Earnings Transcript for NAVB - Q4 Fiscal Year 2021

Operator: Greetings. Welcome to the Navidea Biopharmaceuticals Fourth Quarter Earnings Conference Call. [Operator Instructions] And please note that this conference is being recorded. I will now turn the conference over to Michael Rosol, Chief Medical Officer. Thank you. You may begin.

Michael Rosol: Thank you and thank you all for joining us today. 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. Navidea’s Vice President of Finance and Administration, Erika Eves will be 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 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, 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. So with that, let’s begin with our update. During the fourth quarter of 2021 and since, we have continued to work on financing for the company. We have engaged with an investment bank and options are being pursued. This is all I can say at the current time, but be assured that the Board of Directors and senior management are working on this tirelessly. We will provide you with updates as we are able to do so. Overall, we have made excellent progress in our Phase 2b trial in rheumatoid arthritis, or RA, comparing imaging to biopsy and begun enrollment into our Phase 3 following dialogue with the FDA. We continue to advance the therapeutics and imaging applications through collaborative relationships with various well-known institutions and investigators across the globe and are growing and diligently maintaining the company’s intellectual property. The team here works extremely hard and efficiently and I’m very proud to be associated with this outstanding group of individuals. Senior management is working closely with the Board of Directors, and we are united in moving the company forward. As we’ve said in the recent past there are many things we are working on behind the scenes. We will provide you with updates as soon as we are able and as appropriate. So now I’d like to provide some more detail around clinical updates. I will begin with progress on our rheumatoid arthritis program. We initiated and have enrolled into our Phase 3 trial in RA titled evaluation of technetium 99m tilmanocept imaging for the early prediction of anti-TNF alpha therapy response in patients with moderate to severe active RA. The indications we’re going for an RA are

Erika Eves: Thanks Mike. Total net revenues for the fourth quarter of 2021 were $50,000 compared to $219,000 for the same period in 2020. Total net revenues for the full year of 2021 were $532,000 compared to $914,000 in 2020. The decrease was primarily due to decreased grant revenue related to Small Business Innovation Research grants from the National Institutes of Health supporting Manocept development and decreased royalty and license revenue from sales of tilmanocept in Europe. These decreases were offset by the partial recovery of debts previously written off and receipt of reimbursement from Cardinal Health of certain R&D costs. Research and development expenses for the fourth quarter of 2021 were $1.4 million compared to $1.3 million in the same period in 2020. The R&D expenses for the full year of 2021 were $5.1 million compared to $4.9 million in 2020. The net increase during the year-to-date was primarily due to increased regulatory consulting, employee compensation, travel, recruiting and general office expenses, coupled with net increases in drug project expenses, including increased Manocept therapeutic and Tc99m-tilmanocept development costs, offset by decreased Manocept diagnostic development costs. Selling, general and administrative expenses for the fourth quarter of 2021 were $2.3 million compared to $1.7 million in the same period in 2020. SG&A expenses for the full year of 2021 were $7.5 million compared to $6.7 million in 2020. The net increase during the year-to-date was primarily due to separation of our former Chief Executive Officer, coupled with increased consulting services related to European distribution of Tc99m tilmanocept, director compensation related to additional Board members and increased Board compensation rates, insurance costs, losses on the abandonment of certain intellectual property, recruiting fees, travel and general office expenses. These increases were offset by decreases in legal and professional services, employee compensation, investor relations costs, European annual registration fees, facilities costs and franchise taxes. We would like to clarify that this morning’s press release used the word termination to describe the accounting for separation expenses related to the resignation of our former CEO, Jed Latkin. Our relationship with Mr. Latkin remains amicable. Navidea’s net loss attributable to common stockholders for the fourth quarter of 2021 was $3.7 million or $0.12 per share compared to $3 million or $0.11 per share for the same period in 2020. And Navidea’s net loss attributable to common stockholders for the full year of 2021 was $11.7 million or $0.40 per share compared to $11.4 million or $0.48 per share in 2020. And finally, Navidea ended the fourth quarter of 2021 with $4.2 million in cash and cash equivalents. I will now turn the call back over to Mike.

Michael Rosol: Thank you, Erika. We will now begin the Q&A portion of the call.

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Mike, a private investor. You may proceed with your question.

Unidentified Analyst: Good day Dr. Rosol and Erika. How are you guys today, good?

Michael Rosol: Good. Hi, Mike.

Unidentified Analyst: You were good till Q&A. I got some questions. And I appreciate you guys.

Michael Rosol: I didn’t hear you, Mike. I’m kidding.

Unidentified Analyst: I appreciate you guys. Thanks for taking on me. It’s a tough time for everybody. Dr. Rosol, a couple of questions for you, if you don’t mind. On the – you were hoping to move into an early – or an IND in the TAMs area sometime in early 2024, and I know you’re still doing the preclinicals. Is that still in reach?

Michael Rosol: Yes. Yes. Thanks, Mike. I think it is in reach. Yes, it’s still in line with our projections.

Unidentified Analyst: Okay. There is – on the RA front, there is a lot of people out there, a lot of companies out there trying to do what you’re trying to do, but not in the kind of technical and sophisticated way Navidea is. They try using blood tests and various type of means like that, and they are not FDA approved. Are they having any progress with the rheumatologists to demonstrate how much advantage Navidea would have with the rheumatologist, Dr. Rosol?

Michael Rosol: Yes. I don’t want to get too much into their business, but I can say we think we have several advantages competitively related to those assays. And maybe there is something to be said for being complementary to them. But what we’re doing, of course, is we’re measuring directly – activity directly in the joint. So primarily at the site of interest where the activity is. And those peripheral-based blood assay kind of assays and examinations have some utility, but because they are downstream, you’re not really getting where the action is. So we think we have advantages there. We’ve – we know that the KOLs we speak to are very positive about our modality and our method and our molecule for applications in RA. And we will keep moving forward with them in mind, and they have told us that if our data keep holding up the way they have been in these trials, then they’ll be very happy to have something like this out in the field that they can use as part of their toolkit. Is that fair answer?

Unidentified Analyst: Excellent. I appreciate that. On the 523 patients in the 3-33, I know that statisticians like about 500 in their test, but I was really happy to hear that you’re down between 200 and 600 range now. Is that 523 trying to also prove the negative predictive value as well as the positive predictive value or is that – because I know that’s one of your stretch targets?

Michael Rosol: Yes. No, exactly. So it’s to cover – really, it’s to encompass the sensitivity specificity as well as the PPV and NPV, so kind of all of the above. And 523 is kind of – it’s a midpoint. It’s – maybe we’re conservative in the sense that it’s in the higher zone of where we’d like to be. So, as you’ve noted and as I said are somewhere between 200 and 672 will be the number we need to achieve our objective statistically, if all works out as planned. And that really is dependent on the responders and non-responders to the anti-TNFs. So what am I saying? The trial size is dependent on the number of responders and non-responders to the drugs they get, not just on what our readout says. But we have to have a certain number of people who actually respond to the anti-TNF so we can see if we predicted the response correctly. And we have to have a certain number of non-responders to see if we predicted non-response correctly. So that part is out of our hands, how do patients respond to the therapeutics. So that’s why there is that big range. If we have about a 50-50 ratio of responders to the anti-TNF and non-responders, that’s where we get to 200 in the trial size, and we can look to see if our NPV and PPV and sensitivity and specificity are significant and achieve our targets. But if there are a great many more non-responders than responders to the drugs, then we’re going to need a higher number. So 523 was – is just kind of a conservative number we picked as a midpoint. It’s just the way clinicaltrials.gov is set up that they want you to choose a number, right?

Unidentified Analyst: Well, that’s an important piece of information and very informative. So I know you probably can’t disclose how many patients have been imaged yet in the 3-33. But are you starting to get any early – I know – and you’re on a 213-day major for all of the outcomes, but are you seeing any outcomes yet on any of the patients that have been imaged in 3-33?

Michael Rosol: Yes, I can’t comment on that. It’s early, but stay tuned.

Unidentified Analyst: Stay tuned. So I can’t drag that one. You did mention something on 3-32 about the 11 patients and that you are 3 of each type. Is it fair to assume that with the revenue you’ve had 3, 3 and 9 of the 3 or – 4, 4 and 3, how would you break those down? In other words, are you one short of one type or not?

Michael Rosol: Yes. I don’t know that I can say that either. But we are looking at for 4, 4 and 4. And we will let you know as soon as we get it. As you know, we can’t chose who walks through the door, right? And if you look at the literature, the thinking is the literature suggests there is about third of each subtype in the general population. And whether or not we’re hitting that, I can’t reveal at this time, but keep that in mind and that should give you an idea of the upper bound if things get off balance one way or another. That probably isn’t a satisfying answer to you, but we are getting good recruitment. So 11 at this stage is pretty good. We had a little bit of a lag over Christmas and the holidays. That happens. But we have sites that are really – have ramped it up again. And that’s why, as I said, we have 4 or 5 in screening at this stage. So again, stay tuned. We will let you know as soon as we can in that trial.

Unidentified Analyst: Okay. And one more question for you, Dr. Rosol. On the that meeting ahead with Cardinal, that was very timely and informative. So how do you guys decide with Cardinal like where you’re advancing RA, whose rights they are under? I mean how do you do that?

Michael Rosol: Yes. They have the patent prosecution rights for North America for a certain family of patents that were part of the asset purchase and we, of course, have developed our own over the later the ensuing years. And in terms of their patent prosecution rights, those apply to the U.S. and ours apply for those same patents elsewhere. So you can imagine things could kind of go in every which way, but loose, if we weren’t working together. So at some point, not too long ago, I realized with my colleague who’s managing the IP that we didn’t want that to happen because they might not prosecute claims or push back against rejections that we think we need. So we have this dialogue with them, and we’re working quite well together because at the end of the day, the more we can get approved, it benefits potentially not just us, but possibly Cardinal as well.

Unidentified Analyst: So when they advance an IP, for instance, they modify it or improve it, it could be on your behalf or it could be on their behalf. Is that fair?

Michael Rosol: Well, since we have the license right, we have the irrevocable exclusive license to all of these, it could – it obviously could affect us. So we wanted to make sure we had to say, we had a voice and what their responses would be to the examiner objections or whatever the case may be. And so now we’re in a very good place where we’re doing just that. So we – they take our input, we take their input and we’re working together quite harmoniously to make sure there are no gaps, right? Where they may say, we don’t think we need this. And actually, we think they do or we do for reasons for our business purposes. Now we’ve joined with them in terms of this collaboratively and we’re in a very good place. And I mean, I don’t think there is anything significant that’s been lost there. It was just there were some complexities. And I think now we’ve smoothed all those out. So it’s – we’re in a really good place.

Unidentified Analyst: Okay. Great. And maybe this is both for Erika and for you, Dr. Rosol. On the – in the EU, have they – have you guys got the supply issue worked out in the EU, where there seem to be some issue on having the stock of tilmanocept available? Or is that still an open issue?

Michael Rosol: Yes, it took a while to get the distribution set up. And that was quite a heavy lift for a small company, but I think I’m pretty proud of the team here. Jeff Smith, who’s our – who moonlights as our BD person is also our VP of Operations, and he did [indiscernible] work in getting the distribution set up. So I think we’re in a good place there. And as you know, we are looking at possible partners for Europe, and we will keep you guys posted on that as things progress.

Unidentified Analyst: Is there anything you can share on the Jubilant MOU? Or is that still...

Michael Rosol: And I think we haven’t gotten extremely specific, but as everybody has noticed, and I think we have said in the past, the NAV3-32 study is very important. Kind of on both sides recognize the importance of this study. And so their interest remains, and it’s still the due diligence process, and we will see how NAV3-32 goes.

Unidentified Analyst: Well, does their due diligence and with the 12 patients or with the 24 or you can disclose that?

Michael Rosol: Yes, I don’t think I can disclose the exact term of it.

Unidentified Analyst: Okay. Now Erika, this is probably more for you, but have you got any feedback from the SEC on the S-1 or is that non-disclosable?

Erika Eves: We received a letter from the SEC just stating that they do not intend to review and comment on the S-1 at this time. So that’s really the only feedback.

Unidentified Analyst: Okay. In the PM settlement, you kind of did that universal settlement that you published or that you provide a PR on. Did that also include settling their common warrants or are there common warrants still outstanding?

Erika Eves: The common warrants that are owned by one of the platinum entities are still outstanding at this time.

Unidentified Analyst: Okay. very good. And has Keystone converted any of their last tranche to common? Or is that going to be in the 10-K, 10-Q report?

Erika Eves: It will be in the 10-K. But no, they have not. As of now, they have not converted any of their remaining Series D.

Unidentified Analyst: Well, thanks for being so generous with your guys’ times, and thanks for working so hard for your shareholders.

Michael Rosol: Thanks Mike. Appreciate it. You reached the new record in questions, but they are all good. I like it. Thanks.

Unidentified Analyst: I tried to be really fast.

Michael Rosol: Good. Okay.

Erika Eves: All good. Thank you.

Operator: Thank you. [Operator Instructions] Our next question comes from the line of Edward English, a Private Investor. You may proceed with your question.

Edward English: Hello, Dr. Rosol and Erika. This is Eddie English, an individual investor. So have a few questions. My first one relates to some information. I think I saw on fda.gov site on the clinical trials with the 3-32, it seems to indicate that we’re not recruiting at the Queen Mary location. Is that accurate? And if so, any idea when they will commence recruiting there?

Michael Rosol: Yes. No, good question. No, that’s actually an error on the site. We actually submitted to correct that. I don’t know where the error came from, but they have been recruiting. They were – as you know, and I think we’ve said previously, they were slower to open because of COVID. But that was – that is just an error kind of a typo and entry error on the site. So we’re correcting that. They have been recruiting.

Edward English: Great. Great. Next question is with your Man-Dox studies with Kaposi sarcoma. And since doxorubicin is approved by the FDA already, will long-term clinical studies be required before submitting an FDA application for a new drug?

Michael Rosol: Well, that’s a great question. So it does help that the drug is already approved and well known. What we think – our – one of our advantages is we are – one of the issues or one of the main concerns with doxorubicin is essentially you have a lifetime maximum dose you can get because things start to happen in other organs of your body, specifically the heart. So, bad things happen. With our construct being able to deliver this drug to the areas of interest, specifically with a very high affinity and it’s not going in off-target locations very much, we should be able to significantly reduce that the risk of these side effects. So we will have to demonstrate that in preclinical studies as well as human studies. But I don’t – we’re not going to have to do – I think we won’t have to do. I’m not going to speak for the FDA yet. We haven’t approached them about this. I think there will be some – we have the proof points of the core molecule itself, tilmanocept being or Manocept being safe. Doxorubicin is a well-known toxicity profile. We can deliver less of it, but more specifically to the area of interest. All of this will be taken together as part of the package by the FDA to – as they consider the safety and what kinds of long-term follow-up are needed. But we have – one of our main advantages, as I said, are the main advantages that we can just bring the drug to the area it needs to be, and it won’t go so significantly to areas where it doesn’t need to be. So that should help us with our approval process in terms of the trial duration. Does that make sense?

Unidentified Analyst: Yes. Thank you. Another question, what’s the difference in the work that WorldCare Clinical will perform with the RA workflow versus the activities that you signed a letter of intent with MIM Software?

Michael Rosol: Yes, another great question. So what WorldCare is doing for us is they are imaging contract research organization. So they are actually the imaging group that’s helping us with all of these clinical trials. They are fundamentally handling the imaging chain, we call it. So they oversee in a broad sense of the image acquisition. We also do quite a bit of that ourselves. But in any event, they have all the processes and systems in place to handle these in a secure fashion for regulatory purposes as well as for data integrity for good science. So they do that for us. We had been working with them and talking to them about possibly being our commercial partner for the imaging readout as well. But we think, over time, in our conversations with MIM, that MIM is probably the better partner for us for that specific purpose of the imaging readout for the commercial product because MIM does this for a living, right? And they have literally I think the number is over 100 data scientists who just work on image analysis. And one of their big buckets is nuclear medicine images. So they are already doing this, and they have their application out there that we could be kind of an add-on to. They also have a cloud-based application where images could just be uploaded to the web. And with their automated readout, it could just be split right back at the snap of a finger basically to the med doc on the other end who can make sure that it was read in an appropriate fashion, but there is the score. So they have the background and the infrastructure and the software in place to do this, we think in a way that maybe WorldCare would take some time to ramp up to. So we’re still working with WorldCare as our imaging vendor in the trials, but commercially, we’re – our plan is to go with MIM.

Unidentified Analyst: Thank you. I was confused on that with the announcement today. One final question, has there been any progress on securing a deal with your NAV4694 product?

Michael Rosol: Yes. So we do currently have a – we have a license from AstraZeneca and a sublicense deal with Malur. And we’re always thinking about ways to optimize value for the company. And so as we discuss possibilities with these players, we will let you guys know.

Unidentified Analyst: Alright. That’s all I have. Thank you very much and congratulations on the progress.

Michael Rosol: Appreciated.

Operator: Thank you. At this time, we have reached the end of the question-and-answer session. And I will now turn the call back over to Michael for any closing remarks.

Michael Rosol: Perfect. Thank you all. I want to thank you again for taking the time today to listen to us and to ask us your questions. We appreciate all of you and your investment in the company and your faith in us, and I want to reassure you that we’re working all the time on this to bring value to the shareholders and to the patients at large out there. And we will keep doing that, and we look forward to speaking to you again before too long. Thank you.

Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation, and have a great day.

Michael Rosol: Thank you.