Jaguar Health, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unless otherwise stated, financial figures are unaudited and in U.S. dollars. Jaguar is a commercial-stage pharmaceutical company focused on gastrointestinal products, including Mytesi (crofelemer) for human health and Neonorm products for animal health.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.385 million | $3.167 million | $1.625 million | $4.036 million |
| Operating loss | $11.580 million | $8.451 million | $20.348 million | $16.105 million |
| Net loss | $14.081 million | $9.238 million | $26.090 million | $17.174 million |
| Net loss per share, basic and diluted | $(0.10) | $(0.44) | $(0.20) | $(0.97) |
| Operating cash used | Not separately stated | Not separately stated | $16.615 million | $8.298 million |
Q2 cost of product revenue was $0.664 million, exceeding revenue and implying a gross loss of $0.279 million. For the first half, cost of product revenue was $1.247 million, implying gross profit of $0.378 million, or about 23% of revenue. The filing does not present these gross-margin calculations as reported metrics.
- Balance sheet at June 30: Cash was $21.992 million, plus $9.920 million of restricted cash; total current assets were $44.294 million and current liabilities $12.652 million. Restricted cash primarily relates to proceeds designated for Napo EU and is not available for general use.
- Debt and equity: Notes payable, net of discounts and issuance costs, totaled $25.340 million, of which $1.145 million was current. Total liabilities were $37.754 million; stockholders’ equity was $31.785 million. Accumulated deficit was $192.989 million.
- Cash flows: First-half financing activities provided $40.443 million, principally from registered offerings, an ATM offering, warrant exercises and debt issuance. Investing activities used $0.006 million. Cash and restricted cash increased by $23.822 million.
Changes versus comparable periods
- Revenue fell 87.8% in Q2 and 59.7% in the first half year over year. First-half gross Mytesi sales rose to $9.480 million from $7.592 million, but higher discounts, rebates and fees reduced net product revenue. Management attributed higher rebates and discounts in part to the April 2020 wholesale acquisition cost increase; it also cited the transition toward specialty-pharmacy distribution.
- First-half R&D expense increased 110.4% to $6.285 million, reflecting clinical and contract-manufacturing activity, additional personnel and development work for crofelemer follow-on indications, including cancer therapy-related diarrhea.
- First-half sales and marketing expense increased 35.4% to $4.330 million, while general and administrative expense increased 22.8% to $8.477 million. Operating loss widened 26.3% to $20.348 million.
- Interest expense rose to $3.909 million from $0.678 million, primarily reflecting royalty-interest financing. The company also recorded a $0.753 million loss on extinguishment of debt and a $1.074 million loss from changes in fair value of financial instruments and the hybrid instrument.
- Weighted-average shares for first-half 2021 were 129.951 million versus 19.516 million a year earlier. Voting common shares outstanding were 137.322 million at June 30, 2021, versus 114.022 million at year-end 2020; financing and warrant exercises contributed to share issuance.
Outlook, risks and unusual items
- Management stated that existing cash was expected to fund obligations for at least 12 months after issuance of the statements. It also expects continued losses and negative operating cash flows, and says additional financing may be needed; inability to obtain funding could require reductions in planned activities.
- Management expects R&D expense to increase with clinical-trial start-up and development activity, sales and marketing spending to increase with market-access and partnership efforts, and near-term G&A to remain flat. No specific revenue or earnings guidance was provided.
- Royalty financings create significant future payment obligations. The filing lists minimum royalty payments of $6.0 million in 2022, $18.0 million in 2023, $13.8 million in 2024, $7.1 million in 2025 and $3.8 million in 2026; amounts are subject to the agreements’ terms and revenue-based provisions.
- Revenue concentration is high: two U.S. pharmaceutical distributors represented 84% and 11% of Q2 2021 revenue, respectively; one customer accounted for 85% of accounts receivable at June 30. The company also relies on single third-party manufacturers for Mytesi API and finished product.
- The Streeterville secured note is tied to lechlemer development and is secured by specified lechlemer technology and potential tropical disease priority review voucher proceeds. The filing states no trial failure or default had occurred as of June 30; default or specified trial failure could trigger punitive terms and remedies.
- Management concluded disclosure controls were not effective because of material weaknesses in financial-statement preparation and review, fair-value review procedures and accounting resources. Remediation was planned but not assured.
- A merger-related class-action settlement received final court approval in May 2021; the company stated its D&O insurer would fund the $2.6 million settlement. A July 2021 Dragon SPAC private placement generated approximately $10.8 million gross for the contemplated combination with Napo EU; it is a subsequent event, not June 30 cash.
- Jaguar reported that it regained Nasdaq minimum-bid-price compliance in January 2021. It continued to disclose risks related to COVID-19, supply chains, clinical trials, customer concentration, cybersecurity and financing needs.
Important facts for investors to verify
- Whether Mytesi net sales and customer concentration improve, and how rebates, discounts and the specialty-pharmacy transition affect realized revenue.
- Available unrestricted cash and the timing and size of cash outflows under royalty agreements, debt and clinical-development commitments.
- Progress and spending on crofelemer follow-on trials and lechlemer, including the Streeterville note’s collateral and contingent terms.
- Whether management remediates the disclosed internal-control material weaknesses and sustains effective reporting controls.
- Funding, structure and use of proceeds for the Dragon SPAC/Napo EU transaction, and the potential dilution from future equity or warrant issuance.