SAN FRANCISCO Aug 14, 2020 (Thomson StreetEvents) — Edited Transcript of Jaguar Health Inc earnings conference call or presentation Thursday, August 13, 2020 at 12:30:00pm GMT
* Carol R. Lizak
Jaguar Health, Inc. – Senior VP of Finance & CAO
Jaguar Health, Inc. – VP Commercial Strategy
* Lisa A. Conte
Jaguar Health, Inc. – Founder, CEO, President & Director
* Pravin R. Chaturvedi
Jaguar Health, Inc. – Chair of Scientific Advisory Board & Acting Chief Scientific Officer
Good day, and welcome to the Jaguar Health Investor Call. Today’s conference is being recorded.
Before I turn the call over to management, I’d like to remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company; uncertainties regarding market acceptance of products, the impact of competitive products and pricing, industry trends and product and technology initiatives, including products in the development stage, which may not achieve scientific objectives or meet stringent regulatory requirements.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. These statements are based on currently available information and management’s current assumptions, expectations and projections about future events.
While management believes that its assumptions, expectations and projections are reasonable in view 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 in this call for a variety of reasons, including those described in the forward-looking statements and Risk Factors section of the company’s Form 10-K for the year ending December 31, 2019, which was filed on April 3, 2020; and its other filings with the SEC, which are available on the Investor Relations section of Jaguar’s website.
Except as required by law, Jaguar Health 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 supplements its condensed consolidated financial statements presented on a GAAP basis by providing gross sales, 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 company management assesses and operates the business. These non-GAAP financial measures should not be viewed in isolation or as a substitute for GAAP’s net sales and GAAP net loss and are not substitutes for, or superior to, measures of financial performance in conformity with GAAP.
At this time, it is my pleasure to turn the call over to Lisa Conte, Jaguar Health’s President and Chief Executive Officer. Lisa, the floor is yours.
Lisa A. Conte, Jaguar Health, Inc. – Founder, CEO, President & Director 
Thank you, and thank you all who are on the phone very much for joining our call today. My name is Lisa Conte. I am the founder and CEO of Jaguar Health and our wholly owned subsidiary, Napo Pharmaceuticals. I may use Jaguar and Napo interchangeably.
I want to start today’s call by giving my heartfelt thanks to our dedicated team, many of whom have been working with me over the last 30 years, some now persevering with shelter-at-home with one goal in mind: providing responsibly and sustainably harvested plant-based prescription medicines to people in need around the world.
I’m going to start with the key financial results for the second quarter of 2020. I am filled with gratitude and pride as the Jaguar-Napo team has adapted and thrived during the modified working environment of the pandemic with, for example, several tools and techniques that we’ve adopted to support education and expanded access to Mytesi, while our dedicated sales reps are, for the most part, sheltered at home.
Mytesi net product revenue during the second quarter of 2020 was approximately $3.2 million compared with net sales during the first quarter of 2020 of approximately $830,000. Net sales for the second quarter of 2020 represented 378% of the first quarter of 2020 or an increase of $2.3 million quarter-over-quarter.
Mytesi gross product revenue, this is a non-GAAP number, during the second quarter of 2020 was approximately $6.3 million compared with gross sales during the first quarter of 2020, which was approximately $1.3 million. Gross sales for the second quarter of 2020 represented 482% of the first quarter of 2020, or an increase of approximately $5 million quarter-over-quarter.
In the second quarter of 2020, we sold 3,030 bottles of Mytesi, and in the second quarter of 2020, we sold 1,950 bottles, a Q2 2020 figure that amounts to more than 155% of the Q1 2020 bottle quantity. As I’ve mentioned before, we’re striving to enhance access to Mytesi to all people in the United States living with HIV/AIDS, struggling with chronic diarrhea who rely on this drug Mytesi as an important part of their treatment regimen and to bring Mytesi to a sustainable commercial business as the company continues to support such access. Mytesi is the first and only natural, fair trade, plant-based oral drug approved under FDA’s Botanical Guidance.
Four members of our team began searching for new drug candidates in 1989 by working with indigenous healers in rainforest areas around the world. In the Amazon basin, traditional healers taught a research team about a diversity of plants used to treat a number of diseases. And today, we have an extensive library of plants, 2,300, with firsthand ethnobotanical investigation with medicinal properties, and this, of course, includes Croton lechleri tree, the source of crofelemer, the active ingredient in Mytesi.
The key mission of the company is to advance crofelemer-related pipeline development efforts, and we are pleased to report our progress on our lead target follow-on indication for Mytesi, with prophylaxis and symptomatic relief of cancer therapy-related diarrhea, referred to as CTD, in adult patients with solid tumors receiving targeted cancer therapy with or without standard chemotherapy. As we were excited to report last week, our investigational new drug application, referred to as an IND, filed by Napo with the FDA for the study of crofelemer in CTD, the cancer indication, is now active. Activation of this IND is a key milestone for Napo to initiate the single pivotal trial with Mytesi to support and seek approval and labeling for CTD, which would allow Napo to then educate and promote for this education.
We have 3 speakers from the company for today’s call, in addition to me. Following my comments, Carol Lizak, Jaguar’s Senior Vice President of Finance and Chief Accounting Officer, will provide a brief recap of Q2 2020 financials. Following Carol, we’ll hear from our Vice President of Commercial Strategy, Ian Wendt, who will provide updates regarding our recently initiated enhanced market access programs for Mytesi for the approved indication of the symptomatic release of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy, and discuss encouraging Q2 Mytesi sales trends related to this new program. And finally, our Chief Scientific Officer, Dr. Pravin Chaturvedi, will talk about pipeline activities regarding crofelemer and Mytesi.
Before we dive in, I’d like to let all of you participating today know that we are conducting today’s call as a listen-only event, which means we won’t be taking questions. However, we believe today’s call will be answering questions.
I will now turn the call over to Carol Lizak to recap Q2 results. Carol, are you online?
Carol R. Lizak, Jaguar Health, Inc. – Senior VP of Finance & CAO 
Yes. Thank you, Lisa, and thank you all for joining our call today. The key financial highlights for the quarter ended June 30, 2020, are as follows. Net sales during the second quarter of 2020 were approximately $3.2 million and $1.7 million in the second quarter of 2019. This second quarter 2020 result represents 186% of the same period in 2019, or an increase of $1.5 million quarter-over-quarter.
Total Mytesi bottles sold for the second quarter of 2020 represented 104% of the bottles sold in the same period in 2019. The total operating expense for the second quarter of 2020 was approximately $11.6 million as compared to $12.3 million for the same period last year, a 6% or $700,000 decrease quarter-over-quarter (sic) [year-over-year]. The decrease in total operating expenses was due to a $4 million impairment charge in the second quarter of 2019 and none in the same period this year, an approximately $1 million decrease in cost of product revenue, research and development and sales and marketing expenses, offset by a warrant inducement expense of $3.7 million and an increase in general and administrative expense of $600,000.
The net loss for the second quarter of 2020 was $9.2 million compared to a net loss of $16.7 million in the second quarter of 2019, a 45% or approximately $7.5 million decrease quarter-over-quarter. The decrease in net loss was due to the increase of Mytesi list price, a decrease in operating loss of $2.2 million, and interest expense was lower by $3.2 million. A $2.7 million loss on extinguishment of debt was recorded during the 3 months ended June 30, 2019, and none in the same period this year.
That concludes my recap of high-level financials for the second quarter of 2020. I’ll now hand the discussion over to our next speaker, Ian Wendt.
Ian Wendt, Jaguar Health, Inc. – VP Commercial Strategy 
Good morning all. The second quarter marked significant commercial achievements in financial terms, as described by Carol, by one of the most successful initiatives to acquire new patients and to increase time on therapy with the launch of the NapoCares patient support program. At Jaguar and Napo, we remain fully committed to expanding access to Mytesi to all patients in need with the goal of ensuring that no patient is denied access to Mytesi due to cost. The NapoCares initiative helps remove access barriers for patients regardless of their income or health insurance status.
NapoCares has proven critical in the era of COVID to offset high out-of-pocket costs imposed by insurers, to provide free drug for the uninsured who cannot afford Mytesi, and to advocate on the behalf of patients with insurers who require prior authorizations prior to paying for a patient’s medicine. In particular, the improvements that were made to the copay program showed significant increases in the number of months commercially insured patients stay on Mytesi, which aligns to our commercial imperative of increasing patient persistency. These services could not have been implemented at a more important time to help support patients’ ability to easily start and stay on Mytesi once it has been prescribed by the provider.
A field team has been delivering sales calls, educational programs and customer support virtually. While we look forward to returning to live sales interactions, we have effectively leveraged technology to stay connected with customers and drive our commercial outcomes.
There have also been some interesting efficiencies realized for a small team of 9 reps, since they can now reach their customers across many states using Zoom versus having to fly or drive to each of these sales calls. As a result of these efforts, our commercial-payer patients have now increased from 45% in 2019 to 55% in quarter — in the second quarter of 2020. This is a very important metric to understand the strength of Mytesi brand and has significantly supported our net sales results.
That concludes my comments for today. I will now turn the discussion over to Dr. Chaturvedi to discuss crofelemer development activities.
Pravin R. Chaturvedi, Jaguar Health, Inc. – Chair of Scientific Advisory Board & Acting Chief Scientific Officer 
Thanks, Ian, and good morning to all. As Lisa mentioned, we now have an active IND for the evaluation of Mytesi, which is crofelemer 125-milligram delayed release tablets for the prophylaxis and symptomatic relief of diarrhea in adult patients with solid tumors receiving targeted therapy with or without standard chemotherapy. It is an important milestone for Mytesi, as the clinical study will evaluate the currently approved formulation of Mytesi at the same dosing regimen as used for the symptomatic relief of noninfectious diarrhea in adult HIV/AIDS patients receiving an antiretroviral therapy.
Given the same formulation and dosing, we will be able to continue the — to use the currently established infrastructure for manufacturing, testing and release of Mytesi. Furthermore, we’ll be able to cross-reference our existing data for clinical pharmacology as well as nonclinical studies for the approved indication in HIV, which is a significant cost and time benefit for the development of Mytesi for cancer-related diarrhea.
The unmet medical need for addressing diarrhea in cancer patients receiving therapy remains high as there are currently no physiologically acting antidiarrheal drugs that are approved for cancer therapy-related diarrhea. According to the Centers for Disease Control and Prevention, CDC, approximately 650,000 cancer patients in the U.S. receive chemotherapy in an outpatient oncology clinic each year. Diarrhea is a common adverse event seen with chemotherapy agents, typically used in breast and colon cancers. And in particular, in the more recently introduced therapeutic classes of epidermal growth factor receptor monoclonal antibodies or EGFR inhibitors as well as tyrosine kinase inhibitors or TKIs, which are often used in adjuvant or metastatic settings for the management of cancer as chronic therapy.
For instance, diarrhea has been reported as one of the most common side effects with TKIs. Severe diarrhea has been reported in up to 81% of the patients for tucatinib, a recently approved HER2 selective TKI and for the irreversible pan-HER TKI neratinib or Nerlynx, which has reported an incidence of diarrhea ranging between 86% to 95% in published studies.
Diarrhea has also been reported as a common side effect for some of the CDK4/6 inhibitors, which are also used in adjuvant or metastatic settings.
The availability of new therapies to address diarrhea in cancer patients receiving targeted and/or chemotherapeutic agents will likely result in an improved tolerability of the cancer therapy regimen at approved dosing levels and potentially reduced dose reductions, drug holidays and instances in which patients’ cancer therapies need to be discontinued, potentially leading to improved cancer therapy adherence and outcomes.
Unmitigated diarrhea in cancer patients receiving therapy also has the potential to cause mild-to-moderate severe dehydration, increased susceptibility to infections and/or nonadherence to the therapy regimens.
The novel physiologically acting antidiarrheal drug Mytesi holds promise for treating secretory diarrhea in cancer patients and provides an opportunity to support compliance with the appropriate cancer therapy dosing regimens. We have demonstrated some of these benefits in a recent dog study, which is an appropriate animal model for human diarrhea experience. Specifically, Napo presented the results of a preclinical study in dogs that evaluated the effects of crofelemer in providing symptomatic relief of diarrhea associated with neratinib, Nerlynx, at the American Association of Cancer Research Virtual Annual Meeting in June of 2020. This study was conducted by Napo in collaboration with PUMA Biotechnology. Nerlynx is a Puma Biotechnology TKI that’s approved for extended adjuvant treatment of adult patients with early-stage HER2-positive breast cancer and for the metastatic HER2-positive breast cancer.
In addition to Napo’s planned pivotal clinical study in cancer therapy-related diarrhea, there are some ongoing investigator-initiated trials to evaluate the effects of crofelemer in addressing functional or chronic idiopathic diarrhea, which may also include IBS patients with diarrhea at the University of Texas at Houston. This study was recently initiated and patients are being screened and enrolled, although the trial has been affected by restrictions due to COVID-19.
Another exploratory trial in functional diarrhea is being initiated at Beth Israel Deaconess Medical Center, a Harvard Medical School institution in Boston. This study will have a 4-week double-blind treatment period, followed by another 4 weeks of open-label treatment for eligible patients with functional diarrhea. This study is expected to initiate enrollment in Q4 of 2020. In addition to these functional diarrhea studies, an investigator-initiated trial in metastatic HER2-positive breast cancer patients at Georgetown University Medical Center is nearing completion of its enrollment.
Napo is also developing a new liquid formulation that will allow the initiation of clinical studies in pediatric patients that have congenital diarrheal disorders and require feeding tubes and/or total parenteral nutrition support. Napo is currently in active discussions with clinicians and regulatory experts about this orphan and rare disease patient population and is developing the appropriate clinical development plan to support the goal of expediting availability of crofelemer to this patient population to address their severe diarrhea.
In summary, the Napo R&D team continues to support the development of crofelemer for cancer therapy-related diarrhea in adult solid tumor patients as well as support preliminary and pilot studies for functional and idiopathic diarrhea in adults, and the team is engaged in development of an appropriate pediatric liquid formulation to support studies in pediatric patients with congenital diarrheal disorders.
I will now turn the discussion back over to Lisa Conte. Lisa?
Lisa A. Conte, Jaguar Health, Inc. – Founder, CEO, President & Director 
Thank you, Pravin. Thank you, Ian. Thank you, Carol. Looking ahead to this fall, I’m excited to announce that Jaguar is planning to host a virtual CTD, cancer therapy diarrhea, focused disease education event for investors and business development contacts that we’re calling Diarrhea Dialogues. This will be virtual. Leading key opinion leader oncologists, patient advocates and supportive care experts will address the importance of supportive care for people experiencing chronic lower GI tract distress, specifically with regard to debilitating diarrhea experienced as a result of cancer therapy. We hope all investors and business development contacts taking part in today’s call can join for this event. And we’ll be issuing further details regarding the event, along with information about how to register, to participate as we get closer to the October 20 date. So save the date, please.
At Jaguar and Napo, we remain committed to our dual strategy of forging regional ex U.S. business development deals to bring in nondilutive dollars to fund efforts to move key potential Mytesi pipeline indications to clinical trials to support our goal of expanding crofelemer access to all patients in need throughout the world, where we simultaneously work to become a stable, cash flow positive business, supported primarily by growth in Mytesi sales for its approved indications. While the pandemic and travel restrictions have elongated those business discussions, there’s no doubt of the need for Mytesi globally, and we remain confident that collaborations will be forged.
Transitioning over to the legacy animal side of Jaguar’s business for a moment, I’d like to comment regarding our efforts to gain FDA approval to market Canalevia, our oral plant-based prescription drug candidate for the treatment of cancer-induced diarrhea, referred to as CID, in dogs.
As we announced last month, Jaguar has submitted to the FDA’s Center for Veterinary Medicine, which is called CVM, the second to last required technical section of our application to support conditional approval of Canalevia for CID, cancer chemotherapy-induced, diarrhea in dogs under what’s called the Minor Use and Minor Species Animal Health Act of 2004, which is similar to orphan drug designation for human drug products. We expect to submit the last section of our application for Canalevia for CID in dogs by the end of this month.
According to current estimates, more than 230,000 dogs in the United States received chemotherapy treatment for various cancers each year, and roughly 1 in 4, more than 50,000 dogs, are estimated to experience diarrhea as a side effect of the treatment. There are currently no FDA-approved antisecretory prescription products to manage this type of debilitating diarrhea in dogs, which is not only a health and comfort issue for the dog, the patient, it’s also, obviously, important for the dog owner’s peace of mind for their home and their living environment.
Since our July 2017 merger with Napo, as previously announced, Jaguar’s human portfolio has been and continues to be our core focus. Our groundbreaking work to develop treatments for dogs suffering from chronic diarrhea provides a helpful model for the human medical need. It’s important to note that most cancer treatment agents provided to dogs are human drugs or have the same mechanism of action as human cancer drugs, and these agents and mechanisms of action often have meaningful rates of diarrhea that we’re seeing in humans in the dogs as well. Canalevia acts locally in the gut, is minimally absorbed systemically. It does not alter gastrointestinal motility, has no significant effects on normally functioning intestinal ion channels or the transport of electrolytes or fluids and has no sign effects different from placebo. These features are further augmented by the lack of effects of Canalevia on the absorption and/or metabolism of co-administered chemotherapy drugs, orally or by other routes of administration.
In addition to pursuing an indication of crofelemer for CID in dogs, Jaguar is also seeking conditional approval to market Canalevia for exercise-induced diarrhea in dogs. We expect that Canalevia could be available under conditional approval for both CID and EID in the first half of next year 2021.
So back to comments on our core human business. We look forward to continuing and expanding the NapoCares program as part of our enhanced market access strategy as we work towards becoming a stable, cash flow positive business supported primarily by growth in Mytesi sales. Our mantra at Napo remains pipeline, pipeline, pipeline driven by business development, biz dev, biz dev, with a focus on being responsible stewards of the earth every day.
As I frequently state, we have a remarkable risk-mitigated pipeline that includes multiple novel and important potential follow-on indications for Mytesi and crofelemer in the pediatric formulation, which we consider to be a pipeline within a product. Mytesi is a pipeline within a product.
GMP commercial manufacturing, obviously, is in place for the commercial Mytesi, and several of our targeted crofelemer and Mytesi follow-on indications are backed by strong Phase II and/or proof-of-concept data.
As an additional reminder, because Mytesi is approved under FDA’s Botanical Guidance, the only oral product with that designation, there’s no pathway by which a generic version can be developed.
The depth of our pipeline provides potential supportive care solutions for large patient populations across multiple disease indications around the globe, and we believe this pipeline will fuel long-term value creation for investors and provide nondilutive funding opportunities for our partner collaborations.
Beyond the cancer indication, CTD, pipeline explorations for crofelemer include the potential indications such as congenital diarrheal disorders, which is a rare disease indication for infants and children; supportive care for inflammatory bowel disease; irritable bowel syndrome; and idiopathic functional diarrhea. Napo pipeline explorations are also underway for a second-generation antisecretory agent, lechlemer, which also comes from Croton lechleri, for potential indication in cholera-related diarrhea currently supported by the NIAID.
We continue to be concerned about the impact of COVID on our rainforest partners, the local and indigenous communities in the Peruvian Amazon. These partners have, in many areas, been impacted by COVID. They are showing resilience and are managing their families, their forest and communities with great care.
The collection of red bark sap from Croton lechleri trees, the latex material, from which Mytesi is extracted and purified, is continuing with only minor delays as is essential reforestation work in various regions. We rely very strongly on our relationships with indigenous and local communities in Peru and on the ancient and powerful knowledge these traditional people have about plants, ecosystems and natural healing compounds.
Ongoing sources of income continue to be critical in these regions of Peru, and we remain, as always, fully committed to supporting our local and indigenous partners as we continue to operate in accordance with relevant regional and national government COVID guidelines and safety measures.
I’m also happy to report that the employee headcount at both Jaguar and Napo has remained stable throughout the course of the COVID crisis, and Napo’s national team of highly experienced HIV sales professionals remains fully in place.
We believe 2020 has lived up to our vision that it would be a transformative year for Jaguar and Napo. I’m extremely pleased with all of our achievements thus far this year and continue to be grateful for the ongoing support and dedication of our employees, our stockholders, our local and indigenous partners in Peru and all our stakeholders as we continue efforts to grow sales and progress multiple possible follow-on indications for Mytesi and, of course, our important, important focus on the patients in need.
That concludes our call for today. Thank you all, once again, for joining. Please be safe and be well. Thank you.
This concludes today’s conference call. Thank you all for your participation. You may now disconnect.