Jaguar Health, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 14, 2022. Jaguar is a commercial-stage biopharmaceutical company focused on gastrointestinal products for human and animal health. Mytesi is its principal marketed human product; Canalevia-CA1 launched in 2022.
Key financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Product revenue | $3.15 million | $0.63 million | $8.70 million | $2.26 million |
| Operating expenses | $13.05 million | $10.16 million | $36.83 million | $32.14 million |
| Loss from operations | $9.90 million | $9.53 million | $28.13 million | $29.89 million |
| Net loss | $12.61 million | $12.19 million | $40.16 million | $38.28 million |
| Net loss per share, basic and diluted | $0.12 | $0.27 | $0.49 | $0.87 |
| Operating cash used | Not separately stated for quarter | Not separately stated for quarter | $26.68 million | $26.05 million |
- At September 30, cash was $10.56 million, down from $17.05 million at December 31, 2021. Current assets were $25.21 million and current liabilities $26.94 million, a working-capital deficit of about $1.74 million.
- Notes payable, net of discounts and issuance costs, totaled $31.74 million, including $11.74 million current and $20.01 million noncurrent. Total liabilities were $47.69 million; stockholders’ equity was $3.60 million.
- Revenue was overwhelmingly Mytesi. Nine-month product revenue increased 286%, while cost of product revenue fell 18%. Approximate gross margin on reported product revenue was 82% for the nine months (versus 17% in 2021); reported figures reflect substantial changes in rebates, discounts, returns and distribution fees.
Changes versus the prior comparable period
- Net product revenue increased sharply as Mytesi sales shifted to specialty pharmacies, reducing discounts and eliminating wholesaler fees. Management said the model brought higher average net prices and lower distribution costs, although gross Mytesi sales for the first nine months declined about 14%.
- Q3 net revenue rose 400% year over year. Nine-month revenue rose 286%, while the consolidated nine-month net loss widened by $1.88 million.
- Research and development expense rose 39% for the nine months, primarily from clinical-trial, manufacturing and personnel costs. General and administrative expense rose 20%; sales and marketing increased 8%.
- Interest expense rose 69% to $10.09 million for the nine months, and the company recorded a $2.19 million debt-extinguishment loss. Nine-month cash used in operations remained high at $26.68 million.
- The company issued 49.58 million shares through its ATM offering in the first nine months for $17.8 million net proceeds, and exchanged royalty/debt obligations for additional common shares. Voting common shares outstanding rose from 48.35 million at year-end 2021 to about 135.84 million at September 30, 2022.
Outlook, risks and unusual items
- Going concern: Management said cash was insufficient to fund its operating plan for one year from issuance and that it had an immediate need to raise cash. The filing states there is substantial doubt about the company’s ability to continue as a going concern. Additional financing may not be available on acceptable terms or in time; absent funding, planned activities may need to be curtailed.
- Funding obligations: Royalty arrangements carry minimum payments even if sales are inadequate. The filing lists minimum royalty payments of $0.4 million in 2022, $18.0 million in 2023, $14.6 million in 2024, $18.9 million in 2025 and $5.3 million in 2026. These obligations may strain liquidity.
- Development: The pivotal Phase 3 crofelemer study for cancer-therapy-related diarrhea was ongoing. Crofelemer development also targets short bowel syndrome and congenital diarrheal disorders in Europe; management described a possible European early-access pathway, dependent on study data and country programs. No quantified financial guidance was provided.
- Nasdaq listing: Jaguar received an extension through February 13, 2023 to regain the $1.00 minimum bid-price requirement; failure could lead to delisting, subject to appeal.
- Commercial and operational risks: Revenue depends heavily on Mytesi and a small number of specialty-pharmacy customers. The company also relies on single third-party manufacturers for Mytesi API and finished product. Clinical outcomes, regulatory approvals, financing access and market acceptance remain significant uncertainties.
- Subsequent events: After quarter-end, Jaguar reported $892,000 net proceeds from additional ATM share sales. An October amendment to the Synworld agreement removed its commitment to buy shares and allowed Jaguar to elect cash or shares for service payments. An October amendment to the Streeterville note extended the Lechlemer Phase 1 trial deadline to July 1, 2023 and changed other note terms.
Most important facts for investors to verify
- Available cash, monthly cash burn, near-term financing plans and the ability to meet obligations; the filing expressly identifies substantial going-concern doubt.
- Contractual royalty minimums, payment timing and how the royalty financings affect future cash flows and potential share issuance.
- Post-quarter share count, ATM issuance, debt-for-equity exchanges and remaining authorized share capacity; these transactions create significant dilution risk.
- Mytesi net sales trends and deductions, specialty-pharmacy concentration, and whether the distribution model can sustain higher net revenue.
- Progress, costs and milestones for the Phase 3 CTD trial and European rare-disease programs, including regulatory and patient-access assumptions.
- Compliance with Nasdaq’s bid-price requirement by February 13, 2023 and the status of manufacturing supply arrangements.