages. It is transmitted to humans through the bite of infected sandflies found in parts of the tropics, subtropics and Southern Europe. It’s rare in the United States, but in more tropical countries where the sandfly vectors are found, it is a common serious and potentially life-threatening disease. The U.S. FDA has designated leishmaniasis as a neglected tropical disease, making new therapeutics of this disease potentially eligible for what’s called a priority review voucher that Navidea could sell potentially for more than enough to back cover the cost of development as well as accelerate a number of other pipeline candidates.

Previously, Navidea scientists and our collaborators at the NIH published research results demonstrating that high CD206 expressing macrophages play a role in the dominant form of the disease. This project has advanced significantly in the last year with results from 3 separate experiments showing that a novel construct created by Navidea has significant therapeutic potential to control leishmanial infections in mice. Concurrent with reduced numbers of these parasites, alterations in the immune status of the lesions that are caused by leishmaniasis were observed with potential implications for the mechanism of action of our novel therapeutic construct. Additional experiments are ongoing or our plan to follow up on these very promising initial results.

That brings me to our overall intellectual property front. We received notification of issuance of a patent from the United States Patent and Trademark Office for the company’s application titled Compositions And Methods For Altering Macrophage Phenotype. This patent covers the ability of our constructs to stimulate an immune response against tumors through targeted delivery of payloads that change the nature of macrophages to make them more pro-inflammatory. Efficacy of these constructs has been demonstrated in preclinical studies, including the ones I just spoke about. We have also received notifications of issuance of patent application of patents in Israel and in Canada. Please refer to the earnings call press release from earlier today for more detail.

So we continue to submit new provisional applications and work on our pending ones. We have filed a new provisional patent application describing a new chemistry for addition of mannose sugars to our mannosylated dextran-based imaging and therapeutic constructs. This new chemistry results in a different linkage holding the mannose onto our constructs, one that is more stable than the linkage currently used, and is designed to facilitate commercial scale-up and production of our next-generation imaging and therapeutic constructs. In partnership with our excellent patent attorneys, we have an active IP protection strategy for the company that will provide needed protections and rights to both our current diagnostic and therapeutic agents as well as to our next-generation molecules and disease indications.

On the Lymphoseek front, regarding Lymphoseek Europe and the rest of the world, our strategy has been and remains to find the right partners for marketing and distribution for Lymphoseek and other company pipeline candidates in Europe and beyond. The reason for this is we are focusing on the long-term strategy of partnering for marketing and distribution. On the drug manufacturing and supply front for both Lymphoseek and the RA product, we have been and continue to work with a new active pharmaceutical ingredient or API supplier as well as a final drug product supplier. Progress continues. And as of this time, we are advancing towards completion of these and readiness for clinical and commercial supply. This work has implications for Lymphoseek in China and Lymphoaim in India as we need to be able to supply a steady and reliable stream of product through our partners in these countries.

So these are just some of the highlights of the last quarter that we wanted to touch on for this update. We remain largely focused on the RA pipeline, specifically the Phase IIb imaging, the biopsy trial in the Phase III, while we continue to support and push progress on our other diagnostic and therapeutic indications. As always, I want to thank the team here for their tireless efforts to keep things moving and our network of clinical trial sites and academic research collaborators for all of their hard work. Our business strategy remains to advance our pipeline products to key inflection points and seek appropriate partnerships for commercialization and marketing. So with that, I’ll close the update — summary update. I want to thank you, and I’m going to turn it over to Erika now for the financials.

Erika Eves: Thank you, Mike. As announced last week, I will be leaving Navidea at the end of the month. Our current Controller, Joe Meyer, will be taking over many of my responsibilities. So I’d like to introduce all of you to Joe, who will now read the financial results for the fourth quarter and full year of 2022. Joe?

Joseph Meyer: Thanks, Erika. And for the first time, hello, everyone. Total revenues for the 3-month period ended December 31, 2022, were approximately $1,000 compared to $50,000 for the same period in 2021. Total revenues for the year ended December 31, 2022, were $66,000 compared to $532,000 for the same period in 2021. The decrease was primarily due to the 2021 partial recovery of debt previously written off in 2015, the 2021 receipt of reimbursement from Cardinal Health of certain research and development costs, decreased grant revenue relative to small business innovation research from NIH supporting Manocept development and decreased license revenue from transitional sales up to Manocept in Europe. Research and development expenses for Q4 were $1 million compared to $1.4 million for the same period in 2021.

R&D expenses for the full year 2022 were $6.0 million compared to $5.1 million for the full year 2021. That year-over-year increase was primarily due to increased drug project expenses and increased employee compensation, including incentive-based awards, offset by decreased regulatory consulting expenses. Selling, general and administrative expenses, or SG&A, for Q4 were $1.3 million compared to $2.3 million for the same period in 2021. SG&A expenses for the full year 2022 were $8 million compared to $7.5 million for the full year 2021. Following the ruling by the Texas Court in August 2022, the company recorded $2.6 million of legal fees in SG&A pursuant to the CRG judgment. The year-over-year increase was also due to increases in insurance and depreciation and amortization, partially offset by decreases in employee compensation, including fringe benefits and incentive-based awards, expenses related to European operations, travel, legal and professional services, investor relations and shareholder services, general office expenses, facilities costs, losses on the abandonment of certain intellectual property, and franchise taxes.

Navidea’s net loss attributable to common stockholders for Q4 was $3.5 million or $0.11 per share compared to $3.7 million or $0.12 per share for the same period in 2021. Navidea’s net loss attributable to common stockholders for the full year 2022 was $17.2 million or $0.56 per share compared to $11.7 million or $0.40 per share for the full year 2021. Navidea ended the fourth quarter of 2022 with approximately $2 million in cash and cash equivalents. And with that, I’ll throw it back to you, Mike.

Michael Rosol: Thank you, Joe and Erika. Thanks for everything, Erika, that you’ve done over the years, not just my years here, but before. And now I’d like to open up the call to questions. I’ll let the moderator do that more professionally than I just did. Joining me for the Q&A session, of course, will be the folks here in this room, myself, Erika, Joe. And then indeed, we have Alex Cappello, the Chair of our Board; as well as Mr. Kim Scott, the Vice Chair.

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Q&A Session

Operator: . And the first question comes from the line of Edward English, a private investor.

Edward English: Mike, this is Eddie English. Before I ask my first question, though, I would like to extend a shout-out to Erika Eves for the 30-plus years of service and support, not only to Navidea but us, shareholders, and to wish her the very best in her new endeavors. With that, Mike, the elephant in the room based on the report that came out this afternoon, in my mind, is the current cash position with only $2 million at the end of the fourth quarter and a historical cash burn rate of $800,000 to $1 million a month. Can you shed some light on how far in the future you all can operate with your existing cash reserves?

Michael Rosol: Eddie, thanks for the question, and I appreciate the shout-out. I’m sure Erika does to her.

Erika Eves: Thank you. Appreciate it.

Michael Rosol: Yes. In any event. So Eddie, great question. Really, it’s no secret that the company has been in a resource limited environment, but we are optimistic that we’ll have something to announce around capital infusion soon. As I mentioned, the Board — members of the Board are working diligently on this, and that’s really all that we can say about it at the current time. I appreciate the question, though. So that’s really what we can say right now.

Edward English: Okay. One follow-up, and I’ll abide by the rules and then go back in the queue because I have a few more. But my next question is around your plans to become NYSE-compliant by July 28. Are you all on schedule to meet that deadline? Or what can you tell us about that?

Michael Rosol: I’m going to let Erika use her great financial wisdom to have one — she should have something to say on this last Q&A. Go for it, Erika.

Erika Eves: One final word for me. Yes. So obviously, one of the biggest issues facing us is the NYSE cure that is required, and I think the financing that the Board is currently working on should go a long way towards satisfying the requirements. And so I would say at this time, expectations are that we will indeed become — regain compliance with NYSE by the end of the cure period.

Operator: And our next question comes from the line of with — another private investor.

Unidentified Analyst: Yes. I appreciate you touching on Lymphoseek a few minutes ago. I wanted to — hopefully, you can expand a little bit on that. I know that it’s been 8 years since we’ve retained the international rights to selling Lymphoseek. And in all that time, it appears we’ve not been able to generate any significant revenue. And I wanted — if you could put your honesty on this, is there something more specific that we could do to make this happen? Or is Lymphoseek a lost cause at this point?

Michael Rosol: Yes. Great question. I’m happy to answer and give you as much transparency as possible. So that’s a summerlong story that I’ll try to stick to a shorter version of. So as you and others know on this call, we — Navidea had licensed the European rights to Lymphoseek to a company called Norgine. And they’re a fine company. Their strategy, we might say, was probably not optimal strategy for penetrating the market of sentinel lymph node biopsy assessments or lymphoscintigraphy in Europe. And it’s not all just on their strategy. See, in Europe, there is a viable competitor for Lymphoseek. It’s a version of — it’s a colloidal compound. There are different names, but one of the common names is Nanocoll. And it’s a pretty good agent, right, for — and it’s relatively inexpensive.