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Depreciation and amortization are reflected in selling, general and administrative expenses ($76,954 and $70,393 for the years ended December 31, 2021 and 2020, respectively). Loss from operations does not reflect the allocation of certain selling, general and administrative expenses, excluding depreciation and amortization, to our individual reportable segments, other than those expenses directly incurred by Navidea Europe, Navidea UK and MT. We amortize leasehold improvements over the term of the lease, which in all cases is shorter than the estimated useful life of the asset. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2021

or

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to                 to                

Commission file number 001-35076                  

NAVIDEA BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

31-1080091

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

   

4995 Bradenton Avenue, Suite 240, Dublin, Ohio

 

43017-3552

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code(614) 793-7500

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on which Registered

Common Stock, par value $.001 per share

 

NAVB

 

NYSE American

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

   

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)                      Yes      No  ☒

 

The aggregate market value of shares of common stock held by non-affiliates of the registrant on June 30, 2021 was $35,956,327.

 

The number of shares of common stock outstanding on March 18, 2022 was 30,299,054.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

TABLE OF CONTENTS

 

PART I

 
     

Item 1

Business

1
     

Item 1A

Risk Factors

12
     

Item 1B

Unresolved Staff Comments

26
     

Item 2

Properties

26
     

Item 3

Legal Proceedings

26
     

Item 4

Mine Safety Disclosure

26
     

PART II

27
     

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

27
     

Item 6

Selected Financial Data   

28
     

Item 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28
     

Item 7A

Quantitative and Qualitative Disclosures About Market Risk

34
     

Item 8

Financial Statements and Supplementary Data

34
     

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

34
     

Item 9A

Controls and Procedures

34
     

Item 9B

Other Information

35
     
Item 9C Disclosures Regarding Foreign Jurisdictions that Prevent Inspections 35
     

PART III

36
     

Item 10

Directors, Executive Officers and Corporate Governance

36
     

Item 11

Executive Compensation

39
     

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

53
     

Item 13

Certain Relationships and Related Transactions, and Director Independence

55
     

Item 14

Principal Accountant Fees and Services

58
     

PART IV

59
     

Item 15

Exhibits, Financial Statement Schedules

59

 

The Private Securities Litigation Reform Act of 1995 (the PSLRA) provides a safe harbor for forward-looking statements made by or on behalf of the Company. Statements in this document which relate to other than strictly historical facts, such as statements about the Companys plans and strategies, expectations for future financial performance, new and existing products and technologies, anticipated clinical and regulatory pathways, the ability to obtain, and timing of, regulatory approvals of the Companys products, the timing and anticipated results of commercialization efforts, and anticipated markets for the Companys products, are forward-looking statements within the meaning of the PSLRA. The words anticipate, believe, estimate, expect, future, intend, plan, project, and similar expressions identify forward-looking statements that speak only as of the date hereof. Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results due to many factors including, but not limited to, our history of operating losses and uncertainty of future profitability, accumulated deficit, future capital needs, the outcome of any pending litigation, uncertainty of capital funding, dependence on royalties and grant revenue, limited product line and distribution channels, competition, risks of development of new products, our ability to maintain effective control over financial reporting, our ability to comply with NYSE American continued listing standards, the impact of the recent coronavirus pandemic, and other risks set forth below under Item 1A, Risk Factors.” The Company undertakes no obligation to publicly update or revise any forward-looking statements.

 

 

 
 
 

 

PART I

 

Item 1. Business

 

Development of the Business

 

Navidea Biopharmaceuticals, Inc. (“Navidea,” the “Company,” “our” or “we”), a Delaware corporation (NYSE American: NAVB), is a biopharmaceutical company focused on the development and commercialization of precision immunodiagnostic agents and immunotherapeutics. Navidea is developing multiple precision-targeted products based on our Manocept™ platform to enhance patient care by identifying the sites and pathways of undetected disease and enable better diagnostic accuracy, clinical decision-making and targeted treatment.

 

Navidea’s Manocept platform is predicated on the ability to specifically target the CD206 mannose receptor expressed on activated macrophages. The Manocept platform serves as the molecular backbone of Tc99m tilmanocept, the first product developed and commercialized by Navidea based on the platform. Other than Tc99m tilmanocept, which the Company has a license to distribute outside of Canada, Mexico and the United States, none of the Company’s drug product candidates have been approved for sale in any market.

 

Our business is focused on two primary types of drug products: (i) diagnostic substances, including Tc99m tilmanocept and other diagnostic applications of our Manocept platform, and (ii) therapeutic development programs, including therapeutic applications of our Manocept platform. See Note 15 to the accompanying consolidated financial statements for more information about our business segments.

 

History

 

We were originally incorporated in Ohio in 1983 and reincorporated in Delaware in 1988. From inception until January 2012, we operated under the name Neoprobe Corporation. In January 2012, we changed our name to Navidea Biopharmaceuticals, Inc. in connection with both the sale of our medical device business and our strategic repositioning as a precision medicines company focused on the development and commercialization of precision diagnostic and therapeutic pharmaceuticals. Since our inception, the majority of our efforts and resources have been devoted to the research and clinical development of radiopharmaceutical technologies primarily related to the intraoperative diagnosis and treatment of cancers.

 

Beginning in late 2011, the Company in-licensed two neuro-tracer product candidates, NAV4694 and NAV5001. The Company advanced the development of both product candidates over the course of 2012 through 2014, moving both into Phase 3 clinical trials. However, in May 2014, the Navidea Board of Directors announced that the Company would restructure its development efforts to focus on cost effective development of the Manocept platform and divest its neuro-tracer product candidates. In April 2015, the Company entered into an agreement with Alseres Pharmaceuticals, Inc. (“Alseres”) to terminate the NAV5001 sublicense agreement. In January 2021, the Company executed an agreement with Alseres and LikeMinds, Inc. (“LikeMinds”), pursuant to which Alseres assigned its obligations under the previous sublicense and termination agreements, including certain milestone and royalty payments, to LikeMinds. In April 2018, the Company executed an agreement to provide Meilleur Technologies, Inc. (“Meilleur”) worldwide rights to conduct research using NAV4694, as well as an exclusive license for the development and commercialization of NAV4694 in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide.

 

In December 2014, we announced the formation of a new business unit to further explore therapeutic applications for the Manocept platform, which was incorporated as Macrophage Therapeutics, Inc. (“MT”) in January 2015 as a majority-owned subsidiary of Navidea. Navidea also granted MT an exclusive sublicense for certain therapeutic applications of the Manocept technology. Effective March 1, 2019, Navidea terminated the sublicense to MT in accordance with its terms due to MT’s insolvency. Since then, Navidea has continued the development of therapeutic products based on the Manocept platform.

 

Technology and Product Candidates

 

Our primary development efforts over the last several years were focused on diagnostic products, including Tc99m tilmanocept, which the Company has a license to distribute outside of Canada, Mexico and the United States. Our more recent initiatives have been focused on diagnostic and therapeutic line extensions based on our Manocept platform.

 

During the ongoing COVID-19 global pandemic, the Company’s primary concern is the safety of its employees, the employees of its clinical trial sites, and the patients enrolled in its clinical trials. The Company is working hard to mitigate any safety risk along with any long-term impact on its clinical development programs. We do not believe there has been a significant impact to the Company’s clinical development and regulatory timelines resulting from the ongoing COVID-19 global pandemic. However, the COVID-19 outbreak delayed enrollment in our NAV3-32 clinical study in the United Kingdom due to national COVID-19-related shutdowns. In addition, the regulatory approval process in India was delayed by the impact of COVID-19 in that country.

 

1

 

As brief overview of recent developments in the Company’s diagnostics area (additional details in following sections), Navidea has completed the Phase 2b clinical trial (NAV3-31) evaluating imaging repeatability, reproducibility, and stability, as well as the capacity of Tc99m tilmanocept imaging to serve as an early predictor of treatment efficacy of anti-tumor necrosis factor alpha (“TNFα”) therapy in patients with moderate to severe Rheumatoid Arthritis (“RA”). In addition, the Company has completed enrollment into a Phase 2b clinical trial (NAV3-35) designed to accrue hand and wrist planar and single photon emission computed tomography/computed tomography (“SPECT/CT”) images from healthy subjects (with SPECT/CT imaging also done on a small group of RA patients) so that Navidea can complete a normative database in support of its RA imaging commercial product development. The Company’s recently launched pivotal Phase 3 trial for RA (NAV3-33) is the next step in the development plan for indications in RA. The additional Phase 2b trial (NAV3-32) correlating Tc99m tilmanocept uptake in RA-involved joints with CD206 immunohistochemistry findings from synovial biopsies is actively recruiting. In addition, the investigator-initiated Phase 2 cardiovascular (“CV”) study was completed at Massachusetts General Hospital and a manuscript has been submitted by the investigators. Results of this study provided to date have paralleled data in our earlier published article, and these data are supportive of Navidea’s hypothesis that tilmanocept can provide marked signal to background in a host of CV disease applications.

 

Manocept Platform - Diagnostics and Therapeutics Background

 

Navidea’s Manocept platform is predicated on the ability to specifically target the mannose receptor (CD206) expressed primarily on activated macrophages. This flexible and versatile platform serves as a molecular backbone for purpose-built targeted imaging molecules that may significantly impact patient care by providing enhanced diagnostic accuracy, clinical decision-making, and target-specific treatment. This CD206-targeted drug platform is applicable to a range of diagnostic modalities, including SPECT, positron emission tomography (“PET”), gamma-scanning and intra-operative and/or optical-fluorescence detection, as well as delivery of therapeutic compounds that target macrophages and their role in a variety of immune- and inflammation-involved diseases. The United States Food and Drug Administration (“FDA”)-approved sentinel node/lymphatic mapping agent, Tc99m tilmanocept, is representative of the ability to successfully exploit this mechanism to develop powerful new products and to expand this technology into additional diagnostic and therapeutic applications.

 

Activated macrophages play important roles in many disease states and are an emerging target in many diseases where diagnostic uncertainty exists. Impairment of the macrophage-driven disease mechanisms is an area of increasing and proven 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 up to 700 million worldwide, making macrophage-mediated diseases an area of remarkable clinical importance. There are many recognized disorders having macrophage involvement, including RA, atherosclerosis/vulnerable plaque, nonalcoholic steatohepatitis, inflammatory bowel disease, systemic lupus erythematosus, cancer generally including Kaposi’s sarcoma (“KS”), leishmaniasis, and others that span general clinical areas in cancer immunology, autoimmunity, infectious diseases, cardiology, central nervous system diseases, and inflammation. For the near term, we have selected target diseases that may, if successfully developed, benefit from this technology.

 

The Company has developed processes for producing the first two therapeutic Manocept immuno-construct series, the Manocept doxorubicin (“MAN-DOX”) series, which is designed to specifically target and kill or modify activated CD206+ macrophages by delivering doxorubicin, and the Manocept dexamethasone (“MAN-DEX”) series, which is designed to inhibit the inflammatory activity of activated CD206+ macrophages by delivering a potent anti-inflammatory agent, dexamethasone. We have contracted with independent facilities to improve chemical syntheses and to produce sufficient quantities of the MAN-DOX series and MAN-DEX series agents, along with the concomitant analytical standards, to provide material for current and planned preclinical animal studies and future clinical trials. Evaluation of an advanced MAN-DOX construct has been successfully evaluated in both human macrophage cell culture assays and in various syngeneic mouse models of cancer. Similar evaluations of an advanced MAN-DEX construct are currently ongoing.

 

Manocept Platform Immuno-Diagnostics Clinical Data

 

Rheumatoid Arthritis

 

Two Tc99m tilmanocept dose escalation studies in RA have been completed. The first study was completed and included 18 subjects (nine with active disease and nine healthy subjects) dosed subcutaneously (“SC”) with 50 and 200 µg/2mCi Tc99m tilmanocept (ClinicalTrials.gov NCT02683421). The results of this study were presented at five international meetings, including Biotechnology Innovation Organization, Society of Nuclear Medicine and Molecular Imaging (“SNMMI”), and The American College of Rheumatology (“ACR”). In addition, based on completion of extensive preclinical dosing studies pursuant to our dialog with the FDA, we have completed a Phase 1/2 study involving intravenous (“IV”) dosing of 39 subjects with IV-administered Tc99m tilmanocept (ClinicalTrials.gov NCT02865434). In conjunction with this study, we completed pharmacokinetic, pharmacodynamics and radiation dosimetry phases in human subjects as well. The majority of the costs of these studies were supported through a Small Business Innovation Research (“SBIR”) grant (NIH/NIAMSD Grant 1 R44 AR067583-01A1). Results of the Phase 1/2 study were presented at the June 2018 and June 2019 SNMMI meetings, the 2018 European League Against Rheumatism (“EULAR”) meeting and the 2018 ACR meeting. These studies have been combined and submitted for peer review publication and full published results will follow.

 

2

 

The Phase 1/2 study enrolled subjects with active, moderate-to-severe RA, and healthy controls. Results from the completed trial demonstrated that Tc99m tilmanocept is well-tolerated with no serious adverse events, adverse drug reactions, or drug-related adverse events observed. Additionally, static planar images revealed joint-specific Tc99m tilmanocept localization in RA subjects to disease-involved joints of the shoulders, knees, hands, and feet, but no joint-specific localization in healthy control subjects, revealing potentially significant immunodiagnostic information about CD206-expressing synovial macrophage involvement in RA. An optimal imaging time window post-Tc99m tilmanocept IV administration, as well as optimal dosing, were also determined.

 

In April 2019, the Company received feedback from the FDA regarding the Company’s planned clinical studies to evaluate joint disease in patients with RA and monitor patient response to therapy. The Company’s proposed RA studies were discussed with the FDA during an in-person meeting and through follow-up collaborative efforts. The FDA communicated that the first study, a Phase 2b trial, was aligned with expectations for the studies and that they would continue to work with Navidea as the Company progressed into the second Phase 2b trial correlating Tc99m tilmanocept uptake in RA-involved joints with CD206 immunohistochemistry findings from synovial biopsies and into the planned Phase 3 clinical trial.

 

In May 2019, we began enrolling patients into the first Phase 2b study, (NAV3-31), entitled “Evaluation of the Precision and Sensitivity of Tilmanocept Uptake Value (“TUV”) on Tc99m Tilmanocept Planar Imaging” (ClinicalTrials.gov MCT03938636). This study, since completed, provided confirmatory support necessary to initiate Navidea’s Phase 3 study program. In October 2019, the Company performed its first interim analysis of this trial, covering subjects enrolling into Arms 1 and 2. The results of this interim analysis were in line with the Company’s hypotheses that Tc99m tilmanocept can provide robust, stable imaging in healthy subjects as well as in patients with active RA, and provide the fundamental information needed to keep moving forward into the Phase 3. A summary of these results was presented at the 2020 EULAR meeting. In May 2020, the Company announced the results of its second interim analysis, covering Arm 3 of the trial. This Arm mirrored the upcoming Phase 3 in design and provided information relevant for sample size calculation for the Phase 3 as well as support for the hypothesis that Tc99m tilmanocept imaging can provide an early indicator of treatment efficacy of anti-TNFα therapeutics. These interim results were presented at the 2020 ACR meeting. In June 2020, the Company announced full enrollment into this trial, with imaging events completed in each patient enrolled in Arm 3.

 

In February 2021, the Company submitted its formal briefing book to the FDA, containing detailed analysis and discussion of the Company’s then-ongoing Phase 2b study (NAV3-31) and prior studies in RA as well as the design and statistical analysis plan for the proposed Phase 3 for FDA comment. Following the feedback received from the FDA at the end of March 2021, the Company continued to work toward completing the analysis of the full NAV3-31 trial dataset and submitted the resultant briefing book containing the results of this analysis in preparation for the standard End-of-Phase 2 Type B meeting, which took place on September 1, 2021. The Company had a constructive meeting with the FDA and, based on the discussion in this meeting and follow-up communication, has made agreed-upon modifications to the trial design for the Phase 3 study (NAV3-33). The Company submitted the modified protocol back to the FDA and initiated the study in December 2021. Following additional feedback from the FDA, the Company made modifications to several of the objectives. Enrollment into the Phase 3 study has begun. The pivotal Phase 3 study program will determine Tc99m tilmanocept’s capability to serve as an early predictor of treatment response to anti-TNFα therapy in patients with RA.

 

Cardiovascular Disease

 

In collaboration with researchers at Massachusetts General Hospital, Navidea has completed two investigator-initiated clinical studies evaluating Tc99m tilmanocept’s ability to enable imaging of atherosclerotic plaques. Results of these studies provide strong preliminary evidence of the potential of Tc99m tilmanocept to accumulate specifically in and enable imaging of non-calcified atherosclerotic plaques. Non-calcified atherosclerotic plaques include plaques with morphologies indicating a high risk of rupture. Rupture of such plaques causes myocardial infarctions (heart attacks) and a significant portion of ischemic strokes. The studies compared aortic Tc99m tilmanocept uptake imaged by SPECT/CT in clinically asymptomatic subjects with intermediate Framingham Risk Scores (“FRS”) who were infected with Human Immunodeficiency Virus (“HIV”) as compared to healthy, uninfected, FRS and age-matched subjects. Tc99m tilmanocept SPECT/CT images were compared to aortic images of the same subjects obtained by contrast enhanced coronary computed tomography angiography and/or [18F]NaF PET/CT.

 

A nine-subject study to evaluate diagnostic imaging of emerging atherosclerosis plaque with the Tc99m tilmanocept product dosed SC was performed (ClinicalTrials.gov NCT02542371). The results of this study were presented at two major international meetings (Conference on Retroviruses and Opportunistic Infections and SNMMI, 2017) and published in early release in the Journal of Infectious Diseases in January 2017 (published in the circulated version, Journal of Infectious Diseases (2017) 215 (8): 1264-1269), confirming that the Tc99m tilmanocept product can both quantitatively and qualitatively target non-calcified plaque in the aortic arch of Acquired Immunodeficiency Syndrome (“AIDS”) patients (supported by NIH/NHLBI Grant 1 R43 HL127846-01). This study was later expanded to include up to 31 participants, and has achieved full enrollment, with a manuscript submitted.

 

A second Phase 1/2 investigator-initiated study in cooperation with Massachusetts General Hospital in subjects with HIV was initiated that expanded the original study in both the scope of the drug administration as well as the diagnostic assessment of the subjects. This study enrolled both AIDS subjects and healthy controls in imaging non-calcified plaque using IV and SC-administered Tc99m tilmanocept and will expand the initial investigation to the assessment of aortic plaque as well as carotid and coronary arteries. Initial analysis suggested that the SC route of administration led to superior signal-to-background in areas of non-calcified plaque. These results are being further assessed.

 

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Navidea has also been awarded a $225,000 phase 1 Small Business Technology Transfer grant (1R41HL147640-01A1) entitled Gallium 68 Tilmanocept for PET Imaging of Atherosclerosis Plaques. This grant supports a research collaboration between Navidea and Dr. Suzanne Lapi of the University of Alabama Birmingham evaluating a mouse model of atherosclerosis. This work has as its aim the evaluation of [68]gallium tilmanocept and various next generation imaging agents for visualizing plaques. Activities began in the fourth quarter of 2019. As of January 2022, all images have been acquired with efforts now focused on data analyses.

 

Kaposis Sarcoma

 

We initiated and completed a study of KS in 2015 (ClinicalTrials.gov NCT022201420) and received additional funding from the National Institutes of Health (“NIH”) in 2016 to continue diagnostic studies in this disease. The new support not only continues the imaging of the cutaneous form of this disease but expands this to imaging of visceral disease via IV administration of Tc99m tilmanocept (NIH/NCI 1 R44 CA192859-01A1; ClinicalTrials.gov NCT03157167). This now-escalated study includes a pathology/biopsy component as well as an imaging component to determine pathology concordance with image assessment. We received Institutional Review Board approval of the clinical protocol and initiated a Phase 1/2 clinical study in KS in 2017. This trial has completed enrollment and imaging. Data and image analysis for this study are ongoing.

 

Tuberculosis (TB)

 

In April 2019, the Company announced that Professor Mike Sathekge, MBChB, M. Med (Nuclear Medicine), PhD, Professor and Head of the Department of Nuclear Medicine in the Faculty of Health Sciences at the University of Pretoria/Steve Biko Academic Hospital, planned to initiate a comparative study evaluating the use of tilmanocept in patients with TB. The purpose of this ongoing study is to explore using 68Ga tilmanocept as an aid in TB patient management while contributing to the better understanding of the biology of TB granulomas. CD206+ macrophages constitute one of the most abundant cell types in TB granulomas. Therefore, a molecular probe such as 68Ga-labeled tilmanocept targeting mannose receptor CD206 expressed on macrophages holds great promise not only in understanding the biology of TB granulomas, but may also support future development of a tilmanocept-like drug delivery vehicle for delivering therapeutic interventions to TB granulomas. Navidea has provided tilmanocept for use in this study, and several subjects have been injected and imaged to date. Successful completion of this study could support an extended claim of 68Ga-tilmanocept.

 

Biomarker Application and Qualification

 

In November 2017, the Company commenced the qualification of the biomarker CD206 with the FDA Biomarker Section of The Center for Drug Evaluation and Research (“CDER”). As per FDA protocol, Navidea submitted a draft letter of intent (“LOI”) to CDER prior to the November 2017 meeting. According to the CDER directive, “the Biomarker Qualification Program was established to support the CDER’s work with external stakeholders to develop biomarkers that aid in the drug development process. Through the FDA’s Biomarker Qualification Program, an entity may request regulatory qualification of a biomarker for a particular context of use (“COU”) in drug development.” Following the meeting with the FDA, and because of Navidea’s data sets and the general external publication database, Navidea, in conjunction with FDA, is now reviewing the LOI with the FDA’s recommended consultants. Navidea has revised the LOI draft strategy in order to expedite the application process. In March 2018, Navidea had a follow-up meeting with the FDA’s assigned strategist, during which the potential to further narrow the LOI elements was reviewed. Navidea is continuing the process of finalizing the COU LOI and providing the background data sets for qualification review with the FDA/CDER. Additional meetings have taken place and the pursuit of this qualification is ongoing.

 

Manocept Platform In-Vitro and Pre-Clinical Immunotherapeutics Data

 

The Company has been developing Manocept platform drug delivery constructs that carry various payloads including doxorubicin and dexamethasone. Chemical synthesis techniques have advanced considerably, resulting in more robust and reproducible synthesis protocols that provide products with chemical attributes indicative of enhanced in vivo activity. The most advanced drug delivery construct carries a doxorubicin payload and is now in its third generation of chemical synthesis protocol design. This third-generation doxorubicin carrying construct has been extensively evaluated in human macrophage cell culture assays and in three experiments using syngeneic mouse cancer models. These experiments show that at treatment doses below what is required to kill macrophages, the doxorubicin-carrying constructs dramatically alters the immunological behavior of macrophages, making them more proinflammatory. In one of the syngeneic mouse tumor experiments, the MAN-DOX construct significantly synergized the activity of another anticancer therapy producing anti-tumor activity that was greater than either treatment alone. Results from this study were presented at the New York Academy of Sciences Frontiers in Cancer Immunotherapy 2021 conference on May 14, 2021. Near-term experiments with the Manocept doxorubicin construct include further studies in macrophage cell culture, additional syngeneic mouse tumor models, and a toxicity study in rats. Work involving a second generation Manocept dexamethasone-carrying construct and efforts developing Manocept constructs with different payloads is ongoing. Three new Manocept constructs carrying payloads other than doxorubicin or dexamethasone have progressed to evaluations in macrophage cell culture assays.

 

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Kaposis Sarcoma

 

The novel MAN-DOX class constructs are designed to specifically deliver doxorubicin, a chemotoxin, which can kill KS tumor cells and their tumor-associated macrophages, potentially altering the course of cancer. We received additional funding to continue therapeutic studies in this disease with the goal of completing an investigational new drug (“IND”) submission for a Manocept construct (MAN-DOX class of compounds) consisting of tilmanocept linked to doxorubicin for the treatment of KS. Efforts supported by this grant (NIH/NCI 1 R44 CA206788-01) are now complete. The results greatly advanced our knowhow for robustly and reproducibly synthesizing MAN-DOX and related constructs carrying other payloads. The grant-supported efforts were presented at the New York Academy of Sciences Frontiers in Cancer Immunotherapy 2021.

 

Other Immunotherapeutic Applications

 

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, RA and infectious diseases. The immuno-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. There can be no assurance 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.

 

Market Overview

 

Manocept Diagnostics and Macrophage Therapeutics Market Overview

 

Impairment of the macrophage-driven disease mechanism is an area of increasing focus in medicine. There are many recognized disorders having macrophage involvement, including RA, atherosclerosis/vulnerable plaque, Crohn’s disease, TB, systemic lupus erythematosus, KS, and others that span clinical areas in oncology, autoimmunity, infectious diseases, cardiology, and inflammation. The number of people affected by all the inflammatory diseases combined is estimated at more than 40 million in the United States, making these macrophage-mediated diseases an area of significant clinical importance. The Arthritis Foundation estimates that RA alone affects over 1.5 million people in the United States and as much as 1% of the worldwide population. Based on the most recent U.S. Medicare/Medicaid data, total annual societal costs of RA are estimated to be over $39 billion.

 

Tc99m Tilmanocept Cancer Market Overview

 

Cancer is the second leading cause of death in the United States. The American Cancer Society (“ACS”) estimates that cancer will cause over 600,000 deaths in 2022 in the United States alone. Additionally, the ACS estimates that over 1.9 million new cancer cases will be diagnosed in the United States during 2022. The National Cancer Institute estimates that direct medical costs for cancer in the United States for 2015 were $183 billion, and are projected to increase to $246 billion by 2030. Cancer is also the second leading cause of death in Europe. The World Health Organization reports more than 3.7 million new cases and 1.9 million deaths in Europe each year.

 

Tc99m tilmanocept is approved by the FDA for use in solid tumor cancers where lymphatic mapping is a component of surgical management and for guiding sentinel lymph node biopsy in patients with clinically node negative breast cancer, head and neck cancer, melanoma or squamous cell carcinoma of the oral cavity. Tc99m tilmanocept has also received European approval in imaging and intraoperative detection of sentinel lymph nodes in patients with melanoma, breast cancer or localized squamous cell carcinoma of the oral cavity. If the potential of Tc99m tilmanocept as a radioactive tracing agent is ultimately realized, it may address not only the breast and melanoma markets on a procedural basis, but also assist in the clinical evaluation and staging of solid tumor cancers and expanding lymph node mapping to other solid tumor cancers such as prostate, gastric, colon, gynecologic, and non-small cell lung.

 

Marketing and Distribution

 

Following Navidea’s March 2017 sale to Cardinal Health 414, LLC (“Cardinal Health 414”) of all of its assets used in operating its business of developing, manufacturing and commercializing the Company’s radioactive diagnostic agent marketed under the Lymphoseek® trademark in Canada, Mexico and the United States, the Supply and Distribution Agreement between Cardinal Health 414 and Navidea was terminated and Cardinal Health 414 assumed responsibility for marketing Lymphoseek in those territories.

 

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Europe

 

Unlike in the United States, where institutions typically rely on radiopharmaceutical products that are compounded and delivered by specialized radiopharmacy distributors such as Cardinal Health 414, institutions in Europe predominantly purchase non-radiolabeled material and compound the radioactive product on-site. With respect to Tc99m tilmanocept commercialization in Europe, we initially chose a specialty pharmaceutical strategy that we believed would be supportive of premium product positioning and reinforce Tc99m tilmanocept's clinical value proposition, as opposed to a commodity or a generics positioning approach. On March 5, 2015, Navidea entered into an Exclusive License Agreement (as amended to date, the “License Agreement”) for the commercialization and distribution of a 50-microgram kit for radiopharmaceutical preparation (tilmanocept) in the European Union (“EU”) with SpePharm AG (“SpePharm,” an affiliate of Norgine BV), a European specialist pharmaceutical company with an extensive pan-European presence. Under the License Agreement, SpePharm had the exclusive right to develop, manufacture and commercialize the Company’s products approved for radiolabeling with Tc99m and containing Lymphoseek (collectively, the “Products”) in several jurisdictions abroad, including the United Kingdom, France, Germany, Australia and New Zealand (collectively, the “Licensed Territory”). In exchange for such rights, the Company was entitled to certain royalty payments. In accordance with the License Agreement, Navidea transferred responsibility for regulatory maintenance of the Tc99m tilmanocept Marketing Authorization to SpePharm. SpePharm was also responsible for production, distribution, pricing, reimbursement, sales, marketing, medical affairs, and regulatory activities.

 

On May 11, 2020 (the “Termination Date”), the Company entered into a Termination Agreement (the “Termination Agreement”) with SpePharm AG (“SpePharm”) and Norgine BV (“Norgine”) which terminated that certain Exclusive License Agreement dated March 5, 2015 (as amended to date, the “License Agreement”). Under the License Agreement, SpePharm had the exclusive right to develop, manufacture and commercialize the Company’s products approved for radiolabeling with Tc99m and containing Lymphoseek® (collectively, the “Products”) in several jurisdictions abroad, including the United Kingdom, France, Germany, Australia and New Zealand (collectively, the “Licensed Territory”). In exchange for such rights, the Company was entitled to certain royalty payments.

 

Pursuant to the Termination Agreement, the parties agreed that neither owed the other any payments due under the License Agreement as of the Termination Date and that, among other things, SpePharm no longer has any right in, nor claim to, any intellectual property owned by the Company or its affiliates anywhere in the world. SpePharm also agreed to perform certain wind-down activities (the “Wind-Down Activities”) during the six-month period following the Termination Date (the “Transition Period”), which Transition Period was extended by ninety days. The Wind-Down Activities included, without limitation, SpePharm transferring to the Company or its designee(s) the regulatory approvals controlled by SpePharm or its affiliates for the purpose of marketing, distributing and selling the Products in the Licensed Territory. SpePharm also transferred to the Company certain tenders and other customer and sales contracts related to the Products. Subject to the terms of the Termination Agreement, Norgine, an affiliate of SpePharm, agreed to guarantee SpePharm’s performance of its obligations under the Termination Agreement. Although the Transition Period has elapsed, SpePharm continued to fulfill customer orders until the Company obtained the regulatory license required to distribute the product in Europe, which license was received during the fourth quarter of 2021.

 

On June 9, 2020, Navidea established a new European entity, Navidea Biopharmaceuticals Europe Limited (“Navidea Europe”), to address international development and commercialization needs for our technologies, including Tc99m tilmanocept. SpePharm has transferred the Tc99m tilmanocept Marketing Authorization to Navidea Europe, along with the responsibility for production and commercialization of Tc99m tilmanocept in the Licensed Territory. Navidea Europe has established relationships and executed agreements with third-party providers in order to fulfill such responsibilities. Navidea owns 100% of the outstanding shares of Navidea Europe.

 

China

 

In August 2014, Navidea entered into an exclusive agreement with Beijing Sinotau Medical Research Co., Ltd. (“Sinotau”), a pharmaceutical organization with a broad China focus in oncology and other therapeutic areas, who will develop and commercialize Tc99m tilmanocept in China. In exchange, Navidea will earn revenue based on unit sales to Sinotau, royalties based on Sinotau’s sales of Tc99m tilmanocept and milestone payments from Sinotau, including a $300,000 non-refundable upfront payment. As part of the agreement, Sinotau is responsible for costs and conduct of clinical studies and regulatory applications to obtain Tc99m tilmanocept approval by the China Food and Drug Administration (“CFDA”). Upon approval, Sinotau will be responsible for all Tc99m tilmanocept sales, marketing, market access and medical affairs activities in China and excluding Hong Kong, Macau and Taiwan. Navidea and Sinotau will jointly support certain pre-market planning activities with a joint commitment on clinical and market development programs pending CFDA approval.

 

India

 

In June 2017, Navidea entered into an exclusive license and distribution agreement with Sayre Therapeutics (“Sayre”) for the development and commercialization of Tc99m tilmanocept in India. Sayre specializes in innovative treatments and medical devices commercialization in South Asia. Under the terms of the agreement, Navidea received a $100,000 upfront payment and is eligible to receive milestone payments and double-digit royalties associated with the sale of Tc99m tilmanocept in India. Tc99m tilmanocept has not yet received marketing approval in India.

 

Summary

 

Tc99m tilmanocept is in various stages of approval in other global markets and sales to this point in these markets, to the extent there were any, have not been material. However, we believe that with international partnerships to complement our positions in the EU, China and India, we will help establish Tc99m tilmanocept as a global leader in lymphatic mapping, as we are not aware of any other company that has a global geographic range. However, it is possible that Tc99m tilmanocept will never achieve regulatory approval in any market outside the United States or EU, or if approved, that it may not achieve market acceptance in any market. We may also experience difficulty in securing collaborative partners for other global markets or radiopharmaceutical products, or successfully negotiating acceptable terms for such arrangements. See Item 1A - “Risk Factors.”

 

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Manufacturing

 

We currently use and expect to continue to be dependent upon contract manufacturers to manufacture each of our product candidates. We maintain a quality control and quality assurance program, including a set of standard operating procedures and specifications, with the goal that our products and product candidates are manufactured in accordance with current good manufacturing practices (“cGMP”) and other applicable domestic and international regulations. We are investing in additional manufacturing and supply chain resources, and have entered into development contracts with the established manufacturing companies Corden Pharma Switzerland, LLC for active pharmaceutical ingredient production and ROTOP Pharmaka GmbH for drug product manufacturing. It is likely that we will continue to rely on third-party manufacturers for our development and commercial products on a contract basis. We may not be successful in completing long-term agreements for the supply of Tc99m tilmanocept on terms acceptable to the Company, or at all. See Item 1A - “Risk Factors.”

 

Competition

 

Competition in the pharmaceutical and biotechnology industries is intense. We face competition from a variety of companies focused on developing inflammatory, oncology and CV disease diagnostic imaging agents and other diagnostic modalities. We compete with large pharmaceutical and other specialized biotechnology companies. We also face competition from universities and other non-profit research organizations. any emerging medical product companies have corporate partnership arrangements with large, established companies to support the research, development, and commercialization of products that may be competitive with our products. In addition, a number of large established companies are developing proprietary technologies or have enhanced their capabilities by entering into arrangements with or acquiring companies with technologies applicable to the detection or treatment of cancer and other diseases targeted by our product candidates. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and established biotechnology companies. Many of these competitors have products that have been approved or are in development and operate large, well-funded research and development (“R&D”) programs. Many of our existing or potential competitors have substantially greater financial, R&D, regulatory, marketing, and production resources than we have. Other companies may develop and introduce products and processes competitive with or superior to ours.

 

We expect to encounter significant competition for our pharmaceutical products. Companies that complete clinical trials, obtain required regulatory approvals and commence commercial sales of their products before us may achieve a significant competitive advantage if their products work through a similar mechanism as our products and if the approved indications are similar. A number of biotechnology and pharmaceutical companies are developing new products for the diagnosis and/or treatment of the same diseases being targeted by us. In some instances, such products have already entered late-stage clinical trials or received FDA approval and may be marketed for some period prior to the approval of our products.

 

We believe that our ability to compete successfully will be based on our ability to create and maintain scientifically advanced “best-in-class” technology, develop proprietary products, attract and retain scientific personnel, obtain patent or other protection for our products, obtain required regulatory approvals and manufacture and successfully market our products, either alone or through third parties. We expect that competition among products cleared for marketing will be based on, among other things, product efficacy, safety, reliability, availability, price, and patent position. See Item 1A - “Risk Factors.”

 

Tc99m Tilmanocept Competition Currently Approved Indications

 

Some surgeons who practice the lymphatic mapping procedure for which Tc99m tilmanocept is intended currently use other radiopharmaceuticals such as a sulfur colloid or other colloidal compounds. In addition, some surgeons still use vital blue dyes to assist in the visual identification of the draining lymphatic tissue around a primary tumor. In the EU and certain Pacific Rim markets, there are colloidal-based compounds with various levels of approved labeling for use in lymphatic mapping, although a number of countries still employ products used “off-label.”

 

Rheumatoid Arthritis Competition

 

Currently, no single test is available to diagnose and monitor RA. Rather, a rheumatologist will make a diagnosis based on several procedures that may include a physical exam, blood tests, and/or imaging tests, among others. The Arthritis Foundation states that the goals of RA treatment are to relieve symptoms, stop inflammation, prevent joint and organ damage, improve physical function and well-being, and reduce long-term complications. Medications for the treatment of RA currently fall into two categories: drugs that ease symptoms, such as nonsteroidal anti-inflammatory drugs, and drugs that slow disease activity. Drugs that slow disease activity include corticosteroids, biologic disease-modifying antirheumatic drugs (“bDMARDs”) and Janus kinase inhibitors. Many of these drugs are produced and sold by large pharmaceutical companies, including AbbVie, Amgen, Bristol Meyers Squibb, Johnson & Johnson, Merck, Pfizer and Roche, among others.

 

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One of Navidea’s primary goals for its RA imaging product development program is to develop an imaging-based test that can predict patient-specific therapeutic responses to bDMARDs, especially anti-TNFα antibody therapy, which is the most commonly prescribed type of therapy for RA within this drug class. While no tests predicting therapeutic responses to bDMARDs have been approved by the FDA, Navidea is aware of other groups that are working to develop such tests, primarily blood-based biomarker assays. One or more of these tests could be approved by the FDA in the future, making it possible for them to compete directly with Navidea’s imaging-based RA test. Even without FDA approval, these tests could reduce the Company’s share of this market in the future.

 

Patents and Proprietary Rights

 

The patent position of biotechnology companies, including Navidea, generally is highly uncertain and may involve complex legal and factual questions. Potential competitors may have filed applications, or may have been issued patents, or may obtain additional patents and proprietary rights relating to products or processes in the same area of technology as that used by the Company. The scope and validity of these patents and applications, the extent to which we may be required to obtain licenses thereunder or under other proprietary rights, and the cost and availability of licenses are uncertain. Our patent applications or those licensed to us may not result in additional patents being issued, and our patents or those licensed to us may not afford protection against competitors with similar technology; these patents may be designed around by others or others may obtain patents that we would need to license or design around.

 

We also rely upon unpatented trade secrets. Others may independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets, or disclose such technology, or we may not be able to meaningfully protect our rights to our unpatented trade secrets.

 

We require our employees, consultants, advisers, and suppliers to execute a confidentiality agreement upon the commencement of an employment, consulting or manufacturing relationship with us. The agreement provides that all confidential information developed by or made known to the individual during the course of the relationship will be kept confidential and not disclosed to third parties except in specified circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual will be the exclusive property of our company. However, these agreements may not provide meaningful protection for our trade secrets in the event of an unauthorized use or disclosure of such information. We also employ a variety of security measures to preserve the confidentiality of our trade secrets and to limit access by unauthorized persons. However, these measures may not be adequate to protect our trade secrets from unauthorized access or disclosure. See Item 1A - “Risk Factors.”

 

Tilmanocept Intellectual Property

 

Tilmanocept is under license from the University of California, San Diego (“UCSD”) to Navidea for the exclusive world-wide rights in all diagnostic and therapeutic uses of tilmanocept, except for the use of Tc99m tilmanocept in lymphatic mapping in Canada, Mexico and the United States, which rights have been licensed directly to Cardinal Health 414 by UCSD. Navidea maintains license rights to Tc99m tilmanocept in the rest of the world, as well as a license to the intellectual property underlying the Manocept platform.

 

Tc99m tilmanocept and related compositions, including the Manocept backbone composition and methods of use, are the subject of multiple patent families including issued patents and patent applications in the United States and certain major foreign markets.

 

The first composition of matter patent covering tilmanocept was issued to UCSD in the United States in June 2002 and would have expired in May 2020. However, Navidea was granted a five-year patent term extension under the Hatch Waxman Act due to time lost in regulatory review. The claims of the composition of matter patent covering tilmanocept issued in the majority of major-market European countries in 2004 and would have expired in 2020. However, the Company has obtained supplemental protection certificates, extending the patent terms to 2025. The composition of matter patent issued in Japan expired in 2020.

 

Patent applications have been filed by Navidea in the U.S. and certain major foreign markets related to manufacturing processes for tilmanocept, the first of which was issued in the U.S. in 2013. These patents and/or applications will expire between 2029 and 2034. Further patent applications have been filed by Navidea alone or with The Ohio State Innovation Foundation related to CD206 expressing cell-related disorders and diseases. These patents and/or applications are expected to expire between 2034 and 2041.

 

Government Regulation

 

The research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of our products are extensively regulated by governmental authorities in the United States and other countries. In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, Public Health Service Act, and their implementing regulations. Failure to comply with applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications or supplemental applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution. We also may be subject to regulation under the Occupational Safety and Health Act, the Atomic Energy Act, the Toxic Substances Control Act, the Export Control Act and other present and future laws of general application as well as those specifically related to radiopharmaceuticals.

 

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Most aspects of our business are subject to some degree of government regulation in the countries in which we conduct our operations. As a developer, manufacturer and marketer of medical products, we are subject to extensive regulation by, among other governmental entities, the FDA and the corresponding state, local and foreign regulatory bodies in jurisdictions in which our products are intended to be sold. These regulations govern the introduction of new products, the observance of certain standards with respect to the manufacture, quality, safety, efficacy and labeling of such products, the maintenance of certain records, the tracking of such products, performance surveillance and other matters.

 

Failure to comply with applicable federal, state, local or foreign laws or regulations could subject us to enforcement action, including product seizures, recalls, withdrawal of marketing clearances, and civil and criminal penalties, any one or more of which could have a material adverse effect on our business. We believe that we are in substantial compliance with such governmental regulations. However, federal, state, local and foreign laws and regulations regarding the manufacture and sale of radiopharmaceuticals are subject to future changes. Such changes may have a material adverse effect on our company.

 

For some products, and in some countries, government regulation is significant and, in general, there is a trend toward more stringent regulation. In recent years, the FDA and certain foreign regulatory bodies have pursued a more rigorous enforcement program to ensure that regulated businesses like ours comply with applicable laws and regulations. We devote significant time, effort and expense addressing the extensive governmental regulatory requirements applicable to our business. To date, we have not received a noncompliance notification or warning letter from the FDA or any other regulatory bodies of alleged deficiencies in our compliance with the relevant requirements, nor have we recalled or issued safety alerts on any of our products. However, a warning letter, recall or safety alert, if it occurred, could have a material adverse effect on our company. See Item 1A - “Risk Factors.”

 

The FDA review processes could delay our Company's introduction of new products in the United States in the future. In addition, many foreign countries have adopted more stringent regulatory requirements that also have added to the delays and uncertainties associated with the development and release of new products, as well as the clinical and regulatory costs of supporting such releases. It is possible that delays in receipt of, or failure to receive, any necessary clearance for our new product offerings could have a material adverse effect on our business, financial condition or results of operations. See Item 1A - “Risk Factors.”

 

The U.S. Drug Approval Process

 

None of our drugs may be marketed in the United States until such drug has received FDA approval. The steps required before a drug may be marketed in the United States include:

 

 

preclinical laboratory tests, animal studies and formulation studies;

 

 

submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin;

 

 

adequate and well-controlled human clinical trials to establish the safety and efficacy of the investigational product for each indication;

 

 

submission to the FDA of a New Drug Application (“NDA”);

 

 

satisfactory completion of FDA inspections of the manufacturing and clinical facilities at which the drug is produced, tested, and/or distributed to assess compliance with cGMPs and current good clinical practices (“cGCP”) standards; and

 

 

FDA review and approval of the NDA.

 

Preclinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin.

 

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND.

 

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Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. The study protocol and informed consent information for study subjects in clinical trials must also be approved by an institutional review board at each institution where the trials will be conducted. Study subjects must sign an informed consent form before participating in a clinical trial. Phase 1 usually involves the initial introduction of the investigational product into people to evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics and pharmacologic actions, and, if possible, to gain an early indication of its effectiveness. Phase 2 usually involves trials in a limited subject population to (i) evaluate dosage tolerance and appropriate dosage, (ii) identify possible adverse effects and safety risks, and (iii) evaluate preliminarily the efficacy of the product candidate for specific indications. Phase 3 trials usually further evaluate clinical efficacy and further test its safety by using the product candidate in its final form in an expanded subject population. There can be no assurance that Phase 1, Phase 2 or Phase 3 testing will be completed successfully within any specified period of time, if at all. Furthermore, we or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

 

The FDA and the IND sponsor may agree in writing on the design and size of clinical studies intended to form the primary basis of an effectiveness claim in an NDA application. This process is known as a Special Protocol Assessment (“SPA”). These agreements may not be changed after the clinical studies begin, except in limited circumstances. The existence of a SPA, however, does not assure approval of a product candidate.

 

Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical studies, together with other detailed information, including information on the manufacturing quality and composition of the investigational product, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. The testing and approval process requires substantial time, effort and financial resources. Submission of an NDA requires payment of a substantial review user fee to the FDA. Before approving an NDA, the FDA usually will inspect the facility or the facilities where the product is manufactured, tested and distributed and will not approve the product unless cGMP compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing facilities as acceptable, the FDA may issue an approval letter or a complete response letter. A complete response letter outlines conditions that must be met in order to secure final approval of the NDA. When and if those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter. The approval letter authorizes commercial marketing of the drug for specific indications. As a condition of approval, the FDA may require post-marketing testing and surveillance to monitor the product’s safety or efficacy, or impose other post-approval commitment conditions.

 

The FDA has various programs, including fast track, priority review and accelerated approval, which are intended to expedite or simplify the process of reviewing drugs and/or provide for approval on the basis of surrogate endpoints. Generally, drugs that may be eligible for one or more of these programs are those for serious or life threatening conditions, those with the potential to address unmet medical needs and those that provide meaningful benefit over existing treatments. Our drug candidates may not qualify for any of these programs, or, if a drug candidate does qualify, the review time may not be reduced or the product may not be approved.

 

After approval, certain changes to the approved product, such as adding new indications, making certain manufacturing changes or making certain additional labeling claims, are subject to further FDA review and approval. Obtaining approval for a new indication generally requires that additional clinical studies be conducted.

 

U.S. Post-Approval Requirements    

 

Holders of an approved NDA are required to: (i) conduct pharmacovigilance and report certain adverse reactions to the FDA, (ii) comply with certain requirements concerning advertising and promotional labeling for their products, and (iii) continue to have quality control and manufacturing procedures conform to cGMP. The FDA periodically inspects the sponsor’s records related to safety reporting and/or manufacturing and distribution facilities; this latter effort includes assessment of compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the area of production, quality control and distribution to maintain cGMP compliance. We use and will continue to use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.

 

Marketing of prescription drugs is also subject to significant regulation through federal and state agencies tasked with consumer protection and prevention of medical fraud, waste and abuse. We must comply with restrictions on off-label use promotion, anti-kickback, ongoing clinical trial registration, and limitations on gifts and payments to physicians.

 

Non-U.S. Regulation

 

Before our products can be marketed outside of the United States, they are subject to regulatory approval similar to that required in the United States, although the requirements governing the conduct of clinical trials, including additional clinical trials that may be required, product licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until an appropriate application has been approved by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In certain countries, the sales price of a product must also be approved. The pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory authority, satisfactory prices may not be approved for such product.

 

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In Europe, marketing authorizations may be submitted at a centralized, a decentralized or national level. The centralized procedure is mandatory for the approval of biotechnology products and provides for the grant of a single marketing authorization that is valid in all EU member states. A mutual recognition procedure is available at the request of the applicant for all medicinal products that are not subject to the centralized procedure.

 

The European Commission granted marketing authorization for Tc99m tilmanocept in the EU in November 2014, and a reduced-mass vial developed for the EU market was approved in September 2016.

 

While we are unable to predict the extent to which our business may be affected by future regulatory developments, we believe that our substantial experience dealing with governmental regulatory requirements and restrictions on our operations throughout the world, and our development of new and improved products, should enable us to compete effectively within this environment.

 

Regulation Specific to Radiopharmaceuticals

 

Our radiolabeled targeting agents and biologic products, if developed, would require a regulatory license to market from the FDA and from comparable agencies in foreign countries. The process of obtaining regulatory licenses and approvals is costly and time consuming, and we have encountered significant impediments and delays related to our previously proposed biologic products.

 

The process of completing pre-clinical and clinical testing, manufacturing validation and submission of a marketing application to the appropriate regulatory bodies usually takes a number of years and requires the expenditure of substantial resources, and any approval may not granted on a timely basis, if at all. Additionally, the length of time it takes for the various regulatory bodies to evaluate an application for marketing approval varies considerably, as does the amount of preclinical and clinical data required to demonstrate the safety and efficacy of a specific product. The regulatory bodies may require additional clinical studies that may take several years to perform. The length of the review period may vary widely depending upon the nature and indications of the proposed product and whether the regulatory body has any further questions or requests any additional data. Also, the regulatory bodies require post-marketing reporting and surveillance programs (pharmacovigilance) to monitor the side effects of the products. Our potential drug or biologic products may not be approved by the regulatory bodies or may not be approved on a timely or accelerated basis, or any approvals received may subsequently be revoked or modified.

 

The Nuclear Regulatory Commission (“NRC”) oversees medical uses of nuclear material through licensing, inspection, and enforcement programs. The NRC issues medical use licenses to medical facilities and authorized physician users, develops guidance and regulations for use by licensees, and maintains a committee of medical experts to obtain advice about the use of byproduct materials in medicine. The NRC (or the responsible Agreement State) also regulates the manufacture and distribution of these products. The FDA oversees the good practices in the manufacturing of radiopharmaceuticals, medical devices, and radiation-producing x-ray machines and accelerators. The states regulate the practices of medicine and pharmacy and administer programs associated with radiation-producing x-ray machines and accelerators. We may not be able to obtain all necessary licenses and permits and we may not be able to comply with all applicable laws. The failure to obtain such licenses and permits or to comply with applicable laws would have a materially adverse effect on our business, financial condition, and results of operations.

 

Corporate Information

 

Our executive offices are located at 4995 Bradenton Avenue, Suite 240, Dublin, OH 43017. Our telephone number is (614) 793-7500. “Navidea” and the Navidea logo are trademarks of Navidea Biopharmaceuticals, Inc. or its subsidiaries in the United States and/or other countries. Other trademarks or service marks appearing in this report may be trademarks or service marks of other owners.

 

Available Information

 

The address for our website is www.navidea.com. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and amendments to such filings, as soon as reasonably practicable after each is electronically filed with, or furnished to, the Securities Exchange Commission (“SEC”). We do not charge for access to and viewing of these reports. Information in the investor section and on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference.

 

You may also review our electronically filed reports and other information that we file with the SEC on the SEC’s website at www.sec.gov. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

 

Financial Statements

 

Our consolidated financial statements and the related notes, including revenues, income (loss), total assets and other financial measures are set forth at pages F-1 through F-32 of this Annual Report on Form 10-K.

 

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Human Capital Resources

 

As of March 18, 2022, we had 11 full-time and 4 part-time employees. None of our employees are represented by a collective bargaining agreement, we have not experienced any work stoppages, and we believe that our relationship with our employees is good.

 

We recognize that attracting, motivating and retaining talent is vital to our continued success. We aim to create an equitable, inclusive and empowering environment in which our employees can grow and advance their careers, with the overall goal of developing, expanding and retaining our workforce to support our current pipeline and future business goals. We value innovation, passion, data-driven decision making, persistence and honesty, and are building a diverse environment where our employees and consultants can thrive and be inspired to make exceptional contributions.

 

Our current management team, board of directors, and scientific advisors have significant experience in development and marketing of pharmaceutical product candidates from early stage discovery to clinical trials, regulatory approval and commercialization.

 

Our human capital resources objectives include identifying, recruiting, retaining, and incentivizing our existing and new employees. We maintain an equity incentive plan, the principal purposes of which are to attract, retain and reward personnel through the granting of stock-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. To facilitate talent attraction and retention, we strive to make our company a safe and rewarding workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation, benefits and health and wellness programs, and by programs that build connections between our employees.

 

In addition, as a result of the COVID-19 pandemic, we have taken steps to protect the health and safety of our employees in line with directives from state and the applicable local governments, as well as guidance from the Centers for Disease Control.

 

Item 1A. Risk Factors

 

An investment in our Common Stock, par value $0.001 per share (“Common Stock”) is highly speculative, involves a high degree of risk, and should be made only by investors who can afford a complete loss. You should carefully consider the following risk factors, together with the other information in this Annual Report on Form 10-K, including our financial statements and the related notes, before you decide to buy our Common Stock. If any of the following risks actually occur, our business, financial condition, or results of operations could be materially adversely affected, the trading of our Common Stock could decline, and you may lose all or part of your investment therein.

 

Summary of Risk Factors

 

Our business is subject to numerous risks and uncertainties, discussed in more detail in the following section. These risks include, among others, the following key risks:

 

Risks Related to Our Business, Financial Position and Capital Requirements

 

 

If Cardinal Health 414, Sayre Therapeutics or Sinotau do not achieve commercial success with Tc99m tilmanocept, we may be unable to generate significant revenue from these relationships.

 

 

We may have difficulty raising additional capital, which could deprive us of necessary resources to pursue our business plans.

 

 

There may be future sales or other dilution of our equity, which may adversely affect the market price of shares of our Common Stock.

 

 

The Company has experienced recurring net losses and has used significant cash to fund its operations, and we expect to continue to incur substantial operating losses and may be unable to obtain additional financing, and we may not be able to continue as a going concern.

 

Risks Related to Clinical Development, Regulatory Approval and Commercialization

 

 

If we do not successfully develop any additional product candidates into marketable products, we may be unable to generate significant revenue or become profitable.

 

 

We may never obtain regulatory approval to manufacture or market our unapproved drug candidates and our approval to market our products or anticipated commercial launch may be delayed as a result of the regulatory review process.

 

 

Even if our drug candidates are successful in clinical trials, we may not be able to successfully commercialize them.

 

 

We may be unable to establish or contract for the pharmaceutical manufacturing capabilities necessary to develop and commercialize our potential products.

 

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Risks Related to Our Intellectual Property

 

 

If any of our license agreements for intellectual property underlying our Manocept platform or any other products or potential products are terminated, we may lose the right to develop or market that product.

 

 

We may not have sufficient legal protection against infringement or loss of our intellectual property, and we may lose rights or protection related to our intellectual property if diligence requirements are not met, or at the expiry of underlying patents.

 

 

We and our collaborators may not be able to protect our intellectual property rights throughout the world.

 

 

We may become involved in disputes with licensors or potential future collaborators over intellectual property ownership, and publications by our research collaborators and scientific advisors could impair our ability to obtain patent protection or protect our proprietary information, which, in either case, could have a significant effect on our business.

 

Risks Related to Our Business, Financial Position and Capital Requirements

 

We may have difficulty raising additional capital, which could deprive us of necessary resources to pursue our business plans.

 

We expect to devote significant capital resources to fund R&D and to maintain existing and secure new manufacturing resources. In order to support the initiatives envisioned in our business plan, we will likely need to raise additional funds through the sale of assets, public or private secured or unsecured debt or equity financing, collaborative relationships or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our Common Stock and the development or prospects for development of competitive technology by others. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our Common Stock.

 

Our future expenditures on our programs are subject to many uncertainties, including whether our product candidates will be developed or commercialized with a partner or independently. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:

 

 

the final outcome of the Capital Royalty Partners II, L.P. (“CRG”) litigation and other litigation, including the outcome of any litigation involving Dr. Michael Goldberg;

 

 

the costs of seeking regulatory approval for our product candidates, including any nonclinical testing or bioequivalence or clinical studies, process development, scale-up and other manufacturing and stability activities, or other work required to achieve such approval, as well as the timing of such activities and approval;

 

 

the extent to which we invest in new technologies, product candidates, products or businesses;

 

 

the scope, prioritization and number of development and/or commercialization programs we pursue and the rate of progress and costs with respect to such programs;

 

 

the costs related to developing, acquiring and/or contracting for sales, marketing and distribution capabilities and regulatory compliance capabilities, if we commercialize any of our product candidates for which we obtain regulatory approval without a partner;

 

 

the timing and terms of any collaborative, licensing and other strategic arrangements that we may establish;

 

 

the extent to which we may need to expand our workforce to pursue our business plan, and the costs involved in recruiting, training, compensating and incentivizing new employees;

 

 

the effect of competing technological and market developments; and

 

 

the cost involved in establishing, enforcing or defending patent claims and other intellectual property rights.

 

Our ability to raise additional capital may also be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and Ukraine conflict. In addition, on February 14, 2022, we filed a registration statement with the Securities and Exchange Commission to register the sale of up to $35 million of Company Common Stock pursuant to a rights offering to the Company’s stockholders, the terms and timing of which have not yet been determined by the Company. Further, there is no assurance that such rights offering will occur on any terms. If we are unsuccessful in raising additional capital, or the terms of raising such capital are unacceptable, we may have to modify our business plan and/or significantly curtail our planned development activities, acquisition of new product candidates and other operations.

 

There may be future sales or other dilution of our equity, which may adversely affect the market price of shares of our Common Stock.

 

Our existing warrants or other securities convertible into or exchangeable for our Common Stock, or securities we may issue in the future, may contain adjustment provisions that could increase the number of shares issuable upon exercise, conversion or exchange, as the case may be, and decrease the exercise, conversion or exchange price. The market price of our shares of Common Stock could decline as a result of sales of a large number of shares of our Common Stock or other securities in the market, the triggering of any such adjustment provisions or the perception that such sales could occur in the future.

 

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Shares of Common Stock are equity securities and are subordinate to our existing and future indebtedness and preferred stock.

 

Shares of our Common Stock are common equity interests. This means that our Common Stock ranks junior to our Series D Preferred Stock and Series E Preferred Stock, to our indebtedness and to all creditor claims and other non-equity claims against us and our assets available to satisfy claims on us, including claims in a bankruptcy or similar proceeding. Our future indebtedness and preferred stock may restrict payments of dividends on our Common Stock.

 

Additionally, unlike indebtedness, where principal and interest customarily are payable on specified due dates, in the case of our Common Stock, (i) dividends are payable only when and if declared by our Board of Directors or a duly authorized committee of our Board of Directors, and (ii) as a corporation, we are restricted to making dividend payments and redemption payments out of legally available assets. We have never paid a dividend on our Common Stock and have no current intention to pay dividends in the future. Furthermore, our Common Stock places no restrictions on our business or operations or on our ability to incur indebtedness or engage in any transactions, subject only to the voting rights available to shareholders generally.

 

The Company has experienced recurring net losses and has used significant cash to fund its operations, and we expect to continue to incur substantial operating losses and may be unable to obtain additional financing, and we may not be able to continue as a going concern.

 

Our ability to continue as a going concern is dependent on a combination of several factors, including, our ability to raise capital by issuing debt or equity securities to investors, license or sell our product candidates to other pharmaceutical companies, and generate revenues from successfully developed products. If we are not able to continue our business as a going concern, we may be forced to liquidate our assets for an amount less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose part or all of their investment.

 

The Company is currently engaged in litigation with Dr. Goldberg and CRG. In addition, the Company has experienced recurring net losses and has used significant cash to fund its operations. The Company has considerable discretion over the extent of development project expenditures and has the ability to curtail the related cash flows as needed. The Company also has funds remaining under outstanding grant awards, and continues working to establish new sources of funding, including collaborations, potential equity investments, and additional grant funding that can augment the balance sheet. However, the extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain or treat its impact, among others. A significant outbreak of COVID-19 or other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed.  Based on our current working capital and our projected cash burn, management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the filing of this Annual Report on Form 10-K. No adjustments have been made to the accompanying consolidated financial statements of the Company as a result of this uncertainty.

 

If Cardinal Health 414, Sayre Therapeutics or Sinotau do not achieve commercial success with Tc99m tilmanocept, we may be unable to generate significant revenue from these relationships.

 

In March 2017, Navidea completed the sale to Cardinal Health 414 of all of its assets used in operating its business of developing, manufacturing and commercializing the Company’s radioactive diagnostic agent marketed under the Lymphoseek trademark in Canada, Mexico and the United States. Upon closing of the sale, the Supply and Distribution Agreement between Cardinal Health 414 and the Company was terminated and Cardinal Health 414 assumed responsibility for marketing Lymphoseek in those territories. Under the terms of the sale, Navidea is entitled to receive milestone payments (which, if paid, will be treated as additional purchase price) from Cardinal Health 414 based on net sales derived from Lymphoseek, subject, in each case, to Cardinal Health 414’s right to off-set.

 

Under the terms of our August 2014 agreement with Sinotau, as amended, Navidea is entitled to receive royalties and milestone payments based on Sinotau’s sales of Tc99m tilmanocept. Upon approval by the CFDA, Sinotau will be responsible for all Tc99m tilmanocept sales, marketing, market access and medical affairs activities in China, excluding Hong Kong, Macau and Taiwan. Tc99m tilmanocept has not yet received marketing approval in China, which may be delayed due to the coronavirus outbreak in China.

 

Under the terms of our June 2017 agreement with Sayre, Navidea is eligible to receive milestone payments and royalties associated with the sale of Tc99m tilmanocept in India. Tc99m tilmanocept has not yet received marketing approval in India.

 

Cardinal Health 414, Sayre or Sinotau may never achieve commercial success in North America, India, China, or any other global market, they may never realize sales at levels necessary for us to achieve sales-based earnout, royalty or milestone payments.

 

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Risks Related to Clinical Development, Regulatory Approval and Commercialization

 

If we do not successfully develop any additional product candidates into marketable products, we may be unable to generate significant revenue or become profitable.

 

Additional diagnostic and therapeutic applications of the Manocept platform, including diagnosis of RA and CV disease and solid tumor cancers, among others, are in various stages of pre-clinical and clinical development. Regulatory approval of additional Manocept-based product candidates may not be successful, or if successful, may not result in significant sales. Additional clinical testing for products based on our Manocept platform or other product candidates may not be successful and, even if they are, we may not be successful in developing any of them into a commercial product which will provide sufficient revenue to make us profitable.

 

Many companies in the pharmaceutical industry suffer significant setbacks in advanced clinical trials even after reporting promising results in earlier trials. Even if our Manocept trials are viewed as successful, we may not get regulatory approval for marketing of any Manocept product candidate. Our Manocept product candidates will be successful only if:

 

 

they are developed to a stage that will enable us to commercialize them or sell related marketing rights;

 

 

we are able to commercialize them in clinical development or sell the marketing rights to third parties; and

 

 

upon being developed, they are approved by the regulatory authorities.

 

We are dependent on the achievement of a number of these goals in order to generate future revenues. The failure to generate revenues from our Manocept-based product candidates may preclude us from continuing our R&D of these and other product candidates.

 

We may never obtain regulatory approval to manufacture or market our unapproved drug candidates and our approval to market our products or anticipated commercial launch may be delayed as a result of the regulatory review process.

 

Obtaining regulatory approval to market drugs to diagnose or treat diseases is expensive, difficult and risky. Preclinical and clinical data, as well as information related to the chemistry, manufacturing and control (“CMC”) processes of drug production, can be interpreted in different ways that could delay, limit or preclude regulatory approval. Negative or inconclusive results, adverse medical events during a clinical trial, or issues related to CMC processes could also delay, limit or prevent regulatory approval. Even if we receive regulatory clearance to market a particular product candidate, the approval could be conditioned on us conducting additional costly post-approval studies or could limit the indicated uses included in our labeling.

 

Clinical trials for our product candidates will be lengthy and expensive, and their outcome is uncertain.

 

Before obtaining regulatory approval for the commercial sale of any product candidates, we must demonstrate through preclinical testing and clinical trials that our product candidates are safe and effective for use in humans. Conducting clinical trials is a time consuming, expensive and uncertain process and may take years to complete.

 

We expect to sponsor efforts to explore the Manocept platform, whether in potential diagnostic or therapeutic uses. We continually assess our clinical trial plans and may, from time to time, initiate additional clinical trials to support our overall strategic development objectives. Historically, the results from preclinical testing and early clinical trials often do not predict the results obtained in later clinical trials. Frequently, drugs that have shown promising results in preclinical or early clinical trials subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approval. At any time during the clinical trials, we, the participating institutions, the FDA, the European Medicines Agency (“EMA”) or other regulatory authorities might delay or halt any clinical trials for our product candidates for various reasons, including:

 

 

ineffectiveness of the product candidate;

 

 

discovery of unacceptable toxicities or side effects;

 

 

development of disease resistance or other physiological factors;

 

 

changes in local regulations as part of a response to the COVID-19 coronavirus or other infectious disease outbreak, which may require us to change the ways in which our clinical trials are conducted, and which may result in unexpected costs, or to discontinue the clinical trials altogether;

 

 

delays or difficulties in enrolling patients in our clinical trials, including as a result of impacts associated with the COVID-19 pandemic; or

 

 

other reasons that are internal to the businesses of our potential collaborative partners, which reasons they may not share with us.

 

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While we have achieved some level of success in our clinical trials for Tc99m tilmanocept as indicated by the FDA and EMA approvals, the results of current and future trials for other product candidates that we may develop or acquire, are subject to review and interpretation by various regulatory bodies during the regulatory review process and may ultimately fail to demonstrate the safety or effectiveness of our product candidates to the extent necessary to obtain regulatory approval, or that commercialization of our product candidates is worthwhile. Any failure or substantial delay in successfully completing clinical trials and obtaining regulatory approval for our product candidates could materially harm our business.

 

We extensively outsource our clinical trial activities and usually perform only a small portion of the start-up activities in-house. We rely on independent third-party contract research organizations (“CROs”) to perform most of our clinical studies, including document preparation, site identification, screening and preparation, pre-study visits, training, post-study audits and statistical analysis. Many important aspects of the services performed for us by the CROs are out of our direct control. If there is any dispute or disruption in our relationship with our CROs, our clinical trials may be delayed. Moreover, in our regulatory submissions, we rely on the quality and validity of the clinical work performed by third-party CROs. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals could be adversely impacted.

 

Even if our drug candidates are successful in clinical trials, we may not be able to successfully commercialize them.

 

We have dedicated and will continue to dedicate substantially all of our resources to the R&D of our Manocept technology and related compounds. There are many difficulties and uncertainties inherent in pharmaceutical R&D and the introduction of new products. A high rate of failure is inherent in new drug discovery and development. The process to bring a drug from the discovery phase to regulatory approval can take 12 to 15 years or longer and cost more than $1 billion. Failure can occur at any point in the process, including late in the process after substantial investment. As a result, most research programs will not generate financial returns. New product candidates that appear promising in development may fail to reach the market or may have only limited commercial success. Delays and uncertainties in the regulatory approval processes in the United States and in other countries can result in delays in product launches and lost market opportunities. Consequently, it is very difficult to predict which products will ultimately be approved. Due to the risks and uncertainties involved in the R&D process, we cannot reliably estimate the nature, timing, completion dates, and costs of the efforts necessary to complete the development of our R&D projects, nor can we reliably estimate the future potential revenue that will be generated from a successful R&D project.

 

Prior to commercialization, each product candidate requires significant research, development and preclinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. The development of radiopharmaceutical technologies and compounds, including those we are currently developing, is unpredictable and subject to numerous risks. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons including that they may:

 

 

be found ineffective or cause harmful side effects during preclinical testing or clinical trials;

 

 

fail to receive necessary regulatory approvals;

 

 

be difficult to manufacture on a scale necessary for commercialization;

 

 

be uneconomical to produce;

 

 

fail to achieve market acceptance; or

 

 

be precluded from commercialization by proprietary rights of third parties.

 

The occurrence of any of these events could adversely affect the commercialization of our product candidates. Products, if introduced, may not be successfully marketed and/or may not achieve customer acceptance. If we fail to commercialize products or if our future products do not achieve significant market acceptance, we will not likely generate significant revenues or become profitable.

 

If we fail to establish and maintain collaborations or if our partners do not perform, we may be unable to develop and commercialize our product candidates.

 

We have entered into collaborative arrangements with third parties to develop and/or commercialize product candidates and are currently seeking additional collaborations. Such collaborations might be necessary in order for us to fund our R&D activities and third-party manufacturing arrangements, seek and obtain regulatory approvals and successfully commercialize our existing and future product candidates. If we fail to enter into collaborative arrangements or fail to maintain our existing collaborative arrangements, the number of product candidates from which we could receive future revenues would decline.

 

16

 

Our dependence on collaborative arrangements with third parties will subject us to a number of risks that could harm our ability to develop and commercialize products including that:

 

 

collaborative arrangements may not be on terms favorable to us;

 

 

disagreements with partners or regulatory compliance issues may result in delays in the development and marketing of products, termination of our collaboration agreements or time consuming and expensive legal action;

 

 

we cannot control the amount and timing of resources partners devote to product candidates or their prioritization of product candidates and partners may not allocate sufficient funds or resources to the development, promotion or marketing of our products, or may not perform their obligations as expected;

 

 

partners may choose to develop, independently or with other companies, alternative products or treatments, including products or treatments which compete with ours;

 

 

agreements with partners may expire or be terminated without renewal, or partners may breach collaboration agreements with us;

 

 

business combinations or significant changes in a partner’s business strategy might adversely affect that partner's willingness or ability to complete its obligations to us; and

 

 

the terms and conditions of the relevant agreements may no longer be suitable.

 

The occurrence of any of these events could adversely affect the development or commercialization of our products.

 

Our pharmaceutical products will remain subject to ongoing regulatory review following the receipt of marketing approval. If we fail to comply with continuing regulations, we could lose these approvals and the sale of our products could be suspended.

 

Approved products may later cause adverse effects that limit or prevent their widespread use, force us to withdraw it from the market or impede or delay our ability to obtain regulatory approvals in additional countries. In addition, any contract manufacturer we use in the process of producing a product and its facilities will continue to be subject to FDA review and periodic inspections to ensure adherence to applicable regulations. After receiving marketing clearance, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping related to the product will remain subject to extensive regulatory requirements. We may be slow to adapt, or we may never adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements.

 

If we fail to comply with the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities or previously unknown problems with our products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions, including:

 

 

restrictions on the products, manufacturers or manufacturing processes;

 

 

warning letters;

 

 

civil or criminal penalties;

 

 

fines;

 

 

injunctions;

 

 

product seizures or detentions;

 

 

import bans;

 

 

voluntary or mandatory product recalls and publicity requirements;

 

 

suspension or withdrawal of regulatory approvals;

 

 

total or partial suspension of production; and

 

 

refusal to approve pending applications for marketing approval of new drugs or supplements to approved applications.

 

17

 

If users of our products are unable to obtain adequate reimbursement from third-party payors, or if new restrictive legislation is adopted, market acceptance of our products may be limited and we may not achieve anticipated revenues.

 

Our ability to commercialize our products will depend in part on the extent to which appropriate reimbursement levels for the cost of our products and related treatment are obtained by governmental authorities, private health insurers and other organizations such as health maintenance organizations (“HMOs”). Generally, in Europe and other countries outside the United States, the government-sponsored healthcare system is the primary payor of patients’ healthcare costs. Third-party payors are increasingly challenging the prices charged for medical care. Also, the trend toward managed health care in the United States and the concurrent growth of organizations such as HMOs which could control or significantly influence the purchase of health care services and products, as well as legislative proposals to further reform health care or reduce government insurance programs, may all result in lower prices for our products if approved for commercialization. The cost containment measures that health care payors and providers are instituting and the effect of any health care reform could materially harm our ability to sell our products at a profit.

 

We may be unable to establish or contract for the pharmaceutical manufacturing capabilities necessary to develop and commercialize our potential products.

 

We are in the process of establishing third-party manufacturing capabilities for our compounds under development. We intend to rely on third-party contract manufacturers to produce sufficiently large quantities of drug materials that are and will be needed for clinical trials and commercialization of our potential products. Third-party manufacturers may not be able to meet our needs with respect to timing, quantity or quality of materials. If we are unable to contract for a sufficient supply of needed materials on acceptable terms, or if we should encounter delays or difficulties in our relationships with manufacturers, clinical trials for our product candidates may be delayed, thereby delaying the submission of product candidates for regulatory approval and the market introduction and subsequent commercialization of our potential products, and for approved products, any such delays, interruptions or other difficulties may render us unable to supply sufficient quantities to meet demand. Any such delays or interruptions may lower our revenues and potential profitability.

 

We and any third-party manufacturers that we may use must continually adhere to cGMPs and regulations enforced by the FDA through its facilities inspection program and/or foreign regulatory authorities where our products will be tested and/or marketed. If our facilities or the facilities of third-party manufacturers cannot pass a pre-approval plant inspection, the FDA and/or foreign regulatory authorities will not grant approval to market our product candidates. In complying with these regulations and foreign regulatory requirements, we and any of our third-party manufacturers will be obligated to expend time, money and effort on production, record-keeping and quality control to assure that our potential products meet applicable specifications and other requirements. The FDA and other regulatory authorities may take action against a contract manufacturer who violates cGMPs.

 

Our product supply and related patient access could be negatively impacted by, among other things: (i) product seizures or recalls or forced closings of manufacturing plants; (ii) disruption in supply chain continuity including from natural or man-made disasters at a critical supplier, as well as our failure or the failure of any of our suppliers to comply with cGMPs and other applicable regulations or quality assurance guidelines that could lead to manufacturing shutdowns, product shortages or delays in product manufacturing; (iii) manufacturing, quality assurance/quality control, supply problems or governmental approval delays; (iv) the failure of a sole source or single source supplier to provide us with the necessary raw materials, supplies or finished goods within a reasonable timeframe; (v) the failure of a third-party manufacturer to supply us with bulk active or finished product on time; and (vi) other manufacturing or distribution issues, including limits to manufacturing capacity due to regulatory requirements, and changes in the types of products produced, physical limitations or other business interruptions.

 

We may not be successful in securing and/or maintaining the necessary manufacturing, supply and/or radiolabeling capabilities for our product candidates in clinical development.

 

We may not be able to secure and/or maintain agreements or other purchasing arrangements with our subcontractors on terms acceptable to us, or that our subcontractors will be able to meet our production requirements on a timely basis, at the required levels of performance and quality, including compliance with FDA cGMP requirements. In the event that any of our subcontractors are unable or unwilling to meet our production requirements, we may not be able to establish an alternate source of supply without significant interruption in product supply or without significant adverse impact to product availability or cost. Any significant supply interruption or yield problems that we or our subcontractors experience would have a material adverse effect on our ability to manufacture our products and, therefore, a material adverse effect on our business, financial condition, and results of operations until a new source of supply is qualified. Any interruption in manufacturing across the supply chain, whether by natural disasters, global disease outbreaks such as COVID-19 or otherwise, could significantly and adversely affect our operations, and delay our R&D programs.

 

Risks Related to Our Intellectual Property

 

If any of our license agreements for intellectual property underlying our Manocept platform or any other products or potential products are terminated, we may lose the right to develop or market that product.

 

We have licensed intellectual property, including patents and patent applications relating to the underlying intellectual property for our Manocept platform, upon which all of our current product candidates are based. We may also enter into other license agreements or acquire other product candidates. The potential success of our product development programs depend on our ability to maintain rights under these licenses, including our ability to achieve development or commercialization milestones contained in the licenses. Under certain circumstances, the licensors have the power to terminate their agreements with us if we fail to meet our obligations under these licenses. We may not be able to meet our obligations under these licenses. If we default under any license agreement, we may lose our right to market and sell any products based on the licensed technology.

 

18

 

We may not have sufficient legal protection against infringement or loss of our intellectual property, and we may lose rights or protection related to our intellectual property if diligence requirements are not met, or at the expiry of underlying patents.

 

Our success depends, in part, on our ability to secure and maintain patent protection for our products and product candidates, to preserve our trade secrets, and to operate without infringing on the proprietary rights of third parties. While we seek to protect our proprietary positions by filing U.S. and foreign patent applications for our important inventions and improvements, domestic and foreign patent offices may not issue these patents. Third parties may challenge, invalidate, or circumvent our patents or patent applications in the future. Competitors, many of which have significantly more resources than we have and have made substantial investments in competing technologies, may apply for and obtain patents that will prevent, limit, or interfere with our ability to make, use, or sell our products either in the United States or abroad.

 

Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are or may be developing products. As the biotechnology and pharmaceutical industry expands and more patents are issued, the risk increases that we will be subject to claims that our products or product candidates, or their use, infringe the rights of others. In the United States, most patent applications are secret for a period of 18 months after filing, and in foreign countries, patent applications are secret for varying periods of time after filing. Publications of discoveries tend to significantly lag the actual discoveries and the filing of related patent applications. Third parties may have already filed applications for patents for products or processes that will make our products obsolete, limit our patents, invalidate our patent applications or create a risk of infringement claims.

 

Under U.S. patent law, we are currently subject to a “first to file” system of patent approval, as opposed to the former “first to invent” system. As a consequence, delays in filing patent applications for new product candidates or discoveries could result in the loss of patentability if there is an intervening patent application with similar claims filed by a third party, even if we or our collaborators were the first to invent.

 

We or our suppliers may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our products, product candidates and/or technologies infringe their intellectual property rights or that the process of manufacturing our products or any of their respective component materials, or the component materials themselves, or the use of our products, product candidates or technologies, infringe their intellectual property rights. If one of these patents was found to cover our products, product candidates, technologies or their uses, or any of the underlying manufacturing processes or components, we could be required to pay damages and could be unable to commercialize our products or use our technologies or methods unless we are able to obtain a license to the patent or intellectual property right. A license may not be available to us in a timely manner or on acceptable terms, if at all. In addition, during litigation, a patent holder could obtain a preliminary injunction or other equitable remedy that could prohibit us from making, using or selling our products, technologies or methods.

 

Our currently held and licensed patents expire over the next three to fifteen years. Expiration of the patents underlying our technology, in the absence of extensions or other trade secret or intellectual property protection, may have a material and adverse effect on us.

 

In addition, it may be necessary for us to enforce patents under which we have rights, or to determine the scope, validity and unenforceability of other parties’ proprietary rights, which may affect our rights. There can be no assurance that our patents would be held valid by a court or administrative body or that an alleged infringer would be found to be infringing. The uncertainty resulting from the mere institution and continuation of any patent related litigation or interference proceeding could have a material and adverse effect on us.

 

We typically require our employees, consultants, advisers and suppliers to execute confidentiality and assignment of invention agreements in connection with their employment, consulting, advisory, or supply relationships with us. They may breach these agreements and we may not obtain an adequate remedy for breach. Further, third parties may gain unauthorized access to our trade secrets or independently develop or acquire the same or equivalent information.

 

We and our collaborators may not be able to protect our intellectual property rights throughout the world.

 

Filing, prosecuting and defending patents on all of our product candidates and products, when and if we have any, in every jurisdiction would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we or our licensors have not obtained patent protection to develop their own products. These products may compete with our products, when and if we have any, and may not be covered by any of our or our licensors' patent claims or other intellectual property rights.

 

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and/or pharmaceuticals, which could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

 

19

 

The intellectual property protection for our product candidates depends on third parties.

 

With respect to Manocept and NAV4694, we have licensed certain issued patents and pending patent applications covering the respective technologies underlying these product candidates and their commercialization and use and we have licensed certain issued patents and pending patent applications directed to product compositions and chemical modifications used in product candidates for commercialization, and the use and the manufacturing thereof.

 

The patents and pending patent applications underlying our licenses do not cover all potential product candidates, modifications and uses. In the case of patents and patent applications licensed from UCSD, we did not have any control over the filing of the patents and patent applications before the effective date of the Manocept licenses, and had limited control over the filing and prosecution of these patents and patent applications after the effective date of such licenses. In the case of patents and patent applications licensed from AstraZeneca, we have limited control over the filing, prosecution or enforcement of these patents or patent applications. We cannot be certain that such prosecution efforts have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents. We also cannot be assured that our licensors or their respective licensing partners will agree to enforce any such patent rights at our request or devote sufficient efforts to attain a desirable result. Any failure by our licensors or any of their respective licensing partners to properly protect the intellectual property rights relating to our product candidates could have a material adverse effect on our financial condition and results of operation.

 

We may become involved in disputes with licensors or potential future collaborators over intellectual property ownership, and publications by our research collaborators and scientific advisors could impair our ability to obtain patent protection or protect our proprietary information, which, in either case, could have a significant effect on our business.

 

Inventions discovered under research, material transfer or other such collaborative agreements may become jointly owned by us and the other party to such agreements in some cases and the exclusive property of either party in other cases. Under some circumstances, it may be difficult to determine who owns a particular invention, or whether it is jointly owned, and disputes could arise regarding ownership of those inventions. These disputes could be costly and time consuming and an unfavorable outcome could have a significant adverse effect on our business if we were not able to protect our license rights to these inventions. In addition, our research collaborators and scientific advisors generally have contractual rights to publish our data and other proprietary information, subject to our prior review. Publications by our research collaborators and scientific advisors containing such information, either with our permission or in contravention of the terms of their agreements with us, may impair our ability to obtain patent protection or protect our proprietary information, which could significantly harm our business.

 

General Risks

 

A pandemic, epidemic or outbreak of an infectious disease may adversely affect our business.

 

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our development and commercialization efforts may be adversely affected. In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. In January 2020, the World Health Organization declared this outbreak a “Public Health Emergency of International Concern,” and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare community in responding to COVID-19. The spread of COVID-19 has impacted the global economy and our operations, including the interruption of our clinical trial activities in Europe and regulatory approval process in India. For example, the COVID-19 outbreak delayed enrollment in our NAV3-32 clinical study in the United Kingdom due to national COVID-19-related shutdowns in early 2021. Our clinical trial activities may be further delayed due to prioritization of hospital resources toward the outbreak, and some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results, and could delay our ability to obtain regulatory approval and commercialize our product candidates. The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver clinical drug supplies on a timely basis or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. Such events may result in a period of business disruption, and in reduced operations, or doctors and medical providers may be unwilling to participate in our clinical trials, any of which could materially affect our business, financial condition and results of operations. The extent to which the global COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat its impact, among others. Any significant infectious disease outbreak, including the COVID-19 pandemic, could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed. The Company has enhanced its business continuity plans to include measures to protect our employees in the event of infection in our corporate offices, or in response to potential mandatory quarantines.

 

20

 

We may lose out to larger or better-established competitors.

 

The biotech and pharmaceutical industries are intensely competitive. Many of our competitors have significantly greater financial, technical, manufacturing, marketing and distribution resources as well as greater experience in the industry than we have. The particular medical conditions our product lines address can also be addressed by other medical procedures or drugs. Many of these alternatives are widely accepted by physicians and have a long history of use.

 

To remain competitive, we must continue to launch new products and technologies. To accomplish this, we commit substantial efforts, funds, and other resources to R&D. A high rate of failure is inherent in the R&D of new products and technologies. We must make ongoing substantial expenditures without any assurance that our efforts will be commercially successful. Failure can occur at any point in the process, including after significant funds have been invested. Promising new product candidates may fail to reach the market or may only have limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, the failure to establish or maintain intellectual property rights, or infringement of the intellectual property rights of others. Even if we successfully develop new products or enhancements or new generations of our existing products, they may be quickly rendered obsolete by changing customer preferences, changing industry standards, or competitors' innovations. Innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice or uncertainty over third-party reimbursement. We cannot state with certainty when or whether any of our products under development will be launched, whether we will be able to develop, license, or otherwise acquire compounds or products, or whether any products will be commercially successful. Failure to launch successful new products or new indications for existing products may cause our products to become obsolete, causing our revenues and operating results to suffer.

 

Physicians may use our competitors’ products and/or our products may not be competitive with other technologies. Tc99m tilmanocept is expected to continue to compete against sulfur colloid in the United States and other colloidal agents in the EU and other global markets. If our competitors are successful in establishing and maintaining market share for their products, our future earnout and royalty receipts may not occur at the rate we anticipate. In addition, our potential competitors may establish cooperative relationships with larger companies to gain access to greater R&D or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.

 

We may be exposed to business risk, including product liability claims for any product candidates and products that we are able to commercialize.

 

The testing, manufacturing, marketing and use of any commercial products that we develop, as well as product candidates in development, involve substantial risk of product liability claims. These claims may be made directly by consumers, healthcare providers, pharmaceutical companies or others. In recent years, coverage and availability of cost-effective product liability insurance has decreased, so we may be unable to maintain sufficient coverage for product liabilities that may arise. In addition, the cost to defend lawsuits or pay damages for product liability claims may exceed our coverage. If we are unable to maintain adequate coverage or if claims exceed our coverage, our financial condition and our ability to clinically test our product candidates and market our products will be adversely impacted. In addition, negative publicity associated with any claims, regardless of their merit, may decrease the future demand for our products and impair our financial condition.

 

The administration of drugs in humans, whether in clinical studies or commercially, carries the inherent risk of product liability claims whether or not the drugs are actually the cause of an injury. Our products or product candidates may cause, or may appear to have caused, injury or dangerous drug interactions, and we may not learn about or understand those effects until the product or product candidate has been administered to patients for a prolonged period of time. We may be subject from time to time to lawsuits based on product liability and related claims, and we cannot predict the eventual outcome of any future litigation. We may not be successful in defending ourselves in the litigation and, as a result, our business could be materially harmed. These lawsuits may result in large judgments or settlements against us, any of which could have a negative effect on our financial condition and business if in excess of our insurance coverage. Additionally, lawsuits can be expensive to defend, whether or not they have merit, and the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in managing our business.

 

As a result of a number of factors, product liability insurance has become less available while the cost has increased significantly. We currently carry product liability insurance that our management believes is appropriate given the risks that we face. We will continually assess the cost and availability of insurance; however, there can be no guarantee that insurance coverage will be obtained or, if obtained, will be sufficient to fully cover product liabilities that may arise. If we are held liable for a claim against which we are not insured or for damages exceeding the limits of our insurance coverage, whether arising out of product liability matters, cybersecurity matters, or from some other matter, that claim could have a material adverse effect on our results of operations.

 

21

 

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

 

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers and business partners, and personally identifiable information of employees and clinical trial subjects, in our data centers and on our networks. The secure maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations, and damage our reputation, which could adversely affect our business, revenues and competitive position.

 

Failure to comply with domestic and international privacy and security laws can result in the imposition of significant civil and criminal penalties. The costs of compliance with these laws, including protecting electronically stored information from cyber-attacks, and potential liability associated with failure to do so could adversely affect our business, financial condition and results of operations. We are subject to various domestic and international privacy and security regulations, including but not limited to The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). HIPAA mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. In addition, many states have enacted comparable laws addressing the privacy and security of health information, some of which are more stringent than HIPAA.

 

A security breach or privacy violation that leads to disclosure of consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state and foreign breach notification laws and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue.

 

Despite our efforts to protect against cyber-attacks and security breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques, and we may need to expend substantial additional resources to continue to protect against potential security breaches or to address problems caused by such attacks or any breach of our safeguards. In addition, a data security breach could distract management or other key personnel from performing their primary operational duties.

 

The interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. Among other things, foreign privacy laws impose significant obligations on U.S. companies to protect the personal information of foreign citizens. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices, which could have a material adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

 

We carry cyber risk insurance, which may limit our exposure to liability resulting from a security breach or other disruption in our information systems; however, we cannot assure you that such insurance policy will cover all liabilities that may result from security breaches or other disruption in our information systems.

 

We are subject to domestic and foreign anticorruption laws, the violation of which could expose us to liability, and cause our business and reputation to suffer.

 

We are subject to the U.S. Foreign Corrupt Practices Act and similar anti-corruption laws in other jurisdictions. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other prohibited payments to government officials for the purpose of obtaining or retaining business, and some have record keeping requirements. The failure to comply with these laws could result in substantial criminal and/or monetary penalties. We operate in jurisdictions that have experienced corruption, bribery, pay-offs and other similar practices from time-to-time and, in certain circumstances, such practices may be local custom. We have implemented internal control policies and procedures that mandate compliance with these anti-corruption laws. However, we cannot be certain that these policies and procedures will protect us against liability. If our employees or other agents engage in such conduct, we might be held responsible and we could suffer severe criminal or civil penalties and other consequences that could have a material adverse effect on our business, financial position, results of operations and/or cash flow, and the market value of our Common Stock could decline.

 

22

 

Our international operations expose us to economic, legal, regulatory and currency risks.

 

Our operations extend to countries outside the United States, and are subject to the risks inherent in conducting business globally and under the laws, regulations, and customs of various jurisdictions. These risks include: (i) failure to comply with a variety of national and local laws of countries in which we do business, including restrictions on the import and export of certain intermediates, drugs, and technologies, (ii) failure to comply with a variety of U.S. laws including the Iran Threat Reduction and Syria Human Rights Act of 2012; and rules relating to the use of certain “conflict minerals” under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) changes in laws, regulations, and practices affecting the pharmaceutical industry and the health care system, including but not limited to imports, exports, manufacturing, quality, cost, pricing, reimbursement, approval, inspection, and delivery of health care, (iv) fluctuations in exchange rates for transactions conducted in currencies other than the functional currency, (v) adverse changes in the economies in which we or our partners and suppliers operate as a result of a slowdown in overall growth, a change in government or economic policies, or financial, political, or social change or instability in such countries that affects the markets in which we operate, particularly emerging markets, (vi) differing local product preferences and product requirements, (vii) changes in employment laws, wage increases, or rising inflation in the countries in which we or our partners and suppliers operate, (viii) supply disruptions, and increases in energy and transportation costs, (ix) natural disasters, including droughts, floods, and earthquakes in the countries in which we operate, (x) local disturbances, terrorist attacks, riots, social disruption, or regional hostilities in the countries in which we or our partners and suppliers operate and (xi) government uncertainty, including as a result of new or changed laws and regulations. We also face the risk that some of our competitors have more experience with operations in such countries or with international operations generally and may be able to manage unexpected crises more easily. Furthermore, whether due to language, cultural or other differences, public and other statements that we make may be misinterpreted, misconstrued, or taken out of context in different jurisdictions. Moreover, the internal political stability of, or the relationship between, any country or countries where we conduct business operations may deteriorate. Changes in a country’s political stability or the state of relations between any such countries are difficult to predict and could adversely affect our operations, profitability and/or adversely impact our ability to do business there. The occurrence of any of the above risks could have a material adverse effect on our business, financial position, results of operations and/or cash flow, and could cause the market value of our Common Stock to decline.

 

Our failure to maintain continued compliance with the listing requirements of the NYSE American exchange could result in the delisting of our Common Stock.

 

Our Common Stock has been listed on the NYSE American exchange since February 2011. The rules of NYSE American provide that shares be delisted from trading in the event the financial condition and/or operating results of the Company appear to be unsatisfactory, the extent of public distribution or the aggregate market value of the Common Stock has become so reduced as to make further dealings on the NYSE American inadvisable, the Company has sold or otherwise disposed of its principal operating assets, or has ceased to be an operating company, or the Company has failed to comply with its listing agreements with the NYSE American. For example, the NYSE American may consider suspending trading in, or removing the listing of, securities of an issuer that has stockholders’ equity of less than (i) $2.0 million if such issuer has sustained losses from continuing operations and/or net losses in two of its three most recent fiscal years, (ii) $4.0 million if such issuer has sustained losses from continuing operations and/or net losses in three of its four most recent fiscal years, and (iii) $6.0 million if such issuer has sustained losses from continuing operations and/or net losses in its five most recent fiscal years. As of December 31, 2021 and 2020, Navidea had stockholders’ equity of approximately $625,000 and $2.0 million, respectively.

 

On January 28, 2022, we received a deficiency letter from the NYSE American LLC stating that Navidea was not in compliance with a certain NYSE American continued listing standard relating to stockholders’ equity. Specifically, the deficiency letter stated that we are not in compliance with Section 1003(a)(iii) of the NYSE American Company Guide, which requires an issuer to have stockholders’ equity of $6.0 million or more if it has reported losses from continuing operations and/or net losses in its five most recent fiscal years. The deficiency letter noted that we had stockholders’ equity of $4.1 million as of September 30, 2021, and reported net losses from continuing operations in our five most recent fiscal years ended December 31, 2020.

 

We submitted a plan to the NYSE American on February 28, 2022 advising of actions we have taken or will take to regain compliance with the continued listing standards by July 28, 2023. If our plan is not accepted, or if we do not make progress consistent with the plan, or if we otherwise fail to regain compliance by the deadline, the NYSE American may commence delisting procedures. There is no assurance that we will meet the continued listing standard.

 

Our common stock will continue to be listed on the NYSE American while we attempt to regain compliance with the listing standard noted, subject to our compliance with other continued listing requirements. Our common stock will continue to trade under the symbol “NAVB,” but will have an added designation of “.BC” to indicate that we are not in compliance with the NYSE American’s listing standards. The NYSE American notification does not affect our business operations or our SEC reporting requirements and does not conflict with or cause an event of default under any of our material agreements.

 

The delisting of our common stock from the NYSE American likely would reduce the trading volume and liquidity in our common stock and may lead to decreases in the trading price of our common stock. The delisting of our common stock may also materially impair our stockholders’ ability to buy and sell shares of our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

 

23

 

The price of our Common Stock has been, and may continue to be, highly volatile, and the value of your investment could decline significantly.

 

Our Common Stock traded as low as $0.72 per share and as high as $2.65 per share during the 12-month period ended February 28, 2022.

 

The following factors, some of which are beyond our control, may have a significant impact on the market price of our common stock:

 

 

the impact of the global COVID-19 pandemic on our business, financial condition or prospects, including a decline in the volume of procedures using our product, potential delays and disruptions to global supply chains, manufacturing activities, logistics, operations, employees and contractors, the business activities of our suppliers, distributors, customers and other business partners, as well as the effects on worldwide economies, financial markets, social institutions, labor markets and healthcare systems;

 

 

our history of operating losses 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, including delays and additional costs related to the ongoing COVID-19 pandemic;

 

 

our ability to successfully commercialize our drug candidates, including delays or disruptions related to the ongoing COVID-19 pandemic;

 

 

our ability to raise capital sufficient to fund our development programs, including unavailability of funds or delays in receiving funds as a result of the ongoing COVID-19 pandemic;

 

 

delays in receipt of anticipated proceeds from our capital funding transactions and other receivables;

 

 

our dependence on royalties and grant revenue;

 

 

our limited product line and distribution channels;

 

 

advances in technologies and development of new competitive products;

 

 

our ability to maintain effective control over financial reporting;

 

 

the outcome of any pending litigation; and

 

 

our ability to comply with NYSE American continued listing standards.

 

These factors may materially and adversely affect the market price of our common stock, which could result in substantial losses by our investors.

 

In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like ours. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. Further, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly. Price volatility of our common stock might be worse if the trading volume of our ordinary shares is low.

 

An investors ability to trade our Common Stock may be limited by trading volume.

 

During the 12-month period beginning on March 1, 2021 and ending on February 28, 2022, the average daily trading volume for our Common Stock on the NYSE American was approximately 117,000 shares. However, this trading volume may not be consistently maintained in the future. If the trading volume for our Common Stock decreases, there could be a relatively limited market for our Common Stock and the share price of our Common Stock would be more likely to be affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in the market’s perception of our business and announcements made by us, our competitors or parties with whom we have business relationships. There may also be fewer institutional investors willing to hold or acquire our Common Stock. Such a lack of liquidity in our Common Stock may make it difficult for us to issue additional securities for financing or other purposes or to otherwise arrange for any financing that we may need in the future.

 

The market price of our Common Stock may be adversely affected by market conditions affecting the stock markets in general, including price and trading fluctuations on the NYSE American exchange.

 

The market price of our Common Stock may be adversely affected by market conditions affecting the stock markets in general, including price and trading fluctuations on the NYSE American. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks generally and, in turn, our shares of Common Stock, and (ii) sales of substantial amounts of our Common Stock in the market, in each case that could be unrelated or disproportionate to changes in our operating performance.

 

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Because we do not expect to pay dividends on our Common Stock in the foreseeable future, stockholders will only benefit from owning Common Stock if it appreciates.

 

We have paid no cash dividends on any of our Common Stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, with respect to our Common Stock, we do not expect to pay any cash dividends in the foreseeable future, and payment of cash dividends, if any, will also depend on our financial condition, results of operations, capital requirements and other factors and will be at the discretion of our Board of Directors. Furthermore, we are subject to various laws and regulations that may restrict our ability to pay dividends and we may not pay dividends on our Common Stock without the consent of a majority of the holders of the outstanding Series E Preferred Stock. We may also in the future become subject to contractual restrictions on, or prohibitions against, the payment of dividends. Due to our intent to retain any future earnings rather than pay cash dividends on our Common Stock and applicable laws, regulations and contractual obligations that may restrict our ability to pay dividends on our Common Stock, the success of your investment in our Common Stock will likely depend entirely upon any future appreciation and there is no guarantee that our Common Stock will appreciate in value.

 

Our future ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

 

We have incurred substantial losses during our history, and we may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset a portion of future taxable income, if any, subject to expiration of such carryforwards in the case of carryforwards generated prior to 2018. Additionally, we continue to generate business tax credits, including research and development tax credits, which generally may be carried forward to offset a portion of future taxable income, if any, subject to expiration of such credit carryforwards. Under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards (“NOLs”), and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited. The Company completed a Section 382 analysis through December 31, 2021 and believes that a Section 382 ownership change has not occurred. However, we may experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside of our control. As a result, if we earn net taxable income, our ability to use our pre-change NOLs or other pre-change tax attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. Additionally, for taxable years beginning after December 31, 2017, the deductibility of such U.S. federal net operating losses is limited to 80% of our taxable income in any future taxable year. There is a risk that due to changes under the Tax Cuts and Jobs Act, regulatory changes, or other unforeseen reasons, our existing NOLs or business tax credits could expire or otherwise be unavailable to offset future income tax liabilities. At the state level, there may also be periods during which the use of NOLs or business tax credits is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs or tax credits, even if we attain profitability.

 

We may have difficulty attracting and retaining qualified personnel and our business may suffer if we do not.

 

Our business has experienced a number of successes and faced several challenges in recent years that have resulted in several significant changes in our strategy and business plan, including the shifting of resources to support our current development initiatives. Our management will need to remain flexible to support our business model over the next few years. However, losing members of the Navidea team could have an adverse effect on our operations. Our success depends on our ability to attract and retain technical and management personnel with expertise and experience in the pharmaceutical industry, and the acquisition of additional product candidates may require us to acquire additional highly qualified personnel. The competition for qualified personnel in the biotechnology industry is intense and we may not be successful in hiring or retaining the requisite personnel. If we are unable to attract and retain qualified technical and management personnel, we will suffer diminished chances of future success.

 

Actual and anticipated changes to the regulations of the healthcare system and U.S. tax laws may have a negative impact on the cost of healthcare coverage and reimbursement of healthcare services and products.

 

The FDA and comparable agencies in other jurisdictions directly regulate many critical activities of life science, technology, and healthcare industries, including the conduct of preclinical and clinical studies, product manufacturing, advertising and promotion, product distribution, adverse event reporting, and product risk management. In both domestic and foreign markets, sales of products depend in part on the availability and amount of reimbursement by third-party payors, including governments and private health plans. Governments may regulate coverage, reimbursement, and pricing of products to control cost or affect utilization of products. Private health plans may also seek to manage cost and utilization by implementing coverage and reimbursement limitations. Substantial uncertainty exists regarding the reimbursement by third-party payors of newly approved healthcare products. The U.S. and foreign governments regularly consider reform measures that affect healthcare coverage and costs. Such reforms may include changes to the coverage and reimbursement of healthcare services and products. In particular, there have been recent judicial and Congressional challenges to the Patient Protection and Affordable Care Act (“PPACA”), which could have an impact on coverage and reimbursement for healthcare services covered by plans authorized by the PPACA, and we expect there will be additional challenges and amendments to the PPACA in the future.

 

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In addition, various other healthcare reform proposals have emerged at the federal and state level. The recent changes to U.S. tax laws could also negatively impact the PPACA. We cannot predict what healthcare initiatives or tax law changes, if any, will be implemented at the federal or state level, however, government and other regulatory oversight and future regulatory and government interference with the healthcare systems could adversely impact our business.

 

We may not be able to maintain compliance with our internal controls and procedures.

 

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulation concerning control and procedures could have a material effect on our business, results of operation and financial condition. Any of these events could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively affect the market price of our shares, increase the volatility of our stock price and adversely affect our ability to raise additional funding. The effect of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors and our Board committees and as executive officers.

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

We currently lease approximately 5,000 square feet of office space at 4995 Bradenton Avenue, Dublin, Ohio, as our principal offices, at a monthly base rent of approximately $3,000. The current lease term expires in June 2023. We believe this facility is in good condition.

 

We also currently lease approximately 25,000 square feet of office space at 5600 Blazer Parkway, Dublin, Ohio, formerly our principal offices, at a monthly base rent of approximately $27,000 during 2020. The current lease term expires in October 2022 with an option to extend for an additional five years. The Company does not intend to renew this lease. We also sublease the space on Blazer Parkway to a tenant for approximately $39,000 per month, which expires in October 2022.

 

Item 3. Legal Proceedings

 

See Note 12 to the accompanying consolidated financial statements.

 

Item 4. Mine Safety Disclosure

 

Not applicable.

 

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PART II

 

Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Our Common Stock trades on the NYSE American exchange under the trading symbol “NAVB.” As of March 18, 2022, we had 381 holders of Common Stock of record. There were no repurchases of our Common Stock during the year ended December 31, 2021.

 

Stock Performance Graph

 

The following graph compares the cumulative total return on a $100 investment in each of the Common Stock of the Company, the Russell 3000, and the NASDAQ Biotechnology Index for the period from December 31, 2016 through December 31, 2021. This graph assumes an investment in the Company’s Common Stock and the indices of $100 on December 31, 2016 and that any dividends were reinvested.

 

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*

 

Among Navidea Biopharmaceuticals, the Russell 3000 Index, and the NASDAQ Biotechnology Index

 

chart1.jpg

*         $100 invested on 12/31/2016 in stock or index, including reinvestment of dividends.

 

   

Cumulative Total Return as of December 31,

 
   

2016

   

2017

   

2018

   

2019

   

2020

   

2021

 

Navidea Biopharmaceuticals

  $ 100.00     $ 56.25     $ 15.63     $ 9.84     $ 16.80     $ 7.81  

Russell 3000

    100.00       118.85       110.54       142.09       168.04       209.36  

NASDAQ Biotechnology

    100.00       121.06       109.77       136.56       171.64       170.55  

 

Dividend Policy

 

We did not declare or pay any dividends and we do not currently intend to pay dividends in the foreseeable future. We currently expect to retain future earnings, if any, for the foreseeable future, to finance the growth and development of our business.

 

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Item 6. [Reserved]

 

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion should be read together with our Consolidated Financial Statements and the Notes related to those statements, as well as the other financial information included in this Form 10-K. Some of our discussion is forward-looking and involves risks and uncertainties. For information regarding risk factors that could have a material adverse effect on our business and future results, refer to Item 1A of this Form 10-K, Risk Factors.

 

The Company

 

Navidea Biopharmaceuticals, Inc. is a biopharmaceutical company focused on the development and commercialization of precision immunodiagnostic agents and immunotherapeutics. Navidea is developing multiple precision-targeted products based on our Manocept platform to enhance patient care by identifying the sites and pathways of undetected disease and enable better diagnostic accuracy, clinical decision-making and targeted treatment.

 

Navidea’s Manocept platform is predicated on the ability to specifically target the CD206 mannose receptor expressed on activated macrophages. The Manocept platform serves as the molecular backbone of Tc99m tilmanocept, the first product developed and commercialized by Navidea based on the platform. Other than Tc99m tilmanocept, which the Company has a license to distribute outside of Canada, Mexico and the United States, none of the Company’s drug product candidates have been approved for sale in any market.

 

We manage our business based on two primary types of drug products: (i) diagnostic substances, including Tc99m tilmanocept and other diagnostic applications of our Manocept platform, and (ii) therapeutic applications of our Manocept platform. See Note 15 to the consolidated financial statements for more information about our business segments.

 

In the near term, the Company intends to continue to develop our additional imaging product candidates into advanced clinical testing, as well as working to extend the regulatory approvals for use of the Tc99m tilmanocept product. We will also be evaluating potential funding and other resources required for continued development, regulatory approval and commercialization of any Manocept platform product candidates that we identify for further development, and potential options for advancing development.

 

Outlook

 

Our operating expenses in recent years have been focused primarily on support of both diagnostic and therapeutic applications of our Manocept platform, and Tc99m tilmanocept. We incurred approximately $5.1 million and $4.9 million in total on R&D activities during the years ended December 31, 2021 and 2020, respectively. Of the total amounts we spent on R&D during those periods, excluding costs related to our internal R&D headcount and our general and administrative staff which we do not currently allocate among the various development programs that we have underway, we incurred out-of-pocket charges by program as follows:

 

Development Program (a)

 

2021

   

2020

 

Manocept Platform – Diagnostics (b)

  $ 2,620,057     $ 3,008,463  

Manocept Platform – Therapeutics

    653,733       337,278  

Tc99m Tilmanocept (b)

    136,941       57,456  

 

 

(a)

Certain development program expenditures were offset by grant reimbursement revenues totaling $88,000 and $696,000 during the years ended December 31, 2021 and 2020, respectively.

 

(b)

Certain 2020 amounts have been reclassified from Tc99m Tilmanocept to Manocept Platform – Diagnostics to conform to the 2021 presentation.

 

We expect to continue the advancement of our efforts with our Manocept platform during 2022. We currently expect our total research and development expenses, including both out-of-pocket charges as well as internal headcount and support costs, to be higher in 2022 than in 2021. However, the ongoing global COVID-19 pandemic has impacted the global economy and may impact our operations, including the potential interruption of our clinical trial activities and our supply chain. For example, the COVID-19 outbreak delayed enrollment in our NAV3-32 clinical study in the United Kingdom due to national COVID-19-related shutdowns. In addition, the regulatory approval process in India was delayed by the impact of COVID-19 in that country. The COVID-19 pandemic may delay enrollment in our future clinical trials due to prioritization of hospital resources toward the outbreak, and some patients may be unwilling to enroll in our future trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results. The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver clinical drug supplies on a timely basis or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. Such events may result in a period of business disruption, and in reduced operations, or doctors and medical providers may be unwilling to participate in our clinical trials, any of which could materially affect our business, financial condition and results of operations.

 

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The extent to which the ongoing global COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity and spread of COVID-19, the actions taken by federal, state and local governmental authorities, both domestic and foreign, as well as private parties, to contain or treat its impact, and other events outside of our control. The COVID-19 pandemic has adversely affected economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed. 

 

Tc99m tilmanocept is approved by the EMA for use in imaging and intraoperative detection of sentinel lymph nodes draining a primary tumor in adult patients with breast cancer, melanoma, or localized squamous cell carcinoma of the oral cavity in the EU. We anticipate that we will incur costs to support our product, regulatory, manufacturing and commercial activities related to the sale of Tc99m tilmanocept in the EU, as well as related to the potential marketing registration and sale of Tc99m tilmanocept in markets other than the EU. There can be no assurance that Tc99m tilmanocept will achieve regulatory approval in any market other than the EU, or if approved in those markets, that it will achieve market acceptance in the EU or any other market. See Item 1A - “Risk Factors.”

 

We continue to evaluate existing and emerging data on the potential use of Manocept-related agents in the diagnosis, disease-staging and treatment of disorders in which macrophages are involved, such as RA, KS, NASH and other disease states, to define areas of focus, development pathways and partnering options to capitalize on the Manocept platform. We will also be evaluating potential funding and other resources required for continued development, regulatory approval and commercialization of any Manocept platform product candidates that we identify for further development, and potential options for advancing development. There can be no assurance of obtaining funding or other resources on terms acceptable to us, if at all, 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. See Item 1A - “Risk Factors.”

 

Results of Operations

 

Our pharmaceutical products and product candidates are not yet generating significant commercial revenue, therefore the discussion of our revenue focuses on the grant and other revenue and our operating variances focus on our product development programs and the supporting general and administrative expenses.

 

Years Ended December 31, 2021 and 2020

 

Royalty Revenue. During 2020, we recognized royalty revenue of $8,000 related to our license agreement with SpePharm in Europe. No royalty revenue was recorded during 2021. The decrease in royalty revenue was due to termination of our license agreement with SpePharm in May 2020.

 

License Revenue. During 2021 and 2020, we recognized license revenue of $46,000 and $111,000, respectively, related to net transitional sales from SpePharm in Europe. The decrease in license revenue was due to the cessation of active marketing of Tc99m tilmanocept in Europe following the termination of our license agreement with SpePharm in May 2020.

 

Grant and Other Revenue. During 2021, we recognized $486,000 of grant and other revenue compared to $796,000 in 2020. Grant revenue of $88,000 and $696,000 during 2021 and 2020, respectively, was primarily related to SBIR grants from the NIH supporting Manocept development. Other revenue during 2021 included $298,000 from LikeMinds for the partial recovery of debts previously written off in 2015 and $100,000 from Cardinal Health 414 for reimbursement of certain research and development costs. Other revenue for 2020 included $100,000 from Alseres for the partial recovery of debts previously written off in 2015.

 

Research and Development Expenses. R&D expenses increased $212,000, or 4%, to $5.1 million during 2021 from $4.9 million during 2020. The increase was primarily due to increased regulatory consulting expenses of $101,000, increased employee compensation including incentive-based awards of $82,000, increased travel costs of $30,000, increased recruiting fees of $28,000 and increased general office expenses of $19,000. These increases were coupled with net increases in drug project expenses related to (i) increased therapeutics development costs of $316,000, including increased preclinical and clinical development costs; and (ii) increased Tc99m tilmanocept development costs of $79,000, primarily European regulatory consulting expenses; offset by (iii) decreased Manocept diagnostic development costs of $388,000 including decreased license fees and manufacturing-related activities offset by increased clinical trial costs.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $755,000, or 11%, to $7.5 million during 2021 from $6.7 million during 2020. The net increase was primarily due to separation expenses of $969,000 related to the resignation of our former Chief Executive Officer, increased consulting services of $413,000 related to European distribution of Tc99m tilmanocept, increased director fees of $189,000 related to additional board members and increased board compensation rates, increased insurance costs of $176,000, losses on the abandonment of certain intellectual property of $93,000, recruiting fees of $75,000 related to our search for a new Chief Executive Officer, increased travel expenses of $52,000 and increased general office expenses of $34,000 primarily related to technology upgrades, offset by decreased legal and professional services of $580,000, and decreased employee compensation including incentive-based awards of $471,000, decreased investor relations costs of $133,000, decreased EMA and other annual registration fees of $30,000, decreased facilities costs of $27,000 and decreased franchise taxes of $13,000.

 

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Other Income (Expense). Other income, net, was $346,000 during 2021 compared to other expense, net, of $11,000 during 2020. During 2021, we recognized a gain on extinguishment of debt of $366,000 resulting from forgiveness of our PPP loan. During 2021 and 2020, we recognized interest income of $3,000 and $18,000, respectively. During 2021 and 2020, we recorded interest expense of $9,000 and $7,000, respectively.

 

Liquidity and Capital Resources

 

Cash balances increased to $4.2 million as of December 31, 2021 from $2.7 million as of December 31, 2020. The net increase was primarily due to net proceeds from issuance of preferred stock of $12.6 million, offset by cash used to fund our operations of $10.2 million, payments on notes payable of $492,000 and patent and trademark costs of $304,000.

 

Operating Activities. Cash used in operations was $10.2 million during 2021 compared to $8.2 million cash used in operations during 2020.

 

Stock subscriptions and other receivables decreased $2.9 million to $93,000 as of December 31, 2021 from $3.0 million as of December 31, 2020, primarily due to decreased preferred stock subscriptions of $2.9 million and decreased amounts receivable for transitional sales revenue from SpePharm of $58,000, offset by increased amounts receivable from related parties for reimbursement of legal fees of $90,000.

 

Inventory decreased $19,000 to $151,000 as of December 31, 2021 from $170,000 as of December 31, 2020, primarily due to materials allocated to manufacturing process development of $28,000 offset by increased finished goods inventory of $13,000 due to finished goods cost adjustments.

 

Prepaid expenses and other current assets increased $207,000 to $908,000 as of December 31, 2021 from $701,000 as of December 31, 2020. The increase was primarily due to a net increase in prepaid insurance of $160,000, an upfront contract payment of $56,000 related to a clinical study and an upfront contract payment of $23,000 related to manufacturing process development, offset by the return of a retainer for legal services of $30,000.

 

Accounts payable increased $260,000 to $1.4 million as of December 31, 2021 from $1.2 million as of December 31, 2020, primarily driven by net increased payables due for Manocept development costs, manufacturing-related activities, therapeutics development costs and investor relations costs, offset by net decreased payables due for Navidea Europe costs and legal and professional services. Accrued liabilities and other current liabilities increased $636,000 to $3.1 million as of December 31, 2021 from $2.5 million as of December 31, 2020. Increased accruals related to the separation of our former Chief Executive Officer, Manocept development costs, employee benefits and Navidea Europe were offset by decreased accruals for incentive-based compensation and legal and professional services. Our payable and accrual balances will continue to fluctuate, with planned increases in development activity related to the Manocept platform offset by decreased legal fees as we continue to work to resolve our legal disputes.

 

Investing Activities. Investing activities used $329,000 during 2021 compared to $413,000 used during 2020. Patent and trademark costs used $304,000 and purchases of property and equipment used $25,000 during 2021. Patent and trademark costs used $278,000 and purchases of property and equipment used $136,000 during 2020.

 

Financing Activities. Financing activities provided $12.1 million during 2021 compared to $10.2 million provided during 2020. The $12.1 million provided by financing activities in 2021 consisted primarily of proceeds from issuance of preferred stock of $12.7 million, offset by principal payments on financed insurance premiums of $492,000, payment of preferred stock issuance costs of $70,000 and payment of tax withholdings related to stock-based compensation of $17,000. The $10.2 million provided by financing activities during 2020 consisted primarily of proceeds from the issuance of preferred stock of $6.0 million, proceeds from the issuance of Common Stock of $4.4 million, and proceeds from notes payable of $366,000, offset by principal payments on financed insurance premiums of $369,000, payment of Common Stock issuance costs of $150,000 and payment of preferred stock issuance costs of $55,000.

 

Paycheck Protection Program Loan

 

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. Among the provisions contained in the CARES Act was the creation of the Payroll Protection Program (“PPP”) that provides for Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. PPP loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. On May 18, 2020, Fifth Third Bank (the “Lender”) funded a PPP loan to the Company in the amount of $366,000 (the “PPP Loan”). In accordance with the loan forgiveness requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, rent and utilities. On February 23, 2021, the Lender notified the Company that the entire PPP Loan amount of $366,000 had been forgiven. See Notes 2 and 10 to the accompanying consolidated financial statements.

 

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Registered Offering

 

On February 14, 2020, we executed an agreement with an investor to purchase approximately 1.6 million shares of our Common Stock at a price of $0.85 per share for aggregate gross proceeds to Navidea of $1.4 million. The offering was made pursuant to our shelf registration statement on Form S‑3 (Registration No. 333-222092), which was declared effective by the SEC on December 27, 2017, including the prospectus contained therein, as well as a prospectus supplement filed with the SEC on February 18, 2020. See Notes 2 and 13 to the accompanying consolidated financial statements.

 

Private Placements

 

On February 13, 2020, we executed a stock purchase agreement with John K. Scott, Jr. to purchase approximately 2.4 million shares of Common Stock for aggregate gross proceeds of approximately $2.0 million. A registration statement on Form S-3 (Registration No. 333-248404) covering the resale of the shares of Common Stock issued to Mr. Scott was declared effective by the SEC on September 16, 2020. See Notes 2 and 13 to the accompanying consolidated financial statements.

 

On August 30, 2020, the Company entered into a Common Stock Purchase Agreement with the Investors named therein, pursuant to which the Investors agreed to purchase from the Company up to $25.0 million in shares of the Company’s Common Stock. To date, we have received only $25,000 of the $5.0 million that was owed under the Common Stock Purchase Agreement. We are continuing to evaluate our rights and remedies under that agreement. Effective December 14, 2021, Navidea terminated the Common Stock Purchase Agreement. See Notes 2 and 13 to the accompanying consolidated financial statements.

 

Series C Preferred Stock

 

On May 6, 2020, the Company entered into a Stock Purchase Agreement and Letter of Investment Intent with Keystone Capital Partners, LLC (“Keystone”) pursuant to which the Company agreed to issue to Keystone 420,000 shares of newly-designated Series C Redeemable Convertible Preferred Stock (the “Series C Preferred Stock”) for an aggregate purchase price of $4.2 million. All $4.2 million were received and the related Series C Preferred Stock was issued during the second and third quarters of 2020. The 420,000 shares of Series C Preferred Stock were subsequently converted into 1,425,076 shares of Common Stock. See Notes 2 and 14 to the accompanying consolidated financial statements.

 

Series D Preferred Stock

 

On August 31, 2020, the Company entered into a Stock Purchase Agreement and Letter of Investment Intent (the “Series D Preferred Stock Purchase Agreement”) with Keystone pursuant to which the Company agreed to issue to Keystone 150,000 shares of newly-designated Series D Redeemable Convertible Preferred Stock (the “Series D Preferred Stock”) for an aggregate purchase price of $15.0 million. Pursuant to the Series D Preferred Stock Purchase Agreement, Keystone agreed to purchase Series D Preferred Stock in amounts to be determined by Keystone in one or more closings before the end of the nine-month period following the date when the Company’s prospectus supplement to its existing registration statement on Form S-3 was filed with the SEC. Through July 7, 2021, Keystone purchased 72,500 shares of Series D Preferred Stock pursuant to the Series D Preferred Stock Purchase Agreement for an aggregate purchase price of $7.25 million, leaving a remaining balance of 77,500 shares of Series D Preferred Stock. On July 8, 2021 (the “Amendment Effective Date”), the Company entered into an Amendment to Stock Purchase Agreement and Letter of Investment Intent (the “Series D Amendment”) with Keystone pursuant to which Keystone purchased 22,077 shares of Series D Preferred Stock for an aggregate purchase price of approximately $2.2 million. After purchasing the 22,077 shares, Keystone has no further right or obligation to purchase shares of Series D Preferred Stock. Including the purchases pursuant to the Series D Amendment, Keystone’s purchases of Series D Preferred Stock pursuant to the Series D Purchase Agreement during the year ended December 31, 2021 totaled 76,827 shares of Series D Preferred Stock for an aggregate purchase price of approximately $7.7 million. The Series D Preferred Stock is convertible into a maximum of 5,147,000 shares of Common Stock. See Notes 2 and 13 to the accompanying consolidated financial statements.

 

Series E Preferred Stock

 

On March 2, 2021, the Company entered into a Stock Purchase Agreement and Letter of Investment Intent with an existing accredited investor, John K. Scott, Jr., pursuant to which the Company issued to Mr. Scott in a private placement transaction 50,000 shares of newly-designated Series E Redeemable Convertible Preferred Stock (the “Series E Preferred Stock”) for an aggregate purchase price of $5.0 million. On January 31, 2022, pursuant to the Certificate of Designations of the Series E Redeemable Convertible Preferred Stock dated March 2, 2021, the holder of the Series E Preferred Stock, John K. Scott, Jr., notified the Company that he was exercising his option to extend the Conversion Deadline (as defined therein) for an additional period of six months. The Series E Preferred Stock is convertible into a maximum of 2,173,913 shares of Common Stock. See Notes 2 and 13 to the accompanying consolidated financial statements.

 

31

 

Jubilant Memorandum of Understanding

 

On August 9, 2020, the Company entered into a binding memorandum of understanding (“MOU”) with Jubilant Draximage Inc., dba Jubilant Radiopharma, Radiopharmaceuticals Division (“Jubilant”). The MOU outlines the terms and framework for a potential Exclusive License and Distribution Agreement (“ELDA”) for Navidea’s Tc99m-Tilmanocept Rheumatoid Arthritis diagnostic application in the United States, Canada, Mexico, and Latin America. In connection with the MOU, the Company entered into a Stock Purchase Agreement with Jubilant, pursuant to which Jubilant purchased $1.0 million in shares of the Company’s Common Stock in exchange for exclusivity of negotiations while due diligence efforts are completed.

 

The execution of the ELDA is subject to certain conditions, including negotiation of a definitive agreement in mutually acceptable form and Jubilant’s completion of its due diligence. See Notes 2 and 13 to the accompanying consolidated financial statements.

 

Material Commitments

 

Latkin Separation Agreement. On November 23, 2021, Jed A. Latkin signed a Separation Agreement and General Release (the “Separation Agreement”) in connection with his resignation from his positions as Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and as a director, on October 24, 2021 (the “Separation Date”). Pursuant to the Separation Agreement, among other things, the Company agreed to the continued payment of Mr. Latkin’s base salary of $490,000, less all relevant taxes and other withholdings, on the following basis: (i) for 12 months, 100% of his base salary, minus an aggregate $24,000 deducted monthly pro rata for reimbursement of Mr. Latkin’s attorney fees which were paid by the Company, and (ii) for 10 months following the expiration of the first 12-month period, 50% of his base salary. As of December 31, 2021, there were approximately $633,000 of payments remaining under the Separation Agreement.

 

Financed Insurance Premiums. In November 2021, the Company prepaid $566,000 of insurance premiums through the issuance of a note payable to IPFS Corporation with an interest rate of 4.36%. The note is payable in five monthly installments of approximately $114,000, with the final payment due in April 2022. As of December 31, 2021, there were approximately $458,000 of payments remaining on the note.

 

Clinical Research Agreements. We have agreements in place with multiple clinical trial sites for conduct of our clinical studies, as well as with several contract research organizations for clinical trial-related services such as image and data management, monitoring, and statistical services. As of December 31, 2021, there were approximately $496,000 of payments currently due related to clinical research agreements.

 

UCSD License Agreements. Under our license agreements with UCSD, we have exclusive world-wide rights to all diagnostic and therapeutic uses of tilmanocept, other than Tc99m tilmanocept used in lymphatic mapping in the United States, Canada and Mexico which rights are licensed to Cardinal Health. The UCSD license agreements include obligations for payments related to license fees, milestones, and royalties. As of December 31, 2021, the Company has accrued approximately $1.6 million of payments related to the UCSD license agreements for which we have not yet been invoiced.

 

CRG Litigation

 

See Notes 2 and 12 to the accompanying condensed consolidated financial statements.

 

Platinum Litigation

 

See Notes 2 and 12 to the accompanying consolidated financial statements.

 

Goldberg Agreement and Litigation

 

See Notes 2 and 12 to the accompanying consolidated financial statements.

 

Summary

 

Our future liquidity and capital requirements will depend on a number of factors, including the ability of our distribution partners to achieve market acceptance of our products, our ability to complete the development and commercialization of new products, our ability to obtain milestone or development funds from potential development and distribution partners, regulatory actions by the FDA and international regulatory bodies, the ability to procure required financial resources, the outcome of any pending litigation, and intellectual property protection.

 

We plan to focus our resources during 2022 on development of products based on the Manocept platform. Although management believes that it will be able to achieve this objective, it is subject to a number of variables beyond our control, including the nature and timing of any partnering opportunities, the ability to modify contractual commitments made in connection with these programs, and the timing and expense associated with suspension or alteration of clinical trials, and consequently we may need to seek additional financing in order to support our planned development programs.

 

We will continue to evaluate our timelines, strategic needs, and balance sheet requirements. If we attempt to raise additional capital through debt, royalty, equity or otherwise, we may not be successful in doing so on terms acceptable to the Company, if at all. Although on February 14, 2022 we filed a registration statement with the Securities and Exchange Commission to register the sale of up to $35 million of Company Common Stock pursuant to a rights offering, the terms and timing of such rights offering have not yet been determined by the Company and there is no assurance that such rights offering will occur Further, we may not be able to gain access and/or be able to secure new sources of funding, identify new development opportunities, successfully obtain regulatory approval for and commercialize new products, achieve significant product revenues from our products, or achieve or sustain profitability in the future.

 

The Company is currently engaged in litigation with Dr. Goldberg and CRG. While the Company believes that the ultimate resolution of these matters will not have a material impact on the Company's financial statements, the outcome of litigation is inherently uncertain and the final resolution of these matters may result in expense to the Company in excess of management's expectations.

 

In addition, the Company has experienced recurring net losses and has used significant cash to fund its operations. The COVID-19 pandemic may negatively impact the Company’s operations, including possible effects on its financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. We do not believe there has been a significant impact to the Company’s clinical development and regulatory timelines resulting from the ongoing COVID-19 global pandemic. However, the COVID-19 outbreak delayed enrollment in our NAV3-32 clinical study in the United Kingdom due to national COVID-19-related shutdowns. In addition, the regulatory approval process in India has been delayed by the impact of COVID-19 in that country. The COVID-19 pandemic has adversely affected economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed. The Company will continue to evaluate the impact that the COVID-19 pandemic could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2022 and beyond.

 

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The Company has experienced recurring net losses and has used significant cash to fund its operations. The Company has considerable discretion over the extent of development project expenditures and has the ability to curtail the related cash flows as needed. The Company also has funds remaining under outstanding grant awards, and continues working to establish new sources of funding, including collaborations, potential equity investments, and additional grant funding that can augment the balance sheet. However, based on our current working capital and our projected cash burn, management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the filing of this Annual Report on Form 10-K. No adjustments have been made to the accompanying condensed consolidated financial statements as a result of this uncertainty. See Note 2 to the accompanying consolidated financial statements and Item 1A – “Risk Factors.”

 

As of December 31, 2021, we had no off-balance sheet arrangements.

 

Recent Accounting Standards

 

See Notes 1(m) and 1(o) to the accompanying consolidated financial statements.

 

Critical Accounting Policies

 

Revenue Recognition. We currently generate revenue from a grant to support a product development initiative. We generally recognize grant revenue when expenses reimbursable under the grant have been paid and payments under the grant become contractually due.

 

We also earn revenues related to our licensing and distribution agreements. The consideration we are eligible to receive under our licensing and distribution agreements typically includes upfront payments, reimbursement for research and development costs, milestone payments, and royalties. Each licensing and distribution agreement is unique and requires separate assessment in accordance with current accounting standards.

 

Research and Development. R&D expenses include both internal R&D activities and external contracted services. Internal R&D activity expenses include salaries, benefits, and stock-based compensation, as well as travel, supplies, and other costs to support our R&D staff. External contracted services include clinical trial activities, chemistry, manufacturing and control-related activities, and regulatory costs. R&D expenses are charged to operations as incurred. We review and accrue R&D expenses based on services performed and rely upon estimates of those costs applicable to the stage of completion of each project.

 

Series C, Series D and Series E Convertible Preferred Stock. The Company evaluated the provisions of the Series C, Series D and Series E Preferred Stock under Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, ASC 815, Derivatives and Hedging, ASC 470, Debt, and Accounting Series Release (“ASR”) 268, Presentation in Financial Statements of Redeemable Preferred Stocks.” Based on this evaluation, the Company determined that the Series C, Series D and Series E Preferred Stock are not mandatorily redeemable financial instruments and any obligation to issue a variable number of shares of Common Stock is not unconditional. Accordingly, the Series C, Series D and Series E Preferred Stock should be classified as equity. Neither the embedded conversion option nor the embedded call option meet the criteria to be separated from the Series C, Series D or Series E Preferred stock and thus these features should not be bifurcated and accounted for as derivatives. Additionally, the Series C and Series D Preferred Stock contain a beneficial conversion feature (“BCF”). Prior to the January 1, 2021 adoption of Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entitys Own Equity, the BCF resulted in an increase to additional paid-in capital and a discount on the Series C and Series D Preferred Stock. The discounts on the Series C and Series D Preferred Stock were considered to be fully amortized at the date of issuance because the Series C and Series D Preferred Stock are immediately convertible, resulting in a deemed dividend at the date of issuance for the amount of the BCF. Following adoption of ASU 2020-06, no BCF is recorded in the consolidated financial statements. Finally, the Company determined that the conversion features of the Series C Preferred Stock could result in the Company being required to redeem a portion of the shares converted, thus the Series C Preferred Stock should be classified in mezzanine equity. Conversely, the Company determined that the Series D and Series E Preferred Stock do not contain conversion features that could result in the Company being required to redeem a portion of the shares converted, thus the Series D and Series E Preferred Stock should not be classified in mezzanine equity.

 

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Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base these estimates and assumptions upon historical experience and existing, known circumstances. Actual results could differ from those estimates.

 

Critical Estimates

 

Stock-Based Compensation. Stock-based payments to employees and directors, including grants of stock options and restricted stock, are recognized in the statements of operations based on their estimated fair values on the date of grant, subject to an estimated forfeiture rate. The fair value of each option award with time-based vesting provisions is estimated on the date of grant using the Black-Scholes option pricing model to value such stock-based payments and the portion that is ultimately expected to vest is recognized as compensation expense over either (1) the requisite service period or (2) the estimated performance period. The determination of fair value using the Black-Scholes option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option behaviors. The fair value of each option award with market-based vesting provisions is estimated on the date of grant using a Monte Carlo simulation to value such stock-based payments and the portion that is ultimately expected to vest is recognized as compensation expense over either (1) the requisite service period or (2) the estimated performance period. The determination of fair value using a Monte Carlo simulation is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option behaviors.

 

We estimate the expected term based on the contractual term of the awards and employees' exercise and expected post-vesting termination behavior. Restricted stock awards are valued based on the closing stock price on the date of grant and amortized ratably over the estimated life of the award.

 

Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, we have applied an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates will be revised, if necessary, in future periods if actual forfeitures differ from estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs.

 

Contingent Liabilities. We are subject to legal proceedings and claims that arise in the normal course of business. In accordance with ASC Topic 450, Contingencies, we accrue for contingent liabilities when management determines it is probable that a liability has been incurred and the amount can be reasonably estimated. This determination requires significant judgment by management. As of the date of the filing of this Annual Report on Form 10-K, we are engaged in separate matters of ongoing litigation with Capital Royalty Partners II, L.P. and our former President and Chief Executive Officer, Dr. Michael Goldberg.

 

In assessing whether we should accrue a liability in our financial statements as a result of the lawsuits, we considered various factors, including the legal and factual circumstances of the cases, the trial records and post-trial rulings of the applicable courts and appellate courts, the current status of the proceedings, applicable law and the views of legal counsel. We have concluded that a loss from these cases is not probable and reasonably estimable and, therefore, a liability has not been recorded with respect to these cases as of December 31, 2021. While we believe that the ultimate resolution of these matters will not have a material impact on our financial statements, the outcome of litigation is inherently uncertain and the final resolution of these matters may result in expense to us in excess of management's expectations.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable to smaller reporting companies.

 

Item 8. Financial Statements and Supplementary Data

 

Our consolidated financial statements, and the related notes, together with the report of Marcum LLP dated March 28, 2022, are set forth at pages F-1 through F-32 attached hereto and incorporated herein by reference.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the specified time periods. As a part of these controls, our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.

 

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Under the supervision and with the participation of our management, including our Executive Leadership Committee which consists of our Chief Medical Officer, Vice President of Operations and Vice President of Finance and Administration, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2021, and concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Our management understands that our disclosure controls and procedures do not guarantee that all errors and all improper conduct will be prevented. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, a design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments and decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons, or by management override of the control. Further, the design of any system of controls is also based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations of a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

 

Managements Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

 

 

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

 

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the Company; and

 

 

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

 

Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based upon the criteria set forth in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment we concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria.

 

Changes in Internal Control Over Financial Reporting

 

During the year ended December 31, 2021, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

 

Not applicable.

 

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PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Directors

 

Set forth below are the names and committee assignments of the persons who constitute our Board of Directors.  

 

Name

 

Age

 

Committee(s)

Amit Bhalla

  47  

Audit

Alexander L. Cappello

  66  

Audit; Compensation, Nominating and Governance

John K. Scott, Jr.

  67  

Compensation, Nominating and Governance

Malcolm G. Witter

  68  

Audit (Chair); Compensation, Nominating and Governance (Chair)

 

Director Qualifications

 

The Board of Directors believes that individuals who serve on the Board should have demonstrated notable or significant achievements in their respective field; should possess the requisite intelligence, education and experience to make a significant contribution to the Board and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of our stockholders. The following are qualifications, experience and skills for Board members which are important to our business and its future:

 

 

General Management. Directors who have served in senior leadership positions bring experience and perspective in analyzing, shaping, and overseeing the execution of important operational and policy issues at a senior level. These directors’ insights and guidance, and their ability to assess and respond to situations encountered in serving on our Board of Directors, are enhanced by their leadership experience developed at businesses or organizations that operated on a global scale, faced significant competition, or involved other evolving business models.

 

 

Industry Knowledge. Because we are a pharmaceutical development company, education or experience in our industry, including medicine, pharmaceutical development, marketing, distribution, or the regulatory environment, is important because such experience assists our directors in understanding and advising our Company.

 

 

Business Development/Strategic Planning. Directors who have a background in strategic planning, business development, strategic alliances, mergers and acquisitions, and teamwork and process improvement provide insight into developing and implementing strategies for growing our business.

 

 

Finance/Accounting/Control. Knowledge of capital markets, capital structure, financial control, audit, reporting, financial planning, and forecasting are important qualities of our directors because such qualities assist in understanding, advising, and overseeing our Company’s capital structure, financing and investing activities, financial reporting, and internal control of such activities.

 

 

Board Experience/Governance. Directors who have served on other public company boards can offer advice and insights with regard to the dynamics and operation of a board of directors, the relations of a board to the chief executive officer and other management personnel, the importance of particular agenda and oversight matters, and oversight of a changing mix of strategic, operational, and compliance-related matters.

 

Biographical Information

 

Set forth below is current biographical information about our directors, including the qualifications, experience and skills that make them suitable for service as a director. Each listed director’s respective experience and qualifications described below led the Compensation, Nominating and Governance (“CNG”) Committee of our Board of Directors to conclude that such director is qualified to serve as a member of our Board of Directors.

 

Directors whose terms continue until the 2022 Annual Meeting:

 

Amit Bhalla has served as a director of Navidea since May 2021. Mr. Bhalla has served as the Chief Financial Officer of Infinity BiologiX, LLC since November 2020. From 2015 to 2020, he served as Senior Healthcare Analyst for Lord, Abbett & Co as well as Investment Council Member for Lord, Abbett’s Healthcare Fund. Prior to that, Mr. Bhalla served in various roles including Vice President-Global Strategy & Development for Becton, Dickinson and Company, Director-Equity Research-Life Science Tools/Medical Technology for Citi, Vice President-Equity Research-Emerging Medical Technology and Analyst-Equity Research-Specialty Pharmaceuticals for Morgan Stanley, and Associate-Technical Operations/Research & Development for Johnson & Johnson’s Ortho-McNeil Pharmaceutical. Mr. Bhalla received his B.S. in biology from Cornell University and his M.B.A. from Tepper School of Business at Carnegie Mellon University.

 

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Alexander L. Cappello has served as a director of Navidea since July 2021. Mr. Cappello has led several public and private companies over the past 48 years, including Cappello Global, LLC, a global investment bank, whose principals have transacted business in over 55 countries. He is also a director of The Cheesecake Factory Incorporated (Nasdaq), lead director of Virco Manufacturing Corporation (Nasdaq), lead director of The Agnew Companies and Caldera Medical Corp. Mr. Cappello is a director of RAND Corporation’s Center for Middle East Public Policy, the Center for Global Risk and Security, and the RAND-Russia Forum. Mr. Cappello is a former Chairman of Intelligent Energy, PLC (LSE), Inter-Tel (Nasdaq), and Geothermal Resources Intl. (AMEX), and a former director of Nano Financial Holdings and California Republic Bank. He is also a former advisor to the board of Gusmer Enterprises and former trustee of University of Southern California, and trustee and chairman of the investment committee of City of Hope. Mr. Cappello received a B.S. in management and finance from the Marshall School of Business at the University of Southern California.

 

Director whose term continues until the 2023 Annual Meeting:

 

John K. Scott, Jr. has served as a director of Navidea since July 2021. Mr. Scott has served as the owner and manager of PCS, Inc. since 1997, where he is responsible for directing the acquisition, financing, sales and operations for land entitlement and development for privately owned condominium, apartment, hotel, single family and retail projects in California, Colorado and Texas. He has also served as the general partner of NJD, Ltd., a Texas limited partnership, since 1997 and as the managing member of Merging Interests, Inc. since 1980. Mr. Scott also has extensive experience in conducting due diligence, feasibility studies, financial analysis, cost estimates and transaction negotiations for the purchase, lease, development, marketing and sale of projects and properties. Mr. Scott earned a B.S. in agricultural economics with an emphasis on construction management and real estate from the University of Wisconsin.

 

Director whose term continues until the 2024 Annual Meeting:

 

Malcolm G. Witter has served as a director of Navidea since December 2020. Mr. Witter has over 40 years of operational and investment leadership experience, serving as investment banker, Chief Financial Officer, and advisor to many companies and private organizations. From 2016 to 2021, he served as the Corporate Development Regional Manager for USI Insurance Services (“USI”) where he was responsible for acquiring independent insurance agencies. From 2010 to 2016, Mr. Witter was Business Development Manager for Kibble & Prentice, Inc., a USI company. Prior to USI, Mr. Witter held roles at multiple financial institutions including Kibble & Prentice Financial, Compass Capital Fund Management, Bear, Stearns & Co., and Dean Witter Reynolds. Mr. Witter is a director of the Dean Witter Foundation and an Advisor to American Research Capital. Mr. Witter received his M.B.A. from the Stanford Graduate School of Business.

 

Information About our Executive Officers

 

The following individuals are executive officers of Navidea and serve in the positions indicated below:

 

Name

 

Age

 

Position

Michael S. Rosol, Ph.D.

  53  

Chief Medical Officer

Michel Mikhail, Ph.D.

  67  

Chief Regulatory Officer

Erika L. Eves

  52  

Vice President, Finance and Administration

 

Michael S. Rosol, Ph.D., has served as Chief Medical Officer of Navidea since December 2018. Prior to joining Navidea, Dr. Rosol served as Associate Director in the Clinical and Translational Imaging Group at Novartis Institutes for BioMedical Research from November 2016 to December 2018. Before that, he held positions as Senior Director of Business Development at Elucid Bioimaging, Inc. where he drove adoption of its Computer-Aided Phenotyping applications from May 2016 to November 2016, and as Chief Scientific Officer of MediLumine, Inc. from October 2015 to May 2016. Prior to those roles, he was the Head of the Translational Imaging Group at Novartis Pharmaceuticals Group from October 2012 to March 2015. His training and experience lie in the fields of biophysics, physiology, and biological/medical imaging, and his work has focused on cardiovascular imaging, preclinical and clinical imaging instrumentation and applications, animal models of human disease, pathophysiology, biomarkers, and imaging in toxicological and clinical trials. He has also served as faculty in Radiology and Director of two academic research imaging facilities. Dr. Rosol holds a Ph.D. from Boston University School of Medicine.

 

Michel Mikhail, Ph.D. has served as Chief Regulatory Officer of Navidea since October 2021. Dr. Mikhail has more than 30 years of experience in the pharmaceutical industry and a track record of achievement in R&D and international regulatory affairs at large multinational research-based pharmaceutical companies. Prior to joining Navidea, Dr. Mikhail worked in global regulatory consulting for various pharmaceutical and biotech companies from January 2016 through September 2021. Before acting as a consultant, Dr. Mikhail served in senior regulatory executive roles at BioNTech AG, Fresenius Kabi, Ranbaxy Europe Ltd. (now SunPharma), Pharmacia & Upjohn (now Pfizer), Knoll AG (now Abbvie), SmithKline Beecham (now GlaxoSmithKline), and Boehringer Ingelheim. Dr. Mikhail is a global expert in Regulatory Affairs dealing with the U.S. Food and Drug Administration (“US-FDA”), the European Medicines Agency (“EU-EMA”) as well as national agencies in Europe, Japan’s Pharmaceuticals and Medical Devices Agency, China’s National Medical Products Administration, among other regulatory agencies worldwide. Dr. Mikhail holds a Ph.D. from the University of Paris and a D.V.M. from the University of Hannover.

 

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Erika L. Eves has served as Vice President, Finance and Administration of Navidea since November 2020. Ms. Eves has served the Company in several roles of increasing responsibility beginning in March 1992, including Accounting Clerk, Staff Accountant, Senior Accountant, Controller and Director of Finance and Administration. In addition to directing the financial operations of the Company, she is responsible for internal and external financial reporting including all SEC filings, maintaining a system of internal controls, and managing banking and vendor relationships. Ms. Eves earned a B.S.B.A. in Accounting from The Ohio State University and is a Certified Public Accountant.

 

Delinquent Section 16 Filings

 

Section 16(a) of the Exchange Act requires our officers and directors, and greater than 10% stockholders, to file reports of ownership and changes in ownership of our securities with the SEC. Copies of the reports are required by SEC regulation to be furnished to us. Based on our review of these reports and written representations from reporting persons, we believe that all reporting persons complied with all filing requirements during the fiscal year ended December 31, 2021, except for: (i) former directors Claudine Bruck, Ph.D., Thomas F. Farb, S. Kathryn Rouan, Ph.D. and Agnieszka Winkler, who each had one late Form 4 filing related to stock issued in partial payment of director fees, (ii) Messrs. Cappello, Scott and Witter, who each had one late Form 4 filing related to stock issued in partial payment of director fees, (iii) Mr. Bhalla, who had two late Form 4 filings related to stock issued in partial payment of director fees, (iv) Dr. Mikhail, who had one late Form 4 filing related to a stock option award and (v) Mr. Farb and Ms. Winkler, who each had one late Form 3 filing due to delays in obtaining SEC filer codes.

 

Code of Business Conduct and Ethics

 

We have adopted a code of business conduct and ethics that applies to our directors, officers and all employees. The code of business conduct and ethics is posted on our website at www.navidea.com. The code of business conduct and ethics may also be obtained free of charge by writing to Navidea Biopharmaceuticals, Inc., Attn: Chief Financial Officer, 4995 Bradenton Avenue, Suite 240, Dublin, Ohio 43017.

 

Corporate Governance

 

Our Board of Directors is responsible for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The primary responsibility of our Board is to oversee the management of Navidea and, in doing so, serve the best interests of the Company and our stockholders. Our Board selects, evaluates and provides for the succession of executive officers and, subject to stockholder election, directors. It reviews and approves corporate objectives and strategies, and evaluates significant policies and proposed major commitments of corporate resources. Our Board also participates in decisions that have a potential major economic impact on the Company. Management keeps our directors informed of Company activity through regular communication, including written reports and presentations at Board and committee meetings.

 

Board of Directors Meetings

 

Our Board of Directors held a total of 29 meetings in the fiscal year ended December 31, 2021, and each of the directors attended at least 75 percent of the aggregate number of meetings of the Board of Directors and committees (if any) on which he or she served. It is our policy that all directors attend the Annual Meeting of Stockholders. However, conflicts and unforeseen events may prevent the attendance of a director, or directors. Due to the public health impact of the ongoing COVID-19 pandemic, the 2021 Annual Meeting of Stockholders was held as a virtual meeting. All then-current members of our Board of Directors attended the 2021 Annual Meeting of Stockholders either in person or via webcast.

 

The Board of Directors maintains the following committees to assist it in its oversight responsibilities. The current membership of each committee is indicated in the list of directors set forth under “Board of Directors” above.

 

Audit Committee

 

The Audit Committee of the Board of Directors selects our independent registered public accounting firm with whom the Audit Committee reviews the scope of audit and non-audit assignments and related fees, the accounting principles that we use in financial reporting, and the adequacy of our internal control procedures. The current members of our Audit Committee are Malcolm G. Witter (Chair), Amit Bhalla and Alexander L. Cappello, each of whom is “independent” under Section 803A of the NYSE American Company Guide, and each of whom meets the requirements of an “audit committee financial expert” as set forth in Section 407(d)(5) of Regulation S-K promulgated by the SEC. The Audit Committee held four meetings in the fiscal year ended December 31, 2021. The Board of Directors adopted a written Amended and Restated Audit Committee Charter on April 30, 2004. A copy of the Amended and Restated Audit Committee Charter is posted on the Company’s website at www.navidea.com.

 

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Compensation, Nominating and Governance Committee

 

The CNG Committee of the Board of Directors discharges the Board’s responsibilities relating to the compensation of the Company's directors, executive officers and associates, identifies and recommends to the Board of Directors nominees for election to the Board, and assists the Board in the implementation of sound corporate governance principles and practices. With respect to its compensation functions, the CNG Committee evaluates and approves executive officer compensation and reviews and makes recommendations to the Board with respect to director compensation, including incentive or equity-based compensation plans; reviews and evaluates any discussion and analysis of executive officer and director compensation included in the Company’s annual report or proxy statement, and prepares and approves any report on executive officer and director compensation for inclusion in the Company’s annual report or proxy statement required by applicable rules and regulations; and monitors and evaluates, at the Committee’s discretion, matters relating to the compensation and benefits structure of the Company and such other domestic and foreign subsidiaries or affiliates, as it deems appropriate. The members of our CNG Committee are Malcolm G. Witter (Chair), Alexander L. Cappello and John K. Scott, Jr. The CNG Committee held 11 meetings in the fiscal year ended December 31, 2021. The Board of Directors adopted a written Compensation, Nominating and Governance Committee Charter on February 26, 2009. A copy of the Compensation, Nominating and Governance Committee Charter is posted on the Company’s website at www.navidea.com.

 

Board Oversight Committee

 

The Board Oversight Committee of the Board of Directors provides support and guidance to the Company’s Executive Leadership Committee. In November 2021, following the resignation of the Company’s former Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, Jed. A. Latkin, our Board of Directors established an Executive Leadership Committee to lead the Company on an interim basis while its next CEO is identified. The Executive Leadership Committee includes Michael S. Rosol, Ph.D., our Chief Medical Officer, Erika L. Eves, our Vice President of Finance and Administration and Jeffrey G. Smith, our Vice President of Operations. The current members of the Board Oversight Committee are Alexander L. Cappello and John K. Scott, Jr.

 

Item 11. Executive Compensation

 

Compensation Discussion and Analysis

 

Overview of Compensation Program. The CNG Committee of the Board of Directors is responsible for establishing and implementing our compensation policies applicable to senior executives and monitoring our compensation practices. The CNG Committee seeks to maintain compensation plans that are fair, reasonable and competitive. The CNG Committee is responsible for reviewing and approving senior executive compensation, awards under our cash bonus plan, and awards under our equity-based compensation plans.

 

Philosophy and Goals of Executive Compensation Plans. The CNG Committee’s philosophy for executive compensation is to:

 

 

Pay for performance: The CNG Committee believes that our executives should be compensated based upon their ability to achieve specific operational and strategic results. Therefore, our compensation plans are designed to provide rewards for the individual’s contribution to our performance.

 

 

Pay commensurate with other companies categorized as value creators: The CNG Committee has set a goal that the Company should move toward compensation levels for senior executives that are, at a minimum, at the 40th to 60th percentile for similar executives in the workforce while taking into account current market conditions and Company performance. This allows us to attract, hire, reward and retain senior executives who formulate and execute our strategic plans and drive exceptional results.

 

To assess whether our programs are competitive, the CNG Committee reviews compensation information of peer companies, national data and trends in executive compensation to help determine the appropriateness of our plans and compensation levels. These reviews, and the CNG Committee’s commitment to pay for performance, become the basis for the CNG Committee’s decisions on compensation plans and individual executive compensation payments.

 

The CNG Committee has approved a variety of programs that work together to provide a combination of basic compensation and strong incentives. While it is important for us to provide certain base level salaries and benefits to remain competitive, the CNG Committee’s objective is to provide compensation plans with incentive opportunities that motivate and reward executives for consistently achieving superior results. he CNG Committee designs our compensation plans to:

 

 

Reward executives based upon overall company performance, their individual contributions and creation of stockholder value;

 

 

Encourage executives to make a long-term commitment to our Company; and

 

 

Align executive incentive plans with the long-term interests of stockholders.

 

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The CNG Committee reviews senior executive compensation levels at least annually. During the review process, the CNG Committee addresses the following questions:

 

 

Do any existing compensation plans need to be adjusted to reflect changes in competitive practices, different market circumstances or changes to our strategic initiatives?

 

 

Should any existing compensation plans be eliminated or new plans be added to the executive compensation programs?

 

 

What are the compensation-related objectives for our compensation plans for the upcoming fiscal year?

 

 

Based upon individual performance, what compensation modifications should be made to provide incentives for senior executives to perform at superior levels?

 

In addressing these questions, the CNG Committee considers input from management, outside compensation experts and published surveys of compensation levels and practices.

 

The CNG Committee does not believe that our compensation policies and practices for our employees give rise to risks that are reasonably likely to have a material adverse effect on the Company. Our incentive-based compensation goals are generally tied to product development goals (e.g., clinical trial progress or regulatory milestones) or Company financial goals (e.g., budgeted expense targets or business partnerships). The CNG Committee believes that the existence of these performance incentives creates a strong motivation for Company employees to contribute towards the achievement of strong, sustainable performance, and believes that the Company has a strong set of internal controls that minimize the risk that financial performance can be misstated in order to achieve incentive compensation payouts.

 

In addition to the aforementioned considerations, the CNG Committee also takes into account the outcome of stockholder advisory (“say-on-pay”) votes on the compensation of our Chief Executive Officer and our next two highest-paid executive officers (the “Named Executive Officers”). At the Annual Meeting of Stockholders held on September 14, 2021, approximately 79% of our stockholders who cast a ballot voted in favor of the resolution relating to the compensation of our Named Executive Officers. The CNG Committee believes this vote affirmed our stockholders’ support of the Company’s executive compensation program. The CNG Committee will continue to consider the results of future say-on-pay votes when making future compensation decisions for the executive officers. The Company currently holds an advisory vote to approve the compensation of the Company’s Named Executive Officers every two years. The two-year frequency of advisory “say-on-pay” votes will continue until the next required vote on the frequency of advisory votes on executive compensation at the Company’s Annual Meeting of Stockholders to be held in 2023.

 

Scope of Authority of the CNG Committee. The Board of Directors has authorized the CNG Committee to establish the compensation programs for all executive officers and to provide oversight for compliance with our compensation philosophy. Annually, the CNG Committee recommends the compensation for our executive officers, including objectives and awards under incentive plans. The Chief Executive Officer provides input for the CNG Committee regarding the performance and appropriate compensation of the other officers. The CNG Committee gives considerable weight to the Chief Executive Officer’s evaluation of the other officers because of his or her direct knowledge of each officer’s performance and contributions. The CNG Committee also makes recommendations to the Board of Directors on appropriate compensation for the non-employee directors. In addition to overseeing the compensation of executive officers, the CNG Committee recommends or approves awards under short-term cash incentive and long-term equity-based compensation plans for all other employees. For more information on the CNG Committee’s role, see the CNG Committee’s charter, which can be found on our website at www.navidea.com.

 

Independent Compensation Expertise. The CNG Committee is authorized to periodically retain independent experts to assist in evaluating executive compensation plans and in setting executive compensation levels. These experts provide information on trends and best practices so the CNG Committee can formulate ongoing plans for executive compensation. The CNG Committee retained Board Advisory, LLC (“Board Advisory”) as its independent consultant to assist in the determination of the reasonableness and competitiveness of the compensation levels of its Named Executive Officers and Board of Directors for fiscal 2021. No conflict of interest exists that would prevent Board Advisory from serving as independent consultant to the CNG Committee.

 

For fiscal 2021, Board Advisory performed a benchmark compensation review of our key executive positions, including our Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer, Chief Medical Officer, Chief Business Officer, and our Board of Directors. Board Advisory utilized published survey and proxy reported data from compensation peers, with market data aged to January 1, 2021, by an annualized rate of 3.0%, the expected pay increase in 2021 for executives in the life sciences industry.

 

In evaluating appropriate executive compensation, it is common practice to set targets at a point within the competitive marketplace. The CNG Committee sets its competitive compensation levels based upon its compensation philosophy. Following completion of the Board Advisory study for 2021, the CNG Committee noted that the total cash compensation of our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer was between the 50th and 75th percentile for an established peer group of companies. The CNG Committee also noted that the total cash compensation of our Chief Medical Officer was below the 25th percentile, and the total cash compensation of our Chief Business Officer was between the 25th and 50th percentile for these positions.

 

Peer Group Companies. As part of their review, Board Advisory surveyed the compensation levels at specific competitive benchmark companies. With input from management, Board Advisory chose the peer companies because they are developmental life sciences companies and are similar to Navidea in revenue, invested capital, market capitalization, and employees. The selected peer group companies have invested capital of less than four times that of Navidea, or approximately $375 million, and have comparable key executive positions. While the specific plans for these companies may or may not be used, it is helpful to review their compensation data to provide benchmarks for the overall compensation levels that will be used to attract, hire, retain and motivate our executives.

 

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As competitors and similarly situated companies that compete for the same executive talent, the CNG Committee determined that the following peer group companies most closely matched the responsibilities and requirements of our executives:

 

Actinium Pharmaceuticals, Inc.

Curis

NanoViricides

Adaptimmune Therapeutics

CytoDyn Inc.

Neoleukin Therapeutics, Inc.

Advaxis

CytomX Therapeutics, Inc.

Northwest Biotherapeutics, Inc.

aTyr Pharma Inc.

Fate Therapeutics

OncoSec Medical Incorporated

Avid Bioservices, Inc.

Fortress Biotech

PDL Biopharma

Bellicum Pharmaceuticals, Inc.

Genocea Biosciences, Inc.

Phio Pharmaceuticals Corp.

Calithera Biosciences, Inc.

GeoVax Labs, Inc.

Prothena

CEL-SCI

Idera Pharmaceuticals

Regulus Therapeutics, Inc.

Checkpoint Therapeutics, Inc.

Inovio Pharmaceuticals

Selecta Biosciences, Inc.

ChemoCentryx

Lineage Cell Therapeutics, Inc.

Sorrento Therapeutics, Inc.

Cidara Therapeutics, Inc.

Lumos Pharma, Inc.

T2 Biosystems, Inc.

ContraFect Corporation

Marker Therapeutics, Inc.

Ziopharm Oncology

Corvus Pharmaceuticals

   

 

Board Advisory used the publicly available compensation information for these companies to analyze our competitive position in the industry. Base salaries and short-term and long-term incentive plans of the executives of these companies were reviewed to provide background and perspective in analyzing the compensation levels for our executives.

 

Specific Elements of Executive Compensation

 

Base Salary. Base salaries for senior executives are set using the CNG Committee’s philosophy that compensation should be competitive and based upon performance. Executives should expect that their base salaries, coupled with a cash bonus award, would provide them the opportunity to be compensated at or above the competitive market at the 40th to 60th percentile.

 

Based on competitive reviews of similar positions, industry salary trends, overall company results and individual performance, salary increases may be approved from time to time. The CNG Committee reviews and approves base salaries of all executive officers. In setting specific base salaries for fiscal 2021, the CNG Committee considered published proxy data for similar positions at peer group companies.

 

The following table shows the changes in base salaries for the Named Executive Officers that were approved for fiscal 2021 compared to the approved salaries for fiscal 2020:

 

Named Executive Officer

 

Fiscal 2021

Base Salary(a)

   

Fiscal 2020

Base Salary(a)

   

Change

 

Michael S. Rosol, Ph.D. (b)

  $ 240,000     $ 225,000       6.7

%

Michel Mikhail, Ph.D. (c)

    225,000            

%

Erika L. Eves

    156,200       156,200      

%

Jed A. Latkin (d)

          490,000      

%

Joel H. Kaufman (e)

          230,000      

%

 

 

(a)

The amount shown for fiscal 2021 and 2020 is the approved annual salary of the Named Executive Officer in effect at the end of each year. The actual amount paid to the Named Executive Officer during fiscal 2021 and 2020 is shown under “Salary” in the Summary Compensation table below.

 

(b)

Dr. Rosol received an increase in base salary effective March 1, 2021.

 

(c)

Dr. Mikhail commenced employment with the Company effective October 1, 2021.

 

(d)

Mr. Latkin separated from the Company effective October 24, 2021.

 

(e)

Mr. Kaufman separated from the Company effective May 7, 2021.

 

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The following table shows the base salaries for the Named Executive Officers that were approved for fiscal 2022 compared to the approved salaries for fiscal 2021:

 

Named Executive Officer

 

Fiscal 2022

Base Salary

   

Fiscal 2021

Base Salary

   

Change

 

Michael S. Rosol, Ph.D.

  $ 240,000     $ 240,000      

%

Michel Mikhail, Ph.D.

    225,000       225,000      

%

Erika L. Eves

    156,200       156,200      

%

 

Short-Term Incentive Compensation. Our executive officers, along with our other employees, are eligible to participate in our annual cash bonus program, which has four primary objectives:

 

 

Attract, retain and motivate top-quality executives who can add significant value to the Company;

 

 

Create an incentive compensation opportunity that is an integral part of the employee’s total compensation program;

 

 

Reward participants’ contributions to the achievement of our business results; and

 

 

Provide an incentive for individuals to achieve corporate objectives that are tied to our strategic goals.

 

The cash bonus compensation plan provides each participant with an opportunity to receive an annual cash bonus based on our Company’s performance during the fiscal year. Cash bonus targets for senior executives are determined as a percentage of base salary, based in part on published proxy data for similar positions at peer group companies. The following are the key provisions of the cash bonus compensation plan for our Named Executive Officers:

 

 

The plan is administered by the CNG Committee, which has the power and authority to establish, adjust, pay or decline to pay the cash bonus for each participant, including the power and authority to increase or decrease the cash bonus otherwise payable to a participant. However, the Committee does not have the power to increase, or make adjustments that would have the effect of increasing, the cash bonus otherwise payable to any executive officer.

 

 

The CNG Committee is responsible for specifying the terms and conditions for earning cash bonuses, including establishing specific performance objectives.

 

 

As soon as reasonably practicable after the end of each fiscal year, the CNG Committee determines whether and to what extent each specified business performance objective has been achieved and the amount of the cash bonus to be paid to each participant.

 

For fiscal 2021, the cash bonus for each executive officer was a function of the designated target bonus amount and certain business performance objectives, weighted as a percentage of the total target amount. The business performance objectives established for fiscal 2021 were as follows:

 

 

Achievement of various clinical development goals, subject to a maximum 50% reduction of bonus if not achieved, including:

 

 

o

Advance commercialization programs in diagnostic and therapeutic indications;

 

 

o

Achieve specified milestones in clinical trials for RA imaging indications;

 

 

o

Advance dose-optimization feasibility study in atherosclerosis;

 

 

o

Complete work on Ga[68] in atherosclerotic plaque grant; and

 

 

o

Achieve specified milestones in pre-clinical therapeutic activities.

 

 

Achievement of various business development goals, subject to a maximum 35% reduction of bonus if not achieved, including:

 

 

o

Finalize terms of an RA commercialization partnership agreement with an established pharma company;

 

 

o

Qualify a new drug substance manufacturer;

 

 

o

Select and initiate qualification of a new drug product manufacturer;

 

 

o

Establish a partnership or distribution network for Lymphoseek in the EU; and

 

 

o

Obtain regulatory approval for Lymphoseek in India.

 

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Achievement of various financial management goals, subject to a maximum 10% reduction of bonus if not achieved, including:

 

 

o

Maintain compliance with NYSE American listing standards;

 

 

o

Maintain a clean audit with no going concern language; and

 

 

o

Adhere to the 2021 corporate budget to within 5% of budgeted operating expenses.

 

 

Achievement of various intellectual property goals, subject to a maximum 5% reduction of bonus if not achieved, including:

 

 

o

File one specified provisional patent.

 

For fiscal 2021, the Board of Directors determined the cash bonus targets for Named Executive Officers as follows:

 

Named Executive Officer

 

Target Cash Bonus
(% of Salary)

   

Target Cash Bonus
($ Amount) (a)

 

Michael S. Rosol, Ph.D.

    35.0

%

  $ 84,000  

Michel Mikhail, Ph.D.

    35.0

%

    78,750  

Erika L. Eves

    25.0

%

    39,050  

Jed A. Latkin

    75.0

%

    367,500  

Joel H. Kaufman

    35.0

%

    80,500  

 

 

(a)

Cash bonus awards related to fiscal 2021 were pro-rated based on the weighted average amount of base salary and time served during 2021. Dr. Rosol received an increase in his base salary effective March 1, 2021, and Dr. Mikhail commenced employment with the Company effective October 1, 2021.

 

On January 5, 2022, the Board of Directors determined the amounts to be awarded as 2021 bonuses to all employees, including the Named Executive Officers. The Board of Directors recognized the achievement of approximately 76% of 2021 bonus goals and thus awarded bonuses at 76% of target amounts for all employees, including the Named Executive Officers, to be paid in cash 50% immediately and 50% following successful fundraising. Employees who separated from the Company during 2021, including Mr. Latkin and Mr. Kaufman, did not receive a cash bonus award related to fiscal 2021.

 

Long-Term Incentive Compensation. All Company employees are eligible to receive equity awards in the form of stock options or restricted stock. Equity instruments awarded under the Company’s equity-based compensation plan are based on the following criteria:

 

 

Analysis of competitive information for comparable positions;

 

 

Evaluation of the value added to the Company by hiring or retaining specific employees; and

 

 

Each employee’s long-term potential contributions to our Company.

 

Although equity awards may be made at any time as determined by the CNG Committee, they are generally made to all full-time employees once per year, or on the recipient’s hire date in the case of new-hire grants.

 

Equity-based compensation is an effective method to align the interests of stockholders and management and focus management’s attention on long-term results. When awarding equity-based compensation the CNG Committee considers the impact the participant can have on our overall performance, strategic direction, financial results and stockholder value. Therefore, equity awards are primarily based upon the participant’s position in the organization, competitive necessity and individual performance. Stock option awards have vesting schedules over several years to promote long-term performance and retention of the recipient, and restricted stock awards may include specific performance criteria for vesting or vest over a specified period of time.

 

In February 2021, the Company awarded options to purchase 25,000, 12,500, 100,000 and 25,000 shares of Common Stock to Dr. Rosol, Ms. Eves, Mr. Latkin and Mr. Kaufman, respectively, as part of their annual compensation packages. The options have an exercise price of $2.56 per share, and vest as to one-third of the options on each of the first three anniversaries of the date of grant. The options will expire on the tenth anniversary of the date of grant.

 

In November 2021, the Company awarded options to purchase 75,000 shares of Common Stock to Dr. Mikhail in connection with his employment as Chief Regulatory Officer. The options have an exercise price of $1.37 per share, and vest as to one-third of the options on each of the first three anniversaries of the date of grant. The options will expire on the tenth anniversary of the date of grant.

 

In December 2021, the Company awarded options to purchase 100,000 shares of Common Stock to Dr. Rosol. The options have an exercise price of $1.08 per share, and vest quarterly over four years beginning on April 1, 2022. The options will expire on the tenth anniversary of the date of grant.

 

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Other Benefits and Perquisites. The Named Executive Officers are generally eligible to participate in other benefit plans on the same terms as other employees. These plans include medical, dental, vision, disability and life insurance benefits, and our 401(k) retirement savings plan (the “401(k) Plan”).

 

Our paid time off (“PTO”) policy allows employees to carry up to 40 hours of unused PTO time forward to the next fiscal year. Any unused PTO time in excess of the amount eligible for rollover is generally forfeited.

 

We pay group life insurance premiums on behalf of all employees, including the Named Executive Officers. The benefit provides life insurance coverage at two times the employee’s annual salary plus $10,000, up to a maximum of $400,000.

 

We also pay group long-term disability insurance premiums on behalf of all employees, including the Named Executive Officers. The benefit provides long-term disability insurance coverage at 60% of the employee’s annual salary, up to a maximum of $10,000 per month, beginning 180 days after the date of disability and continuing through age 65.

 

401(k) Retirement Plan. All employees are given an opportunity to participate in our 401(k) Plan following a new-hire waiting period. Under the 401(k) Plan, participants may have pre-tax amounts, or post-tax amounts under a Roth option, withheld from their pay and provides for a discretionary employer matching contribution (currently, a 100% match up to 6% of salary in the form of our Common Stock). Participants may invest their contributions in various fund options, but are prohibited from investing their contributions in our Common Stock. Participants are immediately vested in both their contributions and Company matching contributions. The 401(k) Plan qualifies under section 401 of the Internal Revenue Code, which provides that employee and company contributions and income earned on contributions are not taxable to the employee until withdrawn from the Plan, and that we may deduct our contributions when made.

 

Employment Agreement and Separation Agreement with Mr. Latkin

 

Effective July 27, 2020 through October 24, 2021, Mr. Latkin was employed under an employment agreement that provided for an annual base salary of $490,000. For the fiscal year ending December 31, 2021, the CNG Committee determined that the maximum bonus payment to Mr. Latkin would be $367,500. No bonus was paid to Mr. Latkin due to his resignation prior to payment of bonuses in 2022.

 

On November 23, 2021, Mr. Latkin signed a Separation Agreement and General Release (the “Separation Agreement”) in connection with his resignation from his position as Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and as a director, on October 24, 2021 (the “Separation Date”). Pursuant to the Separation Agreement, among other things, the Company agreed to provide Mr. Latkin with certain separation benefits, commencing on the “Effective Date,” defined as the eighth day after Mr. Latkin signs, without revoking, the Separation Agreement. These separation benefits include continued payment of Mr. Latkin’s base salary of $490,000, less all relevant taxes and other withholdings, on the following basis: (i) for 12 months, 100% of his base salary, minus an aggregate $24,000 deducted monthly pro rata for reimbursement of Mr. Latkin’s attorney fees which were paid by the Company, and (ii) for 10 months following the expiration of the first 12-month period, 50% of his base salary. On the Effective Date, each of Mr. Latkin’s unvested stock options vested, and all of his vested stock options (covering 69,918 shares) and previously unvested options (covering 333,332 shares) may be exercised by Mr. Latkin on or before the earlier of the fifth anniversary of the Separation Date and the original expiration date. On the Effective Date, each of Mr. Latkin’s 33,333 outstanding unvested restricted stock units became fully vested, and all of such restricted stock units were settled within thirty days after the Separation Date, less applicable withholding in shares of common stock. The Company also agreed to reimburse Mr. Latkin for expenses incurred pursuant to Company policy. For purposes of assistance provided in certain litigation matters, the Company agreed to pay Mr. Latkin $250 per hour, subject to certain limitations. Mr. Latkin will also be entitled to receive, subject to his timely execution and non-revocation of the Separation Agreement, a payment equal to up to one percent of total capital raised during the twenty-two months following the Separation Date through one of two investment banking firms introduced to the Company by Mr. Latkin, less relevant taxes and withholdings and subject to certain payment terms. In addition, Mr. Latkin and the Company generally released each other from any and all claims each may have against the other.

 

44

 

 

Report of Compensation, Nominating and Governance Committee

 

The CNG Committee is responsible for establishing, reviewing and approving the Company’s compensation philosophy and policies, reviewing and making recommendations to the Board regarding forms of compensation provided to the Company’s directors and officers, reviewing and determining cash and equity awards for the Company’s officers and other employees, and administering the Company’s equity incentive plans.

 

In this context, the CNG Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this annual report on Form 10-K. In reliance on the review and discussions referred to above, the CNG Committee recommended to the Board, and the Board has approved, that the Compensation Discussion and Analysis be included in this annual report on Form 10-K for filing with the SEC.

 

 

The Compensation, Nominating

 

and Governance Committee

   
 

Malcolm G. Witter (Chair)

 

Alexander L. Cappello

 

John K. Scott, Jr.

 

Compensation, Nominating and Governance Committee Interlocks and Insider Participation

 

None of the members of our CNG Committee during the past year was an officer or employee of the Company. None of our executive officers currently serves, or in the past year served, as a member of a compensation committee (or other committee serving an equivalent function) or director of any entity that has one or more executive officers serving on our CNG Committee or our Board of Directors.

 

No director who served on the CNG Committee during 2021 had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director of the Company or member of the CNG Committee during 2021.

 

45

 

 

Summary Compensation

 

The following table sets forth certain information concerning the annual and long-term compensation of our Named Executive Officers for the last two fiscal years. The compensation of our former Chief Executive Officer and former Chief Business Officer are also included.

 

Summary Compensation Table for Fiscal 2021

 

Named Executive Officer

 

Year

 

Salary

   

(a)

Stock

Awards

   

(a)

Option

Awards

   

(b)

Non-Equity

Incentive Plan

Compensation

   

(c)

All Other

Compensation

   

Total
Compensation

 

Michael S. Rosol, Ph.D. (d)

 

2021

  $ 263,526     $     $ 133,037     $ 63,057     $ 9,731     $ 469,351  

Chief Medical Officer

 

2020

    223,333             19,118       54,710       5,409       302,570  

(Principal Executive Officer)

                                                   
                                                     

Michel Mikhail, Ph.D. (e)

 

2021

  $ 56,250     $     $ 81,580     $ 15,053     $ 167     $ 153,050  

Chief Regulatory Officer

 

2020

                                   
                                                     

Erika L. Eves (f)

 

2021

  $ 171,072     $     $ 23,481     $ 29,614     $ 12,563     $ 236,730  

Vice President,

 

2020

    147,325             4,588       21,042       5,273       178,228  

Finance & Administration

                                                   
                                                     

Jed A. Latkin (g)

 

2021

  $ 408,333     $     $ 187,849     $     $ 750,908     $ 1,347,090  

Former Chief Executive Officer,

 

2020

    481,511       163,450       321,615       252,775       5,700       1,225,051  

Chief Operating Officer

                                                   

and Chief Financial Officer

                                                   
                                                     

Joel H. Kaufman (h)

 

2021

  $ 81,458     $     $ 46,962     $     $ 18,845     $ 147,265  

Former Chief Business Officer

 

2020

    226,042             39,600       55,381       7,324       328,347  

 

 

(a)

Amount represents the aggregate grant date fair value in the year granted in accordance with FASB ASC Topic 718. Assumptions made in the valuation of these awards are disclosed in Note 1(e) of the Notes to the Consolidated Financial Statements in this Form 10-K.

 

(b)

Amount represents the total non-equity incentive plan amounts which have been approved by the Board of Directors as of the date of this filing, and are disclosed for the year in which they were earned (i.e., the year to which the service relates).

 

(c)

Amount represents additional compensation as disclosed in the All Other Compensation Table below.

 

(d)

Dr. Rosol’s salary for the fiscal year ended December 31, 2021 includes an additional $26,026 for his service on the Executive Leadership Committee following Mr. Latkin’s separation from the Company.

 

(e)

Dr. Mikhail commenced employment with the Company effective October 1, 2021.

 

(f)

Ms. Eves’s salary for the fiscal year ended December 31, 2021 includes an additional $14,872 for her service on the Executive Leadership Committee following Mr. Latkin’s separation from the Company.

 

(g)

Mr. Latkin separated from the Company effective October 24, 2021.

 

(h)

Mr. Kaufman separated from the Company effective May 7, 2021.

 

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All Other Compensation

 

The following table describes each component of the amounts shown in the “All Other Compensation” column in the Summary Compensation Table above.

 

All Other Compensation Table for Fiscal 2021

 

Named Executive Officer

Year

 

Severance

   

(a)

Unused Paid

Time Off

   

(b)

Employer

Matching

Contribution

to 401(k) Plan

   

(c)

Employer

Contribution

to Health

Savings Account

   

Total

All Other

Compensation

 

Michael S. Rosol, Ph.D.

2021

  $     $     $ 8,731     $ 1,000     $ 9,731  

Chief Medical Officer

2020

                4,409       1,000       5,409  

(Principal Executive Officer)

                                         
                                           

Michel Mikhail, Ph.D. (d)

2021

  $     $     $     $ 167     $ 167  

Chief Regulatory Officer

2020

                             
                                           

Erika L. Eves

2021

  $     $     $ 11,563     $ 1,000     $ 12,563  

Vice President,

2020

                3,315       1,958       5,273  

Finance & Administration

                                         
                                           

Jed A. Latkin (e)

2021

  $ 694,167     $ 39,341     $ 17,400     $     $ 750,908  

Former Chief Executive Officer,

2020

                5,700             5,700  

Chief Operating Officer and

                                         

Chief Financial Officer

                                         
                                           

Joel H. Kaufman (f)

2021

  $     $ 11,795     $ 6,300     $ 750     $ 18,845  

Former Chief Business Officer

2020

                5,324       2,000       7,324  

 

 

(a)

Amount represents payment for unused Paid Time Off as of the Named Executive Officer’s date of separation from the Company.

 

(b)

Amount represents the value of the common stock accrued for contribution to the Named Executive Officer’s account in our 401(k) Plan as calculated on a quarterly basis.

 

(c)

Amount represents employer contributions to the Named Executive Officer’s Health Savings Account.

 

(d)

Dr. Mikhail commenced employment with the Company effective October 1, 2021.

 

(e)

Mr. Latkin separated from the Company effective October 24, 2021. Amount includes all amounts paid or accrued, including payment of Mr. Latkin’s attorney fees. Amount excludes the value of any accelerated vesting of his stock options and restricted stock units. Additional information regarding Mr. Latkin’s severance benefits is disclosed under “Employment Agreement and Separation Agreement with Mr. Latkin.” 

 

(f)

Mr. Kaufman separated from the Company effective May 7, 2021.

 

Tax Consequences

 

The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, included a number of significant changes to Section 162(m) of the Internal Revenue Code, such as the repeal of the qualified performance-based compensation exemption and the expansion of the definition of “covered employees” (for example, by including the chief financial officer and certain former Named Executive Officers as covered employees). As a result of these changes, except as otherwise provided in the transition relief provisions of the Tax Cuts and Jobs Act, compensation paid to any of our covered employees generally will not be deductible in 2021 or future years, to the extent that it exceeds $1 million.

 

47

 

 

Grants of Plan-Based Awards

 

The following table sets forth certain information about plan-based awards that we made to the Named Executive Officers during fiscal 2021. For information about the plans under which these awards were granted, see the discussion under “Short-Term Incentive Compensation” and “Long-Term Incentive Compensation” in the “Compensation Discussion and Analysis” section above.

 

Grants of Plan-Based Awards Table for Fiscal 2021

 

           

Estimated Future

Payouts Under

Non-Equity Incentive

Plan Awards

   

Estimated Future

Payouts Under

Equity Incentive

Plan Awards

   

All Other

Stock

Awards:

Number

of Shares

   

All Other

Option

Awards:

Number of

Securities

Underlying

   

Exercise

Price of

Option

   

Grant Date

Fair Value

of Stock

and Option

   

Named Executive Officer

 

Grant Date

   

Threshold

   

Maximum

   

Threshold

   

Maximum

   

of Stock

   

Options

   

Awards

   

Awards

   

Michael S. Rosol, Ph.D.

    N/A     $     $ 84,000                             $     $  

(a)

   

2/15/2021

                                    25,000       2.56       46,962  

(b)

   

12/27/2021

                                    100,000       1.08       86,074  

(c)

                                                                           

Michel Mikhail, Ph.D.

    N/A           $ 78,750                             $     $  

(a)

   

11/15/2021

                                    75,000       1.37       81,579  

(b)

                                                                           

Erika L. Eves

    N/A     $     $ 39,050                             $     $  

(a)

   

2/15/2021

                                    12,500       2.56       23,481  

(b)

                                                                           

Jed A. Latkin (d)

    N/A     $     $ 367,500                             $     $  

(a)

   

2/15/2021

                                    100,000       2.56       187,849  

(b)

                                                                           

Joel H. Kaufman (e)

    N/A     $     $ 80,500                             $     $  

(a)

   

2/15/2021

                                    25,000       2.56       46,962  

(b)

 

 

(a)

The threshold amount reflects the possibility that no cash bonus awards will be payable. The maximum amount reflects the cash bonus awards payable if the Board of Directors, in its discretion, awards the maximum cash bonus. The cash bonuses awarded related to fiscal 2021 were pro-rated based on the weighted average amount of base salary and time served during 2021.

 

(b)

These stock options vest as to one-third of the options on each of the first three anniversaries of the date of grant, and expire on the tenth anniversary of the date of grant.

 

(c)

These stock options vest quarterly over four years beginning on April 1, 2022, and expire on the tenth anniversary of the date of grant.

 

(d)

Mr. Latkin separated from the Company effective October 24, 2021. In accordance with the terms of Mr. Latkin’s separation agreement, all of Mr. Latkin’s unvested stock options vested on December 1, 2021 and will expire on the earlier of the expiration of the original ten-year term or October 24, 2026.

 

(e)

Mr. Kaufman separated from the Company effective May 7, 2021. All of Mr. Kaufman’s unvested stock options were forfeited on the date of separation.

 

48

 

Outstanding Equity Awards

 

The following table presents certain information concerning outstanding equity awards held by the Named Executive Officers as of December 31, 2021.

 

Outstanding Equity Awards Table at Fiscal 2021 Year-End

 

    Option Awards         Stock Awards         
   

Number of Securities

Underlying Unexercised

Options (#)

                          Market
Value of
Shares of
   

Equity Incentive

Plan Awards

Named Executive Officer   Exercisable     Unexercisable    

Option

Exercise

Price

 

Option

Expiration

Date

  Note  

Number of

Shares of

Stock that

Have Not

Vested

   

Stock
that

Have
Not

Vested

   

Number of

Unearned

Shares

   

Market
Value

of Unearned

Shares

  Note

Michael S. Rosol,

    6,250           $ 7.60  

1/2/2029

 

(j)

                                 

Ph.D.

    8,333       16,667       1.06  

2/6/2030

 

(m)

                                 
            25,000       2.56  

2/15/2031

 

(p)

                                 
            100,000       1.08  

12/27/2031

 

(s)

                                 
                                                                 

Michel Mikhail,

          75,000     $ 1.37  

11/15/2031

 

(r)

                                 

Ph.D.

                                                               
                                                                 

Erika L. Eves

    500           $ 65.60  

2/17/2022

 

(a)

                                 
      625             61.60  

2/15/2023

 

(b)

                                 
      625             35.40  

1/28/2024

 

(c)

                                 
      625             33.00  

3/26/2025

 

(d)

                                 
      1,000             10.20  

4/25/2027

 

(g)

                                 
      1,200             7.20  

2/20/2028

 

(i)

                                 
      1,600       800       3.00  

2/7/2029

 

(k)

                                 
      2,000       4,000       1.06  

2/6/2030

 

(m)

                                 
            12,500       2.56  

2/15/2031

 

(p)

                                 
                                                                 

Jed A. Latkin

    2,250           $ 30.00