Navidea Biopharmaceuticals, Inc. (NAVB) CEO Jed Latkin on Q2 2020 Results –...

Navidea Biopharmaceuticals, Inc. (NAVB) CEO Jed Latkin on Q2 2020 Results – Earnings Call Transcript

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Navidea Biopharmaceuticals, Inc. (NYSEMKT:NAVB) Q2 2020 Results Earnings Conference Call August 13, 2020 5:00 PM ET

Company Participants

Jed Latkin – Chief Executive Officer, Chief Financial Officer and Chief Operating Officer

Mike Rosol – Chief Medical Officer

Erika Gibson – Director of Finance and Administration

Conference Call Participants

Michael Okunewitch – Maxim Group

Vernon Bernardino – H.C. Wainwright

Jacob Natowitz – Private Investor

Mike Kelly – Private Investor

Operator

Greeting and welcome to Navidea Biopharmaceuticals’ Q2 2020 earnings and business update conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Jed Latkin, CEO. Thank you. You may begin.

Jed Latkin

Thank you Devon. First off, I just want to say that 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 question-and-answer segment.

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 as well as the impact of the COVID -19 pandemic on Navidea’s business operations.

All of these statements are based on the beliefs and expectations of management as of today. These statements involve certain assumptions of 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 recently quarterly and annual filing with the SEC.

I want to thank everyone for calling in for today’s second quarter conference call. The past several calls, I have had relatively brief comments as I wanted the call to focus on the clinical developments and leave enough time at the end for Q&A. Today, my comments will be a little longer than normal due to the corporate activity that was announced on Monday.

A legacy of this company that I inherited was twofold. The ever promised golden partnership and the myriad existing contracts that didn’t live up to their initial hype.

Over the past almost five years, I have spent countless hours extricating Navidea from the web of agreements that either bound our products in profit limiting arrangements or prevented our future products from being partnered. I also spent countless hours slowly but surely trying to secure the right partnership for each of our future negations. I truly feel that what we announced on Monday is the right agreement for RA in North America and I want to go through step-by-step why I strongly feel this way.

I want to take several minutes to discuss the binding MOU that we signed this week. As I discuss this MOU, I will stress four key reasons why we have pursued this route with Jubilant and why you, as the owners of this company, should be more excited today for the future than you were on Sunday. I will also briefly discuss the proposed transaction to sell up to $25 million in shares of our common stock.

I also want to stress now and later that this was an opportunistic raise, not a necessary raise. There is a massive difference. In one instance, you are forced to take money on someone else’s terms. In an opportunistic raise, you get to set the terms and if you don’t like them, you walk away because you know that your main projects are fully funded.

I would also want to apologize in advance. If some of the language I use sounds too simplistic, but I would like to ensure that everyone listening to this call, its replay and/or reading its transcripts clearly understand our thought process as we progress into this partnership. If anyone has any questions at all, we will stay on the line as long as it takes tonight to answer all of your questions.

The first point that I want to make is that the binding MOU that we signed this week has been in negotiation for over 14 months. The terms of our potential partnerships are binding. Extensive and exhaustive due diligence has already been conducted. Over the next period of time, we will conduct the final leg of due diligence and work towards the finalized license and distribution agreement. But make no mistake about it, this is a binding deal with very favorable economic terms for Navidea.

Before I get into the rationale behind the commercialization deal, I want to briefly discuss our partner, Jubilant. I have hinted over the past year that we have one main partner in mind for this product and I am proud to announce that Jubilant was always that partner. Jubilant is an integrated global pharmaceutical company with revenues of roughly $1 billion. They have 5,200 employees engaged in radiopharmaceuticals, allergy therapy products, contract manufacturing, API products and generics.

Jubilant is recognized as a partner of choice by leading pharmaceutical companies globally. Nowhere is this more evident than Gilead choosing Jubilant as one of its partners for remdesivir. Aside from being a large global conglomerate with operations spanning five continents, they are also young and hungry in the U.S. just as we are.

In regards to its radiopharma assets, Jubilant operates the second largest centralized commercial radiopharmacy network in the United States. Jubilant operates over 53 radiopharmacies in America. The company’s radiopharmaceutical products business offers a broad portfolio of products, which include diagnostic and therapeutic agents as well as state-of-the-art devices for cardiology, oncology, pulmonology and endocrinology.

Backed by a global network of R&D facilities and staff, Jubilant is positioning itself to be the global leader in nuclear medicine by making significant investments in early and late-stage product development. They have four FDA manufacturing facilities in North America. And as part of this agreement, they will handle the pack and fill of RA product.

When we started our NAV3-31 Phase 2b trial, we were excited to commence working with Triad, Jubilant’s radiopharmaceutical subsidiary, because we had an opportunity to introduce tilmanocept to individuals that have never had their hands on the technology. Why was this? Well, we had an exclusive relationship with Cardinal that prohibited Lymphoseek from getting into the hands of other radiopharmaceutical players.

I am reminded of a meeting several years ago, where I sat across from a GE radiopharmacy executive that was pleading to use tilmanocept, but unfortunately was unable to access it. This struck a chord with me and was the foundation for this deal. I want to make sure that everyone has access to this product and that we achieve 100% market penetration in the U.S. and globally. Jubilant will help make that happen.

Just as they are feverishly working in India to help Gilead with its remdesivir, so too here in the U.S., they will assure the widest distribution possible for our RA diagnostic. The terms of the planned partnership also ensures Jubilant makes all reasonable efforts to commercialize the product, including building out a channel to call on rheumatologists, the ultimate prescriber of our product. What is also important is that every radiopharmacy will have access to the product through Jubilant’s wholesale distribution network.

When we started the discussions with multiple partners over a year-and-a-half ago, we focused on four pillars, which would maximize the value of any partnership signed by Navidea. I want to stress that, maximizing the value to Navidea. First, bringing a partner that has the resources to see this product, not just through the approval, but to make it a $1 billion product. The life science division of Jubilant has a market cap of over $1.7 billion and they have the resources to make this product to have success. It’s key that whomever our partner is, they are committed to spending tens of millions of dollars upfront in developing the commercialization plan.

Second, contribute upfront payments that exceed the cost of development and also make sure that Navidea’s chosen partner has skin in the game so that they are inherently bound to the success of the company as a whole. Navidea insisted that any deal will be constructed in such a way that would be 60-40 or 50-50 cash and equity investments to guarantee that the partner was invested in the overall success of the company and not just the RA product. That is very important that we stress that point.

Third, build in sales milestones that reflect the potential success of the product and provide long term future capital to allow for continued growth and reinvestment in the company’s pipeline. As this product becomes a greater and greater success, we have several $100 million in sales milestones that can be hit.

And finally, fourth, secure an above-market royalty stream that provides long term cash flow that someone can invest in and support share price appreciation. The royalty rates that we are receiving are substantial and will allow for the company to continue to further its pipeline, but more importantly, will allow for long term visibility on the inherent value of this product and its earnings potential for current and future investors. Point four is possibly the most important one and it brings us back to where we started.

Navidea’s long term value is rooted in the inherent success of each and every one of its future products. It’s crucial that as we bring a product to partnership, we don’t just sell it off for a sugar rush right now because that doesn’t last and that doesn’t promote long term price appreciation. What we are striving to become and what this deal does for us is we have now secured a very profitable long term cash flow stream for our first product post Lymphoseek.

In doing this, we have partially fulfilled the promise I made two years ago when I took over as CEO. The goal then was to focus solely on RA and bring it to fruition. No more distractions, no more detours and no more other projects. Once the ELDA is complete, we will have done that. And with that, we chose to also raise additional growth capital to start in earnest on the other projects that will increase Navidea’s long term share price.

I want to reiterate once again, this is growth capital, not day-to-day capital. This is very different than what many of you are used to. The raise that we contemplated was to promote growth and not assure survival. What this means is we won’t be forced to do deals as we have in the past. We can negotiate from a position of strength. This raise, which does have a floor price to it, is to promote future growth now that the remainder of our planned RA trials are fully funded through FDA submission.

We will have more news on that very shortly. The new capital will be used just as judiciously as past capital under the current management team. It will not be wasted on pie-in-the-sky pipe dreams or 30 different half-done projects. It is going to be very focused and hopefully lead to near term clinical success and long term commercial value.

With that, I would like to turn the call over to Dr. Mike Rosol for the clinical update.

Mike Rosol

Thank you Jed and hello everyone. As always, I am happy to participate in today’s call and provide you with updates from the clinical side. So I will begin with the progress on our currently running Phase 3b trial in RA. We continued to make significant strides forward in the last quarter. As you know from our announcements, not only did we achieve our second interim analysis milestone, but we also completed full enrollment into this trial, meaning all 105 subjects have been entered into the study with arms one and two entirely complete and the latter half of subjects in arm three continuing to have their longitudinal imaging and clinical assessments, as outlined in the study protocol.

As a reminder, this Phase 2b is a three-arm trial. In arms one and two, we are evaluating the repeatability, reproducibility and stability of our tilmanocept imaging readout in both healthy subjects and in patients with active RA. And in the third arm, we are mirroring the upcoming Phase 3 study in order to enable us to obtain data to help validate our sample size estimation and have a first look at the ability of tilmanocept imaging to serve as an early predictor of treatment efficacy and as a monitoring tool.

As we have discussed and presented in the past, the interim results on the first two arms were very positive, demonstrating low variability of imaging both within day and over time. Those data demonstrated that tilmanocept can provide robust quantitative imaging and healthy controls and in patients with active RA and that this imaging is reproducible and can define joints with and without RA involved inflammation.

You may have seen, we presented the results of that first interim analysis at Europe’s largest rheumatology conference, the European League Against Rheumatism Meeting this last quarter. We are planning to present the second interim analysis data later this year at an international meeting. As we announced last quarter, the results of the second interim analysis looking at the first half of patients enrolled in arm three of the trial were also very positive and supportive of our hypothesis. Together, these interim data provide evidence that tilmanocept imaging can provide quantifiable imaging assessment of RA involved joints that enables early prediction of clinical response as well as monitoring of clinical status. These results were and are extremely encouraging and gave us the confidence to proceed forward with the study as well as to continue to prepare for the Phase 3.

In parallel with continuing to enroll into the current trial, we are presently in the midst of preparing a fleshed out package of all of our interim analyses data from all three arms of the trial to take to the FDA to affirm our plans for the Phase 3. We are targeting the next month or so for the submission of our meeting request to the FDA. Following this meeting and it all goes as expected, since we have been in alignment with the recommendations all along the way, we will begin to officially open up sites for the Phase 3.

As I have said in the past, we are well positioned for the Phase 3, since most of the sites that are currently recruiting into the ongoing Phase 2b will be rolled right into that trial. And so the logistics and strategies for recruitment are already established. We will continue to follow the remaining arm three subjects in the current trial and are also preparing for the start of the separate Phase 2b comparative study of our imaging readout to histopathology from the joints of patients with RA. This will be an adaptive study where we aim to recruit patients with each of the three known subtypes of RA and obtain comparative imaging and pathology results from joint biopsies of their RA inflamed joints.

This study will primarily enroll subjects in the U.K., where our principal investigator, who is the world’s leading physician in joint biopsy of patients with RA, is located and where there is a network of academic centers that also have specialists in this domain. We will have at least one site in the U.S. as well and we have been actively working to obtain all necessary approvals and putting the contracts in place to begin the study shortly. Just this week, we spoke with the main U.K. site and PI, Principal Investigator and learned that with COVID-19 restrictions easing in the U.K., they hope to be in a position to begin recruiting in the next month or so.

Recall that this trial is not required for FDA approval in the initial indications in RA that we are going for, but we believe it is critical in order to achieve qualification of CD206 as a biomarker for RA as well as to engage with pharma for its use in trials of new RA therapeutics. We will also provide rheumatologists with a fundamental gold standard of information related to our imaging readout and subtype of RA. For example, if our imaging at baseline can be used to classify a patient subtype of rheumatoid arthritis, this is implications for what class of therapies might or might not work on that patient and would therefore have immediate impact.

In other indications, I updated you previously that we have completed all imaging and biopsy of all subjects in our NIH-funded study of Kaposi’s Sarcoma and have all of the data in hand. Analysis of these results is ongoing.

On the cardiovascular disease front, work is continuing on the clinical investigator-initiated atherosclerotic plaque imaging study at MGH in Boston. And the preclinical studies of gallium tilmanocept imaging for NIH-funded project with the University of Alabama, Birmingham have renewed after a closedown at UAB due to the Coronavirus and we have a study underway as I speak. We have been granted an extension on the funding for that project by NIH due to the closedowns.

The cardiovascular potential is large and we have been having internal and KOL, key opinion leader, discussions about possible trial designs and specific indications to bring to the FDA to advance this part of our pipeline. We also continue to make significant strides towards producing the next generation of our molecule that we think will improve performance in diagnostic applications. And in line with my statements from last quarter’s earnings call, during this last quarter we have filed a provisional patent on this methodology and there are ongoing preclinical studies related to this.

On the therapeutic side, using funding from our NIH therapeutics grant, we believe we have improved the method of synthesis for therapeutic constructs that can then be tested in human subjects. Those new drug delivery constructs are currently being evaluated in cell cultures and in animal models. It is our intention to file a new provisional patent application covering the improved synthesis protocol.

Those are just some of the highlights of the last quarter that I wanted to touch on for this update. We remain largely focused on the RA pipeline, specifically preparation for the meeting with the FDA, planning for the Phase 3 and preparation to open enrollment in the imaging to histopathology Phase 2b comparison study while we continue to support and push for progress on these other diagnostic and therapeutic indications as well. 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. I wanted to keep these remarks relatively brief today since I know there’s much to discuss in the Q&A period.

So with that, I would like to thank you and turn the call back over to Jed. Jed?

Jed Latkin

Thank you Dr. Rosol. I appreciate your comments and keep up the good work. Now I want to turn the call over to Erika just to go through some of the financial highlights of the quarter.

Erika Gibson

Thank you Jed. Total revenues for the second quarter of 2020 were $271,000 compared to $260,000 for the same period in 2019. Total revenues for the first half of 2020 were $427,000 compared to $302,000 for the same period in 2019. The increases were primarily due to increased grant revenue related to Small Business Innovation Research grants from the National Institutes of Health supporting Manocept development.

Research and development expenses for the second quarter of 2020 were $1.3 million compared to $1.1 million in the same period in 2019. R&D expenses for the first half of 2020 were $2.3 million compared to $1.8 million in the same period in 2019. The increases were primarily due to net increases in drug project expenses, including increased Manocept diagnostic development costs, offset by decreased Manocept therapeutic development costs, coupled with increased employee compensation.

Selling, general and administrative expenses for the second quarter of 2020 were $1.3 million compared to $1.9 million in the same period in 2019. SG&A expenses for the first half of 2020 were $3.2 million compared to $3.6 million in the same period in 2019. The decrease was due to decreased legal and professional services, travel, insurance, depreciation and investor relations costs and were offset by increased employee compensation and franchise taxes.

Navidea’s net loss attributable to common stockholders for the second quarter of 2020 was $2.4 million or $0.11 per share compared to $2.7 million or $0.24 per share for the same period in 2019. Navidea’s net loss attributable to common stockholders for the first half of 2020 was $5.1 million or $0.24 per share compared to $5.1 million or $0.48 per share for the same period in 2019.

Finally, Navidea ended the second quarter of 2020 with $1.6 million in cash and investments. However, since June 30, the company has received the final $3.9 million of cash related to the February 2020 funding transactions as well as $1 million related to execution of the Jubilant MOU.

I will now turn the call back over to Jed.

Jed Latkin

Thank you everyone. I just want to once again say how excited we are about everything that we have been working on. But now let’s turn it over to Q&A.

And Devon, with that, can you open up to questions-and-answers?

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question from the line of Michael Okunewitch with Maxim Group. Please proceed with your question.

Michael Okunewitch

Hi Jed. How is it going? Congratulations on the progress.

Jed Latkin

Thank you so much. I appreciate it.

Michael Okunewitch

All right. So I know logistics are generally pretty important in radiopharma. You can’t exactly leave the stuff on a shelf. So I would like to ask how much of the market for RA is covered by Jubilant’s distribution? And then also, I want to see if you could clarify something you mentioned. Is this not going to be exclusively distributed through Jubilant’s nuclear pharmacies?

Jed Latkin

So they have, as we said, I think, it’s 52 radiopharmaceutical sites across the country. But as we discussed, they are the exclusive wholesaler of the product. But the intention in the final agreement is that, it will be available to everybody in the market. So they will resell as a wholesaler to whatever individuals wanted. I think one of the issues that we have with Lymphoseek is that it was 100% exclusive to Cardinal and they kept it and they did not share it with anybody else.

The terms of the agreement is that the wholesale distributor that Jubilant is, they will sell it to their radiopharmaceutical, the Triad Group, but they will also sell it to Cardinal, GE, et cetera. That’s the intention that everybody will have access to the product so that instead of only covering 70% of the market approximately, as we did with Lymphoseek, we will cover 100% of the market. And that was very important to us to make sure that everybody has access to it.

Michael Okunewitch

All right. Thank you. That helps clear a fair bit. And then also on the distribution deal. It also covers Canada and Latin America, which have approximately double the population of the U.S. itself. So how big is the market in RA for those additional areas?

Jed Latkin

Well, it’s a good question, but it’s really hard to estimate that. I mean, those are big population areas. But in terms of the ability to pay, even though the cost is going to be somewhere as we planned somewhere around what Lymphoseek currently costs. It’s hard to really estimate what those markets will be in terms of the actual revenue side. The main market is the U.S. and when we give our assumptions of $0.5 billion on the initial indication and $1 billion, we are really looking at the U.S. market.

Those markets will be nice. And we do think that as it gains more and more acceptance in the U.S., especially where we believe it’s going to become the de facto diagnostic for RA, we do see significant revenues in other markets, but really, the main focus is on the U.S. And it’s really like that for a lot of the products in the market, as you know.

Michael Okunewitch

All right. Thank you. And then just as we are on the topic of international. I would like to see if you could just give a general update on Lymphoseek in Europe. I know you guys are expecting to get that back in, I think, November now. So have there been any ongoing discussions on that front with partners or anything like that?

Jed Latkin

So we are in the process of, well, first off, we actually just got back the MA. So we do have the marketing authorization. So we actually re-own the product now fully. It will continue until November in terms of the negotiations and extricating ourselves from the agreement with Norgine and then the discussions will start in earnest once we have completed. So we are working on a pretty extensive third-party report on the overall value of the market.

So this is something that we did sort of initially way back when. But now as the product has gotten more and more developed, at least in the U.S., we had a third-party do a valuation report and that will be available in the next week. And then we are going to turn our attention to the discussion. So we have already had initial calls with several potential partners. But we expect that to get going in earnest probably, I would say, the September, October time frame, just because Europe, August is, even with COVID, August is usually the time off. So I don’t expect much work to get done in Europe in August.

Michael Okunewitch

Yes. For sure. All right. Thank you Jed. And again congratulations on the progress.

Jed Latkin

Thank you Michael.

Operator

Our next question comes from the line of Vernon Bernardino with H.C. Wainwright. Please proceed with your question.

Vernon Bernardino

Hi guys. And congrats also from me for the progress. A lot of stuff has gone on in this environment. You have done a lot of tremendous work. So congratulations.

Jed Latkin

Thank you Vernon.

Vernon Bernardino

Question on Jubilant, just a little bit more details, I guess. What are their responsibilities, if any, between now and the time when we see further results from bringing them onboard?

Jed Latkin

So do you mean in terms of when we sign the final license and distribution agreement or between now and approval of the product?

Vernon Bernardino

Between now and approval of the product, if anything? Do they participate in anything?

Jed Latkin

So we are going to do is we have a couple of final steps in the due diligence that we are going to complete and it was important for us that as we got to the very last point, that was the initial $1 million payment was sort of to get more fulsome access to some of the people running the trial, some of the data. And so that was the agreement that we announced this week. But really all the other terms have been have ironed out. I mean the MOU, a typical MOU is one or two pages. This was about 35. So we have gone through a lot of the extensive details.

Jubilant understands and they are very excited about the product. But they understand that, as with a diagnostic unlike with a therapeutic where you just have an immediate market once you have it, I always talk about the Harvoni and Sovaldi example that went from zero to $8 billion in one year. Jubilant understands that they are going to need to spend to really get out the marketing. We have discussed the hiring, talking about salespeople and the sales. These are all things that they will start working on almost immediately.

So once we get the license and distribution agreement signed, they are going to start working on the manufacturing. So we are going to start doing the pack and fill. They are going to start working on the marketing, the commercialization plan. And so we have already shared with them quite an extensive budget and we do expect that there’s going to be quite a bit of spend between now and launch and Jubilant will be taking all of that on.

I mean, they understand the value of the product. They know how big the potential is. And that’s all we want with them because I have the benefit of being able to look through the history of Navidea. And we have had lots of people who have run the company and I have really been able to learn a lot from them in terms of making sure that when we sign this deal, they understand the costs.

One of the issues with Lymphoseek is that as a diagnostic, it’s a fantastic diagnostic, but there is cost in getting it up and running. And I think the deal that we had lacked, it was a little bit fuzzy on who was going to bear the cost. We are not going to have that issue here. This is a very clear understanding that Jubilant is a very capable, very powerful organization and they know that they are going to be able to spend the dollars that it takes to get wide distribution, get in front of all the rheumatologists and make sure that we really hit the ground running when the product is approved.

That’s the other thing I want to focus on, bringing in the additional capital that we are going to bring in from Jubilant, the payments that we will start receiving once we get the go ahead and we sign the license and distribution agreement, we are going to go very wide with the trial. We are really going to open up as many centers as possible. And while that will give us a very nice distribution base to start, there will be even more distribution and more marketing spend that’s going to be needed and Jubilant’s going to take all of that on.

Vernon Bernardino

Well, I appreciate you sharing those details because I think that adds to really what has been, even by myself, underappreciated as far as the work that you have done over the past 14 months in the selection of Jubilant. Because I don’t know about others, but I don’t know much about Jubilant at all. And so these details are very helpful in helping me and hopefully others appreciate the importance of this agreement.

Jed Latkin

Yes. Well, thank you, Vernon. I mean, I also want to really stress to everybody listening and the investors that we didn’t announce this on Monday because we were hoping to hurry out an announcement before the quarterly call. We were very, very methodical with working on these documents. And in fact, we have had something signable for quite a while now. I mean when I refer to the imminent signing, we have had documents that were very signable for about a month.

But we really wanted to make sure that this wasn’t just an MOU. We wanted to make sure that this was a document that wants these final little bit of steps of due diligence and I really can’t specify them, but they are some final steps that we really are ready to sign a document. The MOU is very much the framework of the agreement. It is quite extensive. It covers the royalty rate, the sales milestones. And really, it is the longest most detailed MOU I have ever been a part of in my life. I can say that.

Vernon Bernardino

That’s terrific. And so congratulations. It sounds like we should actually even learn more about Jubilant and their capabilities. Switching gears, a question on a Phase 2b full enrollment. Can you comment on the imaging events expectations?

Mike Rosol

Yes. So if I understood you. This is Mike Rosol.

Vernon Bernardino

Hi Mike.

Mike Rosol

So the arms one and two, as I mentioned, are completed today. So the arm one are where healthy subjects and we image those at multiple times in the same day in order to assess the repeatability and the stability over time after injection. Arm two were subjects with active moderate to severe RA and we image those folks on two days separated by a week so that we could do in the first day, we had a number of imaging scans done, just like with the healthy, so we could look at the repeatability and the stability. And then we look at the reproducibility over the course of a week and these patients who are stably treated to look how, with no interventions happening or no new ones, what is the biological variation convolved with the imaging variation, what does that look like overall so that we could then inform ourselves, what is our minimum detectable significant change. Sorry to use some jargon there. But anyway, those are the first two arms.

The third arm that we are doing now, where we have remaining subjects, that’s the arm that mirrors the Phase 3, right. And so the way that arm works is, these are subjects who have RA and are ready to be switched to an anti-TNF alpha therapy. We image them and do clinical assessments at baseline before they have started their new treatment. We then call back five weeks later after they have begun their treatment and do an imaging event and clinical assessments and then do the same thing at weeks 12. So 3 months after they start and week 24, six months after they have started their TNF therapy, the imaging and the clinical assessment.

The idea is this, that our change, if any, from the baseline scan to the five-week scan will be predictive of the clinical outcome at 12 or 24 weeks. If you know the literature at all in rheumatoid arthritis, the thinking is currently, the paradigm is that if a physician puts a subject, a patient with rheumatoid arthritis on one of these therapies, they call him or her back three to six months later and say, do a clinical assessment and say, is the drug working. About half the time, maybe more, the drugs won’t be working. And right now, it’s all trial and error and the patient, there’s a good potential the patient is getting worse. Even if they are not getting worse, the co-morbidities, the joint damage, it’s all stacking up and accumulating if the therapy is not effective.

And there’s no way of determining this in that interval other than, again, you call them back and you have waited three to six months. Those clinical assessments are so nebulous and noisy and subjective that you need a significant amount of time to pass before you can really believe there’s been a significant change either way because what the clinician does is, they look at the patient’s fingers and other joints and see, are they swollen, they squeeze them and ask for, does this hurt or does that hurt and that is subjective, both on the side of the patient, how he or she may feel that day, even just if they have had a good cup of coffee and the same for the physician. They may squeeze more or less hard on a given day.

So these are very noisy measurements and there’s a great need for a quantifiable, robust measurement and we hope to provide that. So again, the design is baseline scans, start a new drug, bring them back a month later basically, see if there’s any change from the baseline. That’s what we will be looking at. Call them back at three months and six months just as is the clinical paradigm currently and then compare our early imaging readout with those later clinical assessments.

Is that good?

Vernon Bernardino

Yes. Well, that’s very helpful information. Now will you need to publish those results and perhaps determine like a correlation coefficient for acceptance of that method?

Mike Rosol

Sure. I mean yes and no. I mean in terms of need to, we don’t need to for the FDA. What we have started to do, of course, is we have presented these results as we have gone from the earlier Phase 1 and Phase 2 and now this Phase 2b, the first interim analysis results we presented these at national and international meetings. We are actually preparing a publication based on the earlier Phase 1 and 2. And of course, these data from this trial will also be published in the future as well.

But what we will bring to the FDA are the analyses of the data from the trial and we put those forward to the FDA and then they review them. And by the way, part of your question, embedded in your question was where we are in terms of the patients enrolled in the arm three. So we have got all of them enrolled in that arm three and more than half of them have had at least there 12, about half have had their three-month imaging visit and clinical assessment. And we are following those up for their six months. And there are roughly half who are earlier in the stream. So they have had maybe their five-week scan or they are just about to. So that’s where we are, so maybe to fully address your question.

Is that helpful?

Vernon Bernardino

Thank you very much. Yes. That’s very helpful. And the additional details are very much appreciated. Those are only questions I had. Thank you very much.

Mike Rosol

Thank you Vernon.

Jed Latkin

Thank you.

Operator

Our next question comes from the line of Jacob Natowitz, a private investor. Please proceed with your question.

Jacob Natowitz

Yes. Hi. So my question relates to the $25 million in shares that was pledged by the investment group. Is that going to be all financed and funded at once? Or is it going to be over time? What can you tell us about that?

Jed Latkin

Well, so we are going to be arranging it. Since the agreement has a floor of $5, we will do the funding when we choose to do it. And I think that we have some arrangements. I mean, I think we could expect, hopefully, some announcements in the near future on that. But we can take as little or as much as we want and then we will have a total of up to 45 days to complete that if we so choose.

Jacob Natowitz

Did you say the minimum floor price on the shares is $5?

Jed Latkin

It’s $5, yes.

Jacob Natowitz

Okay. And then let’s see —

Jed Latkin

I think it’s important that I stress to, sorry Jacob, I didn’t mean to cut you off. But I think that I want to stress repeatedly that we have entered a new phase in this company’s history. We are now, thankfully once we get the deal signed and completed with Jubilant, we are looking at growth capital. We are looking at being able to finally realize the potential of the other products. But I was never going to do that at the expense of getting RA to completion.

With the ELDA in place with Jubilant, we will be fully funded on that and it makes sense since investors have been clamoring for years to see progress in CV and more importantly, see movement on therapeutics. Now is really the time to do that, provided that the terms are right. If the terms aren’t right and if the price isn’t good for us, we are not going to do it. I am not going to be forced into doing a deal. And if it means that we don’t price a deal, well our RA trial is fully funded. We will continue and complete RA, get it to market and then start the projects then.

Jacob Natowitz

Then answer this for me. I am a little curious now. So if the floor was $5 on the price, so I kind of come to the opinion that should be something that should have been discussed when that news came out because obviously as you saw the stock price drop on that news from $4.75 to around $3.40. And obviously, it’s scared the market in thinking of immediate dilution. But to me, this seems more like, like you said, just an opportunistic raise. But with a floor price of $5, it seems much stronger?

Jed Latkin

Yes. I mean, it is. And I mean, I think that what we did was we put the announcement in that it was at or higher than market. The initial shares that Jubilant purchased were at $4.78 and the assumption was that people would understand that we were not looking to do it at $3. Obviously, we didn’t expect that to happen in terms of the share price. But I really want to stress and I have said this all along and I really have spoken to many of you guys, many of the shareholders, as you know, on a pretty continual basis, that we are not going to do raises at other prices.

Banks are offering us bought deals all the time and I am not looking to do a deal at 15%, 20% and pay 7% to 10% fees and all of that other stuff. We are looking to do a raise at strength. And in this case, we felt that we were in a position of strength, having signed the MOU, brought in the partner of choice, the partner that we have wanted all along and something that has been a long term plan for us. And yes and with that floor price, I think we are still going to get shares on it, in my opinion, but we will discuss that at another time.

Jacob Natowitz

Okay. And then just a second question. This isn’t as fun of a question. Can you update the shareholders on the status of the current lawsuits that have been going on?

Jed Latkin

Okay. So we are currently, on the CRG, we are currently awaiting the decision from appellate court, which we assume will be sometime towards the end of the year, beginning of next year. And that we are confident based on the decision that was reached by the Judge Serrott in Ohio.

And then on the Goldberg case, we are moving forward. We continue to move forward on the document of discovery. As you know, we have thankfully gotten quite a number of positive rulings from both Delaware and New York. And we expect Delaware, I believe in December, we will have the trial and I think New York will be sometime before that, but I am not 100% sure on the timing because of the COVID situation. So we are still trying to figure out the actual timing of the depositions and everything and COVID has just made it a little bit more difficult, as you can imagine.

Jacob Natowitz

Sure. All right. Well, that does it for me on my questions. Keep up the good work and I look forward to more good news coming in the future.

Jed Latkin

Thank you Jacob. I really appreciate your support.

Operator

[Operator Instructions]. Our next question comes from the line of Mike Kelly, a private investor. Please proceed with your question.

Mike Kelly

Yes. Jed, this is Mike. How are you?

Jed Latkin

Mike, how are you doing today?

Mike Kelly

Yes. And Michael Rosol, how are you?

Mike Rosol

Hello. How are you?

Mike Kelly

I would like to thank you, Jed, for all your endeavors and sticking in there through the thick and the thin. Obviously, this was an emotional number. Thank you and to Mike and his team and to Erika and to the Board. I would like to thank the Board for supporting you guys for how they have helped turn the company around. So now to my question.

Jed Latkin

Yes. It’s been a long road and I understand the trepidation that a lot of our shareholders feel. And I certainly, this has been 20 years. This is a company that we feel has an amazing product. And obviously, there have been lots of ups and downs. But Mike, fire away.

Mike Kelly

Yes. I have three questions that are more financial related and then couple that are more scientific related. The $0.5 billion a year of potential revenue, is that per year? Or is that over the life of the RA?

Jed Latkin

We actually expect that to be per year. I mean we have done, Joel Kaufman, who is one of the key members of the team on the Business Development side, we have done extensive modeling on the RA market. As we have said, the RA market is a $50 billion-plus revenue market. And I can’t comment as much. Dr. Rosol obviously has spoken about a lot of the images we have looked at. And it’s interesting to us to see how relatively ineffective some of the products are which are multibillion-dollar products and that’s why we feel that our diagnostic is so important to the market. But no, we really feel that of a $50 billion revenue market, the $0.5 billion is achievable easily, we feel.

And we do also, now that we are going to be able to launch 3-32 with the biopsy on the synovial biopsy, it’s something that we think we are going to be able to glean some very good data that will enhance the product once it’s launched because if we could get the phenotyping and we can really tell right away as the database of information grows, whether or not you are going to respond to the anti-TNF, you can move somebody to a different tiered product right away, that’s going to be very important. And that’s why we think that once we show the efficacy of our product and the ability to spot these things, we hope that this is going to be a test that everybody is going to insist on and that the insurance companies are going to really demand it.

I have given an example over and over again about, I suffer from Crohn’s disease and the insurance company insists that I get colonoscopies every year. And as I have said, repeatedly, it’s a real pain in the neck. But with a test, the insurance company doesn’t want to pay $40,000 a year if they don’t think the drug is going to work. If our test gets approved, which we hope it will be and it shows what we think it’s going to show, there’s no reason why the insurance company is not going to insist on it because every six months when you get that renewal and the insurance company says, why are we paying for this drug, is this patient getting better. We are going to be able to say, yes, they are, or no, they are not. And that’s the key and that’s why we feel that this is a $0.5 billion product. And in that $0.5 billion, we took a relatively conservative approach to the pricing as well as the overall cost of the pricing, the scan, the read and everything.

Mike Kelly

I think that $0.5 billion number keeps passing over everybody’s head. It’s such a big number. And I don’t think it’s been appreciated, Jed. And even if you discount it, it’s still a very large number. So I think that’s been passing over everybody’s head. I just don’t think they have comprehended it yet. This next question, you will have answered before time. The $20 million, you say will fund the RA P3 and HIC trials. Is that correct?

Jed Latkin

Yes. So the money that we have, which is essentially the money that we have coming in, which is essentially 50% cash, 50% equity, but not at set prices. Remember those are going to be in market. So as we hit milestones and the stock hopefully continues to appreciate, those shares will come in at ever higher prices. That will more than cover the trials. That will allow us to do 32 and 33 and bring us to approval. And that was really what was important. We have very, very strict budget. We have actually allowed for a lot of flexibility in that.

I mean I have got Jeff Smith, our Business Development guy, working closely with our clinical team to make sure that we really monitor everything. The cost so far have come in very much in line and to a little bit lower than what we expected. But the money that we are going to get from Jubilant, the half cash, half equity, very importantly will cover the ability to expand, do a lot of sites, really try to go really wide with this trial and make this a big success. And then we will have the growth capital that will allow us to work on some other projects.

But yes, the money that we have coming in and pledge will more than cover the trial. I mean, I think it’s important to stress that this deal was very, very closely negotiated. We knew what we needed. We knew what we wanted. And more importantly, we were very happy with the upfront payments between now and approval and we are more than happy with what we have at the end.

And that’s what I said in the beginning, that I am going to say some simplistic terms. The thing I talk to people is, the value of a company is your assets minus your liabilities plus the present value of future cash flows. And it’s really important that we are able to show investors that, yes, we have money coming in today. It’s great to have $30 million on the balance sheet or whatever we will have on the balance sheet, but it’s also more importantly, that there’s a long term stream of cash flows that you can attach a multiple to that would support an ever-increasing share price.

And that’s what’s really important. And that’s what I really want to stress to everybody listening to this call that we have set it up so not only do we have a nice amount of money coming in today, something that more than covers our development, but also a very nice long term cash flow stream that will more than support future growth as well as something that investors can look at. Guys like Jason McCarthy and Vernon and Mike who are or the phone, the analysts, they can model when they come out with their research reports, that’s really what’s very important and that’s what I want to stress to everybody.

Mike Kelly

I think one of the hidden values, obviously, you can’t publish yet, is the value of the license fees and the royalties that will be coming when the agreement is executed. Those were masked right now. And you continually stress they are very favorable to the shareholders. And that’s the thing that obviously is hard to value right now.

Jed Latkin

Exactly. I hear you on that. Yes.

Mike Kelly

The other thing is that you were saying there was 10 sites right now on the P2b and you were thinking of expanding it. Can you give us a rough idea how many sites you think will be in the P3 or is this too early?

Mike Rosol

Yes. We have modeled it out. We expect to have opened up, up to 50, but our first pass estimate is about 25 or so and we are going to do this relatively rapidly or actually very rapidly. So the ones that we have currently open, of course, those can transition really smoothly. We are working behind the scenes to you folks. But on the front lines here, we are preparing other sites to be opened up as part of that first maybe 25 or so.

And one of the rate limiters there, as Jed alluded to, was the amount of resources we could bring to bear financially. So each opening up any one site costs some more than $10,000 typically. So you can see that that adds up quite rapidly just in site opening costs. And that’s a conservative number. So with this nice partnership agreement with Jubilant, we have the wherewithal and the means to go more towards that larger number.

And what that benefits, not just what Jed has been talking about in terms of in the past of getting this wider array of sites and widely distributed array of sites, familiarity with the product and being involved in the evaluation and the first test of the product in terms of a Phase 3, it also of course would enable us to enroll more rapidly, theoretically and then get to the end zone more quickly. So that might even expedite our time line, right. And so that’s the goal. So we are looking at mid-20s and that can grow and it might indeed grow.

Now one thing I want to remind the folks, though, is we actually, we have been very good. The sites that we have for the Phase 2b, you might remember, Mike, in one of the earlier calls, our rate of enrollment, even with the COVID crisis, has been greater than the median rate of enrollment across Phase 2 and Phase 3 trials in North America, looking across all of those trials in the last about eight years. So we are a little company. But the clinical team, I am not taking credit here, the clinical team here has been really good at identifying the right sites who can recruit patients, the right patient and rapidly and we are going to maintain that and grow that.

Mike Kelly

Okay. Well, this question maybe is for Erika or for you, Jed. In the form filing for the $1 million investment by Jubilant, you gave a cash balance of $1.5 million compared to the June ending of $1.6 million. Does that include or exclude the $3 million you have received since the June closing?

Jed Latkin

No, that excludes it.

Erika Gibson

Excluded.

Jed Latkin

I think we have the —

Erika Gibson

We have received the $1 million from Jubilant and another since the end of the quarter, what? $3.9 million related to the February transaction.

Jed Latkin

Yes.

Mike Kelly

Right. So the Form 42, whatever it is, 35 or whatever you filed for the Jubilant $1 million investment showed $1.6 million, excuse me, at the end of June. And then $1.5 million adjusted for current. And it confused some people, that $3.9 million. So that $3.9 million is added to that?

Jed Latkin

So if you add up, you could take that money plus the money that we received the $3 million and change, plus $1 million and then that can give you a more accurate cash balance as of to-date.

Mike Kelly

Great. That’s very much appreciated. That did cause some confusion about what your cash position was. A comment and then a question. Recently, we have seen several Lymphoseek trials filed in the U.S. and overseas. And to me, that continues to speak well for the safety and utility of the molecule. You have seen another one in the United States and you have seen some overseas just recently. Saying that, one question, Jed, when you were doing the KS therapeutic trials a few years ago or still ongoing and then most recently on the conference call, you mentioned and it’s been mentioned by others, that you are seeing other inflammations as you are imaging for the RA and the KS and et cetera. Are you finding other indications that you can’t talk about as you are doing your RA and KS trials? Other inflammation indications?

Jed Latkin

Yes. I mean, it’s a tough question. I will let Dr. Rosol look at that. But I mean, obviously, when we review all the images, we are constantly trying to figure out. And yes, I know what you are referring to that we picked up, I believe it’s the pituitary tumor that you are talking about. We are constantly monitoring the different uses. Obviously, we have been very focused on RA. But I can let Dr. Rosol elaborate. But we are working on a lot of different projects. And especially now as we have moved into the hopeful final phase of RA, we have certain individuals on the team who have really been focused on some of the newer indications and some of the newer filings that we have been made for different uses of the product.

Mike Rosol

Yes. This is Mike. So that, Jed gave, I think, a fair launch there. You can pick up incidental findings, right, Mike. So when our agent targets with very high affinity, activated macrophages and those are involved in any number of disease processes and therein lies an opportunity in terms of being able to bring benefit to the patient, right. So I would say we have seen these things. And some of these may in concert with where we are going in terms of our pipeline and I will leave it at that.

Mike Kelly

Okay. So that’s positive. I think that’s being understated that you are seeing other things. And that it’s not just that you maybe can’t talk about them, but I think it’s been underappreciated and understated that you are seeing other things that would help the patient.

Mike Rosol

Yes. I think in general, you are right again. And really, again, I can’t emphasize this enough. Macrophage, if you look at the literature, are involved in so many disease processes, right, for good or for bad. And we have the agent that is the leading agent, both kind of scientifically and chemistry wise as well as where it is in terms of approvals and in clinical trials, that targets macrophages that affords us the opportunity to either image it or to deliver a therapy to where those macrophages are and to do things to those macrophages, whether it would be kill them or do something else and maybe do something in between those two. And I am going to leave that at that.

But macrophages are involved in a great number of things. So we sometimes get teased about saying we are very excited and enthused, right. But really, there’s a great opportunity here. There’s a reason that people, myself included, are here and stick around. The scientific opportunity here and the opportunity to bring value to the healthcare field and people is giant.

Mike Kelly

Okay. Speaking of giant, in the press release, you mentioned you are continuing to enroll patients in CV. That trial has been going on for a long time under Grinspoon and MGH. Can you give any more color to what you are doing there, even though I know the funding isn’t quite there yet? But can you tell us a little more about that?

Mike Rosol

Yes. So it is an investigator-initiated trial. So I hesitate to give too much info without clearing it with Stephen. But I can tell you that they are continuing to recruit and they have actually done really well recently and are ramping up again. There was a little bit of a lag in terms of recruitment with COVID. But they have a number of patients lined up, both HIV positive as well as controls. And if you look on the clinicaltrials.gov, they are reaching those milestones that they had out there. We have also done our sub-study or they have done a sub-study where they looked at different routes of administration. I have alluded to that in the past.

We have learned a good deal about what’s the best way to deliver this tilmanocept for these atherosclerosis imaging studies. And they are doing, recently, they have asked us for some more drug with a fluorescent label so that they could do some in-vitro studies to look at some of the mechanisms more. So things are going there well. We plan to have a discussion with them in the coming weeks. Literally, the coming weeks about what they have learned, look over the data more closely. And as I mentioned, at some point, yes, I mentioned in my prepared remarks, we have been talking internally as well with the KOLs about what our indications will look like, our first indications to go to the FDA with.

Jed Latkin

And I think there’s another thing I want to build on this. And I think that when Michael said, it’s an investigator driven trial, the thing that we have always done as a company, either because we just haven’t had the resources or because we were grant funded, just a lot of different things. We have always had these trials done at institutions, universities and those tend to take a while. I mean Grinspoon was funded with $350,000 three years ago. And we are slowly but surely getting there. He is a phenomenal doctor. We are really happy with all those work.

But I think that as the company pivots and as we have signed what we consider the real pivotal deal for this phase of the company as we enter the next phase, we are entering a new phase of Navidea’s life. And one of that is, going forward, looking at doing trials, be it on the therapeutic side, in cardiovascular, on the diagnostics side that aren’t necessarily university that are maybe a little bit more expensive, but allow for greater control, better speed, more input. Doing things where you are giving grants to universities is great, but then you lose a little bit of control.

And what I think you are going to see over the next several quarters is a step change for this company, which is looking at trials that are more controlled internally. Obviously, using external vendors, but more controlled internally using quicker to market processes that generate data that we can use, turn around and we own all of it. So no more licensing fees having to be paid out to university, which isn’t necessarily a bad thing. But I think that now when you get to that stage, where you realize you have your one asset, your one new asset are partnered off and then you have other new growth capital coming into the business, that will be allocated wisely so that the projects that we invest in will give us immediate returns.

And when I say immediate, obviously, that doesn’t mean next week, it means in the upcoming years, but it means that we have greater control, we can really push those things and that will give us more data to talk about on a more regular basis. That’s very important. And that is something different. That is something that Navidea as a company hasn’t really done in the past and it’s important to stress that it is something that we are going to do in the future.

Mike Kelly

Excellent. That sounds good. Let me try to wrap up with this last question. And it has to do with the KS therapeutics. Obviously, this next round of funding that you are looking for will go into the therapeutics. But in your SEC reports and in other conference calls, you have talked about putting together the final package for the KS therapeutic presentation to the FDA. Is that still on your immediate plans? Or is that pushed off further yet?

Mike Rosol

So there are two things here, maybe for the benefit of the audience at large and not so much you, Mike, but it’s important. So we have got the KS therapeutics grant, NIH grant and we have done work with UCSF on that. And we have had the KS diagnostic grant as well that we have also done work with UCSF. And so the part that I was specifically referring to in this summary was more related to the diagnostic side in terms of the data that we have accumulated where we have imaging from KS subjects as well as biopsy specimens.

And we think we found something interesting that can bring benefit to those folks who are suffering from KS on the imaging side. And that is, without revealing too much, we think we can give an idea of the lymphatic involvement and that is potentially very important to the management of these patients who have this disease across the world. So on that side, we have been discussing internally once those data are finalized and looked at going forward with an sNDA, right. So that is something we do still have at the forefront of our minds because we are looking through the data right now and speaking with our UCSF investigators, right. So there’s that.

The KS therapeutics grant has afforded us. We have learned quite a bit about the constructs that enable us to attack either the KS cells or tumor-associated macrophages. And it’s really helped us drive the ball forward in terms of the therapeutics that might target these cells or the TAMs, right, as you may have heard us use in the past. And that of course, is at the forefront of our mind. Whether or not we go for a therapeutic in KS, we need to think about that specifically. But there is the diagnostic opportunity and then there’s the therapeutic as well. And that grant has enabled us to drive the therapeutic as a class forward. And that is certainly at the forefront.

Mike Kelly

So on the KS therapeutics, that’s still up in the air, whether it’s near term or long term or not in the term at all?

Mike Rosol

Yes. That’s fair, yes.

Mike Kelly

Okay. All right. I appreciate it. Again, as a long-term shareholder, I really appreciate what you guys are doing and I am very encouraged and I want to say thank you.

Jed Latkin

Thank you Mike. I appreciate it.

Mike Rosol

Yes.

Operator

That concludes the question —

Jed Latkin

I think we have already, yes. Sorry about that, Devon. I didn’t mean to cut you off, right. I think that ends the question-and-answer. It’s already 6:12. Obviously, you all know that if you ever want to reach out to us, you can just send me any questions or give me a call. I really appreciate everybody calling in and we hope to look forward to be speaking with you guys soon in the near future.

Operator

This concludes today’s teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.





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