On The Fast Track With Navidea

I’m rarely attracted to publically traded small-cap biotech and pharmaceutical firms. Most are struggling to get their products approved by the FDA, and looking to enter a marketplace already populated with “800-pound gorillas”—giant big pharma multinationals with deep pockets and heavy-duty institutional support. Very occasionally, however, I’ll stumble upon an up-and-comer in the sector that appears well worth a long look as a nice long-term investment. Right now, Navidea Pharmaceuticals (NAVB) is just such a company.

Now in its 30th year of operation, Navidea Pharmaceuticals is a biopharmaceutical concern focused on the development and commercialization of precision diagnostics and radiopharmaceutical agents. The company’s radiopharmaceutical development programs include Lymphoseek (Lymphoseek, Kit for the Preparation of Technetium Tc99m for Injection), a radiopharmaceutical agent for lymph node mapping; AZD4694, an imaging agent, and RIGScan, a tumor antigen-specific targeting agent. In January 2012, Navidea executed an option agreement with Alseres Pharmaceuticals, Inc. to license [123I]-E-IACFT Injection, also called Altropane, an Iodine-123 radiolabeled imaging agent, being developed as an aid in the diagnosis of Parkinson’s disease, movement disorders and dementia.

NAVB shares got a significant boost earlier this week after the company announced that that the F.D.A. granted Fast Track designation to Lymphoseek (technetium 99m tilmanocept) Injection for sentinel lymph node detection in patients with head and neck cancer. Under the FDA Modernization Act of 1997, the Fast Track program was designed to facilitate the development and expedite the review of drug candidates intended to treat serious or life-threatening conditions, and that demonstrate the potential to address unmet medical needs. Navidea intends to file the supplemental New Drug Application (sNDA) for Lymphoseek before year-end.

The Fast Track designation Navidea has received for Lymphoseek recognizes the significant unmet need that exists in the treatment of head and neck cancers and the important role that Lymphoseek can play in reducing or eliminating the need for debilitating elective neck dissection surgery,” said William J Regan, Navidea Senior Vice President for Global Regulatory Strategy. “After filing the sNDA, we look forward to working closely with the FDA to bring to market as quickly as possible an expanded label for Lymphoseek and what will be the first agent indicated in sentinel lymph node detection.”

Lymphatic mapping is a procedure in which lymph nodes that may contain tumor metastases are identified and biopsied to determine if cancer has spread beyond the primary tumor. Accurate staging of lymph nodes is critical, as it guides therapy decisions and determines patient prognosis and risk of recurrence. According to the American Cancer Society, approximately 232,000 new cases of breast cancer and 77,000 new cases of melanoma will be diagnosed in the United States in 2013.

Digging a little deeper, I discovered that Lymphoseek was already approved by the FDA in March 2013 for use in lymphatic mapping procedures to help in the diagnostic evaluation of potential cancer spread breast cancer and melanoma patients. In fact, the company is banking revenues on the product, adding to the cumulative sales of $400,000 during its last three-month reporting period. Clearly Navidea’s management has already proven that they can negotiate the serpentine process of obtaining FDA approval, which obviously heightens the chances of Lymphoseek ultimately getting the green light for expanded diagnostic use.

With the Fast Track announcement, NAVB shares entered a period of heavy rotation this week, rising from a recent trough of about $1.70 per share, briefly ripping up to about $2.15 per share on the news. Since then, they have been trading in a tight channel, between $1.90 – $2.10 each, with heavy volume coming in. About 7.3 million NAVB shares changed hands the day of the announcement, almost 7x the recent daily average, closing at $2.05 on the day. Impressively, NAVB fought the tape during a day of heavy market selling pressure the next day, closing at $2.04 per share.

NAVB chart

Insiders have been pecking away at shares throughout the course of 2013, and currently nine analysts are following the stock—a relatively epic number for an issue trading at these low levels. In the biopharma space, product approvals and sales are truly what separate the men from the boys, and Navidea has already jumped that hurdle. Now, with the prospect of another imminent product approval, an extremely promising pipeline, and a veteran management team, it may be only a matter of time before NAVB finds even more favor with the investment marketplace.

Warren Gates
Senior Analyst
Normandy Research

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