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
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financing or other means of accelerating the payment of accounts receivable, if needed, possible partnering or other strategic opportunities for the development of our products, as well as other statements related to the progress and timing of product development, present or future licensing, collaborative or financing arrangements or that otherwise relate to future periods, which are all forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements represent, among other things, the expectations, beliefs, plans and objectives of management and/or assumptions underlying our judgments concerning the future financial performance and other matters discussed in this document. The words "may," "will," "should," "plan," "believe," "estimate," "intend," "anticipate," "project," and "expect" and similar expressions are intended to connote forward-looking statements. All forward-looking statements involve certain risks, uncertainties and other factors described in our Annual Report on Form 10-K, that could cause our actual commercialization efforts, financial condition and results of operations, and business prospects and opportunities to differ materially from these expressed in, or implied by, those forward-looking statements. We caution investors not to place significant reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise forward-looking statements.
Overview
Jaguar, formerly known as
On
On
Most of the activities of the Company are focused on the commercialization of Mytesi and Canalevia-CA1 and the ongoing clinical development of crofelemer for the prophylaxis of diarrhea in adult patients receiving targeted cancer
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therapy. In the field of animal health, we are continuing limited activities related to developing and commercializing first in class gastrointestinal products for dogs, dairy calves, foals, and high value horses.
We believe Jaguar is poised to realize a number of synergistic, value adding benefits-an expanded pipeline of potential blockbuster human follow on indications of crofelemer, and a second generation anti secretory agent-upon which to build global partnerships. Jaguar, through Napo, holds global unencumbered rights for crofelemer, Mytesi, and Canalevia-CA1. Additionally, several of the drug product opportunities in Jaguar's crofelemer pipeline are backed Phase 2 and proof of concept evidence from human clinical trials.
Crofelemer is a novel, first in class anti secretory agent which has a
normalizing effect on electrolyte and fluid balance while acting locally in the
gut, and this mechanism of action has the potential to benefit multiple
disorders that cause gastrointestinal distress, including diarrhea and abdominal
discomfort. Crofelemer is also in development for possible follow on
indications, including prophylaxis for cancer therapy related diarrhea ("CTD");
for rare disease indications for symptomatic treatment of infants and children
with congenital diarrheal disorders ("CDD") and for adult and pediatric patients
with short bowel syndrome with intestinal failure ("SBS-IF"). Crofelemer has
received orphan drug designation (ODD) for short bowel syndrome (SBS) in the US
and in
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.
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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 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 three 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.
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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.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of consolidated financial statements in conformity with
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Results of Operations
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 ended
Three Months Ended
March 31,
(in thousands) 2022 2021 Variance Variance %
Product revenue $ 2,625 $ 1,241 $ 1,384 111.5 %
Total revenue 2,625 1,241 1,384 111.5 %
Operating Expenses
Cost of product revenue 455 583 (128) (22.0) %
Research and development 4,945 2,414 2,531 104.8 %
Sales and marketing 2,835 2,139 696 32.5 %
General and administrative 6,144 3,409 2,735 80.2 %
Series 3 warrants inducement expense - 1,462 (1,462) (100.0) %
Total operating expenses 14,379 10,007 4,372 43.7 %
Loss from operations (11,754) (8,766) (2,988) 34.1 %
Interest expense (4,194) (1,901) (2,293) 120.6 %
Loss on extinguishment of debt (2,815) (753) (2,062) 273.8 %
Change in fair value of financial
instruments and hybrid instrument
designated at Fair Value Option (233) (599) 366 (61.1) %
Other income, net 832 10 822 8,220.0 %
Loss before income tax (18,164) (12,009) (6,155) 51.3 %
Income tax expense - - - 100.0 %
Net loss and comprehensive loss (18,164) (12,009) (6,155) 51.3 %
Net loss attributable to
noncontrolling interest $ (178) $ - $ (178) 100 %
Net loss attributable to common
shareholders $ (17,986) $ (12,009) $ (5,977) 49.8 %
Revenue
Product revenue
We transitioned from selling to the wholesalers that resell the product to
retail pharmacies to the closed
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
Though the transition
To a closed network of specialty pharmacies has resulted in fewer bottles sold, it generated significant reductions in distribution costs, a higher average net price, and assisted our market access strategy intended to help remove access barriers for patients prescribed Mytesi and includes services such as higher level of support for prior authorizations, appeals, adherence counseling, and home delivery options.
Medicaid and
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were
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 ended
Three Months Ended
March 31,
(in thousands) 2022 2021 Variance Variance %
Gross product sales
Mytesi $ 3,395 $ 4,558 $ (1,163) (25.5) %
Neonorm 20 33 (13) (39.4) %
Canalevia 44 - 44 100.0 %
Total gross product sales 3,459 4,591 (1,132) (24.7) %
Medicaid rebates (504) (1,097) 593 (54.1) %
Sales discounts (320) (1,732) 1,412 (81.5) %
Sales returns (10) (20) 10 (50.0) %
Wholesaler fee - (501) 501 (100.0) %
Net product sales $ 2,625 $ 1,241 $ 1,384 111.5 %
Our gross product revenues were
Our Neonorm product revenues were
Our Canalevia product revenues were
Cost of Product Revenue
Three Months Ended
March 31,
(in thousands) 2022 2021 Variance Variance %
Cost of Product Revenue
Material cost $ 250 $ 269 $ (19) (7.1) %
Direct labor 162 219 (57) (26.0) %
Royalties 8 - 8 100.0 %
Distribution fees 7 61 (54) (88.5) %
Other 28 34 (6) (17.6) %
Total $ 455 $ 583 $ (128) (22.0) %
Cost of product revenue decreased
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Research and Development
The following table presents the components of research and development ("R&D")
expense for the three months ended
Three Months Ended
March 31,
(in thousands) 2022 2021 Variance Variance %
Research and Development:
Personnel and related benefits
778 89.7 %
Stock-based compensation 348 164 184 112.2 %
Materials expense and tree planting 71 73 (2) (2.7) %
Travel, other expenses 21 - 21 100.0 %
Other 858 876 (18) (2.1) %
Total $ 4,945 $ 2,414 $ 2,531 104.8 %
The change in R&D expense of
Personnel and related benefits increased
? three months ended
due to the additional headcount and accrued bonus.
Clinical and contract manufacturing expenses increased
in the three months ended
? 2022 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.
Stock-based compensation increased
? ended
new options and RSUs granted during the period.
Travel, and other expenses increased
? ended
more travel activities with the clinical trials.
Other expenses consisting of consulting, formulation and regulatory fees
? decreased
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Sales and Marketing
The following table presents the components of sales and marketing ("S&M")
expense for the three months ended
Three Months Ended
March 31,
(in thousands) 2022 2021 Variance Variance %
Sales and Marketing:
Personnel and related benefits $ 1,157 $ 827 $ 330 39.9 %
Direct marketing fees and expense 1,101 912 189 20.7 %
Stock-based compensation 82 52 30 57.7 %
Other 495 348 147 42.2 %
Total $ 2,835 $ 2,139 $ 696 32.5 %
The change in S&M expense of
Personnel and related benefits increased
? months ended
additional headcount within the commercial operations and accrued commissions.
Direct marketing fees and expenses increased
? three months ended
patient access programs and other Mytesi marketing initiatives.
Stock-based compensation increased
? ended
options and RSUs granted during the period.
Other expenses increased
? 31, 2021 to
marketing consulting costs and travel expenses.
General and Administrative
The following table presents the components of general and administrative
("G&A") expense for the three months ended
Three Months Ended
March 31,
(in thousands) 2022 2021 Variance Variance %
General and Administrative:
Personnel and related benefits
748 98 650 663.3 %
Stock-based compensation 633 418 215 51.4 %
Legal services 522 498 24 4.8 %
Third-party consulting services 378 202 176 87.1 %
Audit, tax and accounting services 232 580 (348) (60.0) %
Travel, other expenses 157 11 146 1,327.3 %
Rent and lease expense 115 53 62 117.0 %
Other 1,565 947 618 65.3 %
Total $ 6,144 $ 3,409 $ 2,735 80.2 %
The change in G&A expenses of
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Personnel and related benefits increased
? three months ended
due to additional headcount and accrued bonus.
Other expenses increased
? 31, 2021 to
additional IT support.
Public company expense increased
? ended
attributable to the investor relations and communications consulting expenses,
and expenses for the annual shareholder meeting.
Stock-based compensation increased
? ended
higher expense incurred for options granted with immediate vesting to existing
employees.
Third-party consulting services increased
? months ended
due to support corporate and finance activities.
Travel, and other expenses increased
? ended
higher travel activities related to administrative function.
Rent and lease expense increased
?
in fees related to occupancy of new spaces.
Audit, tax and accounting services fees decreased
? three months ended
due to change in accounting firm and fewer complex transactions
Series 3 Warrants Inducement Expense
In
Interest Expense
Interest expense increased
Loss on Extinguishment of Debt
The increase in the loss on extinguishment of debt from
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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
Liquidity and Capital Resources
Sources of Liquidity
We have incurred net losses since our inception. For the three months ended
We had cash of
We have funded our operations primarily through the issuance of debt and equity
securities, in addition to sales of our commercial products. Cash provided by
financing activities in the three months ended
We expect our expenditures will continue to increase as we continue our efforts
to develop our products and continue development of our pipeline in the near
term. We may seek additional capital due to favorable market conditions or
strategic considerations even if we believe we have 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 Three months Ended
The following table shows a summary of cash flows for the three months ended
Three Months Ended March 31,
(in thousands) 2022 2021
Total cash used in operating activities $ (7,695) $ (6,708)
Total cash provided by financing activities 8,150 30,868
Effects of foreign exchange rate changes on
assets and liabilities (50) -
Net increase in cash $ 405 $ 24,160 Cash Used in Operating Activities
During the three months ended
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During the three months ended
Cash Provided by Financing Activities
During the three months ended
During the three months ended
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