Jaguar Health, Inc. Q3 FY2022 Earnings Call

Before I turn the call over to management, I’d like to remind you that management may make forward-looking statements relating to their growth prospects for the company. There are uncertainties regarding market acceptance of products, the impact of competitive products and pricing, industry trends, and product initiatives, including those in the development stage, which may not achieve scientific objectives or meet stringent regulatory requirements. Thus, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These statements are based on currently available information and management’s current assumptions, expectations, and projections about future events. While management believes its assumptions, expectations, and projections are reasonable in the context of currently available information, you are cautioned not to place undue reliance on these forward-looking statements. The company’s actual results may differ materially from those discussed during this webcast for a variety of reasons, including those described in the Forward-Looking Statements and the Risk Factors sections of the company’s Form 10-K for the year 2021, filed March 11, 2022, and in other filings with the SEC available on the Investor Relations section of Jaguar’s website. Except as required by law, Jaguar undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events, or otherwise. Additionally, please note that the company’s supplement, its condensed unconsolidated financial statements presented on the GAAP basis by providing non-GAAP EBITDA and non-GAAP recurring EBITDA. Jaguar believes that the disclosure items of these non-GAAP measures provide investors with additional information that reflects the basis upon which the company’s management assesses and operates the business. These non-GAAP financial measures should not be viewed in isolation or as substitutes for GAAP net sales and GAAP net loss and are not superior to measures of financial performance in conformity with GAAP. Today’s conference is being recorded, and at this time, it is my pleasure to turn the call over to Lisa Conte, Jaguar Health Founder, President, and Chief Executive Officer. Lisa, the floor is yours.

Thank you very much, and thank you for those comprehensive forward-looking statements. Welcome all. As you just heard, my name is Lisa Conte, and I am the Founder, President, and CEO of Jaguar Health and our wholly owned subsidiary in the United States, Napo Pharmaceuticals. For those of you who can only participate for a short time, here are the key takeaway messages from this webcast regarding upcoming potential momentum drivers. Combined net revenue for our prescription products increased in the third quarter of 2022 for the fifth quarter in a row, growing 8.2% in Q3 versus Q2 of 2022 and increasing approximately 412% over Q3 2021. Next, we expect the successful completion of our ongoing Phase III OnTarget clinical trial of Crofelemer for cancer therapy-related diarrhea to potentially expand the indication of Mytesi, with enrollment in the trial targeted for completion in the second quarter of 2023, with an analogous market opportunity in chemotherapy-induced nausea and vomiting of approximately $3 billion. As we recently announced, the full results of the investigator-initiated trial named HALT-D, evaluating Crofelemer for preventing chemotherapy-induced diarrhea in breast cancer patients, were published last month in the peer-reviewed journal, Breast Cancer Research and Treatment, the principal investigator and author of that was Dr. Sandy Swain, who is the former president of ASCO. Next point, Dr. Mohamad Miqdady, Division Chief of Pediatric Gastroenterology at Sheikh Khalifa Medical City in Abu Dhabi in the UAE, is leading an investigator-initiated proof of concept trial of Crofelemer for short bowel syndrome, which you may hear us refer to as SBS, and also congenital diarrheal disorders which we may refer to as CDD. Publication of proof of concept data from this and other expected investigator-initiated trials could support early patient access to Crofelemer for SBS and/or CDD with intestinal failure within 2023 through programs in Europe. These early patient access programs, which do not exist in the United States, are revenue-generating and reimbursable for participating patients and focused on rare diseases where there are no good alternative treatments. Next, we expect that a business development deal will be executed in the next couple of months that will bring in non-dilutive funding in support of our mental health Entheogen Therapeutics initiative program and our extensive proprietary library of plants and plant extracts, which is an asset we are looking to mobilize. Finally, a second conditional approval for Canalevia for exercise-induced diarrhea, which we refer to as EID, in dogs is targeted for the first quarter of 2023, complementing Canalevia which is currently conditionally approved for chemotherapy-induced diarrhea in dogs. Now I’ll go into greater detail on these bullet point items. I’m going to begin today with the key top line results for the third quarter, the financial results for the third quarter of 2022. Prescription product net revenue totaled approximately $3.1 million, and as I mentioned, this represents an 8.2% increase over the second quarter of 2022 and an increase of approximately 412% over the third quarter of last year, 2021. This is the fifth consecutive quarter of growth in Mytesi net revenue. We are quite pleased with the growth trajectory of our current prescription drug business and, as you’ll hear, we are quite excited about the late-stage pipeline opportunities that we feel will be transformative in value recognition and value creation for all our stakeholders, including of course patients and our shareholders. I’ll continue with a few other updates, and then Carol Lizak, our Chief Financial Officer, will provide a recap of the key financial results for the third quarter of 2022. After Carol speaks, we’ll hear from Ian Wendt, Jaguar’s Chief Commercial Officer, who will speak about updates on Mytesi-related commercial initiatives to continue to educate and serve the HIV community, and about ongoing commercial efforts underway for Canalevia CA1, our prescription product for the treatment of chemotherapy-induced diarrhea in dogs, which has been conditionally approved by the FDA and became commercially available just this year to veterinarians, in April of 2022, for dog owners to provide comfort and relief to their family members and to the canine patients. As a reminder, our commercialized drug product is named Mytesi, the generic name is Crofelemer. It is a first-in-class antisecretory agent approved initially in the United States for the specialty indication of systematic relief of non-infectious diarrhea in adult patients with HIV AIDS on antiretroviral therapy. The indication was fast-tracked by the FDA, and that’s why it’s the first approved indication for Crofelemer. What is really powerful about Crofelemer is that it is a pipeline within a product, and what I’m going to focus on today are the two late-stage clinical milestones, which we believe are potentially transformative events in the next approximately six to nine months in support of the company taking Crofelemer from pipeline opportunities to, with the potential of significant clinical trial results, to tangible revenue-generating patient-benefiting product indications. The core human follow-on indications on which we are focused are cancer therapy-related diarrhea in the United States and, through Napo Therapeutics' rare disease business model, the orphan indications of short bowel syndrome and congenital diarrheal disorders, initially for commercialization in Europe, however, with clinical data both generated in the U.S. and available for U.S. filings as well. First, what exactly are these indications? Each year, according to the CDC, there are more than a million cancer patients in the United States receiving chemotherapy or radiation in an outpatient oncology clinic, and as many as 50% to 100% of these patients experience diarrhea, depending on the treatment regimen. Most of us have had our lives and close communities touched by cancer in some way. There have been amazing advances to treat survivors and to make survivors. Not managing diarrhea negatively impacts patients' outcomes of their cancer therapy, as approximately 40% of patients who experience diarrhea either discontinue their life-saving cancer therapy or move to sub-therapeutic doses of their regimen. This is incredibly distressing and impacts the comfort and dignity of the patient, and at its worst, it drives costs to the healthcare system from immense dehydration and potential infections, leading to compromised outcomes for cancer treatment. Enrollment is continuing for the OnTarget study, our pivotal Phase III trial of Crofelemer for cancer therapy-related diarrhea in humans. We aim to complete this enrollment with a total of 256 patients by the second quarter of 2023, just around the corner. This is a prophylaxis study, which tells you how important it is to address diarrhea during cancer treatment. Cancer therapy-related diarrhea is not the mild loss of control that we’ve all experienced with perhaps some minor flu or a bad meal; it can put patients in the hospital, cause organ shutdown, and has contributed to death in some patients involved in clinical trials of targeted cancer agents. With new targeted cancer therapies used chronically in metastatic and curative situations, therapies are used for months or years, and diarrhea incidence can be as high as 100%. To project the potential market opportunity for cancer therapy-related diarrhea, since Crofelemer would be the first drug approved for this indication, we’re looking at a comparable market - chemotherapy-induced nausea and vomiting, projected to be close to a $3 billion global market this year. CINV agents are typically used for the first three to five days in traditional cytotoxic chemotherapy, with many generic entries in this market. However, with cancer therapy-related diarrhea, we’re discussing a condition that may persist on a chronic basis for months or years. The enrollment criteria for the Phase III trial include all patients with solid tumors, so a basket approval across a broad spectrum, including a label for prophylaxis for patients on targeted therapy with or without cytotoxic chemotherapy. Let me clarify, this trial is being conducted with the exact formulation of Mytesi that is already approved, which has a compliant supply chain in place and is approved for chronic indications, thus demonstrating chronic safety as well. We’re excited about this program; we expect cancer patients to tolerate and benefit from Crofelemer chronically. The successful completion of enrollment in our OnTarget pivotal trial, just ahead of us, targeted for the second quarter of 2023, will lead to a supplemental new drug application filing for Mytesi, as mentioned, the same formulation of Crofelemer currently approved. We have engaged extensively with the FDA concerning the design and execution of this final clinical and regulatory step to support bringing Crofelemer to cancer patients suffering from diarrhea or at risk of diarrhea due to their prescribed therapy. I’ll now discuss our prioritized short bowel syndrome pipeline indication for Crofelemer. I am Chairman of the Board of Napo Therapeutics, the corporation we established in Milan, Italy last year to which we granted an exclusive license to Crofelemer in Europe. Specifically, Napo Therapeutics is initially pursuing a rare disease business model based on the orphan drug designation of Crofelemer for SBS and CDD with intestinal failure. Jaguar is the majority shareholder of Napo Therapeutics and the licensor of the technology, providing equity interest value to Jaguar in addition to typical license terms. Let me describe the catastrophic situation for people with SBS. A normal gut is 20 to 25 feet in length, while in SBS, a patient’s gut could be less than five feet due to congenital reasons or as a result of surgery from cancer, inflammation, or an accident. With a very short gut, it’s like a sieve - what goes in comes right out. The bottom line is that there isn’t intestinal real estate or surface area for SBS patients to absorb the nutrients necessary for life, such as carbohydrates, proteins, fats, vitamins, and minerals. Consequently, these patients often rely on parenteral nutrition, receiving liquid nutrients intravenously for up to 20 hours a day, seven days a week, profoundly negatively impacting their quality of life. The associated health risks include infections and complications that arise from parenteral nutrition, leading to significant costs, often ranging from hundreds of thousands to a million dollars per year to manage each patient’s care. The global market for SBS is projected to reach $5 billion by 2027. Although parenteral nutrition is deemed the standard of care, there is a drug product approved for SBS called teduglutide, which is a GLP-2 analog intended to slightly expand the gut's surface area for better absorption. This drug is administered by injection and is estimated to be utilized by less than 10% of SBS patients, as it is not considered the standard of care and has various side effects, including cardiovascular and endocrine risks. The primary endpoint for the approval trial of teduglutide focused on the reduction in the time required for patients on parenteral nutrition, showing only a 20% improvement. In contrast, our goal with Crofelemer is to reduce the time spent on parenteral nutrition and improve stool formation, along with enhancing quality of life measures, which reimbursement organizations value. As I mentioned, SBS development of Crofelemer is pursued through Napo Therapeutics in Europe, which holds an exclusive license for the European marketplace with the majority stake owned by Jaguar. This classic licensing agreement consists of upfront payment milestones and royalties. We chose to establish Napo Therapeutics in Europe because key countries support early access programs for orphan indications with unmet medical needs, owing to their positive impact on patients. These early access programs allow patients to access products through these programs while full approval trials are still being pursued, offering a revenue-generating opportunity and reimbursement for participating patients. We have approved an investigator-initiated proof of concept trial for Crofelemer targeting SBS and CDD. The third-party investigator plans to present this trial at the upcoming World Congress of Gastroenterology in December 2022 in Dubai. Additional investigator-initiated requests and trials are expected throughout 2023, gathering clinical data and aligning with the guidelines of specific EU countries. These publications could support early access to Crofelemer for SBS and CDD patients with intestinal failure within 2023. Jaguar and Napo Therapeutics are thrilled to announce that last month, the European Medicines Agency granted orphan drug designation for Crofelemer for microvillous inclusion disease, a rare congenital disorder that’s part of CDD, a welcome development as it marks our new molecular entity with two orphan designations granted by the EMA within less than one year. The orphan designation for SBS was received from the EMA in December 2021. This regulatory progress for the molecule is remarkable. Crofelemer also holds orphan drug designation in the United States for SBS, a classic rare disease affecting around 40,000 people worldwide. Third-party market research indicates the market opportunity at $5 billion for a rare disease with such a small population. NVID, also a component of CDD, is considered ultra-rare with only a couple hundred incidences globally. Orphan drug designation for NVID has also been submitted to the FDA, and we await that designation. Financially, the key advantage of Napo Therapeutics' efforts to Jaguar is that Napo Therapeutics is overwhelmingly majority owned by Jaguar, providing potential equity value to Jaguar shareholders. Additionally, Jaguar benefits from any clinical data generated by Napo Therapeutics, while Napo Therapeutics can utilize data from Jaguar’s ongoing Phase III trial for its licensed territory in Europe. The parallel efforts of Crofelemer for CTD, SBS, and CDD are progressing collaboratively with both teams focused on their respective pursuits across the Atlantic Ocean. To recap, over the next six to nine months, we expect to complete enrollment in our Phase III trial of cancer therapy-related diarrhea, and published proof of concept data could support potential early access program participation for SBS and/or CDD, generating meaningful revenues while Crofelemer processes full approval in Europe. These transformative events on the near-term horizon support value recognition and potentially enhance tangible revenues from Crofelemer. Additionally, we recently completed an investigational new drug application filing with the FDA for our NP-300 drug candidate for cholera-related diarrhea, receiving positive feedback from the FDA in September. Following our Phase I trial completion, we are ready to initiate the next stage of clinical development for cholera when resources permit. We are pursuing a tropical disease priority review voucher through the FDA’s financial incentive program, presenting an opportunity for immediate returns upon NP-300 approval and voucher receipt. Moving to our animal health sector, though relatively small, it is meaningful; Crofelemer is also the active ingredient in Canalevia-CA1, our product for chemotherapy-induced diarrhea in dogs, for which commercial launch activities commenced and progressed throughout 2022. Remarkably, the cancer situation in dogs parallels that of humans, with an estimated 40% of dogs discontinuing chemotherapy due to diarrhea. The incidence of cancer in dogs is reported to be five times higher than in humans, and about 50% of dogs over age 10 will be diagnosed with cancer. In addition to our current conditionally approved indication of CID in dogs, we expect conditional approval for Canalevia-CA2 for exercise-induced diarrhea in the first quarter of 2023. We also launched the first-ever canine cancer registry in the United States in May, called the Jaguar Health Take C.H.A.R.G.E. initiative. This project aims to assess cancer prevalence and incidence in dogs while supporting families during these challenging times. The Take C.H.A.R.G.E. campaign, developed by TogoRun, has generated over 80 million media impressions and recently received accolades from the MarCom Awards program for its excellence in marketing and communications. There is potential for significant developments in the next 12 months, especially on the business development front. We maintain global rights to Crofelemer for all indications. Our focus is on Jaguar’s mental health initiative, the Entheogen Therapeutics Initiative, which aims to discover novel natural medicines from psychedelic plants for mental health disorders. The initiative is leveraging our proprietary library of 2,300 plants and 3,500 plant extracts accumulated over three decades. In June, we signed a letter of intent with Filament Health for a collaboration agreement to develop botanical prescription drugs. Filament provides laboratory and manufacturing capabilities for natural products, while we offer ethnobotany expertise and guidance for drug development under FDA standards. Together, our companies are seeking partnerships to pursue regulatory approval and commercialization of novel standardized plant-based drug candidates for mental health treatments. We anticipate formalizing business development collaborations to secure funding to leverage Jaguar’s plant library, with initial targets including ADHD and social anxiety, especially relevant in a post-pandemic market. We are committed to making Crofelemer available to all patient populations worldwide. Finally, for participants today, we will have a brief Q&A segment following the webcast to address any questions submitted in writing through the provided webcast link. The URL for Jaguar’s website is jaguar.health. We will now move on to the key financial results for the third quarter of 2022. Carol, our CFO, I’ll hand it over to you.

Thank you, Lisa, and thank you all for joining our webcast today. I’ll begin my review of our financials for the third quarter of 2022. Prescription product net revenues during the third quarter of 2022 were approximately $3.1 million, compared to $2.9 million in the second quarter of 2022, reflecting an increase of about $200,000 or 8.2% quarter over quarter, and an approximate 412% increase over prescription product net revenue in the third quarter of 2021. Mytesi prescription volumes increased about 3% in the third quarter of 2022 over the third quarter of 2021. It’s important to note that prescription volume differs from invoiced sales volume, which is influenced by factors such as varying product buying patterns among specialty pharmacies managing their inventory levels. For the third quarter of 2022, the loss from operations increased by $400,000, from $9.5 million in the quarter ended September 30, 2021, to $9.9 million during the same period in 2022. Non-GAAP EBITDA for the third quarters of 2022 and 2021 were both a net loss of $8.5 million. For the third quarter of 2022, the net loss attributable to common shareholders increased by approximately $300,000, from $12.2 million in the quarter ended September 30, 2021, to $12.5 million in the same period in 2022. In addition to the loss from operations, interest expense rose by $600,000, from $2.1 million in the quarter ended September 30, 2021, to $2.7 million for the same period in 2022, largely due to interest from royalties. The change in fair value of financial instruments designated as fair value options increased by $700,000, shifting from a loss of around $600,000 in the three months ended September 30, 2021, to a gain of about $200,000 for the same period in 2022, driven primarily by fair value adjustments in liability classified warrants and notes payable. Other expenses also grew by about $100,000, from $20,000 in the quarter ended September 30, 2021, to approximately $200,000 for the same period in 2022, largely due to foreign currency transactions. That concludes my recap of high-level financials for the third quarter of 2022. I will now hand the discussion over to Ian Wendt, Jaguar’s Chief Commercial Officer.

Thank you, Carol, and good morning to all. As Carol noted, Mytesi total prescription volume, regarded as the best indicator of patient demand, increased about 3% in the third quarter of 2022 compared to the second quarter of 2022. As previously announced, the transition we completed throughout the end of 2021 and into the beginning of 2022 to a limited distribution network of specialty pharmacies has resulted in reduced Mytesi distribution costs as well as higher average net pricing. We significantly outperformed the industry gross to net average in the third quarter of 2022, reflecting milestones achieved in the previous three quarters. This improvement in our gross to net was largely due to efficiencies realized through transition to a closed network of specialty pharmacies. This transition helps prepare the U.S. commercial distribution network for potential future indication expansions of Crofelemer to other patient populations with complex needs, including CTD, inflammatory bowel disease, SBS, and CDD. As Lisa mentioned, Q3 2022 marks the fifth consecutive quarter of growth in Mytesi net revenue, which we are quite pleased about. I'm also excited to report that our innovative, recently launched programs to connect patients to care and medication access services are progressing as planned. The first program is our telehealth initiative, which went live in May, enabling patients seeking help with HIV-related diarrhea to connect immediately to providers for urgent medical assistance without waiting for their next scheduled doctor visit. Our second recently launched program delivers digital Mytesi and disease state education directly into providers’ electronic health record systems so that providers can learn about Mytesi as they see their HIV patients. This technology allows us to intelligently deliver relevant ads to providers based on the profiles of the patients they are examining. This communication is strictly one-way—we do not receive any protected health information. Now turning to the animal health side of our business. Canalevia-CA1, our FDA conditionally approved drug for treating chemotherapy-induced diarrhea in dogs, became available to veterinarians across the U.S. at the end of April 2022. Since then, we've expanded Canalevia-CA1 into broad distribution with leading veterinary distribution centers. Approximately 40% of 280 veterinary specialty clinics in the U.S. have ordered at least one bottle of Canalevia-CA1, indicating that veterinarians recognize its clinical benefits for their patients. Commercial launch activities for the drug continue and reception of Canalevia-CA1 among general practice vets and veterinary colleges remains extremely positive. For example, under our Jaguar Animal Health trade name, we sponsored the October 26, 2022 episode of DVM 360 Live, a web-based, talk show for veterinary professionals. This episode drives awareness of Canalevia-CA1 and encourages veterinary clinics to contribute canine cancer records to our Take C.H.A.R.G.E. cancer registry initiative. Additionally, we held an on-demand webinar for veterinarians titled Chemotherapy-Induced Diarrhea in Dogs: Effectively Treating this Therapy-Limiting Side Effect. U.S. veterinarians who participated earned American Association of Veterinary State Boards-approved continuing education credits, demonstrating our engagement with providers. Attendance for the live version of the webcast was a record, signaling great interest among veterinarians in managing and treating chemotherapy-induced diarrhea in dogs. As Lisa mentioned, we expect Canalevia-CA1 to receive conditional approval under the name Canalevia-CA2 for treating exercise-induced diarrhea in dogs in the first quarter of 2023. That concludes my comments. Thank you all, and I’ll pass the conversation back to Lisa.

Great. Hopefully, I did go off mute here, and thank you, Ian and Carol. We are all energized about these important initiatives underway, proud of what we achieved in 2022, and very excited about what’s coming up just around the corner in pharmaceutical terms—six to nine months in 2023. A few questions have come in, and I will take a look at those. One question is about the current ATM, at-the-market program that is in use—how much is left to sell? Let me tell you something about a company like ours having the gift of qualifying and holding an ATM in place. We have about $10.7 million, nearly $11 million in cash reported at the end of this quarter, and to ensure we have sufficient funds to complete our cancer trial, there may be a need to bring in additional funds. Currently, if you look at the financings for companies in our range and market cap, they are not favorable—they come structured with warrants that are highly toxic to current investors. The ATM allows us to bring in cash at the market without any further complications. We’re pleased that we qualify for one and have about $50 million capacity with the ATM. This does not mean we’ll utilize the entire $50 million, but we have that capacity. Regarding key catalysts we are focusing on in the upcoming year, I feel that nearly everything is underappreciated by the street, especially with a market cap hovering around $20 million. We just reported the fifth consecutive growth in net revenue and are in late-stage clinical development for the same product formulation already approved, with a blockbuster opportunity tied to unmet needs for patients, impacting treatment costs, and enhancing cancer patient outcomes. Furthermore, Napo Therapeutics is significantly undervalued; it’s a potential opportunity for generating meaningful revenue in 2023 with a valuable equity piece to Jaguar shareholders, given our majority ownership stake. We are also anticipating another product approval—Canalevia-CA2 for exercise-induced diarrhea—and have several business development deals on the horizon. We did the mid-east license in February 2022, currently have a license for Crofelemer in Europe, and are actively pursuing opportunities in other regions. I’m not certain which of these variables is undervalued; it seems all are disregarded by the market at large. I believe external factors, particularly the macroeconomic environment for biotech in healthcare, have contributed to this lack of recognition. I look forward to events that might help raise awareness of our industry. Regarding the cholera trial completion and pursuing vouchers, we are timing the cholera clinical trials based on securing necessary resources to avoid unnecessary, costly dilution for our shareholders. As we achieve specific milestones and shareholder recognition, we’ll allocate resources for the cholera program, which will take a couple of years to complete and gain approval for the voucher. We are directing efforts toward near-term initiatives—within six to nine months—to drive value recognition for our currently undervalued situation at Jaguar. No specific plans for mergers or acquisitions are in place, but we remain open to opportunities as they arise. We do not foresee any contractual terms in existing deals that would hinder a future merger or acquisition, although we prefer not to pursue any under the current market conditions. A question on the third-quarter revenue generated specifically from dog-related therapy: Carol, I don’t believe we separated that in the quarterly report. Could you clarify that for us?

Yes, the figure is included in the 10-Q documentation; the revenue from Canalevia was about $150,000.

Great, thank you. That is all the questions. Thank you all very much for listening. We’re looking forward to 2023 and will be back to speak with you again when our K results come out, which will also be in 2023. Goodbye.

Thank you. That concludes today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.