Small-Cap Focus: Navidea

I have spent most of 2015 highlighting in my Friday column small-cap stocks from the biotech and biopharma sectors that I find attractive, even if they are speculative. These have included some big winners from my Best Ideas list such as Eagle Pharmaceuticals (EGRX) and Halozyme Therapeutics (HALO). We will look today at a promising small-cap, Navidea Pharmaceuticals (NAVB). It recently had some positive developments on a couple of fronts that could bode well for further revenue growth and capital appreciation. Company Overview: Navidea Biopharmaceuticals is a biopharmaceutical company whose main focus until recently had been developing novel radiopharmaceutical imaging agents. These were designed to help identify the presence and status of disease and to enable better diagnostic accuracy, clinical decision-making and ultimately patient care. Its main product is Lymphoseek, which is an imaging agent used to highlight an expanding roster of cancerous tumors. The stock has been on the move recently, but still has a market capitalization of less than $300 million. Positive Catalysts: Navidea received approval in late November to distribute Lymphoseek for use in the European Union. It will be used for 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. The company announced Thursday it signed an exclusive sublicense agreement for the commercialization and distribution of Lymphoseek with Norgine. Navidea will receive an upfront payment of $2 million and is eligible to receive additional milestone payments up to $5 million -- as well as royalties on European net sales. Lymphoseek was already showing growth of better than 40% annually. As it gets approved for more types of cancer; this deal will just accelerate that growth. Navidea has formed a subsidiary called Macrophage Therapeutics that will leverage the technology that allows Lymphoseek to target and to image various forms of cancer. This subsidiary will explore ways the company could actually deliver treatment to those targeted areas in combination with other drugs. This is even more promising. Navidea announced in late February the appointment of leading experts to a newly -formed scientific advisory board (SAB) to serve as a strategic resource to Macrophage Therapeutics, It is in the initial stages of raising financing for this effort. I like the potential of this enterprise as it reminds of some other companies business models in my portfolio that have utilized the same strategy to great effect, such as Agenus (AGEN). There are myriad benefits to this approach. By partnering with deeper-pocketed players, Navidea can expand its potential pipeline exponentially. The financial model changes as well as other firms will fund development of these potential trials that will attempt to use the technology behind Lymphoseek to deliver medicines to destroy tumors in various forms of cancer. Summary: Navidea is still posting small losses even as Lymphoseek sales grow impressively, if off a small base. I like the potential of Macrophage Therapeutics. Once that subsidiary is fully-funded, I expect that event will be a positive catalyst for the stock. Navidea also has a radio-imaging agent for the detection of Alzheimer's Disease, and another one for the detection of Parkinson's Disease. Both are in Phase III trials. The company has several shots on goal and I feel is worthy of a small speculative position for aggressive investors. Get an email alert each time I write an article for Real Money Pro. Click the +Follow next to my byline on this article.

Small-Cap Focus: Navidea

Aggressive investors should look at a small speculative position.

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