Navidea Biopharmaceuticals, Inc.

Greetings. Welcome to the NVIDIA Q3 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A prepared question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mike Rozal, CMO. You may begin.

Thank you all for joining us today. This call is being webcast live on our website, ir.navidia.com, and a replay will be made available. Following prepared remarks, we will be conducting a question and answer segment where we will read submitted questions and provide our responses. NVIDIA's Vice President of Finance and Administration, Erica 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 NVIDIA'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 NVIDIA'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 filing with the SEC. Before I begin the third quarter update, I'd like to provide a brief comment on recent events. Jed Laskin, our former CEO, resigned from his executive positions and as a member of the board on October 24th. On November 8th, 2021, the company's board of directors transitioned from the office of the CEO and established an executive leadership committee to lead the company on an interim basis while its next CEO is identified. The executive leadership committee includes myself, Mike Rozal, the company's senior VP and chief medical officer, Erica Eves, the company's vice president of finance and administration, and Jeffrey Smith, the Vice President of Operations. The Executive Leadership Committee will work with the newly established Board Oversight Committee consisting of independent directors Alexander Capello, Thomas Farb, and John K. Scott, Jr. During this transition, we remain focused on the rheumatoid arthritis pipeline while also working aggressively to advance our therapeutics program into the clinic. In the third quarter on September 1, We had our end of Phase 2 Type B meeting to discuss the results of our completed Phase 2B trial in rheumatoid arthritis and advancement into Phase 3 in RA. We had a constructive meeting with the FDA, have received the formal minutes of that meeting, and have submitted our NAV 333 Phase 3 protocol and analysis plan with agreed upon modifications based on that discussion. We are actively preparing for initiation of the trial. I'll have some more comments on the RA program in a moment in the clinical update portion of the call. In this past quarter, we also brought in Dr. Michelle McHale as our chief regulatory officer. As you might have read in our press release, Dr. McHale has over 30 years of experience in the pharmaceutical industry and has served in senior regulatory roles at BioNTech AG, SmithKline Beecham, now GSK, and Pharmacia Upjohn, now Pfizer, to name a few. Dr. McHale has moved here to Ohio from Germany so that we can interact with him readily and on a daily basis. We're excited to have him here, and he is working closely with the clinical team as we advance the RA program and manage the distribution of Lymphaseq in Europe. This quarter also saw the appointments of several board members, Alexander Capello, John Scott, Jr., Thomas Farb, and Agnieszka Winkler. Mr. Capello brings over 30 years of banking and public board experience to the company, And Mr. Scott is the company's largest shareholder. Mr. Farb has over three decades of experience as an investor in and senior executive of numerous life science and information technology companies, both in the U.S. and internationally. And Ms. Winkler has extensive professional and board experience with startup, mid-cap, and Fortune 500 companies. Now I would like to cover the clinical updates. So I'll begin with the progress on our RA program and an update on our interactions with the FDA. As we have discussed previously, in July we submitted our End of Phase II Type B meeting package to the agency for their continuing evaluation of the completed Phase IIb trial, as well as review of the proposed Phase III protocol and analysis plan. The Phase IIb trial, NAV331, and the data from it were critical to moving us forward in RA. As a reminder, this was a three-arm trial. In arms one and two, we evaluated the repeatability, reproducibility, and stability of our Telmanisept imaging readout in both healthy subjects and in patients with active RA. And in the third arm, we mirrored the upcoming phase three study to obtain data to help with sample sizing for the phase three and to have a first look at the ability of Telmanisept imaging to serve as an early predictor of treatment efficacy. As we discussed previously, the data from the completed trial demonstrated that Telmanisept can provide robust quantitative imaging and healthy controls and in patients with active RA that this imaging is reproducible and can divine joints with and without RA-involved inflammation, and that telmanicept imaging can provide an early prediction of treatment efficacy of anti-TNF-alpha therapy. In short, the analysis from the complete set of ARM3 patients demonstrated high accuracy at early prediction of treatment effect with a strong predictive value in particular for non-responders to anti-TNF-alpha therapies, even from the baseline scan alone in a defined subset of patients. In these patients, those exhibiting a low level of temanosept uptake in their joints on their initial baseline scan, who likely represent the so-called fibroid subtype of RA, there was an almost 90% non-response rate to anti-TNF alpha therapy using a clinical gold standard assessment. This results on its own. The ability to use a single time point scan to predict that an anti-TNF alpha therapy is highly unlikely to work in a particular group of patients would be a powerful tool for rheumatologists to be able to rule out an entire class of therapies from the get-go, avoiding the high cost possible side effects and possible worsening of disease that could otherwise be the case. In combination with the predictive capacity we saw in the rest of the RM3 subjects, the data continue to support our hypotheses. The results from the full data set from this trial will be submitted for presentation at an upcoming international meeting And, of course, we plan to write these up for publication in a medical journal. Following submission of the briefing package containing these results, as well as the NAV333 Phase III study protocol and analysis plan, the FDA granted our end-of-Phase II meeting request and set the date for September 1. Several days prior to the meeting, the agency sent us their preliminary comments, providing us with the opportunity to send back initial replies to their comments in preparation for an efficient September 1 meeting. The meeting itself was constructive and included two key opinion leaders in rheumatology, Dr. Jonathan Graff of UCSF and Dr. Constantino Pizzalis of QMAL in the UK, both of whom have been site investigators in our Phase II program, as well as instrumental advisors in our RA program development and trial design. Since this constructive meeting on September 1 with the FDA, and after receipt of the formal meeting minutes to make sure we remain in alignment, We finalized the agreed upon modifications to the Phase III protocol design and analysis plan and have sent these back to the FDA for comment. In the interim, we are preparing to initiate the Phase III this quarter. As I mentioned before, we have several key sites that we expect to be able to open up quickly. These are sites that were involved in the Phase IIb study and are well acquainted with the trial design and operations. I want to also mention that we continue to make very good progress in automating the imaging quantification as well, which will have significant benefit to the commercial product. We have nearly completed the Healthy Control Study, NAV 335, to establish what is called a normative database for telmaniseptin RA. An integral part of our ability to discriminate RA-inflamed joints from those that do not have inflammation is the knowledge of what healthy joints look like quantitatively. We used the healthy control data from Arm 1 of the completed Phase 2b to start to set these parameters, and we will use this study to add to the size of the current normative database. This should enable us to discriminate RA-involved joints from non-RA-inflamed joints with improved accuracy and should have a positive impact on our ability to predict treatment response. This normative database, establishing the parameters of what a normal joint looks like with tomanicept, will play an essential part in both the Phase III data analysis as well as commercial product. As of today, we've enrolled all but four of the projected total and are on track to complete enrollment in weeks. Our comparison study of telmaniceft imaging to joint biopsy, NAV332, is in active recruitment. In this Phase IIb study, we are comparing telmaniceft imaging to histology from the joints of patients with active RA. We aim to recruit patients with each of the three known subtypes of RA to obtain comparative imaging and pathology results in order to establish the correlation between our imaging signal and the number and density of macrophages in RA patient joints. We have opened up Northwestern University, Barts Health of London, and a third site, a research rheumatology group called Attune Health out in Los Angeles. Recruitment into this study has really picked up, and as of this call, we have nine subjects enrolled and additional candidates in pre-enrollment screening. The trial is designed so that we enroll a minimum of four subjects in each of the three subtypes of RA, so overall trial size is expected to range between 12 and 24. Remember, this trial is not required for FDA approval in 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 therapeutics. It will also provide rheumatologists with gold standard information related to our imaging readout and the fundamental biology of a patient's RA. For example, results from this study could directly demonstrate that telmanosept imaging can be used to determine a patient's subtype of RA, and this would have implications for what class of therapies might or might not work on that particular patient. This could, therefore, have immediate impact on the management of RA patients. On the cardiovascular disease front, work has completed on the investigator-initiated atherosclerotic plaque imaging study at MGH in Boston. The group there submitted an abstract to an international conference for possible presentation in February. The data we have seen have been promising in terms of localization of tomanacept to sites of atherosclerotic plaque, and have been in line with what was reported in the pilot study we co-published with them previously. Preclinical studies of Gallium-68 telmanisept imaging for our NIH-funded project with the University of Alabama Birmingham are also ongoing. This project evaluated telmanisept and various new imaging agents similar to telmanisept in a mouse model of atherosclerosis. All planned imaging has been completed. Preliminary analyses have shown significant uptake of a gallium-68-telmanisept-like imaging agent in atherosclerotic plaques in this mouse model. On the therapeutic front, we continue to make strides forward. For indications in oncology, we have performed preclinical studies that demonstrate macrophage phenotype change from an immunosuppressive to a pro-inflammatory state, as well as a synergistic effect on tumor growth reduction in animal models, using our doxorubicin-containing construct with an approved checkpoint inhibitor therapy. Put more simply, the tumors grow at a significantly reduced rate with our molecule combined with an approved drug compared to the approved drug alone. Furthermore, evaluations of the cells within these tumors show that our doxorubicin-containing construct altered the inflammatory state of tumor macrophages much as was expected. These are important mechanism of action and proof of concept studies that need to be done in order to move forward and we are excited by the results thus far. We presented these results at the New York Academy of Sciences Frontiers in Cancer Immunotherapy Symposium back in May and are completing work on the first of several related manuscripts. Further preclinical studies including a dose schedule study looking at different starting points for therapy were also carried out this quarter. In this third quarter, another important set of preclinical imaging studies were completed with our collaborators at UAB. These studies evaluated two new imaging technologies in a mouse model of cancer. The first technology is designed to increase imaging agent localization to target tissues, while the second technology was designed to block off-target imaging agent localization to the liver, a major site of localization when telmanicept is administered by intravenous injection. These studies were highly successful, showing that we can dramatically increase localization of a new telmanicep-like imaging agent to tumors while simultaneously significantly blocking off-target localization to the liver. With help from our colleagues at UAB, a manuscript describing these results is being prepared for publication. The success of these imaging studies greatly expands NVIDIA's imaging know-how and potentially illuminates a path to a next-generation imaging agent. Perhaps as importantly, imaging studies also points to a pathway leading to synthesis of more effective therapeutic drug delivery constructs. Building on this new information, new drug delivery constructs have been synthesized that carry payloads of either dexamethasone or doxorubicin. In addition, other new constructs have been synthesized that carry new drug payloads that may be more effective than doxorubicin for beneficially altering the immune status of tumor macrophages. All of these new constructs are currently being evaluated in a human macrophage assay system, with the first new construct carrying a doxorubicin payload having progressed to an ongoing evaluation in a mouse tumor model. The dexamethasone carrying construct will also be evaluated, but in a mouse model of inflammation rather than cancer. This construct could have broad-reaching applications in autoimmunity, inflammation, and in diseases of metabolism. As these preclinical studies are completed, we will update you and announce when and where results will be presented. And so our therapeutic pipeline is robust and moving forward. On the intellectual property front, our provisional patent application titled Synthesis of Uniformly Defined Molecular Weight and Oscillated Dextrans and Derivatives Thereof was converted to an A1 application on July 9th. This application protects a portion of the new imaging know-how I discussed previously. On August 20th, we filed a provisional patent application entitled Compositions and Methods for the Treatment of Rheumatoid Arthritis, which relates to a multivariate algorithmic method that may improve the predicted accuracy of a rheumatoid arthritis imaging product. Finally, we've received notice of allowance of claims in foreign jurisdictions for an application broadly involving diagnosis and treatment of diseases involving CD206-expressing cells. We have an active IP protection strategy that we believe will provide needed protections and rights to both our current diagnostic and therapeutic agents, as well as to our next generation molecules and disease indications. These are just some of the highlights in the last quarter that we wanted to touch on for this update. We remain largely focused on the RA pipeline, specifically preparation for the phase three, as well as enrollment into the currently open biopsy and normative database studies, while we continue to support and push for progress on our other diagnostic and therapeutic indications. As always, I want to thank the team here for their tireless efforts to keep things moving. and our network of clinical trial sites and academic research collaborators for all of their hard work. Thank you. And now I'll turn this call over to Erica for the financial updates.

Thank you, Mike. Total net revenues for the third quarter of 2021 were $96,000 compared to $268,000 for the same period in 2020. Total net revenues for the first nine months of 2021 were $481,000 compared to $695,000 for the same period 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 MANICEP development. Those decreases were offset by receipt of reimbursement from Cardinal Health of certain R&D costs and the partial recovery of debts previously written off in 2015. R&D expenses for the third quarter of 2021 were $1 million, compared to $1.4 million in the same period in 2020. And R&D expenses for the first nine months of 2021 were $3.8 million, compared to $3.7 million in the same period in 2020. The net increase during the year to date was primarily due to net increases in drug project expenses, including increased manuscript, therapeutic, and TC99M to manuscript development costs, offset by decreased manuscript diagnostic development costs. The net increase in research and development expenses also included increased regulatory consulting and general office expenses, offset by decreased employee compensation, including incentive-based awards. Selling general and administrative expenses for the third quarter of 2021 were $1.5 million, compared to $1.8 million in the same period in 2020. SG&A expenses for the first nine months of 2021 were $5.1 million compared to $4.9 million in the same period of the previous year. And that increase during the year to date was primarily due to increased consulting services related to preparing for European distribution of TC99M tolmanisept, increased employee compensation, including incentive-based awards, increased insurance costs, increased director fees related to additional board members, increased travel costs, increased European license fees, general office expenses, and a loss on the third quarter 2021 abandonment of certain intellectual property. These increases were offset by decreased legal and professional services, decreased investor relations costs, facilities costs, and franchise taxes. NVIDIA's net loss attributable to common stockholders for the third quarter of 2021 was $2.4 million or $0.08 per share compared to $3.3 million or $0.13 per share for the same period in 2020. The net loss attributable to common stockholders for the first nine months of 2021 was $8.1 million or $0.28 per share compared to $8.4 million or $0.37 per share for the same period the prior year. And finally, NVIDIA ended the third quarter of 2021 with $7.2 million in cash and cash equivalents. I will now turn the call back over to Mike.