Jaguar Health, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise.
Business context
Jaguar is a commercial-stage pharmaceutical company focused on plant-based products for gastrointestinal disorders in people and animals. Its key marketed products include Mytesi for noninfectious diarrhea in adults with HIV/AIDS and conditionally FDA-approved Canalevia-CA1 for chemotherapy-induced diarrhea in dogs. The company is also developing crofelemer for additional indications and lechlemer for cholera-associated diarrhea.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Net product revenue | $2.625 | $1.241; up 111.5% |
| Cost of product revenue | $0.455 | $0.583 |
| Gross profit / approximate gross margin | $2.170 / 82.7% | $0.658 / 53.0% |
| Operating expenses | $14.379 | $10.007 |
| Operating loss | $11.754 | $8.766 |
| Net loss | $18.164 | $12.009 |
| Net loss attributable to common shareholders | $17.986; $0.40 per share | $12.009; $0.28 per share |
| Cash used in operating activities | $7.695 | $6.708 |
| Cash and cash equivalents | $17.456 at March 31 | $17.051 at December 31, 2021 |
| Notes payable, net of discount | $31.673 | $28.206 at December 31, 2021 |
| Stockholders’ equity / accumulated deficit | $8.109 / $237.480 deficit | $11.853 equity at December 31, 2021 |
The approximate gross margin is calculated from reported revenue less cost of product revenue. The company raised $9.110 million net through its at-the-market (ATM) offering during the quarter; financing cash flow was $8.150 million after repayments and other financing items, leaving cash up $0.405 million.
Material changes versus the prior comparable period
- Reported net revenue more than doubled, mainly because discounts, rebates, returns, and wholesaler fees were substantially lower following the transition to a specialty-pharmacy distribution model. However, gross Mytesi sales fell to $3.395 million from $4.558 million, which the company attributed largely to the distribution-model transition.
- R&D expense rose 104.8% to $4.945 million, reflecting increased staffing, clinical-trial start-up and manufacturing activity, and cholera/lechlemer research. Sales and marketing rose 32.5% to $2.835 million; G&A rose 80.2% to $6.144 million.
- Net loss widened 51.3%. Higher interest expense ($4.194 million versus $1.901 million) and a $2.815 million debt-extinguishment loss contributed to the deterioration. The extinguishment loss arose from exchanges of royalty-interest debt for common shares.
- Voting common shares issued and outstanding increased to 77.1 million from 48.4 million at year-end, including 20.0 million shares issued through the ATM and shares issued in debt exchanges. This materially diluted existing holders.
Outlook, risks, and unusual items
- Going concern: Management said cash was not sufficient to fund its operating plan for one year from issuance of the statements, reported an immediate need to raise cash, and disclosed substantial doubt about the company’s ability to continue as a going concern. It expects continued losses and negative operating cash flows and may need to curtail activities if financing is unavailable.
- Financing and royalty obligations: The company relies on equity and debt financing, product sales, and potential partnerships. It disclosed minimum royalty payments of $6.0 million in 2022, $18.0 million in 2023, $13.9 million in 2024, $7.1 million in 2025, and $3.9 million in 2026. These obligations may strain liquidity. April 2022 amendments subsequently gave the company certain rights to exchange royalty interests and a note for shares, subject to Nasdaq share-issuance limits and other conditions.
- Potential dilution: The company increased its ATM offering authorization to $75 million in February 2022. Post-quarter amendments also permit certain debt exchanges for common stock, subject to an exchange cap unless stockholder approval is obtained.
- Nasdaq listing: Jaguar received a notice that its share price had been below the $1.00 minimum bid requirement. It had until August 16, 2022 to regain compliance; delisting remained a risk if it failed.
- Commercial and development outlook: Canalevia-CA1 received conditional FDA approval in December 2021 and, according to the filing, became available through U.S. veterinary distributors on April 27, 2022. Conditional approval permits commercialization while effectiveness evidence is still being collected. The Phase 3 OnTarget trial of crofelemer for cancer-therapy-related diarrhea was ongoing. Management expected R&D spending to increase with trial start-up and anticipated near-term G&A to remain flat; no quantified revenue or earnings guidance was provided.
- Other risks and items: Mytesi revenue depended heavily on a small number of distributors and specialty pharmacies. The company also relied on a single contract manufacturer for Mytesi API and a single manufacturer for finished product. A disclosed class-action settlement was approved in 2021, with settlement costs covered by D&O insurance; the filing reported no material accrual for currently active legal actions. Management reported disclosure controls and internal control over financial reporting were effective.
Important facts for investors to verify
- Cash runway, near-term funding needs, and whether additional financing or partnerships are obtained on acceptable terms.
- Actual Mytesi demand and net sales under the specialty-pharmacy model, including the effect of rebates, discounts, and channel concentration.
- Progress toward Nasdaq’s minimum bid-price requirement and the status of any extension or delisting risk.
- Terms, timing, and dilution consequences of ATM sales and post-quarter debt or royalty exchanges into shares.
- Ability to meet royalty-payment obligations, and milestones, costs, and evidence of effectiveness for Canalevia-CA1 and ongoing clinical programs.