Following a flurry of turnaround steps, Navidea Biopharmaceuticals Inc. (NYSEMKT: NAVB) is asking shareholders to approve the second reverse stock split in four years and a stock-for-debt swap that would give majority control to its largest investor.
The Dublin biotech set a special meeting for July 27 to consider the proposals, which it said are needed to end its seventh threat of de-listing in five years, the proxy said.
"Our board of directors believes that, in addition to increasing the price of our common stock, the reverse stock split would make our common stock more attractive to a broader range of institutional and other investors," said the proxy filed on Monday.
The second proposal is to issue 26 million shares to John "Kim" Scott Jr., Navidea's vice chairman, to satisfy the last $1.4 million of his loan to the company last year. Certain institutional investors who could shore up operations first want the debt erased and conversion of a class of preferred stock that Scott owns, the proxy said.
"The company is required to have an aggregate net worth of at least $6 million or a market capitalization of at least $50 million prior to July 31, 2023, in order to maintain its listing on NYSE American and is therefore in urgent need of additional equity capital," the proxy said.
The request comes after several moves to raise cash, and in one instance to reject an offer to buy assets, in what the long-struggling company calls its "fix, fund, propel" strategy.
Navidea is developing various diagnostic and eventually therapeutic drugs by attaching different payloads to a molecular backbone attracted to a protein on the surface of white blood cells during inflammation. A rheumatoid arthritis diagnostic is in the third phase of human trials.
The company had just $2 million in cash at the start of the year, after a $17 million 2022 loss. In March, Navidea hired G2G Ventures, a private equity firm founded by a biotech veteran, as a consultant to lead the turnaround.
Since then the company:
- Promoted Dr. Michael Blue to chief medical officer, the top executive role. His predecessor, Dr. Michael Rosol, had stepped down in April. The company also named Jill Bieker Stefanelli, a consultant to precision medicine companies, to its board, replacing investment banker Alexander Cappello, once the company's chairman.
- Received $7.5 million cash from Cardinal Health Inc. (NYSE: CAH), in lieu of a $10 million payment Navidea would have received later under terms of its 2016 sale to Dublin-based Cardinal of the U.S. rights to its diagnostic aid Lymphoseek. The reduced early payment will fund the arthritis trials, according to a release and regulatory filings.
- Slashed administrative expenses by 36% in the first quarter compared to a year ago. For example, the company stopped hosting quarterly conference calls and now reports financials via press releases and SEC filings.
- Rejected a $7 million to $9 million offer from ProPhase Labs Inc. to purchase certain assets, which in a release said the deal would have benefitted Navidea shareholders. Navidea's release countered that the "opportunistic" bid undervalued the assets, which were not specified.
- In contrast, agreed to sell a potential Alzheimer's diagnostic to Meilleur Technologies Inc. for $750,000 plus future performance-based payments.
- Sold $1.1 million in preferred shares to two Columbus-based investors and entered an agreement for Keystone Capital Partners LLC to buy as much as $2.75 million in common stock.
“I remain confident Navidea’s transformative technology holds the potential to improve lives around the world,” Blue said in a release in June. “Our team of experts, with G2G’s support, are making great progress on the changes required."
Before this week's shareholder proposal, Scott made a $300,000 bridge loan to Navidea.
Scott is a real estate developer based in suburban Denver. (He's also the father of NFL punter J.K. Scott.) A Navidea investor since 2003, Scott upped his stake to 32% in 2021.
The shareholder proposal relates to a $2.5 million loan from last year. The company retired $1 million of that by issuing him 12 million shares, the proxy said, but issuing 26 million more shares to extinguish the rest requires the vote. Otherwise, the 8% interest is an ongoing expense.
The proxy lists his current stake at 45%, but a filing from Scott pegged it at 75%. Navidea and G2G representatives were not immediately available.
In April 2019, Navidea executed a 1-for-20 reverse stock split. Just over four years later, the new proposal would authorize the board to enact another, in the range of 1-for-20 to 1-for-50.
Navidea's shares are trading around 10 cents, according to Yahoo Finance, down from about $2.60 after the 2019 reverse split. The adjusted high for the last five years was $6.80 in 2018.
NYSE American LLC sent its latest warning notice on potential de-listing a month ago, following two warnings last year. The company briefly came in compliance with listing regulations in 2020.
