Jaguar Animal Health, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; unaudited. The filing describes an animal-health company developing and commercializing gastrointestinal products. Its commercial products included Neonorm Calf and, launched in Q1, Neonorm Foal; Canalevia is its lead prescription candidate for dogs.
Financial results and position
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | $38,146 | $62,387 |
| Gross profit (margin) | $19,778 (51.8%) | $28,089 (45.0%) |
| Research and development | $1.752 million | $1.423 million |
| General and administrative | $1.788 million | $1.094 million |
| Operating loss | $3.685 million | $2.679 million |
| Net loss | $3.984 million | $3.937 million |
| Net loss per share, basic and diluted | $0.43 | $1.43 |
| Cash used in operating activities | $4.528 million | $1.339 million |
Revenue declined 38.7% year over year. Higher R&D and G&A costs drove the operating loss higher; net loss was broadly similar, partly because interest expense fell by $649,000 and the prior-year warrant fair-value charge did not recur. R&D expense rose 23.1%, with increased personnel costs, while G&A rose 63.4%, including public-company and facility costs.
At March 31, cash and cash equivalents were $7.214 million, restricted cash was $2.821 million, current assets were $8.125 million, and current liabilities were $3.692 million. Working capital was approximately $4.432 million. Net carrying value of long-term debt was $5.749 million, plus $150,000 of convertible notes; the latter was due July 31, 2016. The February follow-on offering raised $4.13 million net through issuance of 2 million shares. Common shares outstanding increased from 8.125 million at year-end to 10.143 million at quarter-end.
Cash decreased by $483,000 during the quarter. Operating cash use of $4.528 million was partly offset by $3.951 million of financing cash flow, principally offering proceeds, and $93,000 of investing cash flow. The filing reports an accumulated deficit of $29.687 million.
Outlook, risks and notable items
- Management expected losses and expenses to continue rising in 2016, with increased spending on product development, trials, manufacturing capabilities and commercialization.
- The company stated that existing cash was not sufficient for its anticipated needs over the next 12 months or to fund its operating plan through December 2016. It warned that additional financing would be needed and might not be available on acceptable terms; the financial statements disclose substantial doubt about the company’s ability to continue as a going concern.
- Canalevia’s pivotal field study for acute diarrhea in dogs was underway. The company had submitted required major technical sections for conditional approval of Canalevia for chemotherapy-induced diarrhea to the FDA for phased review. Development and approval timing remained uncertain.
- Management reported positive reception for newly launched Neonorm Foal and planned to expand equine product development. It also described Neonorm Calf shipments to distributors, while revenue recognition was generally deferred until distributor sell-through.
- On April 21, 2016, after quarter-end, the lender agreement was amended and $1.5 million of debt was repaid from restricted cash. The amendment provided interest-only payments from May through August 2016. A separate $150,000 manufacturing bonus payment was deferred to June 30, 2016.
- The company reported no material pending litigation and stated that disclosure controls and procedures were effective; no material change in internal control over financial reporting was reported.
Investor verification priorities
- Confirm cash runway, restricted-cash availability, and financing needs in light of management’s stated funding shortfall and going-concern uncertainty.
- Review the April debt repayment and amended amortization schedule, including remaining principal, covenants and payment obligations.
- Track Canalevia clinical-study progress, FDA review and approval milestones, and associated development costs.
- Assess distributor sell-through, returns and pricing adjustments, and whether Neonorm launches can generate material recurring revenue.
- Evaluate dilution and capital needs following the February share issuance, alongside the company’s expected increases in operating expenses.