JAGUAR HEALTH, INC. The following discussion and analysis of financial condition and results of
operations should be read together with the condensed consolidated financial
statements and the related notes included in Item 1 of Part I of this Quarterly
Report on Form 10-Q, and with our audited consolidated financial statements and
the related notes included in our Annual Report on Form 10-K as of and for
the year ended
The discussion and analysis below includes certain forward-looking statements
related to our research and development and commercialization of our products in
the
Overview
We are a commercial stage pharmaceuticals company focused on developing novel,
plant-based, non opiod, and sustainably derived prescription medicines for
people and animals with gastrointestinal distress, specifically chronic,
debilitating diarrhea. Our wholly-owned subsidiary,
Jaguar was founded in
We believe Jaguar is poised to realize a number of synergistic, value adding benefits-an expanded pipeline of potential blockbuster human follow-on indications, a second-generation anti-secretory agent, as well as a pipeline of
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important animal indications for crofelemer -upon which to build global partnerships. As previously announced, Jaguar, through Napo, now holds extensive global rights for Mytesi, and crofelemer manufacturing is being conducted at a multimillion-dollar, FDA-compliant commercial manufacturing facility. Additionally, several of the drug product candidates in Jaguar's crofelemer pipeline are backed by what we believe are strong Phase 2 and proof of concept evidence from completed human clinical trials.
Crofelemer is a novel, first-in-class anti-secretory agent which has a basic
normalizing effect locally on the gut, and this mechanism of action has the
potential to benefit multiple disorders. Crofelemer is in development for
multiple possible follow-on indications, including cancer therapy-related
diarrhea ("CTD"); orphan-drug indications for symptomatic relief of diarrhea in
infants and children with congenital diarrheal disorders ("CDD") and for adult
and pediatric patients for short bowel syndrome with intestinal failure with
"SB-IFS"; supportive care for diarrhea relief in inflammatory bowel diseases
("IBD"); diarrhea-predominant irritable bowel syndrome ("IBS-D"); and for
idiopathic/functional diarrhea. In addition, a second-generation anti-secretory
agent, lechlemer, is in development for cholera. Crofelemer previously received
orphan-drug designation for SBS in the
Financial Operations Overview
On a consolidated basis, we have not yet generated enough revenue to date to
achieve break even or positive cash flows, and we expect to continue to incur
significant research and development and other expenses. Our net loss was
Revenues
Our product and collaboration revenue consist of the following:
? Revenues from the sale of our human drug Mytesi, which is sold through
distributors and wholesalers and specialty pharmacies.
Revenues from the sale of our animal products branded as Neonorm Calf and
? Neonorm Foal. Our Neonorm and botanical extract products are primarily sold to
distributors, who then sell the products to the end customers.
Our policy typically permits returns if the product is damaged, defective, or
otherwise cannot be used when received by the customer if the product has
? expired. Returns are accepted for product that will expire within six months or
that have expired up to one year after their expiration dates. Estimates for
expected returns of expired products are based primarily on an ongoing analysis
of our historical return patterns.
See "Results of Operations" below for more detailed discussion on revenues.
Cost of Revenue
Cost of revenue consists of direct drug substance and drug product materials expense, direct labor, distribution fees, royalties and other related expenses associated with the sale of our products.
Research and Development Expense
Research and development expenses consist primarily of clinical and contract manufacturing expense, personnel and related benefits expense, stock-based compensation expense, employee travel expense, and reforestation expenses. Clinical and contract manufacturing expense consists primarily of costs to conduct stability, safety and
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efficacy studies, and manufacturing startup at an outsourced API provider in
We typically use our employee and infrastructure resources across multiple development programs. We track outsourced development costs by prescription drug product candidate and non-prescription product and we track personnel or other internal costs related to development to specific programs or development compounds.
The timing and amount of our research and development expenses will depend largely upon the outcomes of current and future trials for our prescription drug product candidates as well as the related regulatory requirements, the outcomes of current and future species-specific formulation studies for our non-prescription products, manufacturing costs and any costs associated with the advancement of our line extension programs. We cannot determine with certainty the duration and completion costs of the current or future development activities.
The duration, costs and timing of trials, formulation studies and development of our prescription drug and non-prescription products will depend on a variety of factors, including:
the scope, rate of progress, and expense of our ongoing, as well as any
? additional clinical trials, formulation studies and other research and
development activities;
? future clinical trial and formulation study results;
? potential changes in government regulations; and
? the timing and receipt of any regulatory approvals.
A change in the outcome of any of these variables with respect to the development of a prescription drug product candidate or non-prescription product could mean a significant change in the costs and timing associated with our development activities.
We expect research and development expense to increase due to the start-up costs associated with our clinical trials for other indications.
Sales and Marketing Expense
Sales and marketing expenses consist of personnel and related benefits expense,
stock-based compensation expense, direct sales and marketing expense, employee
travel expense, and management consulting expense. We currently incur sales and
marketing expenses to promote Mytesi. We do not have significant marketing or
promotional expenses related to Neonorm Calf or Neonorm Foal in the nine months
ended
We expect sales and marketing expense to increase going forward as we focus on expanding our market access activities and commercial partnerships for the development of follow-on indications of Mytesi and crofelemer.
General and Administrative Expense
General and administrative expenses consist of personnel and related benefits expense, stock-based compensation expense, employee travel expense, legal and accounting fees, rent and facilities expense, and management consulting expense.
In the near term, we expect general and administrative expense to remain flat as we focus on our pipeline development and market access expansion. This will include efforts to grow the business.
Interest Expense
Interest expense consists primarily of non-cash and cash interest costs related to our borrowings.
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Critical Accounting Policies and Significant Judgments and Estimates
The preparation of consolidated financial statements in conformity with
Results of Operations
Comparison of the Nine Months Ended
The following table summarizes the Company's results of operations with respect to the items set forth in such table for the nine months endedSeptember 30, 2021 and 2020 together with the change in such items in dollars and as a percentage. Nine Months Ended September 30, (in thousands) 2021 2020 Variance Variance % Product revenue$ 2,255 $ 6,809 $ (4,554) (66.9) % Total revenue 2,255 6,809 (4,554) (66.9) % Operating Expenses Cost of product revenue 1,864 2,491 (627) (25.2) % Research and development 9,597 4,509 5,088 112.8 % Sales and marketing 6,596 4,728 1,868 39.5 % General and administrative 12,450 11,218 1,232 11.0 % Series 3 warrants inducement expense 1,462 3,696 (2,234) (60.4) % ELOC warrants inducement expense 172 - 172 100.0 % Series B convertible preferred stock inducement expense - 1,647 (1,647) (100.0) % Total operating expenses 32,141 28,289 3,852 13.6 % Loss from operations (29,886) (21,480) (8,406) 39.1 % Interest expense (5,988) (1,259) (4,729) 375.6 % Loss on extinguishment of debt (753) - (753) 100.0 % Change in fair value of financial instruments and hybrid instrument designated at FVO (1,639) (2,491) 852 (34.2) % Other expense, net (16) 190 (206) (108.4) % Loss before income tax (38,282) (25,040) (13,242) 52.9 % Income tax expense - - - 100.0 % Net loss (38,282) (25,040) (13,242) 52.9 % Deemed dividend attributable to accretion of Series A redeemable convertible preferred stock - (1,332) 1,332 (100) % Stock dividend attributable to Series C perpetual preferred stock - (56) 56 (100) % Deemed dividend attributable to Series 1, Series 2 and Bridge warrant holders - (856) 856 (100) % Net loss attributable to common shareholders$ (38,282) $ (27,284) $ (10,998) 40.3 % 55 Table of Contents Revenue Gross product sales equal the number of bottles sold multiplied by WAC. Due to the Company's arrangements, including elements of variable consideration, gross product sales are reduced in order to reflect the expected consideration to arrive at net product sales. Deductions to reduce gross product sales to net product sales in the nine months endedSeptember 30, 2021 and 2020 were as follows: Nine Months Ended September 30, (in thousands) 2021 2020 Variance Variance % Gross product sales Mytesi$ 12,665 $ 13,895 $ (1,230) (8.9) % Neonorm 54 61 (7) (11.5) % Total gross product sales 12,719 13,956 (1,237) (8.9) % Medicaid rebates (2,900) (1,248) (1,652) 132.4 % Sales discounts (5,932) (4,307) (1,625) 37.7 % Sales returns (104) (203) 99 (48.8) % Wholesaler fee (1,528) (1,389) (139) 10.0 % Net product sales$ 2,255 $ 6,809 $ (4,554) (66.9) %
Our gross product revenues were
Human
Sales of Mytesi are recognized as revenue when the products are delivered to the
wholesalers and to specialty pharmacies. Our gross revenues from the sale of
Mytesi were
Sales discounts and sales returns were
Animal
Our Neonorm product revenues were$54,000 and$61,000 for the nine months endedSeptember 30, 2021 and 2020, respectively. Sales and marketing expenses for Neonorm products are not significant during 2021 and none during the same period in 2020. 56 Table of Contents Cost of Product Revenue Nine Months Ended September 30, (in thousands) 2021 2020 Variance Variance % Cost of Product Revenue Material cost$ 797 $ 1,412 $ (615) (43.6) % Direct labor 788 501 287 57.3 % Distribution fees 168 331 (163) (49.2) % Other 111 247 (136) (55.1) % Total$ 1,864 $ 2,491 $ (627) (25.2) %
Cost of product revenue decreased
Research and Development
The following table presents the components of research and development ("R&D")
expense for the nine months ended
Nine Months Ended
September 30,
(in thousands) 2021 2020 Variance Variance %
Research and Development:
Clinical and contract manufacturing
2,827 1,270 1,557 122.6 %
Stock-based compensation 935 580 355 61.2 %
Materials expense and tree planting 284 57 227 398.2 %
Travel, other expenses 10 42 (32) (76.2) %
Other 2,238 1,558 680 43.6 %
Total $ 9,597 $ 4,509 $ 5,088 112.8 %
The change in R&D expense of
Clinical and contract manufacturing expenses increased
million in the nine months ended
? period in 2021 largely due to increased clinical trial activities related to
the start-up of CTD and other indications, additional CMC manufacturing,
consulting and contractors expenses, and cholera/lechlemer research expenses.
Personnel and related benefits increased
? nine months ended
due to the addition of eleven new hires, salary increases in
increase in bonus.
Stock-based compensation increased
? ended
to new options and RSUs granted during the period.
Other expenses consisting of consulting, formulation and regulatory fees
? increased
2020 to
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Consulting expenses increased due to increase in clinical trial consultants
while direct R&D testing costs also increased due to an increase in R&D work.
Sales and Marketing
The following table presents the components of sales and marketing ("S&M")
expense for the nine months ended
Nine Months Ended
September 30,
(in thousands) 2021 2020 Variance Variance %
Sales and Marketing:
Personnel and related benefits $ 2,887 $ 2,485 $ 402 16.2 %
Direct marketing fees and expense 2,544 1,467 1,077 73.4 %
Stock-based compensation 208 167 41 24.6 %
Other 957 609 348 57.1 %
Total $ 6,596 $ 4,728 $ 1,868 39.5 %
The change in S&M expense of
Personnel and related benefits increased
? months ended
to the addition of four new personnel within Commercial Operations, increase in
bonus, and salary increases in
Direct marketing fees and expenses increased
? the nine months ended
patient access programs and other Mytesi marketing initiatives.
Other expenses increased
?
additional marketing consulting costs.
General and Administrative
The following table presents the components of general and administrative
("G&A") expense for the nine months ended
Nine Months Ended
September 30,
(in thousands) 2021 2020 Variance Variance %
General and Administrative:
Personnel and related benefits
2,045 803 1,242 154.7 %
Stock-based compensation 1,689 1,437 252 17.5 %
Legal services 1,532 1,882 (350) (18.6) %
Audit, tax and accounting services 828 399 429 107.5 %
Third-party consulting services 560 747 (187) (25.0) %
Rent and lease expense 191 632 (441) (69.8) %
Travel, other expenses 84 31 53 171.0 %
Other 3,052 3,921 (869) (22.2) %
Total $ 12,450 $ 11,218 $ 1,232 11.0 %
The change in G&A expenses of
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Personnel and related benefits increased
? nine months ended
2021, due to new hires and increase in bonus.
Public company expense increased
? ended
attributable to the investor relations and communications consulting expenses,
and expenses for the annual shareholder meeting.
Audit, tax and accounting services fees increased
? nine months ended
mostly due to the increased audit fees related to complex debt and equity
transactions.
Stock-based compensation increased
? months ended
primarily due to higher expense incurred for options granted with immediate
vesting to existing employees.
Rent and lease expense decreased
? ended
the transfer to a lower-cost facility and the occupancy of less space.
Legal services decreased
?
a decrease in fees related to legal proceedings and other regulatory filings.
Third-party consulting services decreased
? months ended
primarily due to switch to full-time employees instead of consultants in the
finance department.
Other expenses decreased
?
non-recurring trial delay penalty incurred in the nine months ended September
30, 2020.
Series 3 Warrants Inducement Expense
The decrease in the Series 3 Warrants inducement expense of
In
investor for the exercise of 135,416 Bridge Note Warrants in accordance with
? the
Offer. These Series 3 Warrants were valued at
Black-Scholes-Merton option pricing model on the issuance date.
In
the Series 1, Series 2 and Bridge Warrants and inducement offer, the Company
? issued unregistered Series 3 warrants to purchase 2,890,284 shares of common
stock. These Series 3 warrants were valued at
Scholes-Merton option pricing model on the issuance date.
ELOC Warrants Inducement Expense
In
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Series B Convertible Preferred Stock Inducement Expense
On
Interest Expense
Interest expense increased
Loss on Extinguishment of Debt
The increase in the loss on extinguishment of debt from zero in the nine months
ended
Change in Fair Value of Financial Instruments and Hybrid Instrument Designated at FVO
Change in fair value of financial instrument and hybrid instrument designated at
FVO decreased
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Comparison of the Three Months Ended
The following table summarizes the Company's results of operations with respect to the items set forth in such table for the three months endedSeptember 30, 2021 and 2020 together with the change in such items in dollars and as a percentage. Three Months Ended September 30, 2021 2020 Variance Variance % (in thousands) Product revenue$ 630 $ 2,773 $ (2,143) (77.3) % Operating expenses Cost of product revenue 617 784 (167) (21.3) % Research and development 3,312 1,522 1,790 117.6 % Sales and marketing 2,261 1,529 732 47.9 % General and administrative 3,969 4,313 (344) (8.0) % Total operating expenses 10,159 8,148 2,011 24.7 % Loss from operations (9,529) (5,375) (4,154) 77.3 % Interest expense (2,078) (581) (1,497) 257.7 % Other income (expense), net (20) 194 (214) (110.3) % Change in fair value of financial instruments and hybrid instrument designated at FVO (565) (2,104) 1,539 (73.1) % Loss before income tax (12,192) (7,866) (4,326) 55.0 % Income tax expense - - - 100.0 % Net loss and comprehensive loss (12,192) (7,866) (4,326) 55.0 % Deemed dividend attributable to accretion of Series A redeemable convertible preferred stock - (349) 349 (100) % Stock dividend attributable to Series C perpetual preferred stock - (56) 56 (100) % Net loss attributable to common shareholders$ (12,192) $ (8,271) (3,921) 47.4 % Revenue Gross product sales equal the number of bottles sold multiplied by WAC. Due to the Company's arrangements, including elements of variable consideration, gross product sales are reduced in order to reflect the expected consideration to arrive at net product sales. Deductions to reduce gross product sales to net product sales in the three months endedSeptember 30, 2021 and 2020 were as follows: Three Months Ended September 30, (in thousands) 2021 2020 Variance Variance % Gross product sales Mytesi$ 3,184 $ 6,303 $ (3,119) (49.5) % Neonorm 15 13 2 15.4 % Total gross product sales 3,199 6,316 (3,117) (49.4) % Medicaid rebates (449) (588) 139 (23.6) % Sales discounts (1,599) (2,218) 619 (27.9) % Sales returns (36) (107) 71 (66.4) % Wholesaler fees (485) (630) 145 (23.0) % Net product sales$ 630 $ 2,773 $ (2,143) (77.3) %
Our gross product revenues were
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Human
Sales of Mytesi are recognized as revenue when the products are delivered to the
wholesalers and specialty pharmacies. Our gross revenues from the sale of Mytesi
were
Sales discounts and sales returns were
Animal
Our Neonorm product revenues were$15,000 and$13,000 for the three months endedSeptember 30, 2021 and 2020, respectively. Sales and marketing expenses for Neonorm products are not significant during 2021 and none during the same period in 2020. Cost of Product Revenue Three Months Ended September 30, (in thousands) 2021 2020 Variance Variance % Cost of Product Revenue Material cost$ 208 $ 402 $ (194) (48.3) % Direct labor 275 154 121 78.6 % Distribution fees 92 193 (101) (52.3) % Other 42 35 7 20.0 % Total$ 617 $ 784 $ (167) (21.3) %
Cost of product revenue decreased
Research and Development The following table presents the components of R&D expense for the three months endedSeptember 30, 2021 and 2020 together with the change in such components in dollars and as a percentage: Three Months Ended September 30, (in thousands) 2021 2020 Variance Variance %
Research and Development:
Clinical and contract manufacturing
958 458 500 109.2 %
Stock-based compensation 404 175 229 130.9 %
Materials expense and tree planting 116 10 106 1,060.0 %
Travel, other expenses 6 1 5 500.0 %
Other 571 480 91 19.0 %
Total $ 3,312 $ 1,522 $ 1,790 117.6 %
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The change in R&D expense of
Clinical and contract manufacturing expense increased
? the three months ended
2021 primarily due to increased clinical trial activities related to the
start-up of CTD and other indications.
Personnel and related benefits increased
? months ended
to the addition of eleven new hires and salary increases.
Stock-based compensation increased
? ended
to higher expense incurred for options granted with immediate vesting to
existing employees. Sales and Marketing
The following table presents the components of S&M expense for the three months
ended
Three Months Ended
September 30,
(in thousands) 2021 2020 Variance Variance %
Sales and Marketing:
Personnel and related benefits
698 512 186 36.3 %
Stock-based compensation 88 54 34 63.0 %
Other 469 151 318 210.6 %
Total $ 2,261 $ 1,529 $ 732 47.9 %
The change in S&M expense of
Personnel and related benefits increased
? months ended
to the addition of two new personnel within Commercial Operations.
Direct marketing fees and expenses increased
? the three months ended
patient access programs and other Mytesi marketing initiatives.
Other expenses increased
?
additional marketing consulting costs.
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General and Administrative
The following table presents the components of G&A expense for the three months
ended
Three Months Ended
September 30,
(in thousands) 2021 2020 Variance Variance %
General and Administrative:
Personnel and related benefits
673 446 227 50.9 %
Public company expense 564 384 180 46.9 %
Legal services 461 497 (36) (7.2) %
Third-party consulting services 187 171 16 9.4 %
Audit, tax and accounting services 129 127 2 1.6 %
Rent and lease expense 92 220 (128) (58.2) %
Travel, other expenses 69 5 64 1,280.0 %
Other 1,088 2,011 (923) (45.9) %
Total $ 3,969 $ 4,313 $ (344) (8.0) %
The change in G&A expenses of
Personnel and related benefits increased
? months ended
the addition of 3 new employees, and salary increases.
Stock-based compensation expense increased
? months ended
options grants in the period.
Public company expense increased
? ended
attributable to the investor relations and communications consulting expenses,
and expenses for the annual shareholder meeting
Other expenses decreased
?
inducement expenses. Interest Expense
Interest expense increased
Change in Fair Value of Financial Instruments and Hybrid Instrument Designated at FVO
Change in fair value of financial instrument and hybrid instrument designated at
FVO decreased
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Liquidity and Capital Resources
Sources of Liquidity
We have incurred net losses since our inception. For the nine months ended
We had cash of
We have funded our operations primarily through the issuance of equity and debt
financing, in addition to sales of our commercial products. Cash provided by
financing activities in the nine months ended
During
? upon the exercise of the
proceeds of$975,000 .
On
? pursuant to which the Company agreed to issue and sell, in a registered public
offering an aggregate of 1,479,290 shares of common stock, at an offering price
of
On
?
issued a secured promissory note in the aggregate principal amount of
million for an aggregate purchase price of
? During January and
shares under the ATM Agreement for total net proceeds of
On
Streeterville, pursuant to which the Company sold a royalty interest entitling
Streeterville to
? repayment amount for an aggregate purchase price of
accrue on the royalty repayment amount at a rate of 5% per annum, compounding
quarterly, and will increase to 10% per annum, compounding quarterly on the
12-month anniversary of the closing date.
Between January to
? were issued upon the exercise of Series 1, Series 2 and Bridge Note Warrants
for total proceeds of
On
pursuant to which the Company agreed to issue and sell, in a registered public
? offering an aggregate of 2,549,000 shares of common stock at an offering price
of
deducting placement agent fees and related offering expenses of
On
(the "
? the Company agreed to issue and sell to the investors in a private placement an
aggregate of 309,242 unregistered shares of the Company's common stock for an
aggregate purchase price of approximately
We expect our expenditures will continue to increase as we continue our efforts to develop our products and continue the development of our pipeline in the near term. We do not believe our current capital is sufficient to fund our operating plan through one year from the issuance of these unaudited condensed consolidated financial statements. We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have
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sufficient funds for our current or future operating plans. We may also not be
successful in entering into partnerships that include payment of upfront
licensing fees for our products and product candidates for markets outside
Cash Flows for the Nine Months Ended
The following table shows a summary of cash flows for the nine months endedSeptember 30, 2021 and 2020: Nine Months Ended September 30, (in thousands) 2021 2020 Total cash used in operating activities$ (26,047) $ (11,217) Total cash used in investing activities (10,484) (7) Total cash provided by financing activities 40,816 8,690 Net increase (decrease) in cash $ 4,285$ (2,534)
Cash Used in Operating Activities
During the nine months ended
During the nine months ended
Cash Used in Investing Activity
During the nine months ended
During the nine months ended
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Cash Provided by Financing Activities
During the nine months ended
During the nine months ended
Off-Balance Sheet Arrangements
We have entered into a Subscription Agreement with SPAC, advancing an amount of
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