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NAVB > SEC Filings for NAVB > Form 10-Q on 11-Aug-2014All Recent SEC Filings

Show all filings for NAVIDEA BIOPHARMACEUTICALS, INC.

Form 10-Q for NAVIDEA BIOPHARMACEUTICALS, INC.


11-Aug-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things:

• general economic and business conditions, both nationally and in our markets;

• our history of losses, negative net worth and uncertainty of future profitability;

• our ability to successfully complete research and further development of our drug candidates;

• the timing, cost and uncertainty of obtaining regulatory approvals of our drug candidates;

• our ability to successfully commercialize our drug candidates;

• our expectations and estimates concerning future financial performance, financing plans and the impact of competition;

• our ability to raise capital sufficient to fund our development and commercialization programs;

• our ability to implement our growth strategy;

• anticipated trends in our business;

• advances in technologies; and

• other risk factors set forth in this report and detailed in our most recent Annual Report on Form 10-K and other SEC filings.

In addition, in this report, we use words such as "anticipate," "believe," "plan," "expect," "future," "intend," and similar expressions to identify forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

The Company

Navidea Biopharmaceuticals, Inc. (Navidea, the Company, or we), a Delaware corporation, is a biopharmaceutical company focused on the development and commercialization of precision diagnostics. We have five pharmaceutical platforms in various stages of development:

• Lymphoseek® (technetium Tc 99m tilmanocept) Injection is a novel, receptor-targeted, small-molecule radiopharmaceutical used in lymphatic mapping procedures that are performed to help evaluate patients with breast cancer or melanoma. Lymphoseek is designed to identify the lymph nodes that drain from a primary tumor, which have the highest probability of harboring cancer. It was approved by the U.S. Food and Drug Administration (FDA) in March 2013, and launched commercially in the United States in May 2013.

• Navidea's Manocept™ platform is predicated on the ability of the backbone of tilmanocept to specifically target the CD206 mannose receptor expressed on macrophages. Building on the success of Lymphoseek, this flexible and versatile platform acts as an engine for the design of purpose-built molecules offering the potential to be utilized across a range of diagnostic modalities, including single photon emission computed tomography (SPECT), positron emission tomography (PET), intra-operative and/or optical-fluorescence detection in a variety of disease states.


• NAV4694 is a Fluorine-18 (F-18) radiolabeled PET imaging agent being developed as an aid in the diagnosis of patients with signs or symptoms of Alzheimer's disease (AD) and mild cognitive impairment (MCI).

• NAV5001 is an Iodine-123 (I-123) radiolabeled SPECT imaging agent being developed as an aid in the diagnosis of Parkinson's disease (PD) and other movement disorders, with potential use as a diagnostic aid in dementia.

• NAV1800 (formerly RIGScan™) is being developed as a diagnostic aid for imaging and use during surgery to help surgeons locate occult or metastatic cancer, with a primary focus to date on colorectal cancer.

The last four of these drug product platforms are in development and must be cleared for marketing by the appropriate regulatory authorities before they can be sold in any markets.

Product Line Overview

Our primary development efforts over the last few years have been focused on the development of our now-approved Lymphoseek product, as well as more recently on our other pipeline programs, including NAV4694, NAV5001, NAV1800, and our Manocept platform. In May 2014, the Board of Directors made the decision to refocus the Company's resources to better align the funding of our pipeline programs with the expected growth in Lymphoseek revenue. This realignment primarily involves reducing our near-term support for our two neurological product candidates, NAV4694 and NAV5001, as we seek to secure a development partner or partners for these programs. The Company is also working to establish new sources of non-dilutive funding, including collaborations that can augment the balance sheet as the Company works to reduce spending to levels that can be increasingly offset by growing Lymphoseek revenue. In particular, substantial progress on the Manocept platform has resulted in several promising opportunities, including our recently announced R-NAV venture, which we believe may further expand the Company's pipeline but which require less near-term funding from Navidea than the two ongoing Phase 3 neurological development programs.

Navidea remains committed to expanding the Lymphoseek label and realizing the full potential of the product. We intend to work closely with our partners to continue the strong growth of this important product. The Company believes that the resources being devoted to drive Lymphoseek sales will lead to cash flows that can ultimately fund developmental stage programs from cash flow from operations. The Company is focused on expanding the market for Lymphoseek in all relevant markets.

We expect our overall research and development expenditures to be lower during the second half of 2014 as compared to 2013 due to the refocusing efforts outlined above, as we reduce the near-term scope of development of NAV4694, NAV5001, and NAV1800, while we allocate our resources to personnel, contractors and consultants supporting the global registration and commercialization of Lymphoseek, and development of our Manocept platform.

Lymphoseek

Lymphoseek is a lymph node targeting radiopharmaceutical agent intended for use in intraoperative lymphatic mapping procedures and lymphoscintigraphy employed in the overall diagnostic assessment of certain solid tumor cancers. Lymphoseek has the potential to provide oncology surgeons with information to identify key predictive lymph nodes that may harbor cancer and to help avoid the unnecessary removal of non-cancerous lymph nodes and the surrounding tissue in patients with a variety of solid tumor cancers. Lymphoseek was approved and indicated for use in lymphatic mapping for breast cancer and melanoma by the FDA in March 2013.


In December 2013, the FDA granted Fast Track designation to Lymphoseek for sentinel lymph node detection in patients with head and neck cancer and we submitted a supplemental New Drug Application (sNDA) with the FDA seeking approval for the marketing and sale of Lymphoseek for the same indication. In assessing the data-rich submission, the FDA chose to separate the filing into two applications based on the proposed labeling extensions requested and the scope of information provided. The first sNDA, aimed at Lymphoseek's use as a sentinel lymph node detection agent in patients with head and neck cancer, was accepted for review by the FDA in February 2014, and was granted Priority Review. Under the Prescription Drug User Fee Act (PDUFA), the FDA set a target review date for the first sNDA of June 16, 2014. In March 2014, the FDA accepted for review the second sNDA to support broader and more flexible use of Lymphoseek in imaging and lymphatic mapping procedures, including lymphoscintigraphy and other product capabilities. Under PDUFA, the FDA has set a target review date for the second sNDA of October 16, 2014. On June 13, 2014, the FDA approved the first sNDA for the expanded use of Lymphoseek indicated for guiding sentinel lymph node biopsy in head and neck cancer patients with squamous cell carcinoma of the oral cavity, making Lymphoseek the first and only FDA-approved radiopharmaceutical application for sentinel lymph node detection. Additional trials, including an ongoing trial in colorectal cancer, and others in various stages of execution, planning or consideration, are anticipated to provide additional data to potentially support expansion of the Lymphoseek opportunity. The Company continues to advance the second sNDA through productive discussions with the FDA.

In March 2014, we announced results of a three-year, voluntary follow-up study of Lymphoseek conducted in patients who participated in a Phase 3 clinical trial (NEO3-05) of the product. The primary objective of the follow-up study was to determine the regional recurrence-free rate (RRFR) after sentinel lymph node biopsy with Lymphoseek. Results of the follow-up study indicated that in patients who were confirmed to be node-negative after sentinel lymph node biopsy (n=88; 49 breast cancer, 39 melanoma) the RRFR was 98.8% (100% in breast cancer; 97.4% in melanoma) and the disease-specific survival rate was 98.6% (97.8% in breast cancer; 100% in melanoma) at three years.

In June 2014, the Company announced results from combined analyses of Phase 3 clinical trials that evaluated Lymphoseek efficacy in lymphatic mapping for identifying pathology-positive lymph nodes across multiple solid tumor types:
melanoma, breast cancer and head and neck squamous cell carcinoma. The results indicated that Lymphoseek sensitivity for sentinel lymph node mapping was consistent across the tumor type studies, regardless of whether surgery was conducted on the same day as, or on the day after, injection of Lymphoseek. Additionally, for patients with head and neck cancer, Lymphoseek demonstrated a low false negative rate (FNR) of 2.6% (4.6% for same day injection before surgery and 0.0% FNR in patients injected the day prior to surgery). Results from the study comprise part of an sNDA filing for Lymphoseek which is under review by the FDA.

Also in June 2014, we announced results from a post-hoc analysis of patient data from the Company's Phase 3 clinical trial (NEO3-06) of Lymphoseek in head and neck cancer. In the NEO3-06 Phase 3 study, Lymphoseek localization to lymph nodes showed a strong correlation with a full regional lymph node dissection and pathology analysis with a low false negative rate, a priority in identifying sentinel nodes. Lymphoseek was also observed to home preferentially to pathology-positive nodes at a higher rate than pathology-negative nodes. These results suggest that Lymphoseek not only effectively targets sentinel lymph nodes, but further that its ability to highlight tumor-positive lymph nodes may be augmented mechanistically by the recruitment of macrophages to cancer-harboring lymph nodes.

An investigator-initiated study is currently underway at the University of California, San Diego (UCSD) to evaluate injection site pain between Lymphoseek and an alternative radiopharmaceutical that is commonly used in lymphatic mapping procedures. The study is designed to determine if patients receiving Lymphoseek experience the same or less pain following injection compared to radiolabeled sulfur colloid, and to measure the amount of discomfort that patients report during and after injection, as well as other characteristics of performance.

In July 2014, we amended our license agreement with UCSD for the exclusive world-wide rights to Lymphoseek. The amended license agreement is effective until the third anniversary of the expiration date of the longest-lived underlying patent. Under the terms of the license agreement, UCSD has granted us the exclusive rights to make, use, sell, offer for sale and import licensed products as defined in the agreement and to practice the defined licensed methods during the term of the agreement. We may also sublicense the patent rights, subject to certain sublicense terms as defined in the agreement. In consideration for the license rights, we agreed to make payments to UCSD upon successfully reaching certain clinical, regulatory and cumulative sales milestones, and a royalty on net sales of licensed products subject to a $25,000 minimum annual royalty. We also agreed to reimburse UCSD for all patent-related costs and to meet certain diligence targets.

We are currently pursuing registration of Lymphoseek in the European Union (EU). We submitted our Marketing Authorization Application (MAA) for Lymphoseek to the European Medicines Agency (EMA) in December 2012. In December 2013, the EMA provided updated feedback on the MAA as it continued its review. The updated feedback was limited to supplemental product specification data and the NEO3-06 Phase 3 study in head and neck cancer. In March 2014, we held an update meeting


with the EMA where we presented oral explanations to the Committee for Medicinal Products for Human Use (CHMP) relating to open questions on the Lymphoseek MAA. At the conclusion of the meeting, the CHMP informed Navidea that the Committee will continue with its review of the MAA and provided the Company with additional questions, which we are currently addressing. In April 2014, the Company announced its expectation that the CHMP would convene a meeting of the Scientific Advisory Group on Oncology (SAG-O) to discuss additional elements of the Lymphoseek clinical study in patients with head and neck cancer to provide an opportunity for Navidea and independent experts in head and neck cancer surgery to review clinical data in the MAA filing and discuss broad aspects of care for patients with head and neck cancer in Europe. Navidea expects that the SAG-O's opinion, though not binding, will be considered by the CHMP when it meets to review the Lymphoseek MAA later this year. During this process, the MAA remains active and the review clock will continue to be stopped while Navidea works with the CHMP to continue expanded discussions. A positive opinion for approval would enable commercialization in the EU subsequent to European Commission (EC) adoption of the CHMP opinion on a country-by-country basis in each member state, a process which could take several months. However, we cannot assure you that Lymphoseek will achieve regulatory approval in the EU or any market outside the U.S., or if approved, that it will achieve market acceptance in any market.

Manocept Platform

Navidea's Manocept platform is predicated on the ability to specifically target the CD206 mannose receptor expressed on macrophages. Macrophages play important roles in many disease states and are an emerging target in many diseases where diagnostic uncertainty exists. This flexible and versatile platform serves as an engine for purpose-built molecules that may enhance diagnostic accuracy, clinical decision-making and ultimately patient care, while offering the potential to utilize a breadth of diagnostic modalities, including SPECT, PET, intra-operative and/or optical-fluorescence detection, as well as potentially in the delivery of therapeutic compounds targeting macrophages and their role in a variety of immune- and inflammation-based disorders. The Company's FDA-approved precision diagnostic lymphatic mapping agent, Lymphoseek, is representative of the ability to successfully exploit this mechanism to develop powerful new products.

In February 2014, data utilizing compounds from our Manocept platform in models of rheumatoid arthritis (RA) were presented by representatives from The Ohio State University at a Keystone Symposia on Molecular Cell Biology of Macrophages in Human Disease. The studies demonstrate the ability of fluorescent Cy3-tilmanocept to identify and localize to disease-state macrophages when administered intravenously, enabling detection of immune-mediated arthritis in affected joints in vivo in mice. Results were confirmed using histopathology. The data highlighted the identification of immune-mediated inflammation seen in arthritic joints of arthritis-affected mice but not in control mice or un-affected joints within arthritis-affected mice. The imaging results in this study showed preferential localization of macrophages by Cy3-tilmanocept in affected joints with little to no localization in unaffected joints.

In April 2014, collaborators from the University of California, San Francisco presented results at the 2014 American Association for Cancer Research conference, highlighting the potential utility of imaging agents derived from the Manocept platform in identifying affected tissues and lymph nodes in patients with Kaposi's Sarcoma (KS). The investigators concluded that, based on the results obtained, labeled imaging agents from the CD206-targeting Manocept platform provide potential avenues to enhance diagnosis and staging in this disorder.

In July 2014, Navidea announced that it has formed a joint enterprise with Essex Woodlands-backed Rheumco, LLC, to develop and commercialize radiolabeled diagnostics and therapeutics for rheumatologic and arthritic diseases. The joint enterprise, called R-NAV, LLC, will combine Navidea's proprietary Manocept CD206 macrophage targeting platform and Rheumco's proprietary Tin-117m radioisotope technology to focus on leveraging the platforms across several indications with high unmet medical need:

1) Detection of RA initially using Tc-99m tilmanocept, commercially known as Lymphoseek,

2) Combination of the Manocept platform with Tin-117m for detection and treatment of RA,

3) Detection and treatment of human and veterinary osteoarthritis (OA) using the Tin-117m technology, and

4) Treatment of pediatric hemophilic arthropathy (PHA), a rare rheumatologic condition.

R-NAV will be initially funded primarily through a $4 million investment from Infinity Capital III, of Houston-based McRay Money Management, and other third-party private investors working closely with Essex Woodlands, and underpinning the technology contributions from Rheumco and Navidea. Navidea has committed an additional $1 million to support R-NAV's development efforts to be paid in equal installments over three years. In exchange for its cash, in-kind and technology contributions, Navidea has received both common units and Preferred Series A units of R-NAV and will initially own approximately 30% of the combined entity. Joint oversight of R-NAV is shared between Navidea, Rheumco, Infinity Capital III of Houston-based McRay Money Management, and the other investors. Navidea also has an option to acquire, at its sole


discretion prior to Phase 3 clinical study, imaging products derived from the Manocept platform, and therapeutic products combining Manocept agents from Navidea with the Tin-117m technology for commercialization.

Also in July 2014, the Company completed a license agreement with UCSD for the exclusive world-wide rights in all diagnostic and therapeutic uses of tilmanocept. The license agreement is effective until the third anniversary of the expiration date of the longest-lived underlying patent. Under the terms of the license agreement, UCSD has granted us the exclusive rights to make, use, sell, offer for sale and import licensed products as defined in the agreement and to practice the defined licensed methods during the term of the agreement. We may also sublicense the patent rights, subject to certain sublicense terms as defined in the agreement. In consideration for the license rights, we agreed to pay UCSD a license issue fee of $25,000 and license maintenance fees of $25,000 per year. We also agreed to make payments to UCSD upon successfully reaching certain clinical, regulatory and cumulative sales milestones, and a royalty on net sales of licensed products subject to a $25,000 minimum annual royalty. We also agreed to reimburse UCSD for all patent-related costs and to meet certain diligence targets.

The Company continues to evaluate emerging data in other disease states to define areas of focus, development pathways and partnering options to capitalize on the Manocept platform, including ongoing studies in KS and RA. The immune-inflammatory process is remarkably complex and tightly regulated with indicators that initiate, maintain and shut down the process. Macrophages are immune cells that play a critical role in the initiation, maintenance, and resolution of inflammation. They are activated and deactivated in the inflammatory process. Because macrophages may promote dysregulation that accelerates or enhances disease progression, diagnostic and therapeutic interventions that target macrophages may open new avenues for controlling inflammatory diseases (Fujiwara, et al., "Macrophages in inflammation," Curr Drug Targets Inflamm Allergy 2005 June;4(3):281-6).

Impairment of the macrophage-driven disease mechanism is an area of increasing focus in medicine. The number of people affected by all the inflammatory diseases combined is estimated at more than 40 million in the United States and perhaps 700 million worldwide, making these macrophage-mediated diseases an area of remarkable clinical importance. There are many recognized disorders having macrophage involvement, including RA, atherosclerosis/vulnerable plaque, Crohn's disease, tuberculosis (TB), systemic lupus erythematosis, KS, and others that span clinical areas in oncology, autoimmunity, infectious diseases, cardiology, and inflammation. Data from studies using agents from the Manocept platform in RA, KS and TB were published in a special supplement, Nature Outlook: Medical Imaging, in Nature's October 31, 2013 issue. The supplement included a White Paper by Navidea entitled "Innovations in receptor-targeted precision imaging at Navidea: Diagnosis up close and personal," focused on the Manocept platform.

We cannot assure you that further evaluation or development will be successful, that any Manocept platform product candidate will ultimately achieve regulatory approval, or if approved, the extent to which it will achieve market acceptance.

NAV4694

NAV4694 is a Fluorine-18 labeled precision radiopharmaceutical candidate for use in the imaging and evaluation of patients with signs or symptoms of AD and potentially also MCI. NAV4694 binds to beta-amyloid deposits in the brain that can then be imaged in PET scans. Amyloid plaque pathology is a required feature of AD and the presence of amyloid pathology is a supportive feature for diagnosis of probable AD. Patients who are negative for amyloid pathology do not have AD.

Based on the data accumulated to date, NAV4694 appears to have better sensitivity and specificity in detecting beta-amyloid than other agents in its category. Due to its high affinity for amyloid, improved contrast, and enhanced uptake in the amyloid-target regions of interest in the brain compared with low uptake in white matter background, better signal-to-noise ratios have been observed. Greater contrast may enable the ability to detect smaller amounts of amyloid and earlier identification of disease, as well as the opportunity to detect smaller changes in amyloid levels and monitor disease progression over time.

NAV4694 has been studied in rigorous pre-clinical studies and clinical trials in humans. Clinical studies through Phase 3 have included subjects with MCI, suspected AD patients, and healthy volunteers. Results suggest that NAV4694 has the potential ability to image patients quickly and safely with high sensitivity and specificity.


During 2013, we initiated a Phase 2b trial in subjects with MCI and a Phase 3 autopsy-based trial to support registration in the U.S. and the EU. During the first quarter of 2014, we reported data from a blinded read of over 160 cases in which NAV4694 showed sensitivity and specificity both in excess of 95%. Positive results were also reported from our Phase 2b trial in subjects with MCI, showing the agent's ability to identify beta-amyloid with a high confidence of diagnosis in these are early-stage patients for whom diagnostic uncertainty is often significant. These data build on prior work showing that NAV4694 can separate MCI patients with high beta amyloid who are likely to progress to AD from those who do not. To date, the product candidate appears to be safe and well-tolerated. We cannot assure you, however, that further clinical trials for this product will be successful, that the product will achieve regulatory approval, or if approved, that it will achieve market acceptance.

In May 2014, the Board of Directors made the decision to refocus the Company's resources to better align the funding of our pipeline programs with the expected growth in Lymphoseek revenue. This realignment primarily involves reducing our near-term support for our neurological product candidates, including NAV4694, as we seek to secure a development partner or partners for these programs.

NAV5001

NAV5001 is a patented Iodine-123 labeled small molecule radiopharmaceutical used with SPECT imaging to identify the status of specific regions in the brains of patients suspected of having PD. The agent binds to the dopamine transporter (DAT) on the cell surface of dopaminergic neurons in the striatum and substantia nigra regions of the brain. Loss of these neurons is a hallmark of PD.

Results from clinical trials to date have demonstrated that NAV5001 has high affinity for DAT and rapid kinetics which enable the generation of clean images quickly, beginning within about 20 minutes after injection, while other agents have waiting periods from 4 to 24 hours before imaging can occur. In addition to its potential use as an aid in the differential diagnosis of PD and movement disorders, NAV5001 may also be useful in the diagnosis of Dementia with Lewy Bodies, one of the most common forms of dementia after AD.

In December 2013, we announced the initiation of our pivotal Phase 3 registration program to assess the safety and efficacy of NAV5001 as an aid in the differential diagnosis of Parkinsonian Syndromes from non-Parkinsonian tremor. This clinical study is focused on subjects with emerging symptoms in whom diagnostic uncertainty and unmet need are highest. Results from earlier trials using NAV5001 suggest that it is an effective, well-tolerated imaging agent. The agent's high affinity for DAT and resulting clear images can assist physicians in reaching an accurate diagnosis sooner, and the rapid kinetics with minimal time between injection and scanning and time in the SPECT scanner not only decrease patient exposure and but also facilitate increased efficiency with potential cost savings for the nuclear medicine facility. Reducing diagnostic uncertainty and error rates for patients with movement disorders who often exhibit similar clinical symptoms has the potential to afford great value, especially early in the initial clinical presentation, and may lead to improved clinical decision-making and patient management. We cannot assure you, however, that further clinical trials for this product will be successful, that the product will achieve regulatory approval, or if approved, that it will achieve market acceptance.

In May 2014, the Board of Directors made the decision to refocus the Company's resources to better align the funding of our pipeline programs with the expected growth in Lymphoseek revenue. This realignment primarily involves reducing our near-term support for our neurological product candidates, including NAV5001, as we seek to secure a development partner for these programs.

NAV1800

NAV1800 is intended to aid in identifying a primary tumor, ascertaining tumor margins, or determining the extent and location of occult and metastatic tumor . . .

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