Jaguar Health, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Amounts are in U.S. dollars; financial statement amounts are in millions unless otherwise noted. Jaguar develops and commercializes plant-based gastrointestinal medicines for people and animals. Revenue is primarily from Mytesi, its FDA-approved treatment for noninfectious diarrhea in adults with HIV/AIDS receiving antiretroviral therapy.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Product revenue | $2.813 | $3.150 | $7.461 | $8.696 |
| Gross profit / margin | $2.299 / 81.7% | $2.537 / 80.5% | $6.111 / 81.9% | $7.172 / 82.5% |
| Operating expenses | $11.600 | $13.046 | $34.195 | $36.825 |
| Operating loss | $(8.787) | $(9.896) | $(26.734) | $(28.129) |
| Net loss | $(7.904) | $(12.609) | $(32.592) | $(40.163) |
| Net loss per common share | $(0.38) | $(8.83) | $(2.21) | $(36.62) |
Q3 revenue fell 10.7% year over year; nine-month revenue fell 14.2%. Human-health revenue was $7.335 million for the nine months, while animal-health revenue was $0.126 million. Revenue remained highly concentrated in Mytesi and a small number of specialty pharmacies. There was no income tax expense.
- Expense trends: Nine-month R&D rose 13.5% to $15.133 million, primarily on clinical, contract-manufacturing, and CTD trial activity. Sales and marketing declined 30.5% to $4.929 million, and G&A declined 14.1% to $12.783 million.
- Cash flow: Operating activities used $25.791 million in the first nine months, compared with $26.681 million in 2022. Investing activities used no cash, versus $1.314 million in 2022. Financing provided $23.577 million, largely from $20.847 million of net ATM proceeds. Cash declined $2.243 million to $3.226 million.
- Balance sheet at September 30: Current assets were $22.059 million and current liabilities $12.456 million; cash was $3.226 million. Total liabilities were $43.964 million, including $34.666 million of notes payable, net of discount. Stockholders’ equity was $1.416 million, versus a $1.359 million deficit at December 31, 2022. Accumulated deficit was $299.079 million.
Material changes and unusual items
- The $3.697 million nine-month gain on debt extinguishment—versus a $2.187 million loss in 2022—reflected modifications and exchanges of royalty-interest obligations. The company also recorded a $3.365 million loss from changes in fair value of financial instruments and notes designated under the fair value option. These accounting items materially affected reported losses.
- Interest expense declined to $6.134 million from $10.089 million, partly because certain debt instruments moved to fair-value accounting; the lower interest expense was offset by fair-value losses.
- Jaguar issued 17.931 million common shares through its ATM program in the first nine months for $20.847 million net proceeds. It also issued preferred stock and warrants in financing and debt exchanges. Warrants outstanding increased to 11.425 million at September 30.
- After quarter-end, the company reported another 18.945 million ATM shares sold from October 1 through November 14 for $7.0 million net proceeds. It also reported 25.9 million common shares issued after September 30 and conversions of preferred stock. Common shares outstanding were 50,755,580 as of November 14.
Outlook, risks, and contingencies
- Going concern: Management said September 30 cash was insufficient to fund operations for one year from issuance of the statements and identified substantial doubt about the company’s ability to continue as a going concern. It expects continued losses and negative operating cash flow and may need additional equity, debt, partnerships, or other financing; funding availability and terms are uncertain.
- Subsequent liquidity and listing: By November 14, cash exceeded $6.0 million, and management estimated stockholders’ equity exceeded Nasdaq’s $2.5 million minimum. Nasdaq granted an additional 180-day bid-price compliance period through May 6, 2024. These developments do not remove the company’s stated financing and runway risks.
- Pipeline: Jaguar reported completion of patient enrollment in the pivotal Phase 3 OnTarget trial of crofelemer for prevention of diarrhea in adults receiving targeted cancer therapy. Management also expected proof-of-concept data for a lyophilized product by the end of 2023. No quantified financial guidance or definitive trial outcome is provided in the filing.
- Royalty obligations: Royalty interests carry minimum payments that may be due even if product sales are insufficient. The risk-factor section lists minimum payments of $6.8 million in 2024, $40,000 in 2025, $27.0 million in 2026, and $19.1 million in 2027. Amendments and exchange transactions changed terms, so payment timing and amounts merit review against the underlying agreements.
- Other exposures: The company depends on a single finished-product contract manufacturer and two suppliers of Mytesi active ingredient. It reported a remaining crofelemer purchase commitment of 500 kilograms. Management reported no material legal proceedings and no material accruals for active legal actions.
Most important facts for investors to verify
- Whether post-quarter ATM proceeds and other financing provide adequate operating runway, and the timing and terms of any further capital raise.
- The OnTarget Phase 3 results, regulatory milestones, and funding required for ongoing clinical programs.
- Royalty and debt agreements, including minimum payment schedules, maturity terms, default provisions, and the effects of further amendments.
- Actual dilution from ATM issuance, preferred-stock conversions, and outstanding warrants; reconcile the post-quarter share issuances with the reported November 14 share count.
- Mytesi revenue trends and specialty-pharmacy concentration, along with continuity of supply from the company’s manufacturer and ingredient suppliers.