Earnings Transcript for NAVB - Q3 Fiscal Year 2022

Operator: Greetings and welcome to the Navidea Biopharmaceuticals’ Quarter Three Earnings Call and Business Update. [Operator Instructions] And as a reminder this conference call is being recorded. It is now my pleasure to introduce Dr. Michael Rosol, Chief Medical Officer. Thank you, Michael. You may begin.

Michael Rosol: Thank you. And welcome to everybody. Thank you for joining us here today on our earnings call. This call is being webcast live on our website, ir.navidea.com, and a replay will be made available. There is an accompanying – following prepared remarks, we will be conducting a live Q&A Session. Navidea's Chair of its Board of Directors, Mr. Alex Cappello; its Vice Chair, Mr. Kim Scott; its Vice President of Finance and Administration, Erika Eves; and me are joining you on the call here 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, I thought it would be helpful to detail a few of our key areas of focus in our 2023 planning. One, we will continue the RA Phase 3 trial success to full enrollment, NDA submission and FDA approval. Two, we’ll fully fund the Phase 3 trial. Company management and the Board of Directors are engaged with multiple potential capital providers in support of our mission to identify this full RA trial funding, our goal is to be fully funded in 2023. Three, we’ll attract and retain top biopharmaceutical talent. As our RA development program success grows, so does the need to grow our team to help support key milestone achievements, support key strategic relationships, and initiate new PR/IR efforts as a way to share our trial and milestone success. As we look at Q3 specifically, the company successfully received an additional $1 million in capacity bridge using the same bridge loan facility currently in place from the company's Vice Chair of its Board of Directors, Mr. Scott. The company also successfully raised $6.2 million in proceeds from its most recent rights offering with the investment banking arm of Maxim Group. If exercised, additional proceeds of up to $11.6 million may be received through the exercise of warrant that same rights offering. We also received an accelerated reimbursement payment of $800,000 for certain research and development expenses from a strategic partner. We have advanced our clinical trials in rheumatoid arthritis as well as our pipeline in other diagnostic indications and in therapeutic. We continue to make solid progress on our Phase 2b trial in rheumatoid arthritis or RA, comparing imaging to biopsy and this week presented at the international conference our up promising preliminary results supporting tilmanocept’s ability to distinguish the fibroid pathotype from the non-fibroid in the first participants evaluated by the time of the presentation finalization. More on that in a moment. These strong early results do 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 Phase 3 and open up additional sites in August and early September, bringing our total open to 12. We also 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 and advance the company's intellectual property. We are very 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 had two rulings that essentially bracket its exposure in both, the company will continue to minimize exposure. Now I would like to provide a brief update specific to our clinical results. I will begin with the progress in our rheumatoid arthritis program. So we continue to enroll into our Phase 3 trial, as I just mentioned in RA. We've recently announced that we've opened up those nine additional sites. The initial indications we're pursuing for FDA approval are

Erika Eves: Thank you, Mike. Consistent with peers focused on the successful completion of Phase 3 trials, our revenues for Q3 were minimal. Total revenues for the third quarter of 2022 were approximately $8,000 compared to $96,000 for the same period in 2021. Total revenues for the first nine months of 2022 were $65,000 compared to $481,000 for the same period in 2021. The decrease was primarily due to the 2021 partial recovery of debts that were previously written off in 2015, the 2021 receipt of reimbursement from Cardinal Health of certain R&D costs, decreased grant revenue related to small business innovation research grants from the National Institutes of Health supporting Manocept development, and decreased license revenue from transitional sales of to tilmanocept in Europe. Research and development expenses for the third quarter of 2022 were $1.2 million compared to $1 million for the same period of 2021. R&D expenses for the first nine months of 2022 were $4.1 million compared to $3.8 million for the same period in 2021. Selling, general and administrative expenses for the third quarter of 2022 were $3.6 million compared to $1.5 million for the same period in 2021. SG&A expenses for the first nine months of 2022 were $6.7 million compared to $5.1 million for the same period in 2021. Following the ruling by the Texas Court in August 2022, the company recorded $2.6 million in legal fees pursuant to the CRG judgment, and that was recorded in SG&A. Navidea’s net loss attributable to common stockholders for the third quarter of 2022 was $7.7 million or $0.25 per share compared to $2.4 million or $0.08 per share for the same period in 2021. Our net loss attributable to common stockholders for the first nine months of 2022 was $13.7 million or $0.45 per share compared to $8.1 million or $0.28 per share for the same period in 2021. And finally, Navidea ended the third quarter of 2022 with $4.6 million in cash and cash equivalents. Back to Mike.

Michael Rosol: Thank you, Erika. And now I’ll turn the call over to any questions that might be out there we’d be happy to address. Once again, joining me on the call is, our Chair of the Board, Alex Cappello, as well as Mr. Kim Scott, our Vice Chair, and Erika Eves. So I think we should be able to handle any questions that come our way.

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Michael Okunewitch with Maxim Group. Please proceed with your questions.

Michael Okunewitch: Hey guys. Thank you for taking the questions and congrats on the progress this quarter.

Michael Rosol: Thanks, Michael.

Michael Okunewitch: So I guess, I just wanted to first touch on, for those nine additional sites for any of those used in prior studies for Tc-Til and has – how has the above average rate of recruitment held up as you’ve added in these new sites?

Michael Rosol: Yes, great question. So yes, we have – we took advantage of the kind of conglomeration of research centers in certain geographic areas as well as the imaging centers that we’ve worked with before. So there’s an imaging center, for example, that we’ve worked with in prior trials that has – is fed into by several different rheumatology practices. So we took advantage of that and so that is happening. So it’s an imaging center we’ve used before as well. We have a couple of rheumatology sites we’ve used previously that we’ve opened up into the study. So we try to take advantage of prior experience with sites that have been excellent recruiters to bring them in. There are several other sites that are in the queue to come into the Phase 3 that we worked with in prior studies and they’re – should to come in. We just need the accelerant of increased capital into the company, so we can go full bore on that front. And yes, right now we’re still – we’re above the average recruitment rate for RA trials Phase 2 and Phase 3 in North America historically. We continue to maintain that. And we’re doing that even with the fact that we just opened nine of these sites, as I mentioned, end of August, early September, and very frequently it’ll take a month or two or more for sites to really get rolling. And some of the sites are in that boat to be frank, other sites just started enrolling rapidly right away and there are different reasons for that. Overall, we’re maintaining above the average recruitment rate significantly. So things are looking very good.

Michael Okunewitch: All right. Thank you for that. And just one follow-up from me. I wanted to see if you could give an update on either how many or the proportion of responders versus non-responders, which have enrolled in the study so far since this could impact the overall trial size.

Michael Rosol: Great question. Yes, we are tracking that. And what we’re doing is without unblinding the study, we’re able to see the clinical response rates at three and six months. Then right now we have a good number of patients at the three month milestone. And so we can look at their clinical responses. And without going into the details, without releasing too much information here, we’re trending more towards the lower end of the trial size possibilities, which would be great. So as you know, maybe not others on the phone here, the Phase 3 trial size could range from about 200 to 672, and we’re trending more towards the mid to lower end of that based on the response rate. So things are looking really good there.

Michael Okunewitch: All right. Thank you very much. And again, thanks for taking my questions.

Michael Rosol: You’re welcome. Thank you.

Operator: Thank you. And our next question comes from the line of Mike Rigali, a Private Investor. Please proceed with your question.

Mike Rigali: Yes, Dr. Rosol, appreciate the concise strategic outlook you presented at the beginning. That was very useful. My first question is, are you able to share how many people have been enrolled in the Phase – the 333 so far.

Michael Rosol: Thanks, Mike. Good question. I’m not going to share that today. What we’ll do is we’re tracking that and when we hit certain milestones, we’ll make announcements as appropriate when those are hit. So stay tuned is what I’d say, but enrollment is going well.

Mike Rigali: Okay. A follow-up on 332. You said you’ve had 15 patients enrolled now. Are you still running at 100% match?

Michael Rosol: Yes, we’re at 100% match. Can’t do better than that, right? Yes. Yes, it’s 14.

Mike Rigali: 14. Okay. Now on that 100% match, that’s excellent. How important is it to now differentiate between the fibroid and the non-fibroid? I know you’re still trying to differentiate between the diffuse and the lympho. Is that really that critical?

Michael Rosol: Yes, great question. So what we’re hearing from the rheumatologists out there, and I was just at the American College of Rheumatology meeting over the weekend, and I met with a number of key opinion leaders in rheumatology and really the big players in rheumatology in the world, not just in the U.S. that’s not me bragging, that’s me giving them compliments. And the words from those folks is primarily the – they’re really excited about the fibroid and non-fibroid differentiation because there’s a nice body of literature already suggesting that being able to distinguish between those two types can really give you significant information for helping guide patients to a more appropriate therapy or guide them away from a therapy that is less appropriate for their type of disease. So that I think is a primary importance. Distinguishing between the diffuse myeloid and the lympho myeloid is important as well, and it depends on who you ask. There are certain scenarios where it’s importance may rise particularly, for example, in the development of therapeutics that may target one of these specific subtypes or two out of three of the subtypes of RA. You can imagine scenarios where it’s important as elevated. And we’ve heard that from key opinion leaders as well as pharmaceutical companies directly. So – and there’s a growing body of literature suggesting that some agents work better on one of those two types than the other as well. But that’s more of an evolving field currently. So really the fibroid, non-fibroid is seen kind of across the board is extremely important and very exciting, because right now you can’t do it any other way other than by doing an invasive biopsy. So our virtual biopsy is a way to do it noninvasively and quickly. And there’s growing emergence of the idea of looking distinguishing between the other two types.

Mike Rigali: Would you still be considered the gold standard if you could only do the fibroid versus the non-fibroid? Would you still be clear…

Michael Rosol: Yes. Yes. That is absolutely tremendous value, because again, you can’t do it any other way than doing the biopsies. The biopsies depending on who does them have a 15% plus or minus 5% or so margin of error, they’re difficult to do, patients don’t like to do them, that's why these trials are hard to recruit for these biopsy trials. So with our scan being able to distinguish fibroid and non-fibroid, the word I heard on the street is that would be tremendous value to the field of rheumatology.

Mike Rigali: Excellent. Well your science is so robust. I'll go back into the queue and come back in. Thank you.

Michael Rosol: Actually, I think you're back in the queue. You're back, number one, Mike, or get back in?

Operator: Thank you. There are no further questions at this time, and I would like to turn the floor back over to Michael for any closing comments.

Michael Rosol: That's all right. We'll do, Mike Rigali has one more question. We'll let him ask now.

Operator: Sorry, I do see that he just re-queued. Thank you. Mike, you are live.

Mike Rigali: Well, thank you. Thanks very much. On the science, you mentioned that being at these conferences and that you did have a lot of feedback particularly the cancer immunotherapies conference. Can you give us some generalization of the type of questions they were probing you with?

Michael Rosol: Sure. So one of the interesting things of our constructs is what we're doing is we're attaching these known therapeutics like paclitaxel, doxorubicin and now bisphosphonate, which in general are known drugs, although importantly, we've created a novel bisphosphonate. So that's also very exciting. But those drugs have known mechanisms of action. When they are attached to our molecule our Manocept platform and delivered through the CD206 pathway. They actually have different mechanisms of action than the free drugs themselves. And what they're doing is they are actually changing the phenotype of the macrophage rather than doing what they do as pure cancer drugs for example, the paclitaxel and doxorubicin, they're not achieving their effect in that same way where they go in and stop cell division or call it death. They're actually going into the macrophage and changing the phenotype. In this case more, or in these cases more towards the pro-inflammatory type, which rallies and stimulates the body's immune response in our animal models against the tumors. And this is very exciting. So we had a number of questions related to that, that mechanism of action and that led to a lot of excitement. And then the results themselves, and I'll post the poster onto our website in the coming days we're posting the American College of Rheumatology posters on the website later today or tomorrow as well. You can look at the poster. But in our data, what we've done is not only are we driving the phenotype more towards the pro-inflammatory state, but we're also having other effects, like we're reducing the SIRPalpha signal, which relates to the macrophage – I'm sorry, the tumor cell don't eat me [ph] signal. So what we're doing is we're SIRPalpha, which would then work in a roundabout way to – get over the hurdle that the tumor cells present, where they stop the macrophages from eating them, basically keeping things simple. So we have a kind of – we have a surprising and really cool, unexpected additional mechanism of action that's really on the cutting edge immunotherapy's and cancer. So not only do we, can we drive the phenotype a certain way in so doing, we're actually stimulating the phenotype in a way that is the – at the leading edge of what's going on in the immunooncology space. So we had a large number of people who were very excited by that. And the encouraging thing for this small company from Columbus, Ohio or Dublin, Ohio specifically is worth the forefront – out data alright. They're the forefront of this kind of medicine. So our need is to get the accelerant as I said earlier, to drive these things more rapidly into the clinic. But the technology is there, the science is there, and we're doing all we can to advance it, uh, as rapidly as possible, but it's really very exciting.

Mike Rigali: So would that forefront, would that kind of like we be driving the CD163 as an example?

Michael Rosol: Yes. So there's all sorts of things going on here. So some of the macrophage markers that represent macrophages that are more anti-inflammatory or wound healing, so those are – those are going down in these cells, and with our amino-oncology agents. The ones that are recognized as the pro-inflammatory markers, those are going up. As part of those some markers are going up that interact with T cells to tell the G-cells to attack the tumor cells, and those are going up as well. And then these other things that are involved in what's called checkpoint inhibition are going down. So we have this concert of different things going on when we introduce our constructs that all work together to rally the body's immune response, the macrophages and the T cells against the tumors. And we're seeing all of that in our studies and so, yes, and so that's – it's just really exciting.

Operator: Thank you. There are no further questions at this time, and I would like to turn the floor back over to Michael for any closing comments.

Michael Rosol: Thank you. I'd like to – thank you all for joining us today and for your support of the company and the people here. We will close the call now and see you, I believe at the annual meeting. It will be the next milestone on the calendar. Thank you very much.

Operator: This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a great day.