Q2 2023 Jaguar Health Inc Earnings Call

Participants

Carol R. Lizak; CFO; Jaguar Health, Inc.

Lisa A. Conte; Founder, CEO, President & Director; Jaguar Health, Inc.

Presentation

Operator

Good morning. Before I turn the call over to management, I would 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 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 of future events. While management believes 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 during this webcast for a variety of reasons, including those described in Forward-Looking Statements and Risk Factors sections of the company's Form 10-K for the year of 2022, which was filed on March 24, 2023, 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 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 consolidated financial statement presented on a GAAP basis by providing non-GAAP EBITDA and non-GAAP recurring EBITDA. Jaguar believes that the disclosed 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 substitute for GAAP net sales and GAAP net loss and are not substitutes for or superior to measures of financial performance in conformity with GAAP.
Today's conference is being recorded. At this time, it is my pleasure to turn the call over to Lisa Conte, Jaguar Health's Founder, President and Chief Executive Officer. Lisa, the floor is yours.

Lisa A. Conte

Thank you. Thank you all for joining our earnings webcast for the second quarter of 2023, and welcome to all of you. And as you just heard, my name is Lisa Conte. I'd like to begin today's call with a high-level overview of the Jaguar family of companies, and then I will provide updates on our key near-term initiatives and milestones. Following my comments, Carol Lizak, Jaguar's Chief Financial Officer, will provide a detailed recap of the key financial results for the second quarter of 2023, although, spoiler alert, we're very pleased to report that the net revenue increased 36% in Q2 2023 versus the first quarter of this year.
Jaguar, as if you know the company, is a commercial-stage pharmaceuticals company focusing on developing novel proprietary prescription medicines, sustainably derived from plants from rainforest areas for people, primarily, and animals with GI distress, specifically overactive bowel, which is fresh lexicon I'm introducing today. There's a range of interpretations when we use the word diarrhea. With the terminology overactive bowel, we include symptoms such as chronic debilitating loose watery stools or as some will refer to diarrhea, also GI urgency and unpredictability and GI incontinence, all disrupting and disturbing to the patient, their quality of life and their health.
I'll now review also the relationship of the Jaguar family companies. Napo Pharmaceuticals, wholly owned by Jaguar, focuses on developing and commercializing the human prescription pharmaceuticals we develop. Napo Pharmaceuticals' crofelemer drug product candidate is the subject of the OnTarget study, our ongoing pivotal Phase III clinical trial for preventative treatment of chemotherapy-induced overactive bowel, CIOB, and that is the acronym that we're all going to start to get used to, CIOB in adults with cancer on targeted therapy.
Jaguar family company Napo Therapeutics, as opposed to Napo Pharmaceuticals, Napo Therapeutics is an Italian corporation Jaguar established in Milan, Italy in 2021, focused on expanding crofelemer access in Europe, specifically for rare diseases. Jaguar Health is doing business as animal -- Jaguar Animal Health focuses on developing and commercializing animal prescription pharmaceuticals and nonprescription products, a small portion of our business. And then Magdalena Biosciences is a joint venture recently formed by Jaguar and Filament Health and is focused on earlier stage developing novel prescription medicines derived from plants for mental health indications, non-crofelemer-related.
As a reminder, our commercialized human prescription drug product, crofelemer, is brand-named Mytesi. The generic name is crofelemer; brand name, Mytesi. It's a first-in-class, antisecretory chloride ion channel modulator approved initially in the U.S. for the specialty indication of symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy. That is the label. As the term specialty market implies, this is a relatively small market in the United States. Indication was fast-tracked by the FDA, and that's primarily the reason why it's the first FDA-approved indication for crofelemer.
Crofelemer Mytesi is plant-based, it's organic, it's natural, it's sustainably harvested, it's fair trade. And it is the only oral prescription drug approved by the FDA under botanical guidance. There is no practical pathway to bring a generic version of crofelemer to the market under botanical guidance. So in addition to all the patents we filed, just like any other pharmaceutical company does and all the expense associated with that, we essentially have an exclusivity position forever.
And that's a very powerful factor when we're in discussions, for example, corporate partnerships, and we're talking about terminal value and net present value and potential license fees, non-dilutive funds to come into the company. We have global unencumbered rights to crofelemer, so there are always business development activities and discussions going on. And you never know when these are actually going to occur and come to the public consciousness.
Well, the market for small-cap biotechs is undeniably in a horrible state at present. We, at Jaguar, are fortunate this year that we have 2 major and what we feel are transformative clinical events coming up in the next couple of months, literally around the corner, that take pipeline opportunities to major blockbuster opportunities. And this is the most important takeaway message from today, and I'll say it again, 2 major late-stage clinical events, which we feel will be transformative for company value, recognition and patient assistance.
First and foremost, these late-stage clinical events are major opportunities to help address neglected medical needs for patients. And what follows from a focus on patients are the benefits to all the stakeholders in the company, financial and otherwise. As I frequently say, what's really powerful about crofelemer is that it is a pipeline within a product. Crofelemer has the potential to be expanded to multiple follow-on indications beyond the HIV indication.
We can focus on all potential indications at the same time. So the ones that we have prioritized and are focusing on now are chemotherapy-induced overactive bowel, CIOB, an acronym which we're going to get used to, CIOB, which previously we have been referring to as cancer therapy-related diarrhea. So let me make that link for our long-term followers. CTD, cancer therapy-related diarrhea now referred to as a more inclusive CIOB.
And 2 rare disease indications, short bowel syndrome and microvillus inclusion disease, MVID, with intestinal failure. SBS, short bowel syndrome, and MVID with intestinal failure are catastrophic medical situations for patients where they end up on total parenteral nutrition for up to 20 hours a day, 7 days a week. There are currently no approved drug treatments for MVID. As we were thrilled to announce last week, the FDA activated our Investigational New Drug Application for crofelemer for the treatment of MVID, and the FDA approved a physician IND for an SBS patient with a distressful and severe diarrhea situation.
We are so grateful that crofelemer has an opportunity to benefit these patients who are not only managing really difficult health situations, so also the dramatic impact on their quality of life. Our paramount near-term completion of our clinical activity for our Phase III pivotal OnTarget trial of Mytesi, this is literally the same formulation as Mytesi currently in the market, for the follow-on indication of the preventative treatment of chemotherapy-induced overactive bowel.
We've completed patient enrollment for OnTarget, an important milestone on our journey to making crofelemer available to treat the neglected comorbidity of CIOB. And top line results from this pivotal trial are expected in late October of this year, 2023. Again, one of the most important takeaway messages from this call, top line results in late October of this year to potentially expand the indication Mytesi to CIOB.
In support of our goal of obtaining FDA approval for a paradigm-shifting first oral drug for the preventative treatment and management of CIOB, OnTarget is the first trial of its kind. The trial includes participation of adult cancer patients with a diversity of solid tumor types. We call that a basket trial. It is the first clinical trial to include multiple targeted therapies that have greater than 50% all-grade diarrhea on their label and, which by the way, decided because typically it works in a real-world situation than the label; includes targeted therapy with or without standard cytotoxic chemotherapy being administered to the patient; and it is the first trial for prophylactic use, the preventative treatment, which with targeted therapy is a situation where you're treating the patient potentially for months and years, often essentially for the rest of their lives in both the curative and metastatic situation.
If we compare this to, for example, the established chemotherapy-induced nausea and vomiting protocols, and by the way, that is referred to as CINV, treatment typically occurs for the first 3 days with CINV in a limited cytotoxic chemotherapy treatment protocol. So CIOB, chemotherapy-induced overactive bowel, is a dramatically different from the nausea CINV in terms of the length of treatment.
There's an estimated 1.9 million new cancer cases projected in the U.S. for this year, 2023. The global market for the comparable CINV prophylactic indication is projected to reach a value of approximately $3.9 billion by 2029, and that's according to market research from an outside firm, iHealthcareAnalyst. Again, those products are taken for approximately 3 days for the 6 months or so of the duration of cytotoxic chemo.
The OnTarget study design is studying preventative treatment of CIOB from chronically administered targeted therapy, essentially every day for months and years and sometimes for the rest of the patients' hopefully extended and quality of life. Another important similarity is the preventative treatment to address and assist the opportunity for the patient to stay compliant with their anticancer therapy, potentially affecting the outcome of the patient's cancer care in a positive way.
I'm going to refer back to the lexicon shift of CIOB, which as you've heard is similar to the terminology for CINV, also CINP, chemotherapy-induced neuropathic pain. A preventative labeling benefits the patient who could be dealing with severe watery stools daily, essentially chaining the patient to their home; as well as the patient who deals with the unsettling, unpredictable and disrupting surprise diarrhea, which might happen once a week, once a month, but unpredictable. Both circumstances can be isolating, embarrassing and impact the dignity and well-being of the person with the cancer diagnosis as well as the health and compliance to other therapy implications, the anticancer therapies.
As an analogy, think of preventative treatment for epilepsy. You don't want to wait until the seizure occurs to treat you on therapy on board to prevent and/or mitigate the impact of the seizure. That's how we think about the preventative treatment of the full range of episodes of CIOB. The cancer treatment landscape has wonderfully radically changed. We're in the age of targeted therapies. You're seeing advertisements for new targeted therapies. Wherever pharmaceutical companies advertise direct to consumers, there are now dozens of approved targeted therapies, most, if not all, of which cause diarrhea by the exact secretory mechanism that crofelemer normalizes.
Crofelemer is a novel, first-in-class, antisecretory gastrointestinal chloride channel modulator. It is -- the disruption to the gut is caused by oversecretion of fluids into the intestines following the active secretion of chloride ions into gut. So the osmosis that occurs from the active secretion of excess chloride ions into the gut and the water, therefore, that follows and then the watery diarrhea that occurs. By normalizing ion flow, crofelemer's unique mechanism of action normalizes the flow of fluids into the intestine and normalize intestinal behavior.
Crofelemer is taken orally and it acts locally in the gut, meaning it goes into the intestine and it normalizes that over-activation, as I just described. It doesn't block it up or clog it up. It normalizes that over-activation, which normalizes the flow of water into the intestines and brings the fluid situation back to normalcy. When you think of antidiarrheals historically, you think of products such as Imodium and loperamide, which are taken typically after a diarrhea episode occurs.
These products are opioids, and they essentially work by the mechanism of constipation. And obviously, you can't stay constipated chronically. Crofelemer is not an opioid and, therefore, does not have that risk of constipation because crofelemer is acting locally in the gut, it doesn't have any known drug-drug interactions. Crofelemer doesn't have secondary metabolites causing problems later on. You don't have a first pass effect in the liver. And it's not an antibiotic, so you don't have the resistance that antibiotics can generate. And the safety profile is part of why we focus on complicated patient situations where you don't want to interfere with their life-saving therapies, and you do want to address the quality of life and the health care -- health benefit implications that can come from managing CIOB.
The 2 most common reasons why new drug applications fail are safety and manufacturing. Mytesi is already on the market for an approved chronic indication. So we've already completed, for example, 2-year carcinogenicity. Safety is a huge hallmark of the product. We have never seen a side-effect profile different than placebo, and we have no serious adverse events that have been reported for a product that's been in the market for many years now and in thousands of patients living with HIV/AIDS on label.
So in October, when we release top line data, it's a matter of what is the statistical significance on the primary endpoint for the OnTarget trial in people undergoing cancer treatment. That's the key transformative event for the cancer indication CIOB. Again, top line data, last week of October. And then the rest of the data is -- there's a beautiful collection of secondary endpoints and a rich database that will come from the completion of this trial.
The rest of that data will come out in conferences and presentations that we'll make throughout the next year as we prepare for the potential approval of Mytesi, a product that's already in full supply chain from the rainforest to essentially any specialty pharmacy in the United States for this important new indication and for this much larger neglected market opportunity with a much larger number of patients potentially benefiting.
We believe the OnTarget trial will successfully demonstrate the normalization crofelemer provides to the over-activation from targeted cancer therapies and that crofelemer should be taken as a companion drug every single day and should be part of the standard targeted therapy protocols while patients are remaining on their targeted cancer therapy, again, either in a curative situation or to maintain cancer as a chronic situation that patients can live with. And the keyword here is live with, not just exist, but live life fully, addressing the quality of life of patients undergoing cancer treatment, focusing on control and dignity and a common voice in the choice of how to live.
This is the power of patient voice, which importantly is infused throughout our development and educational planning. And there are potential important health benefits to highlight as well, which is very important not only for the patients, and of course, the health care providers, the prescribing providers, also for payers. Publications show that about 40% of the time, people living with cancer on targeted therapies will go to a subtherapeutic dose or go off their life-saving targeted therapy because of the side effect of diarrhea, loose watery stools, overactive bowel.
So preventing this type of diarrhea, otherwise known as chemotherapy-induced overactive bowel, as we are introducing today, can support better adherence to cancer treatment for patients and better treatment outcomes. And it's been shown that it costs about 3x as much to take care of people living with cancer in targeted therapies when they suffer from loose watery stools, diarrhea as well.
I'll now discuss Jaguar's 2 prioritized rare disease investigative indications for a novel crofelemer powder and a highly concentrated oral formulation. So crofelemer yet a different product than Mytesi. MVID is life-threatening in ultra-rare autosomal recessive disease estimated to affect a couple of hundred newborns and children globally, leading to intestinal failure, significant morbidity and even death from severe secretory diarrhea.
While there are currently no approved therapeutic treatments for MVID, total parenteral nutrition, the delivery of nutrition of life, the NIV, which is the standard of care for the management of MVID, can cost around $150,000 a year or multiples of that with complications. MVID patients suffer from severe cholera-like diarrhea daily. And symptomatic management of diarrhea and MVID may reduce their dependence on parenteral nutrition. We plan to host an investor-facing webinar in the near future with leading pediatric gastroenterologists to further elaborate the value of managing diarrhea and MVID patients with intestinal failure and bring a greater understanding to this ultra-rare disease.
Crofelemer has been granted Orphan Drug Designation by the FDA and the European Medicines Agency, EMA, for MVID; and crofelemer has also been granted Orphan Drug Designation by the FDA and the EMA for short bowel syndrome, which is referred to as SBS. SBS patients with intestinal failure are also treated with parenteral nutrition. Jaguar is supporting investigator-initiated proof-of-concept studies of crofelemer for SBS and MVID with intestinal failure in the EU and MENA regions with the goal of reducing dependence on parenteral nutrition by about 15% to 20%, a known and accepted regulatory endpoint.
We're also providing product for an FDA-approved physician IND for an SBS patient here in the United States. We'll be looking at improved stool volume and stool formation and other metabolic measures. In accordance with the guidelines of specific EU countries, published data from such clinical investigations could support reimbursed early patient access to crofelemer for short bowel syndrome or MVID or both potentially in 2024 for these debilitating conditions.
And early access programs, which do not exist in the United States, provide an opportunity for reimbursement while impacting the morbidity and high cost of care of these chronic neglected needs and was a major catalyst and impetus for us establishing Napo Therapeutics in Europe to be able to have feet on the ground to be able to access these early patient access opportunities for both patients and the benefit for all our stakeholders.
And again, that is the second major what we feel is a transformative clinical event, late-stage clinical event in 2023, around the corner, for these rare diseases to effect the opportunity for patients to access these products in 2024. An estimated 40,000 short bowel syndrome patients around the world, so it's a typical rare disease business model. SBS patients have high morbidity, high mortality, high expense, active patient advocacy group and the patients require very expensive and toxic, in some cases, very toxic parenteral nutrition essentially every single day, 20 hours a day for the rest of their lives.
The goal -- the global SBS market is projected -- again, these are rare disease business models, it's projected to grow to, by third parties, to $4.6 billion in 2027. This is the market research firm, Vision Research Reports. Other studies put the growth to approximately $12 billion. And the standard of care at this time for the population of SBS patients is, in fact, parenteral nutrition.
So to recap here, we expect to have top line results from our Phase III trial crofelemer for the prophylaxis of chemotherapy-induced overactive bowel, CIOB, in the last week of October this year. And we expect initial proof-of-concept evidence before the end of the year for patients with either SBS and/or MVID with intestinal failure in support of early patient access participation in certain European countries. So both potentially important revenue generations in 2024 based on these late-stage clinical results in 2023.
Before I hand the discussion over to our CFO, Carol, I'd like to let all of you participating today know that we will have a brief Q&A segment at the end of the webcast to address any questions submitted in writing. They can be submitted via the webcast link for today's event that appears on the Events & Presentations page of the Investor Relations section of Jaguar's website, and the URL for our website is jaguar.health.
And we'll now move along to the key financial results for the second quarter of 2023. Carol, I'll turn it over to you.

Carol R. Lizak

Well, thank you, Lisa, and thank you all for joining our webcast today.
I'll begin my review of our financials for the second quarter of 2023. Prescription product net revenue was approximately $2.7 million in the second quarter of 2023, representing an increase of 36% compared to prescription product net revenue in the first quarter of 2023, which totaled approximately $2 million, and a decrease of approximately 8% over prescription product net revenue in the second quarter of 2022, which totaled approximately $2.9 million.
Mytesi prescription volume increased approximately 4% in the second quarter of 2023 compared to the first quarter of 2023 and decreased approximately 4.5% in the second quarter of '23 compared to the second quarter of 2022. Prescription volume differs from invoice sales volume, which reflects, among other factors, varying buying patterns among specialty pharmacies in the closed network as they manage their inventory levels.
Loss from operations increased by $1.6 million from $6.5 million in the quarter ended June 30, 2022, to $8.1 million during the same period in 2023, largely from increased research and development expenses related to the clinical trials for CIOB and other indications.
Non-GAAP recurring EBITDA for the second quarter of 2023 and the second quarter of 2022 were a net loss of $7.8 million and $5.3 million, respectively. Net loss attributable to common shareholders increased by approximately $2.8 million from $9.4 million in the quarter ended June 30, 2022, to $12.2 million in the same period in 2023.
That concludes my recap of high-level financials for the second quarter of 2023. And I will now hand the discussion back to Lisa Conte.

Lisa A. Conte

Thank you, Carol. We, at Jaguar, and our family companies are highly, highly energized about all our important initiatives underway in 2023 and the culmination of these late-stage clinical events and what this can mean for patients and all that follows from that.
We have no questions that have come in, unless I have screwed up my access to them, but I believe we have no questions. So with that, we'll conclude our call for today. Thank you all who have listened and participated and support Jaguar. Have a good day.

Operator

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.