Jaguar Health, Inc. (JAGX) Earnings Call Transcript & Summary

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, 2020, which was filed March 31, 2021, 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. At this time, it's my pleasure to turn the call over to Lisa Conte, Jaguar Health's President and Chief Executive Officer. Lisa, the floor is yours.

Thank you. Thank you very much. Welcome, good morning to all of you. As you just heard, my name is Lisa Conte, and I'm the Founder, President and CEO of Jaguar Health and our wholly-owned subsidiary in the United States, Napo Pharmaceuticals, and I am a Board member of our wholly-owned subsidiary in Italy, Napo EU. Our webcast today features a video of the interview I filmed with Jane King earlier this week as part of her Innovators series. It's always fun to speak with Jane. We've done a series with her now about the Dragon SPAC and Napo EU's business plan. We conducted this interview to update investors and her viewers about the closing of Dragon SPAC, the financial closing of Dragon SPAC and what's next, which is our business plan, an ongoing drug development efforts related to Napo EU which is the target of the Dragon SPAC and the activities to achieve the legal merger of Napo EU and Dragon SPAC in Italy. And Dragon SPAC, of course, in this merger, provides the initial funding for the Napo EU business plan. I'm very pleased to announce last week that the financing of Dragon SPAC closed despite an elongated pathway we experienced due to the pandemic and geographical challenges for the 6 months that we were pursuing the SPAC and Napo EU in Italy. I was not able -- nobody was able to travel to Italy. We've fixed that now. So the closing involves gross proceeds of approximately EUR 8.83 million. And on the dollar to euro exchange rate, that's approximately USD 10.8 million. It is fantastic to have this closing behind us. And I'm pleased to say that we have continued investor interest in Napo EU's business, business plan and mission. So through Napo Pharmaceuticals in the United States, Jaguar is providing Napo EU with an exclusive license to study, develop and commercialize our proprietary drug product crofelemer for the region of the European market and for specific indications. And Napo EU's initial focus is on pursuing the accelerated conditional marketing authorization pathway from EMA, which is the European Medicines Agency, the equivalent of the U.S. FDA for crofelemer for an important orphan designated disease, intestinal failure with short bowel syndrome. And that's what you will hear about in this interview with Jane King. It's another shot on goal for crofelemer, another dramatically in-need patient population that can potentially benefit, a high-valued license agreement and a potentially accelerated pathway to bring the product to patients in need through the European regulatory agency, all enabled by the first private SPAC financing in Italy, with Napo EU as the target company, which will merge into the SPAC for financing. And all this did get achieved before the European August break, which we're thrilled about. So what's not to love here. Enjoy the video. I had a great deal of enjoyment speaking to Jane King about it and Chao.

Dragon SPAC and Napo EU, which is the Italian subsidiary of Napo Pharmaceuticals, which is the wholly-owned U.S. subsidiary of Jaguar Health announced the closing of the financing of the Dragon SPAC with Napo EU as a target company for merger. And with me today is Lisa Conte, who is the CEO of Jaguar Health and Napo EU Board member. So I know you've been really busy, Lisa. Great to see you again.

Thank you.

Let's just start with the financing for the Dragon SPAC is closed. The merger with Napo EU is expected within the next 80 days or so. So tell us what that means for Napo EU?

Okay. First of all, it's so wonderful to see you again. We're so excited about this closing. So -- and we did it through all the administrative issues associated with the pandemic and offices closed. So Napo EU was formed with the mission to expand access to our plant-based medicines, crofelemer and lechlemer to Europe. And crofelemer, of course, is approved in the United States under the brand name Mytesi for HIV-related diarrhea, which we've spoken about before. And also, we've discussed that it's wonderful and that it's a pipeline within a product for multiple follow-on indications. However, the initial focus of Napo EU is for an important rare disease, short bowel syndrome and the related intestinal failure associated with that. So this is a catastrophic condition, where patients -- and this could be due to an accident, it could be a congenital defect, it could be due surgical resection after having cancer, in the way patients have their intestines shortened from what is normal, which might be 15 to 20 feet to maybe only 50 centimeters. And that result is they don't have enough intestinal length to absorb the nutrients of life, the proteins, the carbohydrates, the fats, the vitamins, the minerals. This is what normally occurs as a continual process in all of us in a normal situation. So these patients have excessive intestinal fluid output. It's like pouring water through a sieve. And they typically end up on intravenous fluids for most of the day, and most of the day could be as much as 20 hours a day. So a treatment that's called parenteral nutrition. And it has obviously a huge impact on their ability to carry on a normal life. And the morbidity and mortality issues are tremendous. The lifelong dependence on nutritional parenteral nutrition can lead to organ shutdown, sepsis, organ failure. One study with adults with short bowel syndrome, put their survival at 2 years at only 40%, survival at 5 years only 17%. So there is a drug approved. There is some drug intervention approved in the United States and Europe. It's a growth hormone and is for short bowel syndrome patients who are dependent on parenteral nutrition. It's not satisfactory. We still have a huge unmet medical need here, the classic need that you're looking for. Chronic growth hormone treatment has numerous side effects, including cardiovascular effects, endocrine effects, accelerated cancers. And the product is only utilized in a very, very small percentage of patients. The cost is immense, running an estimated $0.5 million per patient per year in the United States and an estimated $0.25 million per patient per year in Europe. And parenteral nutrition itself is remarkably expensive with additional costs that may come from the inevitable complications. So the short bowel syndrome patient population is very important. From a business perspective and a business model perspective, it provides crofelemer with another shot on goal. It provides Jaguar, Napo Pharmaceuticals in the United States and Napo EU with another shot on goal. The license agreement is between the 2 organizations, the parent organization, Napo Pharma and Jaguar in United States and Napo EU. And it furthers our mission of developing crofelemer for larger patient populations, both in terms of geography and additional disease states. The parent organization is going to receive license fees and funding for this additional shot on goal for the short bowel syndrome indication and the clinical and development package for short bowel syndrome that can be utilized in the United States, can be utilized in the rest of the world, so we can continue to benefit patients in this disease state.

So why is that important, shot on goal? And I understand that crofelemer has been approved in the U.S. under the brand name Mytesi. So how does this change that at all?

What Napo EU means for crofelemer and with this additional shot on goal, it's expanding the benefits to be evaluated in the clinical development setting, further along the value chain from supportive care, which should not be diminished in its importance to patient comfort to -- from support care to an impact on patient outcome and cost of care and then even further to disease management modification. Okay. So what does that mean? Supportive care often falls into the area of patient comfort. And therefore it's often not the main focus of health care providers. But supportive care goes beyond the impact of patient comfort and dignity. It can also have a vital impact on nutrition and the ability of the patient to absorb nutrients of life. And then as we progress up the value chain to patient impact, we're talking about the potential of diarrhea to affect the ability of a patient to stay on their therapeutic dose of life-saving medication. So for example, we found in third-party papers that were recently accepted and presented at ASCO, which is the American Society of Clinical Oncology, they looked specifically at the outcome of cancer treatment in patients both with and without diarrhea, with the latter experiencing better cancer disease management and better cost effectiveness. So conversely, cancer patients who suffer from diarrhea were found to pass the health care system during 3x as much and found to be 40% more likely to discontinue their chemotherapy or their targeted cancer therapy. This is their life-saving therapy, 40% more likely to change or cancel or take a holiday from the therapy, which is remarkable. And then finally, if we move further on the value chain to short bowel syndrome and intestinal failure, we're potentially reducing the time and the quantity of required parenteral nutritional care in all the descriptions that I gave of the mortality, the morbidity, the patient comfort and the immense cost associated with that as well as giving patients a chance to have some sort of normal life, to have some sort of dignity.

Sure. Where does Mytesi fall on the spectrum of the value chain of intervention, Mytesi for HIV?

So I think, unfortunately, for HIV patients, chronic diarrhea today is often not well recognized by their health care providers as a critical concern because the good news is, most people living with HIV/AIDS can be sustainably managed. Not all, but most. And so there are HIV patients in every category of this value chain, and we're quite grateful that we have Mytesi indicated for these individuals. It makes a huge difference in their life. It's just heartwarming some of the responses and the relationships that we have with some of the patients. But the learning that we have from the specialty indication in HIV, it's a relatively small niche market, but it is a source that has been very important for Napo and Jaguar from both a clinical and educational perspective and provides benefits beyond the financial performance of Mytesi as we are developing the product along this value chain.

Who will manage Napo EU?

Well, I just came back from Italy all worked. We're interviewing some fantastic European candidates that we expect to bring on to Napo EU shortly. There's the big holiday in August. Most -- everything is shut down from the second half of August. We're looking at a managing director, essentially a President, a Chief Medical Officer and a Chief Regulatory Officer. And these 3 individuals will serve as the cornerstone of the Napo EU presence in Italy, and provide leadership for Napo EU and the planned short bowel syndrome indication and the development of that indication for a package that can be utilized on a global basis.

Why is Europe a core focus for you?

So -- it was absolutely the right decision as we learned more about it and are completely convinced at this point. The short bowel syndrome patient in Europe allows us to pursue orphan drug designation in Europe as we already have in the United States. However, the short -- the orphan drug designation in Europe would make us eligible for conditional marketing authorization. So EMA, which is the FDA of Europe, it's a regulatory pathway for a Fast Track process and potentially more rapid access of the patient population to the product. So the fastest way that we can benefit these patients is what we're looking at, and Europe seems to be the way to do that. In addition, single payer health care systems, which are common in Europe and more common in Europe, they're more financially incentivized to bring chronic diseases under better management sooner and sooner in the patients' lifetime. And interestingly, this type of European experience was very much reflected in the experience and the resumes of the candidates that I've been interviewing.

Interesting. So what is next for Napo EU?

So we've said publicly that the merger of Napo EU and the Dragon SPAC will occur in 80 days. We'll get to this August holiday. We're completing really its administrative legal documentation and expect to have the completion of these tasks perhaps, in September -- mid-to-late September. And Napo EU, which is already operating, it's operating under contract services from the parent organization will then be off and on its own and out there to develop its first mission, which is the development of the short bowel syndrome indication.

Well, Lisa, I've talked to you for several months. I know you have worked so hard and congratulations. So I feel like I've been a part of it. So it's great to have...

Part of it going forward. Absolutely. More to come.

Great. And we look forward to the updates. Thank you so much, Lisa.

Okay. I hope I'm back on the line again. I hope everybody enjoyed the video. Thank you, everybody, who is still on and watched the interview. This concludes the webcast for today. We're not going to take questions and answers today. However, there will always be additional business updates. And in particular, at our next quarterly investor webcast, which we expect to conduct mid-August. And we will have a Q&A section at that time. So thank you once again all for joining us today. We are so pleased with the closing of the SPAC, the anticipated merger with Napo EU and the implementation of the Napo EU business plan for this very, very important first indication that can benefit patients with short bowel syndrome. Potentially, with crofelemer. Thank you all. Be safe, be well and chao-chao.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.