Jaguar Health, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless stated otherwise. Amounts are in U.S. dollars. Jaguar is a commercial-stage pharmaceutical company focused on human gastrointestinal products, including Mytesi, and a smaller animal-health business.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $1.241 million | $0.869 million | Up 42.8% |
| Gross profit / gross margin | $0.658 million / 53.0% | $0.193 million / 22.2% | Margin improved |
| Operating expenses | $10.007 million | $8.523 million | Up 17.4% |
| Operating loss | $8.766 million | $7.654 million | Loss increased |
| Net loss | $12.009 million | $7.936 million | Loss increased 51.3% |
| Net loss per share | $0.10 | $0.56 | Per-share loss narrowed as weighted-average shares rose substantially |
| Cash used in operations | $6.708 million | $4.296 million | Cash use increased |
Nearly all revenue came from Mytesi: human-health revenue was $1.208 million, including $729,000 through Cardinal Health and $479,000 through specialty pharmacies. Animal-health revenue was $33,000. Gross Mytesi sales rose to $4.558 million from $1.304 million, but rebates, discounts, returns and wholesaler fees reduced net revenue; management attributed higher gross sales chiefly to a 230% increase in sales price and a 6.3% increase in bottles sold. The filing says the 2020 price adjustment drove higher Medicaid rebates and sales discounts. Cost of product revenue declined 13.8%; reported gross margin improved accordingly.
Balance sheet, debt and liquidity
- At March 31, cash was $32.250 million, versus $8.090 million at year-end 2020. Current assets were $44.104 million and current liabilities $12.592 million, implying working capital of approximately $31.512 million.
- Total assets were $68.713 million; total liabilities were $36.822 million; stockholders’ equity was $31.891 million. Accumulated deficit was $178.908 million.
- Notes payable, net of discounts and issuance costs, totaled $25.661 million ($1.431 million current and $24.230 million noncurrent), compared with $16.210 million at year-end. Gross listed debt obligations before discounts were $46.950 million. These figures include royalty-interest financings and a fair-value-option note; carrying values and repayment amounts can differ.
- Financing activities provided $30.868 million in Q1, including net proceeds from a registered offering ($13.486 million), an ATM offering ($5.365 million), note issuances ($10.975 million), and warrant exercises and other share issuances. The company used $6.708 million in operating cash and made no material cash investment in equipment.
- Management stated that cash on hand at the financial-statement issuance date was $35.0 million and, under its current operating plan, expected it to fund obligations for at least 12 months from issuance. The company nevertheless expects continuing losses and negative operating cash flows and may need additional financing.
Material changes, outlook and notable items
- R&D expense rose 52.6% to $2.414 million, mainly from increased clinical-trial, contract-manufacturing and development activity. Sales and marketing rose 45.6% to $2.139 million, reflecting patient-access programs and Mytesi marketing. G&A increased 8.3% to $3.409 million.
- Interest expense increased to $1.901 million from $199,000, largely reflecting royalty-interest financings. Jaguar recorded a $753,000 loss extinguishing Exchange Note 2 and a $599,000 loss from fair-value changes in financial instruments and hybrid instruments. A $1.462 million Series 3 warrant inducement expense was also recorded.
- Management expects R&D costs to increase as clinical trials and pipeline work advance; it also anticipates higher sales and marketing expense as market-access and partnership activities expand. It expected G&A to remain broadly flat in the near term. No quantified revenue or earnings guidance was provided.
- Development priorities include Mytesi follow-on indications, particularly cancer therapy-related diarrhea, and lechlemer for cholera. The company established Napo EU in Italy to support its European strategy, including work addressing inflammatory diarrhea associated with post-COVID conditions. These are plans, not assured outcomes.
- Royalty financings carry significant minimum payment commitments even if product sales are inadequate: the filing lists minimum payments of $2.3 million in 2021, $6.7 million in 2022, $18.0 million in 2023, $14.0 million in 2024, $7.1 million in 2025 and $3.8 million in 2026. A separate clinical-trial services agreement had an $11.8 million remaining commitment at quarter-end.
- The Streeterville secured note is backed by a first-priority security interest in lechlemer-related assets and potential priority-review-voucher proceeds. Specified trial failures or defaults can trigger increased balances, acceleration or other penalties. The filing reported no trial failure or default as of March 31.
- A proposed $2.6 million class-action settlement was preliminarily approved, with final approval then scheduled for May 27, 2021. The company expected its D&O insurer to fund the full amount if approved and recorded no loss contingency or insurance recovery at quarter-end. The company also disclosed a congressional inquiry into Mytesi’s price adjustment; the FDA had denied its EUA request for COVID-19-related symptoms in April 2020.
- Nasdaq listing compliance matters: the company reported regaining compliance with the minimum bid-price requirement in January 2021. Management reported that disclosure controls were not effective at March 31 because of unremediated material weaknesses involving financial-statement preparation and review, fair-value assumptions and staffing/resources.
- Subsequent events included an April registered offering of 7.647 million shares for approximately $10.8 million gross, an April royalty exchange for 1.765 million shares to reduce a royalty balance by $3.0 million, and an April amendment to the equity line. These occurred after quarter-end and are not included in Q1 results.
Important facts for investors to verify
- Whether Mytesi’s higher gross sales and net revenue are sustained, and how pricing, rebates, discounts and payer access affect net sales and cash collections.
- The company’s cash runway under actual operating cash burn, its ability to meet escalating royalty minimums and other clinical and supply commitments, and whether further financing will be needed.
- Full contractual balances, effective costs, collateral, default provisions and related-party terms of the royalty financings and Streeterville note; reported net debt excludes substantial discounts.
- Progress, funding and regulatory milestones for Mytesi follow-on indications and lechlemer, along with reliance on a contract manufacturer and concentrated suppliers.
- Whether the proposed settlement received final court approval and insurer coverage, and whether management remediated the disclosed financial-reporting control weaknesses.
- Share dilution: voting common shares outstanding increased during Q1, and the filing reported 9.412 million additional shares issued after quarter-end through May 6, 2021.