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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO. 001-36714
JAGUAR HEALTH, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
46-2956775
(I.R.S. Employer
Identification No.)
200 Pine Street, Suite 400
San Francisco, California 94104
(Address of principal executive offices)
Registrant’s telephone number, including area code:
(415) 371-8300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Common Stock, Par Value $0.0001 Per Share
Trading Symbol(s)
JAGX
Name of each exchange on which registered
The Nasdaq Capital Market
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ⌧
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ⌧ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ⌧
Smaller reporting company ⌧
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
As of June 31, 2022, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $25.0 million based upon the
closing sales price of the registrant’s common stock on The Nasdaq Capital Market on such date.
The number of shares of the registrant’s common stock outstanding as of March 24, 2023, was 13,862,329 shares of voting common stock and 9 shares of non-
voting common stock, par value $0.0001 per share (convertible into 9 shares voting common stock after the effects of the reverse stock split effected through January 23,
2023).
Portions of the proxy statement for the registrant’s 2023 Annual Meeting of Stockholders, or Proxy Statement, to be filed within 120 days of the end of the
fiscal year ended December 31, 2022 are incorporated by reference in Part III hereof. Except with respect to information specifically incorporated by reference in this Form
10-K, the Proxy Statement is not deemed to be filed as a part hereof.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
TABLE OF CONTENTS
Item No.
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosure
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
SIGNATURES
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Forward-looking statements
PART I
This Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts
contained in this Form 10-K, including statements regarding our future results of operations and financial position,
business strategy, prospective products, product approvals, research and development costs, timing of receipt of clinical
trial, field study and other study data, and likelihood of success, commercialization plans and timing, other plans and
objectives of management for future operations, and future results of current and anticipated products are forward-
looking statements. These statements involve known and unknown risks, uncertainties and other important factors that
may cause our actual results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,”
“plan,” “aim,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,”
“potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in
this Form 10-K are only predictions. We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends that we believe may affect our business, financial
condition and results of operations. These forward-looking statements speak only as of the date of this Form 10-K and
are subject to a number of risks, uncertainties and assumptions described under the sections in this Form 10-K titled
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
elsewhere in this Form 10-K. Forward-looking statements are subject to inherent risks and uncertainties, some of which
cannot be predicted or quantified and some of which are beyond our control. The events and circumstances reflected in
our forward-looking statements may not be achieved or occur and actual results could differ materially from those
projected in the forward-looking statements. Moreover, we operate in a dynamic industry and economy. New risk factors
and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and
uncertainties that we may face. Except as required by applicable law, we do not plan to publicly update or revise any
forward-looking statements contained herein, whether as a result of any new information, future events, changed
circumstances or otherwise.
Jaguar Health, our logo, Napo Pharmaceuticals, Napo Therapeutics, Mytesi, Equilevia, Canalevia, Canalevia-
CA1, Canalevia-CA2, and Neonorm are our trademarks that are used in this Form 10 K. This Form 10-K also includes
trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience,
trademarks and tradenames referred to in this Form 10-K appear without the ©, ® or ™ symbols, but those references
are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights or that the
applicable owner will not assert its rights, to these trademarks and tradenames.
ITEM 1. BUSINESS
BUSINESS
Jaguar Health, Inc. (“Jaguar” or the “Company”) is a commercial stage pharmaceutical company focused on
developing novel, plant-based, sustainably derived prescription medicines for people and animals with gastrointestinal
(“GI”) distress, including chronic, debilitating diarrhea. Jaguar Health's wholly owned subsidiary, Napo
Pharmaceuticals, Inc. (“Napo”), focuses on developing and commercializing proprietary plant-based human
pharmaceuticals from plants harvested responsibly from rainforest areas. Our crofelemer drug product candidate is the
subject of the OnTarget study, an ongoing pivotal Phase 3 clinical trial for prophylaxis of diarrhea in adult cancer
patients receiving targeted therapy. As announced, patient enrollment in OnTarget reached approximately 75% in
February 2023, and target trial enrollment of 256 patients is expected to complete in the second quarter of 2023. Jaguar
is the majority shareholder of Napo Therapeutics S.p.A. (“Napo Therapeutics”), an Italian corporation established by
Jaguar in Milan, Italy in 2021 that focuses on expanding crofelemer access in Europe. Napo Therapeutics’ core mission
is to provide access to crofelemer in Europe to address significant rare/orphan disease
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indications, including, initially, two key rare disease target indications: Short bowel syndrome (“SBS”) with intestinal
failure and congenital diarrheal disorders (“CDD”). Jaguar Animal Health is a tradename of Jaguar Health.
Napo’s marketed drug Mytesi (crofelemer 125 mg delayed-release tablets) is a first-in-class oral botanical drug
product approved by the U.S. Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious
diarrhea in adults with HIV/AIDS on antiretroviral therapy. To date, this is the only oral plant-based botanical
prescription medicine approved under the FDA’s Botanical Guidance. The Company’s Canalevia-CA1 (crofelemer
delayed-release tablets) drug is the first and only oral plant-based prescription product that is FDA conditionally
approved to treat chemotherapy-induced diarrhea (“CID”) in dogs.
Crofelemer was granted orphan drug designation (“ODD”) by the FDA in August 2017 and by the European
Medicines Agency (“EMA”) in December 2021. Crofelemer was granted ODD by the FDA in February 2023 for
microvillus inclusion disease (“MVID”), a rare CDD condition, and granted ODD for MVID by the EMA in October
2022. The Company is currently supporting investigator-initiated proof-of-concept (“POC”) studies of crofelemer in
patients with SBS with intestinal failure or CDD, focused on obtaining POC of reduction of requirements of parenteral
support including parenteral nutrition and/or intravenous fluids, throughout 2023. In accordance with the guidelines of
specific European Union countries, publications of POC data from these trials could support early patient access to
crofelemer for SBS with intestinal failure or CDD through programs in Europe. Early access programs are revenue
generating, and reimbursable for participating patients.
Napo Therapeutics is initiating efforts to commence clinical development of crofelemer in SBS patients in
support of the Company’s key focus on leveraging the EMA’s accelerated conditional marketing authorization pathway
in Europe for these rare diseases. SBS affects approximately 10,000 to 20,000 people in the U.S., according to the
Crohn's & Colitis Foundation, and it is estimated that the population of SBS patients in Europe is approximately the
same size. Despite limited treatment options, the global SBS market exceeded $568 million in 2019 and is expected to
reach $4.6 billion by 2027, according to a report by Vision Research Reports.
CDD is considered an ultra-rare disease, with likely a couple of hundred patients diagnosed globally. In
February 2022, Napo announced the completion of an investigator-initiated preclinical enterocyte (intestinal cell) in
vitro study to evaluate the effects of crofelemer on cells with certain genetic defects that result in specific forms of CDD.
The data from this study is expected to support the rare disease business model that Napo Therapeutics is pursuing in
Europe under its exclusive license for crofelemer from Jaguar and Napo. CDD patients have intestinal failure and
morbidity resulting in a failure to thrive due to malabsorption of nutrients and need parenteral nutrition. We believe the
novel mechanism of action of crofelemer may have considerable potential to manage the severe secretory loss of
electrolytes and fluid resulting in dehydration. There are currently no therapies for CDD except parenteral nutrition.
Thus, crofelemer may reduce the associated morbidity and mortality of CDD and lessen the need for parenteral nutrition
(“PN”).
Most of the activities of the Company are focused on the development and/or commercialization of Mytesi,
including the ongoing clinical development of crofelemer for the prophylaxis of diarrhea in adult patients receiving
targeted cancer therapy. Napo’s pivotal OnTarget Phase 3 clinical trial of crofelemer for prophylaxis of cancer therapy-
related diarrhea (“CTD”) was initiated in October 2020 and is expected to complete enrolment in 2nd quarter of 2023.
We also support the prioritized clinical program at Napo Therapeutics centered around the POC investigator-initiated
trials of Crofelemer for SBS and CDD. In the field of animal health, we are continuing limited activities related to
developing and commercializing first-in-class gastrointestinal products for dogs, dairy calves and foals.
Crofelemer is a novel, first-in-class anti-secretory antidiarrheal drug which has a normalizing effect on
electrolyte and fluid balance in the gut, and this mechanism of action has the potential to benefit multiple disorders that
cause gastrointestinal distress, including diarrhea and abdominal discomfort. Mytesi is in development for multiple
possible follow-on indications, including for the lead Phase 3 program in CTD, investigating prophylaxis of diarrhea
related to targeted therapy with or without standard chemotherapy. Crofelemer delayed-release tablets are also being
evaluated in diarrhea-predominant irritable bowel syndrome (“IBS-D”) and idiopathic/functional diarrhea in
investigator-initiated trials.
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Crofelemer powder for oral solution is being developed to support orphan or rare disease indications for infants
and/or children with SBS and/or CDD, such as MVID.
In addition, a second-generation proprietary anti-secretory antidiarrheal drug (“NP-300”) is in development for
symptomatic relief and treatment of moderate-to-severe diarrhea, with or without concomitant antimicrobial therapy,
from bacterial, viral and parasitic infections including Vibrio cholerae, the bacterium that causes cholera. This program
is being pursued with the targeted incentive from the FDA of tropical disease priority review voucher.
In January 2023, Jaguar and Filament Health (“Filament”), with Funding from One Small Planet, formed the
U.S.-based joint venture Magdalena Biosciences, Inc. (“Magdalena”). Magdalena’s focus is on the development of
novel, natural prescription medicines derived from plants for mental health indications including, initially, attention-
deficit/hyperactivity disorder (“ADHD”) in adults. The goal of the collaboration is to extend the botanical drug
development capabilities of Jaguar and Filament in order to develop pharmaceutical-grade, standardized drug candidates
for mental health disorders, and to partner with a potential future licensee to develop and commercialize these novel
plant-based drugs. This new venture aligns with Jaguar's mental health Entheogen Therapeutics Initiative (“ETI”) and
Filament's corporate mission to develop novel, natural prescription medicines from plants. Magdalena will leverage
Jaguar's proprietary medicinal plant library and Filament's proprietary drug development technology. Jaguar’s library of
2,300 highly characterized medicinal plants and 3,500 plant extracts, all from firsthand ethnobotanical investigation by
Jaguar and members of the ETI Scientific Strategy Team, is a key asset we have generated over 30 years that bridges the
knowledge of traditional healers and Western medicine. Magdalena holds an exclusive license to plants and plant
extracts in Jaguar's library, not including any sources of crofelemer or NP-300, for specific indications and is in the
process of identifying plant candidates in the library that may prove beneficial for addressing indications such as ADHD.
In December 2021 we received conditional approval from the FDA to market Canalevia-CA1 (crofelemer
delayed-release tablets), our oral plant-based prescription drug and the only available veterinary drug for the treatment of
chemotherapy-induced diarrhea (“CID”) in dogs, and Canalevia-CA1 is now available to multiple leading veterinary
distributors in the U.S. Canalevia-CA1 is a tablet that is given orally and can be prescribed for home treatment of CID.
Canalevia-CA1 is conditionally approved by the FDA under application number 141-552. Conditional approval allows
for commercialization of the product while Jaguar Animal Health continues to collect the substantial evidence of
effectiveness required for full approval. We have received Minor Use in a Major Species (“MUMS”) designation from
the FDA for Canalevia-CA1 to treat CID in dogs. FDA has established a "small number" threshold for minor use in each
of the seven major species covered by the MUMS act. The small number threshold is currently 80,000 for dogs,
representing the largest number of dogs that can be affected by a disease or condition over the course of a year and still
have the use qualify as a minor use.
We believe Jaguar is poised to realize a number of synergistic, value adding benefits—an expanded pipeline of
potential blockbuster human follow-on indications of crofelemer, and a second-generation anti-secretory agent—upon
which to build global partnerships. Jaguar, through Napo, holds global unencumbered rights for crofelemer, Mytesi, and
Canalevia-CA1. Additionally, several of the drug product opportunities in Jaguar’s crofelemer pipeline are backed by
Phase 2 and proof of concept evidence from human clinical trials.
Napo has a direct sales force of 8 sales representatives and a national sales director covering U.S. geographies
with the highest commercial potential.
A key component of our marketing strategies for Mytesi in 2022 was our focus on the transition of Mytesi
distribution to a closed network of specialty pharmacies rather than to wholesalers that resell the product to retail
pharmacies. This transition was intended to help remove access barriers for patients receiving Mytesi and includes
services such as a higher level of support for prior authorizations, appeals, adherence counseling, and home delivery
options. While patients often visit retail pharmacies for short-term or uncomplicated medical needs, specialty
pharmacies focus on serving patients with complex and chronic medical conditions like HIV. The transition to a closed
network of specialty pharmacies resulted in a meaningful reduction in Mytesi distribution costs and helps prepare our
U.S. commercial distribution network for future indication expansion of crofelemer to other populations of patients with
complex medical needs, such as CTD.
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With the introduction of newer antiretroviral (“ARV”) drug therapies, there has been a reduction in the severity
of ARV induced diarrhea. However, a significant portion of this patient population still suffers from diarrhea caused by
HIV enteropathy, which is due to the direct and indirect effects of HIV on the intestinal mucosa. Chronic diarrhea
remains a significant complaint of PLWHA, particularly those who are older and have lived with the virus in their gut
for more than 10 years. According to data from the U.S. Centers for Disease Control and Prevention, currently more than
70% of people living with HIV are over age 50 and have lived with HIV for more than 10 years.
Napo expanded the NapoCares Patient Support Program for Mytesi in April 2020 as part of the Company's
enhanced market access strategy. The expansion meaningfully increased co-pay support for commercially insured
patients, which also includes allowing the co-pay amount to remain the same whether a patient fills a 30-day or a 90-day
prescription of Mytesi. The expansion also increased the income ceiling from two times the Federal poverty limit to five
times the Federal poverty limit for our patient assistance program, which will allow more low-income patients to receive
Mytesi at no cost. The co-pay program and patient assistance program are components of a comprehensive suite of
patient support services Napo rolled out in the second quarter of 2020 with the support of AssistRx, a specialty therapy
initiation and patient support company.
Napo has actively ensured that its intellectual property (“IP”) filings in support of the development of
crofelemer for various proposed indications are protected appropriately. The IP portfolio for crofelemer includes the
relief and treatment of HIV-associated diarrhea and CID as well as planned indications for inflammatory diarrhea, IBS-
D, CDD and SBS, with all indications, Napo prioritizes IP protection. Napo currently holds approximately 145 patents,
the majority of which do not expire until 2027-2031, and approximately 53 patents pending.
In October 2020, Napo initiated its pivotal OnTarget Phase 3 clinical trial of crofelemer for prophylaxis of
diarrhea in adult cancer patients receiving targeted therapy with or without chemotherapy. As announced, patient
enrollment in OnTarget reached approximately 75% in February 2023, and target trial enrollment of 256 patients is
expected to complete in the second quarter of 2023. The Company’s efforts over the past year were focused on
expanding the trial to new U.S. and international sites – with trial sites now active in Georgia, the Republic of Serbia,
Argentina, and Taiwan—which has significantly accelerated enrollment. The OnTarget trial is evaluating crofelemer's
effectiveness in prophylaxis of diarrhea in adult solid tumor patients that receive targeted therapies with or without
standard chemotherapy. Such prophylaxis would potentially impact the patient's ability to remain on their cancer therapy
regimens at approved doses for better cancer treatment outcomes, with less required medical intervention and cost.
The OnTarget clinical trial is a 24-week (two 12-week stages), randomized, placebo-controlled, double-blind
study to evaluate the safety and efficacy of crofelemer in the prophylaxis of diarrhea in adult cancer patients with solid
tumors receiving targeted cancer therapy-containing treatment regimens. Patients are randomized to receive either
crofelemer or matching placebo treatment that starts concurrently with the initiation of targeted cancer therapy regimen.
The primary endpoint will be assessed at the end of the initial (Stage I) 12-week double-blind placebo-controlled
primary treatment phase after the last patient has completed 12 weeks of treatment. After completing the Stage I
treatment phase, the subjects will have the option to remain on their assigned blinded treatment arm and reconsent to
enter into the Stage II 12-week extension phase. The assessment of prophylactic effects on diarrhea will be measured by
the average number of weekly loose and/or watery stools for the active (crofelemer) or placebo arms over 12-week Stage
I treatment period.
A significant proportion of patients undergoing cancer therapy experience diarrhea, which has the potential to
cause dehydration, potential hospitalization, and non-adherence to treatment in this population. Novel "targeted cancer
therapy" agents, such as epidermal growth factor receptor (EGFR) antibodies and tyrosine kinase inhibitors (TKIs), with
or without cycle chemotherapy agents, may cause increased electrolyte and fluid content in the gut lumen, which results
in passage of loose/watery stools (i.e., diarrhea). Diarrhea has been reported as one of the most common side effects of
TKIs and may result in cancer therapy drug holidays or reductions from therapeutic dose, potentially impacting patient
outcomes. Diarrhea is also a common side effect of some approved CDK 4/6 inhibitors.
With increased approval of several novel targeted therapies, it is estimated that 13.6% of cancer patients in
2020 were eligible for targeted therapies with or without standard chemotherapy regimens, according to a paper
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published in April 2021 in the journal Annals of Oncology1. According to the National Cancer Institute, in 2020,
1,806,590 new cases of cancer were diagnosed and nearly 250,000 of these newly diagnosed patients could be eligible
for available targeted therapies.
Due to the chronic dosing and toxicity associated with targeted therapies, many cancer patients on targeted
therapy require drug holidays or dose reductions in their therapy, including those due to diarrhea. By improving stool
consistency and reducing the frequency of loose/watery stools, crofelemer is expected to provide improved adherence to
the therapeutic dosing of any targeted therapies, potentially leading to better clinical outcomes. We have learned from
discussions with cancer drug manufacturers that the adoption and continued use of targeted cancer therapies is directly
related to the ability of patients to tolerate these therapies—highlighting the importance of supportive care drugs like
crofelemer to help manage cancer treatment-related diarrhea in this patient population.
As previously announced, it has been reported that patients with cancer related diarrhea (CRD) were 40% more
likely to discontinue the chemotherapy or targeted therapy than patients without CRD. The persistence of index cancer
therapy and time to switch were also lower for patients with CRD. Strategies to control CRD and continue cancer
therapy are urgently needed2.
Furthermore, it has been reported that patients with CRD used significantly more resources, including
outpatient services, emergency room visits, and hospitalizations. Effective prevention of CRD provides an untapped
market opportunity to reduce the overall cost of cancer care3. Findings from studies have indicated that patients with
CRD had nearly 2.9 times higher all-cause total cost of care than patients without CRD after adjusting for covariates.
Thus, prophylaxis of CRD is expected to result in a significant reduction in cancer-treatment cost4.
As previously announced results from a dog study of crofelemer and an irreversible pan-HER2+ tyrosine kinase
inhibitor (TKI), neratinib, provide further scientific support for the evaluation of crofelemer in providing symptomatic
relief of watery diarrhea in patients receiving a targeted cancer therapy drug like neratinib with or without cycle
chemotherapy, without the use of loperamide, an antimotility drug.
The dog study was conducted without the prophylaxis or concomitant use of loperamide and demonstrated that
crofelemer caused an approximate 30% reduction in the incidence and severity of diarrhea associated with daily oral
administration of neratinib, within the 28-day treatment period. Crofelemer also demonstrated significant improvement
in the proportion of “responder” dogs, and there was a trend for fewer neratinib dose reductions in crofelemer treatment
groups when compared to the control group.
Crofelemer was evaluated in a Phase 2 clinical study (called HALT-D), for the effectiveness of crofelemer for
reduction of diarrhea in HER2 positive breast cancer patients receiving trastuzumab, pertuzumab, and chemotherapy
agents such as docetaxel or pacilitaxel with or without carboplatin. These therapies cause CID in up to 80% of breast
cancer patients, reaching grade 3, which often requires hospitalization, in 8-12% of patients. No antidiarrheal
medications are currently approved that specifically target the underlying mechanism of CID associated with
pertuzumab-containing regimens. The results of the study were published in October 2022 and showed that prophylaxis
with crofelemer resulted in substantial reduction of higher grade diarrhea compared to the standard-of-care control group
patients.
Recent studies have shown that EGFR inhibitors cause increased chloride secretion into the lumen of the gut
and that crofelemer, through its unique and novel mechanism of normalizing the chloride-secretory actions of the cystic
fibrosis transmembrane conductance regulator (“CFTR”) and calcium-activated chloride channels (CaCC), is
1A. Haslam, M.S. Kim, V. Prasad, Updated estimates of eligibility for and response to genome-targeted oncology drugs among US cancer patients,
2006-2020
2Pablo C. Okhuysen, M.D., Lee Schwartzberg, M.D., FACP, Eric Roeland, M.D., FAAHPM, The impact of cancer-related diarrhea on changes in
cancer therapy patterns: Real world evidence
3Lee Schwartzberg, M.D., FACP, Eric Roeland, M.D., FAAHPM, Pablo C. Okhuysen, M.D., Characterizing unplanned resource utilization associated
with cancer-related diarrhea
4Eric Roeland, M.D., FAAHPM, Pablo C. Okhuysen, M.D., Lee Schwartzberg, M.D., FACP, Healthcare utilization and costs associated with cancer-
related diarrhea
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considered to be mechanistically- and physiologically-appropriate for reducing the loss of electrolyte and fluid in breast
cancer patients receiving this regimen.
As announced October 26, 2022, the results of the HALT-D trial were published in the peer reviewed journal
Breast Cancer Research and Treatment.
This HALT-D study evaluated 51 breast cancer patients who were eligible to receive at least three cycles of
pertuzumab-containing regimen with chemotherapy that were randomly assigned to either crofelemer in cycles 1 and 2
or the control group, in which patients received standard of care. Breakthrough anti-diarrheal medicines (“BAM”) were
permitted but not given prophylactically. Findings showed that the primary endpoint, the incidence of diarrhea for at
least two consecutive days, was not statistically different for the two groups. However, crofelemer patients demonstrated
significantly better outcomes compared to control group patients across a number of key secondary endpoints including
reductions in the incidence and severity of diarrhea in cycle 2 based on Investigator and Patient Reported Outcomes (see
Jaguar Health's November 19, 2021 press release). The study also showed that CID occurred significantly lesser (by
23%) in the crofelemer group during cycle 1 and crofelemer patients were 1.8 times more likely than control patients to
have their diarrhea resolved. These data provide POC support to the primary endpoint in Napo’s ongoing phase 3
OnTarget clinical study.
Napo completed its requisite preclinical and formulation activities to support the Investigational New Drug
(IND) application for its second-generation, plant-based oral prescription drug product, NP-300, for its clinical
development for the symptomatic relief and treatment of moderate-to-severe diarrhea, with or without concomitant
antimicrobial therapy, from bacterial, viral and parasitic infections including Vibrio cholerae, the bacterium that causes
cholera. As announced in September 2022, the FDA has activated the Company’s Investigational New Drug (IND)
application for NP-300and the FDA concluded that Napo may proceed with its proposed phase 1 clinical trial for NP-
300. Following the completion of the phase 1 trial, the Company will be positioned to initiate the next stage of our
clinical development program for cholera-related diarrhea when our development team has the requisite resources and
bandwidth to initiate the additional required trials.
Cholera produces a devastating loss of electrolytes and fluid in patients and without appropriate reduction in
loss of fluid and electrolytes, patients experience significant hospitalization and mortality. NP-300 provides the
opportunity to treat cholera patients in combination with oral rehydration salts (“ORS”) and the recommended guidelines
from the World Health Organization (“WHO”) for the use of appropriate antibiotics to reduce the burden of the
pathogen. Appropriate preclinical toxicity studies and formulation development activities are ongoing to support the
conduct of clinical studies with NP-300.
Napo received partial financial support for preclinical services from the National Institute of Allergy and
Infectious Diseases (“NIAID”) of the National Institutes of Health, and Napo is grateful for their support of NP-300’s
development.
Cholera is an acute diarrheal illness caused by infection of the intestine with the bacterium Vibrio cholerae.
According to the Centers for Disease Control and Prevention of the U.S. Department of Health & Human Services, an
estimated 1.3 to 4 million people around the world get cholera each year and 21,000 to 143,000 people die from it. The
infection is often mild or without symptoms but can sometimes be severe. Approximately one in 10 of infected persons
will have severe disease characterized by profuse watery diarrhea, vomiting, and leg cramps. In these people, rapid loss
of body fluids leads to dehydration and shock. Without treatment, death can occur within hours. The largest cholera
outbreak in recorded history recently occurred in Yemen. According to Oxfam, the number of cholera cases in Yemen in
2019 was the second largest ever recorded in a country in a single year, surpassed only by the numbers in Yemen in
2017. According to the Brookings Institution, cholera continues to spread in Yemen, with 180,000 new cases reported in
the first eight months of 2020.
We expect that NP-300 will be significantly less expensive and would support development efforts to receive a
tropical disease priority review voucher from the FDA for an indication for the symptomatic treatment of diarrhea from
acute infections such as cholera. Priority review vouchers are granted by the FDA as an incentive to develop treatments
for neglected diseases and rare pediatric diseases. Priority review vouchers are transferable and, in past
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transactions by other companies, have sold for prices ranging from $60 million to $350 million. Additionally, we believe
NP-300 may provide a long-term pipeline opportunity as a second-generation anti-secretory agent for multiple
gastrointestinal diseases—especially in resource-constrained countries.
The NP-300 program is paired with funding from a promissory note related to the potential future sale of a
possible TDPRV.
As previously announced, the Company also launched the Entheogen Therapeutics (“ETI”) initiative to support
the discovery and development of novel, natural medicines derived from psychoactive and psychedelic plant compounds
for treatment of mood disorders, neuro-degenerative diseases, addiction, and other mental health disorders. The initiative
is initially focused on plants with the potential to treat depression and leverages Napo’s proprietary library of
approximately 2,300 plants with medicinal properties. According to statistics available from the National Institute of
Mental Health Disorders, part of the National Institutes of Health, approximately 9.5% of American adults ages 18 and
over will suffer from a depressive illness (major depression, bipolar disorder, or dysthymia) each year.
Field research collaborations have been conducted in the past by members of the scientific strategy team
(“SST”) of Jaguar’s predecessor company Shaman Pharmaceuticals, who are also members of the ETI SST, yielded
possible applications for a compound called alstonine. Alstonine is derived from a plant used by traditional healers in
Nigeria, and has demonstrated a potential novel mechanism of action for the treatment of difficult to manage conditions
such as schizophrenia.
The ETI SST consists of leading and globally renowned ethnobotanists, physicians, and pharmacologists as
well as experts in the fields of natural product chemistry and neuropharmacology. We believe the wealth of expertise,
experience, and commitment of the ETI SST—comprised of multiple members of the original SST that contributed to
development of Jaguar's proprietary library of plants—will play an instrumental role in advancing our shared initial goal
of identifying plants in our library that may have the potential to treat mood disorders and neurodegenerative diseases,
such as Alzheimer's disease, Parkinson's disease, and amyotrophic sclerosis. Mood disorders and neurodegenerative
diseases affect hundreds of millions of people around the globe and represent classic unmet medical needs.
While Napo and Jaguar remain steadfastly focused on the commercial success of Mytesi and on the potential
development of crofelemer for CTD and the rare disease indications of SBS with intestinal failure and CDD, the
Company believes the same competencies and multi-disciplinary scientific strategy that led to the successful
development of Mytesi will support collaborative efforts with potential partners—such as the recently formed joint
venture Magdalena Biosciences—to develop novel first-in-class prescription medicines derived from plants.
Our management team has significant experience in gastrointestinal product development for both humans and
animals. Napo was founded more than 30 years ago to perform drug discovery and development by leveraging the
knowledge of traditional healers working in rainforest areas. Ten members of the Jaguar and Napo team have been
together for more than 15 years. Dr. Steven King, our chief sustainable supply, ethnobotanical research and intellectual
property officer, and Lisa Conte, our founder, president and CEO, have worked together for more than 30 years. We
have buttressed the early founding team with the expertise and experiences of team members like Dr. Darlene Horton
and Dr. Karen Brunke to support the continued development and commercialization activities of the Napo and Jaguar
family. We have assembled an impressive group of scientific advisory board (SAB) members that work closely with the
Chair of Jaguar’s Scientific Advisory Board, Dr. Pravin Chaturvedi, who also serves as the Chief Scientific Officer
(“CSO”) of Jaguar. Together, these dedicated personnel successfully transformed crofelemer, which is extracted from
trees growing in the rainforest, to Mytesi and Canalevia-CA1, which are natural, sustainably harvested, FDA-approved
drugs.
As announced in February 2020, the American Botanical Council named Napo the recipient of the 2019 Varro
E. Tyler Commercial Investment in Phytomedicinal Research Award in recognition of Napo’s ongoing commitment to
the sustainable development and production of natural therapeutic preparations. Specifically, this award acknowledges
the successful development and approval of crofelemer, which is derived from the Croton
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lechleri tree in the Amazon rainforest. Previous recipients of this award include Jaguar’s partner, Italy based Indena
S.p.A., one of the world’s largest producers of clinically-tested botanical extracts for the food, dietary supplement,
cosmetic, and pharmaceutical markets.
Pipeline development opportunities for crofelemer
Crofelemer is currently being evaluated for the prophylaxis of CTD in adult solid tumor patients receiving
targeted therapy with or without standard chemotherapy. A significant proportion of patients undergoing cancer therapy
experience diarrhea. Novel targeted cancer therapy agents, such as epidermal growth factor receptor and tyrosine kinase
inhibitors, may activate intestinal chloride secretory pathways leading to increased chloride secretion into the gut lumen,
coupled with significant loss of water that would result in secretory diarrhea.
According to data appearing in “Treatment Guidelines for CID” (chemotherapy-induced diarrhea) in the April
2004 issue of Gastroenterology and Endoscopy News, diarrhea is the most common adverse event reported in
chemotherapy patients. Approved third-party supportive care products for chemotherapy-induced nausea and vomiting
(“CINV”) include Sustol, Aloxi, Akynzeo and Sancuso. According to a market research report by iHealthcareAnalyst,
Inc., the global market for CINV drugs is estimated to reach a value of $3.9 billion by 2029.
Diarrhea has been reported as the most common side effect of the recently approved CDK 4/6 inhibitor
abemaciclib and the pan HER TKI neratinib, with occurrence ranging from 86% to >95% and grade 3 over 40%, in
published studies. Diarrhea in this patient population has the potential to cause dehydration, potential infections, and
non-adherence to treatment. A novel antidiarrheal like crofelemer may hold promise for treating secretory diarrhea—and
therefore also support long term cancer treatment adherence—in this population.
Crofelemer was granted ODD for SBS by the FDA in August 2017 and by the EMA in December 2021.
Crofelemer was granted ODD by the U.S. FDA in February 2023 for MVID, a rare CDD condition, and crofelemer
received ODD for MVID from the EMA in October 2022. The Company is currently supporting investigator-initiated
POC studies of crofelemer in patients with SBS with intestinal failure or CDD, focused on obtaining POC of reduction
of requirements of parenteral support including parenteral nutrition and/or intravenous fluids, throughout 2023. In
accordance with the guidelines of specific European Union countries, publications of POC data from these trials could
support early patient access to crofelemer for SBS with intestinal failure or CDD in 2023 through programs in Europe.
Early access programs are revenue generating, and reimbursable for participating patients.
The Orphan Drug Act (“ODA”) in the US provides for granting special status to a small molecule drug or
biological product to treat a rare disease or condition upon request of a sponsor. This status is referred to as ODD (or
sometimes "orphan status"). ODD qualifies the sponsor of the drug for various development incentives, including tax
credits for qualified clinical testing and relief of filing fees. Additionally, the ODA provides a seven-year period of
marketing exclusivity to the first sponsor who obtains marketing approval for a designated orphan drug.
In the EU, receipt of ODD supports some specific regulatory pathways, and sponsors who obtain ODD for their
drug can benefit from Scientific Advice from the EMA for clinical trials for the orphan indication and receive market
exclusivity for a period of ten years once the medicine is approved for commercialization.
CDD is a group of rare, chronic intestinal channel diseases, with onset in early infancy, that are characterized
by severe, lifelong diarrhea and a lifelong need for nutritional intake either parenterally or with a feeding tube. CDD is
related to specific genetic defects inherited as autosomal recessive traits. The incidence of CDD is prevalent in regions
where consanguineous marriage (related by blood) is part of the culture. CDD is directly associated with serious
secondary conditions including dehydration, metabolic acidosis, and failure to thrive, prompting the need for immediate
therapy to prevent death and limit lifelong disability. A recent preclinical study shows that crofelemer reduces the
chloride secretion in intestinal cells derived from patients with CDD and these preclinical results provide additional
support and rationale for the use of crofelemer in treating patients with CDD and/or SBS with IF.
As previously announced (in 2019), a clinical research study sponsored by The University of Texas Health
Science Center at Houston (“UTHealth”) is being supported by Napo. This study evaluates the safety and
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effectiveness of crofelemer for treatment of chronic idiopathic diarrhea in patients. Chronic idiopathic diarrhea is a
common complaint of patients presenting to family practitioners and internists and is one of the most common reasons
for referral to gastroenterologists. It is estimated that the prevalence of chronic idiopathic diarrhea in developed
countries (including the U.S.) is approximately 3-5%. It has a significant negative effect on health-related quality of life
and causes a high economic burden on patients and society. The American Gastroenterological Association Burden of
Illness study (2012) showed that the estimated annual direct and indirect costs associated with chronic idiopathic
diarrhea is up to $524 million per year and $136 million per year, respectively. The principal investigator for this study is
Dr. Brooks D. Cash, MD, AGAF, FACG, FACP, FASGE, Chief – Division of Gastroenterology, Hepatology and
Nutrition, Sterling Professor of Medicine, McGovern Medical School at UTHealth, Co-Director, Ertan Digestive
Disease Center at Memorial Hermann-Texas Medical Center. The Study is titled Yield of Diagnostic Tests and
Management of Crofelemer for Chronic Idiopathic Diarrhea in Non-HIV Patients.
Crofelemer is also being evaluated in another investigator-initiated trial for the management of functional
diarrhea in non-HIV patients. This study is being conducted at the Beth Israel Deaconess Medical Center, Harvard
Medical School, Boston, MA. This clinical study is a randomized double-blind, placebo-controlled study in adult
subjects with functional diarrhea. Eligible patients will have functional diarrhea defined by Rome IV criteria as >25%
loose watery stools and <25% hard/lumpy stools. The study plans to randomize 80 patients and the subjects will be
randomized 1:1 for 4 weeks to either the placebo or crofelemer 125 mg delayed-release tablets (Mytesi) arm,
administered twice daily for 4 weeks. Following the four-week placebo-controlled period, all subjects will receive
Mytesi for an additional four weeks in an open label extension phase. The safety and tolerability of crofelemer and the
clinical response during the placebo-controlled period will be evaluated in this study. Subjects will be allowed to use
limited amounts of an antimotility drug (loperamide) during the placebo-controlled and open-label extension phase to
manage uncontrolled diarrhea. However, no more than 11 doses of 2 mg loperamide will be permitted during any given
week per subject.
Jaguar’s and Napo’s portfolio development strategy involves meeting with Key Opinion Leaders (“KOLs”) to
identify indications that are potentially high value because they address important medical needs that are significantly or
globally unmet, obtain input on protocol practicality and protocol generation, and then strategically sequencing
indication development priorities, second-generation product pipeline development, and partnering goals on a global
basis.
Mytesi is the only antidiarrheal drug that has been approved by the US FDA for the treatment of chronic,
noninfectious diarrhea in adult HIV/AIDS patients receiving ART. This approval was on the basis of the drug’s safety
and efficacy in reducing the number of weekly and daily watery stools in patients and improvement of stool consistency,
from unformed to formed stools, over a 24-week treatment period.
Unlike other available diarrhea remedies, crofelemer does not act by inhibiting intestinal motility. It has
minimal oral absorption and does not have any clinically significant food or drug interactions, thereby allowing patients
to maintain their appropriate dosing of treatment to suppress their viral load and maintain adequate CD4 levels in
PLWHA. Crofelemer is also the only approved antidiarrheal drug that is approved for chronic use. Moreover, it is not an
opioid, like other traditionally used treatments, thus avoiding both the acute side effect of constipation and the potential
for abuse.
There are significant barriers to entry for generic competition for Mytesi (crofelemer). Napo holds an extensive
global patent portfolio. At the present time, we hold approximately 145 issued worldwide patents, with coverage in
many cases that extends until 2031. These issued patents cover multiple indications, including HIV AIDS diarrhea,
irritable bowel syndrome (“IBS”), IBD, manufacturing, enteric protection from gastric juices, among others. We also
have approximately 55 pending patent applications worldwide in the human health areas that are being prosecuted.
Mytesi is the first oral drug approved under the FDA’s Botanical Guidance, which provides another barrier to
entry from potential generic competition. The FDA requires that the manufacturer of crofelemer use a validated
proprietary bioassay to release the drug substance and drug product of Mytesi. While most generic products are
fashioned to meet chemical release specifications that are in the public domain, the specifics of this assay are not
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publicly available. There is no pathway by which a generic product can be developed for a drug approved under
botanical guidance. In addition, Mytesi is minimally absorbed systemically, so the classic approach of creating a generic
drug by matching pharmacokinetic blood levels is not possible. A generic player would have to conduct costly and risky
clinical trials.
While Jaguar’s commercial and development efforts have evolved to focus primarily on Mytesi and human
pipeline indications since its merger with Napo, the Company commenced launch initiatives related to Canalevia-CA1,
our drug product which received conditional approval in December 2021 for treatment of CID in dogs. CID in dogs is
typically caused by the same mechanism of action as in humans, and hence the work in dogs serves as a preclinical proof
of concept for the diarrhea in humans that is related to targeted cancer therapy. CID is an interesting model for human
medical need and is being pursued as a prescription indication for animal health. We believe there is an important unmet
medical need for the treatment of CID in dogs. Certain 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 in humans as well.
As previously announced, Jaguar has received MUMS designation status from the FDA for Canalevia-CA1 for
the indication of CID in dogs. MUMS designation is modeled on the ODD for human drug development and offers
possible financial incentives to encourage MUMS drug development, such as the availability of grants to help with the
cost of developing the MUMS drug.
Canalevia is also the Company’s drug candidate for the proposed indication of exercise-induced diarrhea
(“EID”) in dogs.
Crofelemer is extracted and purified from the Croton lechleri tree, which we sustainably harvest and manage
through programs that we have been developing over the past 30 years. This process has involved working with local
and indigenous communities to plant trees, obtaining permits for export, and creating a supply network that is robust and
reliable.
Our team continues to have relationships with partners that we began working with in the 1990s. Additionally,
through the establishment of a nonprofit called the Healing Forest Conservancy, our team has created a long-term
mechanism for benefit sharing that recognizes the intellectual contribution of Indigenous populations. This program is
intended to contribute to the continued strength and effectiveness of the valued and strategically important relationships
we have carefully cultivated over the past more than 30 years.
Product Pipeline
In addition to our Mytesi (crofelemer) product that is approved by the U.S. FDA for the symptomatic relief of
noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy, we are also developing a pipeline of
prescription drug product candidates to address unmet needs in gastrointestinal health through Napo. Mytesi
(crofelemer) is a novel, first-in-class anti-secretory antidiarrheal drug which has a normalizing effect to restore the
electrolyte and fluid balance in the gut and lumen, and this mechanism of action has the potential to benefit multiple
disorders. Clinical trials demonstrated that nearly 80% of Mytesi users experienced an improvement in their diarrhea
over a four-week period. At week 20 of the pivotal trial, over half the patients had no watery stools, or a 100% decrease,
and 83% had at least a 50% decrease in watery stools. Our Mytesi pipeline currently includes prescription drug product
candidates for multiple follow-on indications, several of which are backed by Phase 2 evidence from clinical trials. In
addition, NP-300 is in development for symptomatic relief and treatment of moderate-to-severe diarrhea, with or without
concomitant antimicrobial therapy, from bacterial, viral and parasitic infections including Vibrio cholerae, the bacterium
that causes cholera.
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Product
Candidates
Mytesi
Mytesi
Mytesi
Napo Prescription Drug Product Candidates
Indication
CTD
•
Completed Milestones
Initiated pivotal Phase 3
clinical trial in October
2020
IBS-D
• Two Phase 2 studies
Phase 2
completed
Chronic idiopathic
diarrhea
Phase 2 POC
study
• Clinical POC study initiated
at The University of Texas
Health Science Center at
Houston (“UTH”)
Initiated clinical study at
Beth Israel Deaconess
Medical Center, Harvard
Medical School, Boston
• ODD for SBS granted by
•
FDA and EMA
Current
Phase of
Development
Phase 3
Anticipated Near-
Term
Milestones*
• Target trial
enrollment of 256
patients expected to
complete in Q2
2023
• Potential business
development
opportunities
• Top line results
expected in 2023
Phase 2 POC
study
• Enrollment ongoing
Clinical POC
study
•
•
•
IIT POC study in
2023
Initiate clinical
study in 2023
Initiating Phase 1
trial
• ODD for MVID granted by
IND stage
FDA and EMA
• FDA activated Company’s
Phase I
IND: Q3 2022
Mytesi
Functional diarrhea
Crofelemer
powder for oral
solution*
Crofelemer
powder for oral
solution*
NP-300*
Rare disease
indication: SBS with
intestinal failure in
adults
Rare disease
indication: Pediatric
MVID, a CDD
condition
Second-generation
antidiarrheal drug for
infectious diarrhea
including from Vibrio
cholerae, the
bacterium that causes
cholera
*Clinical trials are funding dependent
Estimated Size of Mytesi Target Markets
We believe the medical need for Mytesi is significant, compelling, and unmet, and that doctors are looking for a
drug product with a mechanism of action that is distinct from the options currently available to resolve diarrhea. A
growing percentage of HIV patients have lived with the virus in their gut for 10+ years, often causing gut enteropathy
and chronic or chronic episodic diarrhea. According to data from the U.S. Centers for Disease Control and Prevention, it
was estimated that by 2020 more than 70% of Americans with HIV were 50 and older and had lived with HIV for more
than 10 years (1).
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Market
HIV-related Diarrhea (Mytesi)
Competition
None
CTD (Crofelemer delayed-release
None
tablets)
SBS/CDD (Crofelemer powder for oral
solution)
IBS-D (Crofelemer delayed-release
tablets)
1
3
Infectious Diarrhea (NP-300 tablets)
None
Market Size/Potential
We estimate the U.S. market revenue potential for
Mytesi to be approximately $50 million in gross
annual sales.
An estimated 650,000 U.S. cancer patients receive
chemotherapy in an outpatient oncology clinic(2).
Comparable supportive care (i.e., CINV) product sales
of ~$620 million in 2013(3). Global CINV market
projected to reach a valuation of $2.7 billion by
2022(4).
Financial benefits of ODD. The global SBS market
exceeded $568 million in 2019 and is expected to
reach $4.6 billion by 2027, according to a report by
Vision Research Reports(5).
Most IBS products have an estimated revenue
potential of greater than $1.0 billion(6).
In transactions by other companies, priority review
vouchers have sold for $67 million to $350 million(7).
(1)
(2)
(3)
(4)
(5)
(6)
(7)
HIV Among People Aged 50 and Older (https://www.cdc.gov/hiv/group/age/olderamericans/index.html)
Centers for Disease Control and Prevention. Preventing Infections in Cancer Patients: Information for Health
Care Providers (cdc.gov/cancer/prevent infections/providers.htm)
Heron Therapeutics, Inc. Form 10-K for the fiscal year ended December 31, 2016
Report published by Allied Market Research, titled, "Chemotherapy-induced Nausea and Vomiting (CINV)
Market-Global Opportunity Analysis and Industry Forecast, 2014-2022” (https://www.prnewswire.com/news-
releases/chemotherapy-induced-nausea-and-vomiting-cinv-market-expected-to-reach-2659-million-by-2022-
611755395.html)
Short Bowel Syndrome Market – Global Industry Analysis, Size, Share, Trends, Revenue, Forecast 2020 to
2027 (https://www.mynewsdesk.com/us/medical-technology-news/pressreleases/short-bowel-syndrome-
market-global-industry-analysis-size-share-trends-revenue-forecast-2020-to-2027-3069433)
Merrill Lynch forecasts peak US sales of roughly $1.5 bn for Ironwood’s Linzess
(https://247wallst.com/healthcare-business/2015/04/27/key-analyst-sees-nearly-30-upside-in-ironwood/);
Rodman & Renshaw estimate peak annual sales of Synergy Pharmaceuticals’ Trulance at $2.3 bn in 2021
(https://www.benzinga.com/analyst-ratings/analyst-color/17/04/9304883/what-synergys-new-patents-mean-for-
its-commercial-prospe)
In Aug. 2015, AbbVie Inc. bought a priority review voucher from United Therapeutics Corp for $350 million
(https://www.wsj.com/articles/united-therapeutics-sells-priority-review-voucher-to-abbvie-for-350-million-
1439981104 ). In July 2014, BioMarin announced that it had sold a priority review voucher to Sanofi and
Regeneron for $67.5 million. (https://investors.biomarin.com/2014-07-30-BioMarin-Sells-Priority-Review-
Voucher-for-67-5-Million).
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The following diagram illustrates the mechanism of action of crofelemer, which normalizes chloride ion
secretion and fluid content of the gut to improve stool consistency.
Business Strategy
Our goal is to become a leading pharmaceutical company with first in class, sustainably derived products that
address significant unmet gastrointestinal medical needs globally. To accomplish this goal, we plan to:
Expand Mytesi by leveraging our significant gastrointestinal product knowledge, experience and intellectual property
portfolio
Mytesi (crofelemer 125 mg delayed-release tablets) is a novel, first-in-class anti-secretory antidiarrheal agent
which has a normalizing effect on the electrolyte and fluid balance in the gut, and this mechanism of action has the
potential to benefit multiple gastrointestinal disorders. Our Mytesi (crofelemer) product is approved by the U.S. FDA for
the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. Jaguar, through
Napo, holds global unencumbered rights for Mytesi. Mytesi is in development for multiple possible follow-on
indications, including prophylaxis of diarrhea related to targeted therapy with or without standard chemotherapy.
Crofelemer delayed-release tablets are also being evaluated in IBS-D and idiopathic/functional diarrhea.
Crofelemer powder for oral solution is being developed to support orphan or rare disease indications for infants
and/or children with SBS and/or CDD, such as MVID.
In addition, a NP-300 is in development for symptomatic relief and treatment of moderate-to-severe diarrhea,
with or without concomitant antimicrobial therapy, from bacterial, viral and parasitic infections including Vibrio
cholerae, the bacterium that causes cholera.
Our management team collectively has extensive experience in the development of prescription drugs. This
experience covers all aspects of product development, including discovery, preclinical and clinical development, GMP
manufacturing, regulatory affairs, and commercialization. Key members of this team successfully developed Mytesi.
Maintain commercial capabilities in Mytesi sales and marketing efforts
Napo’s direct sales organization is comprised of Mytesi field sales representatives strategically positioned in
different territories to cover U.S. geographies with the highest potential. With support provided by concomitant
marketing, promotional activities, patient empowerment programs, including an integrated social digital campaign, and
medical education initiatives described below, we expect a proportional response in the number of patients treated with
Mytesi.
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Leverage our relationships with Scientific Advisory Board (SAB) members for crofelemer commercialization and
development in follow-on indications
The Company has retained several subject matter experts and KOLS as its SAB members across the therapeutic
areas of HIV, CTD, gastrointestinal disorders, SBS, and/or CDD.
Establish partnerships to support moving pipeline indications to pivotal clinical trials
The Company’s goal is to establish partnerships to support moving pipeline indications towards
commercialization in the US and/or other geographies.
Strategically sequence the development of follow-on indications of Mytesi and seek geographically focused licensing
opportunities
As announced April 1, 2022, the Company has entered an agreement with Quadri Pharmaceuticals Store LLC
(Quadri Pharma) that grants Quadri Pharma exclusive promotional, commercialization, and distribution rights for
specified human indications of Mytesi (crofelemer 125 mg delayed-release tablets) in Bahrain, Kuwait, Qatar, Saudi
Arabia, the United Arab Emirates (UAE), and Oman following regulatory approval to market crofelemer in these
countries for the specified indications, including the indication currently approved in the U.S. for HIV-related diarrhea.
They also have rights to commercialization, for Mytesi for CTD, for which crofelemer is currently in a pivotal Phase 3
clinical trial. In addition, the agreement grants Quadri Pharma exclusive rights to distribute crofelemer in these countries
in the immediate future under Named Patient Programs.
As announced September 24, 2018, Jaguar and Knight Therapeutics Inc. (“Knight”) entered into a Distribution,
License and Supply Agreement that grants Knight the exclusive right to commercialize Mytesi and related products in
Canada and Israel. The License Agreement has a term of 15 years (with automatic renewals) and provides Knight with
an exclusive right to commercialize current and future Jaguar human health products (including crofelemer, NP-300, and
any product containing a proanthocyanidin or with an anti-secretory mechanism) in Canada and Israel. Knight forfeited
its right of first negotiation for expansion to Latin America. Under the License Agreement, Knight is responsible for
applying for and obtaining necessary regulatory approvals in the territory of Canada and Israel, as well as marketing,
sales and distribution of the licensed products. Knight will pay a transfer price for all licensed products, and upon
achievement of certain regulatory and sales milestones, the Company may receive payments from Knight in an
aggregate amount of up to approximately $18 million payable throughout the initial 15-year term of the agreement. The
Company did not have any license revenues since the execution of this agreement.
Although it is possible that we may enter into additional corporate partnering relationships related to Mytesi,
our intention would be to retain all or co-commercialization and promotional rights in the U.S., so that we do not
become primarily a royalty collecting organization, and we are opposed to entering into any Mytesi partnering
relationship that would require splitting indications. We are seeking to put limited geographically focused partnerships in
place in the near term, while also considering possibilities for a worldwide partnership with a leading global entity
(excluding the U.S. exclusive commercial rights) in the field of gastrointestinal care and cancer in the long term.
Reduce risks relating to product development
Risk reduction is a key focus of our product development programs. Mytesi is FDA approved for a first-in-class
chronic noninfectious diarrhea indication in adult HIV/AIDS patients receiving antiretroviral therapy (“ART”). This
FDA approved New Drug Application (“NDA”) provides, us the ability to leverage this corresponding safety data when
seeking approval for additional follow-on indications that are also chronic or chronic episodic indications. In an effort to
reduce risk further, we have implemented the following approach: first, we meet with KOLs, including at medical
conferences. Next, we confirm unmet medical needs with patients as well as KOLs and discuss the practicality of patient
enrollment and trial implementation. We then generate protocols to discuss with the FDA, seeking, when possible,
special protocol assessments. Our goal is to have de risked the program as much as we believe
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we possibly can, by the time we start devoting significant funds to a clinical trial, in particular the regulatory pathway.
We believe this approach will lead to better long-term outcomes for our products in development.
We will continue to seek partnerships outside the United States for the above indications while focusing on
development and commercial access in the United States directly. We are also focused on investigating NP-300 for
various gastrointestinal indications. NP-300 is a proprietary Jaguar pharmaceutical product, a standardized botanical
extract distinct from crofelemer, also sustainably derived from the Croton lechleri tree.
We believe NP-300, which has a similar mechanism of action as crofelemer and is significantly less costly to
produce, may support efforts to receive a priority review voucher from the U.S. FDA for symptomatic relief and
treatment of moderate-to-severe diarrhea, with or without concomitant antimicrobial therapy, from bacterial, viral and
parasitic infections including Vibrio cholerae, the bacterium that causes cholera. Priority review vouchers are granted by
the FDA to drug developers for tropical disease indications (TDPRV) as an incentive to develop treatments for neglected
diseases and rare pediatric diseases. Additionally, we believe NP-300 represents a long-term pipeline opportunity as a
second-generation anti-secretory agent, on a global basis, for multiple gastrointestinal diseases—especially in resource
constrained countries where the cost of goods is a factor, in part, because requirements often exist in such regions for
drug prices to decrease annually.
The Company has previously presented Phase 2 data on crofelemer for the treatment of diarrhea in cholera
patients from a study in Bangladesh. Napo plans to follow a similar clinical study design to support the development of
NP-300 for a cholera-related indication. Our portfolio development strategy is based on identifying indications that are
potentially high value because they address important medical needs that are significantly or globally unmet, and then
strategically sequencing indication development priorities, second-generation product pipeline development, and
partnering goals on a global basis.
Our technology for proprietary gastrointestinal disease products is central to the product pipelines of both
human and veterinary indications. Crofelemer is also the active pharmaceutical ingredient (“API”) in Canalevia-CA1,
our prescription drug product conditionally approved by the FDA and launched for CID in dogs.
Napo Therapeutics Provides New Opportunities to Treat Orphan Indications Like SBS
Jaguar is strategically pursuing multiple important shots on goal for its drug development pipeline: Crofelemer
for CTD, led by Napo, and crofelemer for SBS and CDD, led by Napo Therapeutics. Jaguar’s exclusive license
agreement with Napo Therapeutics provides a perpetual, royalty-bearing license for Europe, and includes traditional
terms such as royalties on sales in Europe, and a supply agreement, and rights to utilize all data Napo Therapeutics
generates for Jaguar development and approval activities globally.
Competition
There are several significantly larger pharmaceutical companies competing with us in the gastrointestinal
segment.
Diarrhea in adult patients living with HIV/AIDs. We are not aware of any other FDA approved drugs for the
symptomatic relief of diarrhea in HIV/AIDs patients. HIV/AIDs diarrhea patients may also use loperamide or Lomotil
but these medications affect motility which can result in rebound diarrhea and are not indicated for chronic use. Other
agents’ patients may use include over the counter anti diarrheal remedies such as Mylanta or Kaopectate.
Cancer therapy related diarrhea. We are not aware of any FDA approved drugs specifically indicated for
prophylaxis of cancer therapy related diarrhea in patients receiving targeted therapies with or without standard
chemotherapy. Opioids and over-the-counter drugs are commonly used to treat chemotherapy induced diarrhea, but these
drugs affect motility. Certain tyrosine kinase inhibitor chemotherapy agents have diarrhea as a significant side effect. For
example, FDA guidance suggests diarrhea prophylaxis prior to initiating adjuvant therapy with neratinib.
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CDD. We are not aware of any FDA approved drugs specifically indicated for CDD.
SBS with intestinal failure. In the U.S., Takeda Pharmaceuticals’ GATTEX® (teduglutide) is indicated for the
treatment of adults and pediatric patients 1 year of age and older with SBS who are dependent on parenteral support.
Zorbtive® is a recombinant human growth hormone indicated for the treatment of SBS in adult patients receiving
specialized nutritional support. To the best of our knowledge, no drugs have been approved in the US or rest of the world
(ROW) for the reduction of parenteral support with a concomitant reduction in the high stool volume and diarrhea in
SBS patients.
Diarrhea predominant irritable bowel syndrome. Two drugs were approved in 2015 for the treatment of
diarrhea predominant irritable bowel syndrome, Allergan plc’s Viberzi and Xifaxan, which is marketed by Valeant
Pharmaceuticals International. Also, Lotronex was approved by the FDA in 2000 but was withdrawn from the market
and later reintroduced in 2002 under a Risk Management Program. With the exception of Lotronex, the sponsors of
Viberzi and Xifaxan employ extensive media and print promotion for the commercialization of these products.
Infectious diarrhea. We are not aware of any FDA approved drugs specifically acting as anti-secretory drugs to
improve stool consistency. Oral rehydration solution (ORS) with or without the use of antibiotics is the current standard
of care for infectious diarrhea. NP-300 provides a first of its kind antisecretory antidiarrheal drug which would
potentially reduce the duration of diarrhea including its sequalae such as hospitalization.
Manufacturing
The plant material used to manufacture is crude plant latex (“CPL”) extracted and purified from Croton
lechleri, a widespread and naturally regenerating tree in the rainforest that is managed as part of sustainable harvesting
programs. The tree is found in several South American countries and has been the focus of long term sustainable
harvesting research and development work. Napo’s collaborating suppliers obtain CPL and arrange for the shipment of
CPL to Napo’s third party contract manufacturer.
Napo’s third party contract manufacturer, India based Glenmark Life Sciences Ltd. (“Glenmark”), a research
driven, global, integrated pharmaceutical company, is Napo’s manufacturer of crofelemer, the active pharmaceutical
ingredient in Mytesi. Glenmark processes CPL into crofelemer utilizing a proprietary manufacturing process. The
processing occurs at an FDA approved Glenmark facility. Additionally, Napo is establishing a second processing site,
which will be operated by Indena S.p.A. (“Indena”), a Milan, Italy based contract manufacturer dedicated to the
identification, development and production of high-quality active principles derived from plants, for use in the
pharmaceutical, health food and personal care industries. Indena has completed the required validation activities to gain
approval as a manufacturer of crofelemer drug substance.
As announced January 25, 2023, the required procedure of registering the source of the API of crofelemer with
the Agenzia Italiana Del Farmaco (“AIFA”), the Italian Medicines Agency, has been successfully completed.
Resultingly, batches of crofelemer API manufactured by Indena can now be used by Jaguar for further development
work. This was a key milestone in the ongoing process of establishing Indena as an additional approved crofelemer
manufacturer as we work to support the increased crofelemer manufacturing demand expected upon potential FDA
approval of crofelemer for new indications, including approval for CTD.
Proprietary Library of Medicinal Plants
We possess a proprietary library of more than 2,300 medicinal plants.
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Intellectual Property
Trademarks
We plan to market all of our products under a trademark or trademarks we select, and we will own all rights,
title and interest, including all goodwill, associated with such trademarks. Mytesi is a registered trademark owned by
Napo. Jaguar Animal Health is a trademark owned by Jaguar.
License Agreements
Patent Portfolio
Napo
Napo owns a portfolio of patents and patent applications covering formulations of and methods of treatment
with proanthocyanidin polymers isolated from Croton spp. or Calophyllum spp., including Mytesi (crofelemer).
Napo owns a family of patents arising from International Patent Application Publication WO2012/058664 that
cover methods of treating HIV associated diarrhea and HAART associated diarrhea with proanthocyanidin polymers
isolated from Croton spp. or Calophyllum spp., including crofelemer. In the U.S., there are two issued patents, US
8,962,680 and US 9,585,868, both of which expire October 31, 2031. Outside the U.S., patent protection for methods of
treating HIV associated diarrhea has been obtained in Australia, Europe, Hong Kong, Japan, Kenya, Mexico, Russia,
Ukraine, South Africa, and Zimbabwe, with expiration dates of October 31, 2031, and applications are pending in Brazil,
Hong Kong, and China. Napo also has patent families related to methods of treating diarrhea predominant irritable
bowel syndrome, methods of treating constipation predominant irritable bowel syndrome, and methods of treating
inflammatory bowel disease, familial adenomatous polyposis and colon cancer, with proanthocyanidin polymers isolated
from Croton spp. or Calophyllum spp., including crofelemer. In particular, for diarrhea predominant irritable bowel
syndrome, Napo has two issued U.S. patents, US 8,846,113 and US 9,980,938, which expire on February 9, 2027, as
well as issued patents in Australia, Canada, Europe, Gulf States, Hong Kong, Japan, South Korea, Mexico, New
Zealand, Singapore, Thailand, and Taiwan and pending applications in Bangladesh, and Venezuela, all of which are
estimated to expire April 30, 2027; for constipation predominant irritable bowel syndrome, Napo has three issued U.S.
patents, with terms to at least April 30, 2027, patents in Australia, Canada, Europe, Hong Kong, Mexico, New Zealand,
and Singapore, all of which are estimated to expire April 30, 2027; and for inflammatory bowel disease, familial
adenomatous polyposis and/or colon cancer, Napo has two issued U.S. patents, US 8,852,649 and US 9,987,250 with
terms until at least January 4, 2028, as well as issued patents in Australia, Hong Kong, and Europe and Canada, which
have estimated expiration dates of April 30, 2027. Napo has a U.S. patent for the treatment of CID caused by neratinib
with crofelemer and a related continuation application also directed to treating CID effectively filed on March 9, 2018,
as well as multiple pending national stage applications outside the US also directed to treating CID with crofelemer
effectively filed June 19, 2020. In addition, Napo has two patent families each with pending applications in United
States, Australia, Canada, China, Europe, Israel, Jordan, Japan and the Gulf States directed to the treatments of SBS and
CDD, respectively, and each filed on May 31, 2018. Napo also has pending International applications to “Methods and
Compositions For Treating Post-Acute Infection Gastrointestinal Disorders” filed November 23, 2021.
For methods of manufacturing proanthocyanidin polymers isolated from Croton spp. or Calophyllum spp.,
including crofelemer, Napo owns issued patents in India, South Africa, and Eurasia with terms at least until August 26,
2029. Napo also owns issued patents in Brazil, India, and Russia, and a pending application in Venezuela that also cover
methods of manufacturing proanthocyanidin polymers isolated from Croton spp. or Calophyllum spp., including
crofelemer, with terms at least until January 17, 2032. Lastly, Napo owns two U.S. patents covering a formulation of NP
500 (nordihydroguiaretic acid (“NDGA”)) and its use in treating a metabolic disorder that have terms until April 23,
2031.
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Napo also has two international applications pending directed to alstonine derivatives and salts thereof and uses
thereof for treating psychotic disorders which were filed on June 14, 2022, and October 26, 2022, respectively.
Napo grants license to Napo Therapeutics
On August 2021, Napo signed a license agreement with Napo Therapeutics to study, develop, manufacture, and
commercialize Napo’s plant-based crofelemer and NP-300 drug product candidates in the European Union (excluding
Russia) and in specified non-EU countries in Europe for specific indications, which rights and obligations were assumed
by the combined company formed by the merger of Napo EU S.p.A. with Dragon SPAC (the combined company uses
the Napo Therapeutics name). The license agreement grants Napo Therapeutics the rights for SBS-IF, HIV-related
diarrhea, and the symptomatic relief and treatment of IF-related diarrhea in patients with congenital disorders.
Government Regulation
The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose
substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing
and distribution of prescription drugs such as those Napo is that Jaguar and its subsidiaries are commercializing and/or
developing. These agencies and other federal, state and local entities regulate, among other things, the research and
development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval,
advertising and promotion, distribution, post approval monitoring and reporting, sampling and export and import of
Napo’s drug product candidates. To comply with the regulatory requirements in each of the jurisdictions in which Napo
is seeking to market and subsequently sell its prescription products, Napo has established processes and resources to
provide oversight of the development, approval processes and launch of its products and to position those products in
order to gain market share.
U.S. Government Regulation
Human Prescription Drugs
In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act
(“FDCA”), and it’s implementing regulations.
The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state,
local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to
comply with the applicable U.S. requirements at any time during the product development process, approval process or
after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to
approve pending New Drug Applications (“NDAs”), withdrawal of an approval, imposition of a clinical hold, issuance
of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions,
fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the FDA before a human prescription drug may be marketed in the United States
generally involves the following:
● completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the
FDA’s good laboratory practice, or good laboratory practices (“GLPs”) regulations;
● submission to the FDA of an investigational new drug application (“IND”) for human clinical trials;
● approval by an institutional review board (“IRB”) for human trials. Multiple sites may necessitate the
involvement of multiple IRBs and submissions for human health products;
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● performance of adequate and well controlled human clinical trials in accordance with good clinical
practices (“GCPs”), requirements to establish the safety and efficacy of the proposed drug product for each
indication;
● submission to the FDA of an NDA for marketing approval of human prescription drugs;
● satisfactory completion of FDA advisory committees review, if applicable;
● satisfactory completion of an FDA pre-approval inspection (“PAI”) of the manufacturing facility or
facilities at which the product is produced to assess compliance with current good manufacturing practices
(“cGMPs”), requirements and to assure that the facilities, methods and controls are adequate to preserve
the drug’s identity, strength, quality and purity; and
● FDA review and approval of the NDA.
Pre-clinical Studies
Pre-clinical studies include laboratory evaluation of the drug product’s chemistry, toxicity and formulation, as
well as animal studies to assess potential safety and effectiveness. An IND sponsor must submit the results of the pre-
clinical tests, together with manufacturing information, analytical data and any available clinical data or literature,
among other things, to the FDA as part of an IND. Some pre-clinical testing may continue even after the IND is
submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA
raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.
As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Trials for Human Prescription Drugs
Clinical trials involve the administration of the investigational new drug to human subjects pursuant to a
clinical protocol, under the supervision of qualified investigators in accordance with GCPs requirements, which include
the requirement that all research subjects provide their informed consent in writing for their participation in any clinical
trial. Clinical trials are conducted under protocols detailing, among other things, the objectives or endpoints of the trial,
the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical
trial and any subsequent protocol amendments must be submitted to the FDA under the IND. In addition, an IRB at each
institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at
that institution. Information about certain clinical trials must be submitted within specific timeframes to the National
Institutes of Health, or NIH, for public dissemination on their www.clinicaltrials.gov website.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
•
•
•
Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or
condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if
possible, to gain an early indication of its effectiveness depending on the endpoints set forth in the
protocol.
Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to
determine dosage tolerance and optimal dosage.
Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed
clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the
efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product,
and to provide adequate information for the labeling of the product.
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Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and
more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed
successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a
clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an
unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the
clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with
unexpected serious harm to patients.
Special Protocol Assessment for Human Health Prescription Drugs
The special protocol assessment, or SPA, process is designed to facilitate the FDA’s review and approval of
drugs by allowing the FDA to evaluate issues related to the adequacy of certain clinical trials, including Phase 3 clinical
trials that can form the primary basis for a drug product’s efficacy claim in an NDA. Upon specific request by a clinical
trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s questions regarding, among other things,
primary efficacy endpoints, trial conduct and data analysis, within 45 days of receipt of the request.
The FDA ultimately assesses whether the protocol design and planned analysis of the trial are acceptable to
support regulatory approval of the product candidate with respect to effectiveness of the indication studied. All
agreements and disagreements between the FDA and the sponsor regarding a SPA must be clearly documented in a SPA
letter or the minutes of a meeting between the sponsor and the FDA.
Even if the FDA agrees to the design, execution and analyses proposed in protocols reviewed under the SPA
process, the FDA may revoke or alter its agreement under the following circumstances:
•
•
•
•
public health concerns emerge that were unrecognized at the time of the protocol assessment;
the director of the review division determines that a substantial scientific issue essential to determining
safety or efficacy has been identified after testing has begun;
a sponsor fails to follow a protocol that was agreed upon with the FDA; or
the relevant data, assumptions, or information provided by the sponsor in a request for SPA change, are
found to be false statements or misstatements, or are found to omit relevant facts.
A documented SPA may be modified, and such modification will be deemed binding on the FDA review
division, except under the circumstances described above, if FDA and the sponsor agree in writing to modify the
protocol and such modification is intended to improve the study.
Marketing Approval for Human Prescription Drugs
Assuming successful completion of the required clinical testing, the results of the pre-clinical studies and
clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed
labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for
one or more indications. In most cases, the submission of an NDA is subject to a substantial application user fee. Under
the Prescription Drug User Fee Act (“PDUFA”), guidelines that are currently in effect, the FDA has a goal of ten months
from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review
typically takes twelve months from the date the NDA is submitted to the FDA because the FDA has approximately two
months to make a “filing” decision.
In addition, under the Pediatric Research Equity Act of 2003, as amended and reauthorized, certain NDAs or
supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the
claimed indications in all relevant pediatric subpopulations; this would include information which supports dosing and
administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own
initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after
approval of the product for use in adults or full or partial waivers from the pediatric data requirements.
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The FDA may also require submission of a risk evaluation and mitigation strategy, or REMS, plan to ensure
that the benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician
communication plans, assessment plans, and/or elements to assure safe use, such as restricted distribution methods,
patient registries, or other risk minimization tools.
The FDA may also require other information as part of the NDA filing, such as an environmental impact
statement. The FDA can waive some or delay compliance with some of these requirements.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting
them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request
additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the
additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once
the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to
determine, among other things, whether the drug is safe and effective and whether the facility in which it is
manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality
and purity.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel
of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a
recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by
the recommendations of an advisory committee, but it considers such recommendations carefully when making
decisions.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and
facilities are in compliance with cGMPs requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to
assure compliance with GCPs requirements.
After evaluating the NDA and all related information, including the advisory committee recommendation, if
any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval
letter, or, in some cases, a complete response letter. A complete response letter must contain a statement of specific items
that prevent the FDA from approving the application and will also contain conditions that must be met in order to secure
final approval of the NDA and may require additional clinical or pre-clinical testing in order for FDA to reconsider the
application. Even with submission of this additional information, the FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s
satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the
drug with specific prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications for use the of product, require that
contraindications, warnings or precautions be included in the product labeling, require that post-approval studies,
Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance
programs to monitor the product after commercialization, or impose other conditions, including distribution and use
restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and
profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-
marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing
requirements and FDA review and approval.
Post-Approval Requirements for Human Prescription Drugs
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing
regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting,
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product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.
After approval, most changes to the approved product, such as adding new indications or other labeling claims are
subject to prior FDA review and approval. New secondary indications must be supported by clinical trials or data. There
also are continuing, annual user fee requirements for any marketed products and the establishments at which such
products are manufactured, as well as new application fees for supplemental applications with clinical data.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For
example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess
and monitor the product’s safety and effectiveness after commercialization.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved
drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic
unannounced inspections by the FDA and these state agencies for compliance with cGMPs requirements. Changes to the
manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA
regulations also require investigation and correction of any deviations from cGMPs requirements and impose reporting
and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMPs compliance.
Once approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the
approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety
risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include,
include, but are not limited to:
● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from
the market or product recalls;
● fines, warning letters or holds on post-approval clinical trials;
● refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or
revocation of product approvals;
● product seizure or detention, or refusal to permit the import or export of products; or
● injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the
market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved
label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability. In
addition, the FDA regulates the purity and or consistency of the approved product. Products, if deemed adulterated, can
lead to serious consequences as set forth above as well as civil and criminal penalties.
EMA Regulation of Human Prescription Drugs
Napo and Napo Therapeutics intend to leverage the orphan medicines marketing authorization incentives from
the EMA for the SBS and CDD indications for crofelemer for the licensed territories in the European Union. EMA has
developed a regulatory procedure for sponsor eligibility for incentives available for drugs with ODD for the appropriate
patient populations in an expedited manner. The EMA is responsible for scientific evaluation of
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centralized marketing authorization applications (“MAA”). Once granted by the European Commission, the centralized
MAA is valid in all EU member states, Iceland, Norway and Liechtenstein.
Centralized authorization procedure
Under the centralized authorization procedure, pharmaceutical companies submit a single marketing
authorization application to EMA. This allows the marketing-authorization holder to market the medicine and make it
available to patients and healthcare professionals throughout the EU on the basis of a single marketing authorization.
EMA's Committee for Medicinal products for Human Use (“CHMP”) or Committee for Medicinal products for
Veterinary Use (“CVMP”) carry out a scientific assessment of the application and give a recommendation on whether
the medicine should be marketed or not. However, under EU law EMA has no authority to actually permit marketing in
the different EU countries. The European Commission is the authorizing body for all centrally authorized product, who
takes a legally binding decision based on EMA's recommendation. This decision is issued within 67 days of receipt of
EMA’s recommendation.
Once granted by the European Commission, the centralized marketing authorization is valid in all EU Member
States as well as in the European Economic Area (“EEA”) countries Iceland, Liechtenstein and Norway. Commission
decisions are published in the Community Register of medicinal products for human use.
Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products,
orphan medicinal products, and medicinal products containing a new active substance indicated for the treatment of
AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases.
Conditional marketing authorization
The EMA supports the development of medicines that address unmet medical needs. In the interest of public
health, applicants may be granted a conditional marketing authorization for such medicines on less comprehensive
clinical data than normally required, where the benefit of immediate availability of the medicine outweighs the risk
inherent in the fact that additional data are still required.
Medicines for human use are eligible if they are intended for treating, preventing or diagnosing seriously
debilitating or life-threatening diseases. This includes orphan medicines. Its use is also intended for a public health
emergency (e.g. a pandemic). For these medicines, less comprehensive pharmaceutical and non-clinical data may also be
accepted. The legal basis is Article 14-a of Regulation (EC) No 726/2004. The provisions for granting a conditional
marketing authorization are further elaborated in Regulation (EC) No 507/2006.
Criteria and conditions
EMA's CHMP may grant a conditional marketing authorization for a medicine if it finds that all of the
following criteria are met:
● the benefit-risk balance of the medicine is positive;
● it is likely that the applicant will be able to provide comprehensive data post-authorization;
● the medicine fulfils an unmet medical need; and
● the benefit of the medicine's immediate availability to patients is greater than the risk inherent in the fact
that additional data are still required.
Conditional marketing authorizations are valid for one year and can be renewed annually. Once a conditional
marketing authorization has been granted, the marketing authorization holder must fulfil specific obligations within
defined timelines. These obligations could include completing ongoing or new studies or collecting additional data to
confirm the medicine's benefit-risk balance remains positive. EMA publishes the conditions of the marketing
authorization in the medicine's European public assessment report.
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The marketing authorization can be converted into a standard marketing authorization (no longer subject to
specific obligations) once the marketing authorization holder fulfils the obligations imposed and the complete data
confirm that the medicine's benefits continue to outweigh its risks. Initially, this is valid for 5 years. It can then be
renewed for unlimited validity.
As for any medicine, if new data show that the medicine’s benefits no longer outweigh its risks, EMA can take
regulatory action, such as suspending or revoking the marketing authorization. EMA can also take regulatory action if
the company does not comply with the imposed obligations.
Despite earlier approval, it guarantees that the medicine meets rigorous EU standards for safety, efficacy and
quality and that comprehensive data is still generated post-approval. It offers a robust post-authorization regulatory
framework based on legally binding obligations, safeguards and controls.
These include:
● full prescribing information and package leaflet with detailed instructions for safe use and conditions for
storage;
● a robust risk-management and safety monitoring plan;
● manufacturing controls including official batch controls for vaccines, as required;
● legally binding post-approval obligations (i.e. conditions) for the marketing authorization holder and a
clear legal framework for the evaluation of emerging efficacy and safety data;
● a pediatric investigation plan.
Guidance for applicants for conditional marketing authorization
EMA advises applicants to discuss their development plans with the EMA via scientific advice or protocol
assistance early in the development process. Involving health technology assessment bodies early is also encouraged,
which is possible via EMA's parallel consultations procedure. The applicant should indicate a request for conditional
marketing authorization in their notification of intention to submit a marketing authorization application. They should
submit this six to seven months before submitting the application. EMA also encourages applicants to further discuss
their plans with EMA as part of a pre-submission meeting. For products deemed suitable for a conditional marketing
authorization, EMA encourages applicants to also consider requesting accelerated assessment.
Applicants should include a formal request for a conditional marketing authorization in their marketing
authorization application. The CHMP will assess this request together with the application. Guideline on the scientific
application and the practical arrangements necessary to implement Regulation (EC) No 507/2006 on the conditional
marketing authorization for medicinal products for human use falling within the scope of Regulation (EC) No 726/2004.
Distinction from authorization under exceptional circumstances
EMA may also grant a marketing authorization in absence of comprehensive data under exceptional circumstances.
Unlike conditional marketing authorization, where marketing approval is granted in the likelihood that the sponsor will
provide such data within an agreed timeframe, EMA can grant authorization under exceptional circumstances when
comprehensive data cannot be obtained even after authorization. This authorization route normally does not lead to a
standard marketing authorization.
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Orphan drug development incentives from EMA
Protocol assistance
The EMA provides a form of scientific advice specifically for orphan medicines called protocol assistance. This
allows sponsors to get answers to their questions on the types of studies needed to demonstrate the medicine's quality,
benefits and risks, and information on the significant benefit of the medicine. Protocol assistance is available at a
reduced charge for designated orphan medicines, linked to a fee-reduction scale that depends on the status of the
sponsor. There is no restriction on the number of times a sponsor can request protocol assistance.
The EMA encourages sponsors to consider coordinating the timing of protocol assistance from the EMA with
request for scientific advice from the FDA. Parallel scientific advice with the FDA is available.
Access to the centralized authorization procedure
All designated orphan medicines are assessed for marketing authorization centrally in the European Union. This
allows companies to make a single application to the EMA, resulting in a single opinion and a single decision from the
European Commission, valid in all EU Member States. Sponsors may also have access via orphan designation to
conditional approval, which is conducted under the centralized procedure.
Ten years of market exclusivity
Authorized orphan medicines benefit from ten years of protection from market competition with similar
medicines with similar indications once they are approved. This period of protection is extended by two years for
medicines that also have complied with an agreed pediatric investigation plan granted at the time of review of the orphan
medicine designation.
Additional incentives for micro, small and medium-sized enterprises (“SMEs”)
Companies classified as SMEs benefit from further incentives when developing medicines with orphan
designation. These include administrative and procedural assistance from the EMA’s SME office and fee reductions.
Fee reductions
Companies applying for designated orphan medicines pay reduced fees for regulatory activities. This includes
reduced fees for protocol assistance, marketing-authorization applications, inspections before authorization, applications
for changes to marketing authorizations made after approval, and reduced annual fees. Fee reductions are revised each
year in relation to the budget available.
EMA Grants
The EMA does not offer research grants for sponsors of orphan medicines, but funding is available from the
European Commission and other sources:
● Horizon 2020, the EU Framework Programme for Research and Innovation;
● E-Rare, a transnational project for research programs on rare diseases.
● Grants are also available for sponsors considering research in the United States or Japan:
● United States: Food and Drug Administration: Orphan products grants program
● Japan: National Institute of Biomedical Innovation: Services to promote development of medicinal
products for rare diseases
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Incentives in Member States
Details on incentives available for designated orphan medicines in EU Member States are available in the
European Commission's Inventory of Union and Member State incentives to support research into, and the development
and availability of, orphan medicinal products.
Activities after orphan designation
Orphan designation makes the sponsor eligible for a number of orphan incentives. Sponsors need to comply
with various activities that take place after a designation has been granted. Sponsors should submit all post-designation
activities, including annual reports. For information and guidance on using IRIS, see the IRIS homepage. Sponsors must
submit an annual report on development to the EMA summarizing the status of development of the medicine.
Sponsors of medicines with orphan designation should also remember to apply for a pediatric investigation plan
(“PIP”), deferral or waiver at the appropriate time, as specified in the Pediatric regulation.
Sponsors also need to submit an application for maintenance of the orphan designation at the time of marketing
authorization, in order to be eligible for the ten-year market exclusivity incentive.
A valid and completed PIP could make the sponsor eligible for the two-year marketing exclusivity extension to
the ten-year marketing exclusivity which is granted at the time of review of the orphan medicinal designation. Transfers
of orphan designation from one sponsor to another are possible. Transfers are free of charge. Sponsors can also request
removal of an orphan designation.
EMA Compassionate Use Program
Compassionate use is a treatment option that allows the use of an unauthorized medicine. Under strict
conditions, products in development can be made available to groups of patients who have a disease with no satisfactory
authorized therapies and who cannot enter clinical trials. The EMA provides recommendations through the Committee
for Medicinal Products for Human Use (“CHMP”), but these do not create a legal framework. Compassionate use
programs are coordinated and implemented by Member States, which set their own rules and procedures.
Established by Article 83 of Regulation (EC) No 726/2004, this tool is designed to:
● facilitate and improve access to compassionate use programs by patients in the EU;
● favor a common approach regarding the conditions of use, the conditions for distribution and the patients
targeted for the compassionate use of unauthorized new medicines;
● increase transparency between Member States in terms of treatment availability.
These programs are only put in place if the medicine is expected to help patients with life-threatening, long-
lasting or seriously debilitating illnesses, which cannot be treated satisfactorily with any currently authorized medicine.
The medicine must be undergoing clinical trials or have entered the marketing-authorization application process and
while early studies will generally have been completed, its safety profile and dosage guidelines may not be fully
established.
How to request an opinion for Compassionate Use
National competent authorities can ask EMA for an opinion on how to administer, distribute and use certain
medicines for compassionate use. The CHMP also identifies which patients would benefit, and Member States should
take note of these recommendations when making decisions.
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Manufacturers and marketing-authorization applicants should not contact EMA to request an opinion, but they
may wish to inform the EMA of applications underway at national level. National competent authorities will inform the
EMA if they are making a product available to a group of patients for compassionate use.
Comparison to individual basis treatment (Named Patient Program)
Compassionate use should not be confused with 'named-patient basis' treatments, which see doctors obtain
medicines directly from manufacturers before authorization. This is done on an individual basis under the direct
responsibility of the doctor, and the EMA does not need to be informed.
In general, medicines that are not yet authorized are first made available through clinical trials and patients
should always be considered for inclusion in trials before being offered compassionate use programs.
Compassionate use recommendations
EMA's recommendations cover how a medicine should be used in compassionate use programs across the EU,
and the type of patient who may benefit from treatment. EMA does not update its recommendations after a medicine
receives marketing authorization, as all relevant information on the medicine's use is available in its European public
assessment report (“EPAR”). However, compassionate use programs may continue in certain Member States until the
medicine becomes available on the market.
Rewards and incentives for pediatric medicines
Several rewards and incentives for the development of pediatric medicines for children are available in the EU.
Medicines authorized across the EU with the results of studies from a pediatric investigation plan included in the product
information are eligible for an extension of their supplementary protection certificate by six months. This is the case
even when the studies' results are negative.
For orphan medicines, the incentive is an additional two years of market exclusivity.
Scientific advice and protocol assistance at the EMA are free of charge for questions relating to the
development of pediatric medicines. Medicines developed specifically for children that are already authorized but are
not protected by a patent or supplementary protection certificate are eligible for a pediatric-use marketing authorization
(“PUMA”). If a PUMA is granted, the product will benefit from 10 years of market protection as an incentive. The
above can be complemented by other incentives to support the research, development and availability of medicinal
products for pediatric use.
Market exclusivity: Orphan medicines
Orphan medicines benefit from ten years of market exclusivity once they receive a marketing authorization in
the EU. This measure is intended to encourage the development of medicines for rare diseases, by protecting them from
competition from similar medicines with similar indications, which cannot be marketed during the exclusivity period.
Market exclusivity is an orphan incentive awarded by the European Commission to a specific clinical indication with an
orphan designation.
Each indication with an orphan designation confers ten years' market exclusivity for the particular indication. A
medicine that has multiple orphan designations for different conditions will benefit from separate market exclusivity
periods pertaining to its different orphan designations.
To benefit from market exclusivity, a medicine must maintain its orphan designation at the time of marketing
authorization.
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Extension of market exclusivity period
The market exclusivity period is extended by two additional years for an orphan-designated condition when the
results of specific studies are reflected in the summary of product characteristics (“SmPC”) addressing the pediatric
population and completed in accordance with a fully compliant PIP.
The European Commission grants the extension based on a positive compliance check from the Pediatric
Committee and opinion from the Committee for Medicinal Products for Human Use (“CHMP”), and includes this
information in the Community register of orphan medicinal products.
Review of market exclusivity period
Article 8(2) of the Orphan Regulation establishes the possibility for Member States to request that the market
exclusivity be reduced from ten to six years, under certain circumstances.
Expiry of market exclusivity
When the period of market exclusivity for an indication ends, the orphan designation for that indication expires
and the European Commission removes it from the Community register of orphan medicinal products.
Once all of the orphan designations associated with an approved medicine have expired or been withdrawn by
the sponsor, the medicine ceases to be classified as an orphan medicine and no longer benefits from the orphan
incentives.
European Union new chemical entity exclusivity
In the EU, new chemical entities, sometimes referred to as new active substances, qualify for eight years of data
exclusivity upon marketing authorization and an additional two years of market exclusivity. This data exclusivity, if
granted, prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic
application for eight years, after which a generic marketing authorization application can be submitted, and the
innovator’s data may be referenced, but not approved for two years. The overall ten-year period will be extended to a
maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an
authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their
authorization, are held to bring a significant clinical benefit in comparison with existing therapies.
European Union orphan designation and exclusivity
In the EU, the EMA’s Committee for Orphan Medicinal Products grants ODD to promote the development of
products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating
conditions affecting not more than 5 in 10,000 persons in the European Union Community and for which no satisfactory
method of diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit to those
affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-
threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales
of the drug in the European Union would be sufficient to justify the necessary investment in developing the medicinal
product.
In the European Union, ODD entitles a party to financial incentives such as reduction of fees or fee waivers and
ten years of market exclusivity is granted following medicinal product approval. This period may be reduced to six years
if the ODD criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify
maintenance of market exclusivity. ODD must be requested before submitting an application for marketing approval.
ODD does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
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European Union Pediatric Plan
In the EEA, marketing authorization applications for new medicinal products not authorized have to include the
results of studies conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed
with the EMA’s Pediatric Committee (“PDCO”). The PIP sets out the timing and measures proposed to generate data to
support a pediatric indication of the drug for which marketing authorization is being sought. The PDCO can grant a
deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to
demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data
can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective
or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or
when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once
the marketing authorization is obtained in all Member States of the EU and study results are included in the product
information, even when negative, the product is eligible for six months’ supplementary protection certificate extension.
For orphan drug designated medicinal products, the 10-year period of market exclusivity is extended to 12 years.
Clinical Trials Regulation in Europe
In the EU, pursuant to the currently applicable Clinical Trials Directive 2001/20/EC and the Directive
2005/28/EC on GCP, a system for the approval of clinical trials in the EU has been implemented through national
legislation of the EU member states. Under this system, an applicant must obtain approval from the national competent
authority of an EU member state in which the clinical trial is to be conducted, or in multiple member states if the clinical
trial is to be conducted in a number of member states. Furthermore, the applicant may only start a clinical trial at a
specific study site after the independent ethics committee for each site has issued a favorable opinion. The clinical trial
application must be accompanied by an investigational medicinal product dossier with supporting information prescribed
by Directive 2001/20/EC and Directive 2005/28/EC and corresponding national laws of the individual EU member states
and further detailed in applicable guidance documents. In April 2014, the EU adopted a new Clinical Trials Regulation
(EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC. It is anticipated that the new
Clinical Trials Regulation (EU) No 536/2014 may come into effect in late 2021with a three-year transition period for
some types of clinical trials. It will overhaul the current system of approvals for clinical trials in the EU. Specifically, the
new regulation, which will be directly applicable in all EU member states, aims at simplifying and streamlining the
approval of clinical trials in the EU. For instance, the new Clinical Trials Regulation provides for a streamlined
application procedure via a single-entry point and strictly defined deadlines for the assessment of clinical trial
applications
Other U.S. Healthcare Laws
In addition to FDA restrictions on marketing of pharmaceutical and biological products, other U.S. federal and
state healthcare regulatory laws restrict business practices in the pharmaceutical industry, which include, but are not
limited to, state and federal anti-kickback, false claims, data privacy and security and physician payment and drug
pricing transparency laws.
The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and
willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly,
to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of
any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal
healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-
Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand
and prescribers, purchasers, formulary managers and beneficiaries on the other. Although there are a number of statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe
harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce
prescribing, purchases, or recommendations may be subject to scrutiny if they do not meet the requirements of a
statutory or regulatory exception or safe harbor. Failure to meet all of the requirements of a particular applicable
statutory exception or regulatory safe harbor does not make the conduct per se illegal under the
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U.S. federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case by case basis
based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent
requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal
healthcare covered business, the statute has been violated.
Additionally, the intent standard under the U.S. federal Anti-Kickback Statute was amended by the Patient
Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or
collectively, the ACA, to a stricter standard such that a person or entity does not need to have actual knowledge of the
statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that
a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a
false or fraudulent claim for purposes of the federal civil False Claims Act. The majority of states also have Anti-
Kickback laws, which establish similar prohibitions and, in some cases, may apply to items or services reimbursed by
any third-party payer, including commercial insurers.
The federal false claims and civil monetary penalties laws, including the civil False Claims Act, prohibit any
person or entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or
fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be
made or used a false record or statement material to a false or fraudulent claim to the federal government, or from
knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal
government. A claim includes “any request or demand” for money or property presented to the U.S. government.
Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private
individual in the name of the government. Violations of the civil False Claims Act can result in very significant
monetary penalties and treble damages. Several pharmaceutical and other healthcare companies have been prosecuted
under these laws for, among other things, allegedly providing free product to customers with the expectation that the
customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims
to be submitted because of the companies’ marketing of products for unapproved, or off label, uses. Companies also
have been prosecuted for allegedly violating the Anti-Kickback Statute and False Claims Act as a result of
impermissible arrangements between companies and healthcare practitioners or as a result of the provision of
remuneration by the companies to the healthcare practitioners. In addition, the civil monetary penalties statute imposes
penalties against any person who is determined to have presented or caused to be presented a claim to a federal health
program that the person knows or should know is for an item or service that was not provided as claimed or is false or
fraudulent. Many states also have similar fraud and abuse statutes or regulations that apply to items and services
reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.
Violations of fraud and abuse laws, including federal and state Anti-Kickback and false claims laws, may be
punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from
federal healthcare programs (including Medicare and Medicaid), disgorgement and corporate integrity agreements,
which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions
and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.
Given the significant size of actual and potential settlements, it is expected that the government authorities will continue
to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable
fraud and abuse laws.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal
criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a
scheme to defraud any healthcare benefit program, including private third party payers, knowingly and willfully
embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare
offense and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false,
fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Similar to the U.S. federal Anti-Kickback Statute, the ACA broadened the reach of certain criminal healthcare fraud
statutes created under HIPAA by amending the intent requirement such that a person or entity does not need to have
actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
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In addition, there has been a recent trend of increased federal and state regulation of payments made to
physicians and certain other healthcare providers. The ACA imposed, among other things, new annual reporting
requirements through the Physician Payments Sunshine Act for covered manufacturers for certain payments and
“transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members. Failure to submit timely, accurately and completely the required
information for all payments, transfers of value and ownership or investment interests may result in civil monetary
penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing
failures.” Covered manufacturers must submit reports by the 90th day of each subsequent calendar year. In addition,
certain states require the implementation of compliance programs and compliance with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, impose
restrictions on marketing practices and/or tracking and reporting of gifts, compensation and other remuneration or items
of value provided to physicians and other healthcare professionals and entities.
Napo may also be subject to data privacy and security regulation by both the federal government and the states
in which Napo conducts its business. HIPAA, as amended by the Health Information Technology for Economic and
Clinical Health Act (“HITECH”), and their respective implementing regulations, including the Final HIPAA Omnibus
Rule, published on January 25, 2013, impose specified requirements relating to the privacy, security and transmission of
individually identifiable health information held by covered entities and their business associates. Among other things,
HITECH made HIPAA’s security standards directly applicable to “business associates,” defined as independent
contractors or agents of covered entities that create, receive, maintain or transmit protected health information in
connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal
penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal
HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws
govern the privacy and security of health information in certain circumstances, many of which differ from each other in
significant ways and may not have the same requirements, thus complicating compliance efforts.
Animal Health Prescription Drugs
Under the FDCA, the term "drug" means articles recognized in the official United States Pharmacopoeia,
official Homeopathic Pharmacopoeia of the United States, or official National Formulary; articles intended for use in the
diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; and articles other than food
intended to affect the structure or any function of the body of man or other animals. It also includes articles intended for
use as a component of a drug.
Once a product is determined to be a drug for animal use, the next step is to determine whether or not it is a
new animal drug. The FDCA defines a new animal drug (in part) as any drug intended for use for animals other than
man, the composition of which is not generally recognized, among experts qualified by scientific training and
experience, as safe and effective for use under the conditions prescribed, recommended, or suggested in its labeling. By
virtue of Supreme Court interpretations of the necessary basis for general recognition, there are, for all practical
purposes, no animal drugs which are not also new animal drugs.
Under the FDCA, a new animal drug may not be legally introduced into interstate commerce unless it is the
subject of either:
● an approved NADA or abbreviated new animal drug application (ANADA) under section 512 of the Act;
● a conditional approval under section 571 of the FDCA;
● a listing on the Legally Marketed Unapproved New Animal Drug Index for Minor Species (the Index)
under section 572 of the FDCA;
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● an emergency use authorization (“EUA”) under section 564 of the FDCA (an EUA may only be issued
under very limited circumstances, more information regarding EUAs is available at this webpage:
Emergency Use Authorization) ; or
● an investigational exemption under section 512(j) of the FDCA.
Three Regulatory Pathways in the U.S. to Legal Marketing Status for Animal Health Drugs
Approval
An approved animal drug has gone through the New Animal Drug Application (NADA) process, or for an
approved generic animal drug, the Abbreviated New Animal Drug Application (ANADA) process. If the information in
the application meets the requirements for approval, FDA approves the animal drug. FDA’s approval means the drug is
safe and effective when it is used according to the label. FDA’s approval also ensures that the drug’s strength, quality,
and purity are consistent from batch to batch, and that the drug’s labeling is truthful, complete, and not misleading.
Conditional Approval
Conditional approval is only available for some animal drugs for use in a minor species or in a major species
under special circumstances. A conditionally approved animal drug has gone through FDA's drug approval process
except the drug has not yet met the effectiveness standard for full approval. FDA’s conditional approval means that when
used according to the label, the drug is safe and has a “reasonable expectation of effectiveness.” FDA's conditional
approval also means that the drug is properly manufactured.
The conditional approval is valid for one year. The drug company can ask FDA to renew the conditional
approval annually for up to four more years, for a total of five years of conditional approval. During the 5-year period,
the drug company can legally sell the animal drug while collecting the remaining effectiveness data. After collecting the
remaining effectiveness data, the company submits an application to FDA for full approval. The agency reviews the
application and, if appropriate, fully approves the drug.
Indexing
An indexed animal drug is a drug on FDA’s Index of Legally Marketed Unapproved New Animal Drugs for
Minor Species, referred to simply as “the Index.” As the name says, a drug listed on the Index is unapproved but has
legal marketing status. It can be legally sold for a specific use in certain minor species. Indexing is allowed for drugs for:
● Non-food-producing minor species, such as pet birds, hamsters, and ornamental fish. These animals are
typically not eaten by people or by other animals that produce food for people to eat; and
● An early non-food life stage of a food-producing minor species, such as oyster spat (immature oysters).
Because people do not generally eat oyster spat, a drug to treat a disease in spat can be indexed, but a drug
to treat a disease in adult oysters, which people commonly eat, cannot be indexed.
Indexing a drug is quite different from the drug approval process. Indexing relies heavily on a panel of qualified
experts outside FDA. The experts review the drug’s safety in the specific minor species and the drug’s effectiveness for
the intended use. All experts on the panel must agree that, when used according to the label, the drug’s benefits outweigh
the risks to the treated animal. If FDA agrees with the panel, the agency adds the drug to the Index.
Animal Health Business Regulations
The development, approval and sale of animal health products are governed by the laws and regulations of each
country in which we intend to seek approval, where necessary, to market and subsequently sell our prescription
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drug and non-drug products. To comply with these regulatory requirements, we have established processes and resources
to provide oversight of the development, approval processes and launch of our products and to position those products in
order to gain market share in each respective market.
Certain U.S. federal regulatory agencies are charged with oversight and regulatory authority of animal health
products in the United States. These agencies, depending on the product and its intended use, may include the FDA, the
USDA and the Environmental Protection Agency. The approval of prescription drugs intended for animal use is
regulated by the FDA’s CVM. In addition, the Drug Enforcement Administration regulates animal therapeutics that are
classified as controlled substances. In addition, the Federal Trade Commission may, in the case of non-drug products,
regulate the marketing and advertising claims being made.
Labeling
The FDA plays a significant role in regulating the labeling, advertising and promotion of animal drugs. This is
also true of regulatory agencies in the EU and other territories. In addition, advertising and promotion of animal health
products is controlled by regulations in many countries. These rules generally restrict advertising and promotion to those
claims and uses that have been reviewed and approved by the applicable agency. We will conduct a review of advertising
and promotional material for compliance with the local and regional requirements in the markets where we sell our
product candidates.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical products for
which Napo obtains regulatory approval. In the United States and markets in other countries, patients who are prescribed
treatments for their conditions and providers performing the prescribed services generally rely on third-party payers to
reimburse all or part of the associated healthcare costs. Patients are unlikely to use Napo’s products unless coverage is
provided and reimbursement is adequate to cover a significant portion of the cost of Napo’s products. Sales of any
products for which Napo receives regulatory approval for commercial sale will, therefore depend, in part, on the
availability of coverage and adequate reimbursement from third party payers. Third party payers include government
authorities, managed care plans, private health insurers and other organizations. In the United States, the process for
determining whether a third party payer will provide coverage for a pharmaceutical or biological product typically is
separate from the process for setting the price of such product or for establishing the reimbursement rate that the payer
will pay for the product once coverage is approved. Third party payers may limit coverage to specific products on an
approved list, also known as a formulary, which might not include all of the FDA approved products for a particular
indication. A decision by a third party payer not to cover Napo’s product candidates could reduce physician utilization of
Napo’s products once approved and have a material adverse effect on Napo’s sales, results of operations and financial
condition. Moreover, a third party payer’s decision to provide coverage for a pharmaceutical or biological product does
not imply that an adequate reimbursement rate will be approved. Adequate third party reimbursement may not be
available to enable Napo to maintain price levels sufficient to realize an appropriate return on Napo’s investment in
product development. Additionally, coverage and reimbursement for products can differ significantly from payer to
payer. One third party payer’s decision to cover a particular medical product or service does not ensure that other payers
will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement
rate. As a result, the coverage determination process will require Napo to provide scientific and clinical support for the
use of Napo’s products to each payer separately and will be a time consuming process.
In the EEA, governments influence the price of products through their pricing and reimbursement rules and
control of national health care systems that fund a large part of the cost of those products to consumers. Some
jurisdictions operate positive and negative list systems under which products may only be marketed once a
reimbursement price has been agreed to by the government. To obtain reimbursement or pricing approval, some of these
countries may require the completion of clinical trials that compare the cost effectiveness of a particular product
candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines,
but monitor and control company profits. The downward pressure on health care costs in general, particularly
prescription products, has become very intense. As a result, increasingly high barriers are being erected to the entry of
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new products. In addition, in some countries, cross border imports from low priced markets exert commercial pressure
on pricing within a country.
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the
prices of pharmaceutical or biological products have been a focus in this effort. Third party payers are increasingly
challenging the prices charged for medical products and services, examining the medical necessity and reviewing the
cost effectiveness of pharmaceutical or biological products, medical devices and medical services, in addition to
questioning safety and efficacy. If these third party payers do not consider Napo’s products to be cost effective compared
to other available therapies, they may not cover Napo’s products after FDA approval or, if they do, the level of payment
may not be sufficient to allow Napo to sell its products at a profit.
Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and
other third party payers have attempted to control costs by limiting coverage and the amount of reimbursement for
particular medical products. For example, in March 2010, the ACA was enacted, which, among other things, increased
the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a
new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for
drugs that are inhaled, infused, instilled, implanted or injected; extended the Medicaid Drug Rebate Program to the
utilization of prescriptions of individuals enrolled in Medicaid managed care plans; imposed mandatory discounts for
certain Medicare Part D beneficiaries as a condition for manufacturers’ outpatient drugs covered under Medicare Part D;
subjected drug manufacturers to new annual fees based on pharmaceutical companies’ share of sales to federal
healthcare programs; created a new Patient Centered Outcomes Research Institute to oversee, identify priorities in, and
conduct comparative clinical effectiveness research, along with funding for such research; creation of the Independent
Payment Advisory Board, once empaneled, will have authority to recommend certain changes to the Medicare program
that could result in reduced payments for prescription drugs; and establishment of a Center for Medicare Innovation at
the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending. Since its
enactment, the U.S. federal government has delayed or suspended the implementation of certain provisions of the ACA.
Napo expects that the ACA, as well as other healthcare reform measures that may be adopted in the future, may
result in more rigorous coverage criteria and lower reimbursement and additional downward pressure on the price that
Napo receives for any approved product. Any reduction in reimbursement from Medicare or other government-funded
programs may result in a similar reduction in payments from private payers. Moreover, recently there has been
heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. The
implementation of cost containment measures or other healthcare reforms may prevent Napo from being able to generate
revenue, attain profitability or commercialize Napo’s drugs.
Additionally, on August 2, 2011, the Budget Control Act of 2011 created measures for spending reductions by
Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at
least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the
legislation’s automatic reduction to several government programs. This included aggregate reductions of Medicare
payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and due to subsequent legislative
amendments to the statute, will stay in effect through 2025 unless additional action is taken by Congress. On January 2,
2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced
Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and
increased the statute of limitations period for the government to recover overpayments to providers from three to five
years. More recently, there has been heightened governmental scrutiny recently over the manner in which manufacturers
set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills
designed to, among other things, bring more transparency to product pricing, review the relationship between pricing
and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical
products.
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Napo expects that additional state and federal healthcare reform measures will be adopted in the future, any of
which could limit the amounts that federal and state governments will pay for healthcare products and services, which
could result in reduced demand for Napo’s products once approved or additional pricing pressures.
Other Regulatory Considerations
We believe regulatory rules relating to human food safety, food additives, or drug residues in food will not
apply to the products we currently are developing because our animal prescription drug product candidates are not
intended for use in production animals, with the exception of horses, which qualify as food animals in Europe and
Canada; and our nonprescription products are not regulated by section 201(g) of the Federal Food, Drug, and Cosmetic
Act, which the FDA is authorized to administer.
We do not believe that our animal nonprescription products are currently subject to regulation in the United
States. The CVM only regulates those animal supplements that fall within the FDA’s definition of an animal drug, food
or feed additive. The Federal Food Drug and Cosmetic Act defines food as “articles used for food or drink for man or
other animals and articles used as components of any such article.” Animal foods are not subject to pre-market approval
and are designed to provide a nutritive purpose to the animals that receive them. Feed additives are defined as those
articles that are added to an animal’s feed or water, as illustrated by the guidance documents. Our nonprescription
products are not added to food, are not ingredients in food, nor are they added to any animal’s drinking water. There is
no intent to make our nonprescription products a component of an animal food, either directly or indirectly. We do not
believe that our nonprescription products fit the definition of an animal drug, food or food additive and therefore are not
regulated by the FDA at this time.
In addition to the foregoing, we may be subject to state, federal and foreign healthcare and/or veterinary
medicine laws, including but not limited to anti-kickback laws, as we may from time to time enter consulting and other
financial arrangements with veterinarians, who may prescribe or recommend our products. If our financial relationships
with veterinarians are found to be in violation of such laws that apply to us, we may be subject to penalties.
Legal Proceedings
From time to time, we may become involved in litigation relating to claims arising from the ordinary course of
business. Other than as set forth in “Item 3. LEGAL PROCEEDINGS”, there are currently no claims or actions pending
against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial
condition or cash flows.
Corporate Information
We were incorporated in the State of Delaware on June 6, 2013. Our principal executive office is located at 200
Pine Street, Suite 400, San Francisco, CA 94104 for human health prescription drugs and the telephone number is (415)
371 8300. We have an additional office at 200 Pine Street, Suite 600, San Francisco, CA 94104 for Jaguar Animal
Health. Our website for the corporation is https://jaguar.health. The information contained on, or that can be accessed
through, our website is not part of this annual report. Our voting common stock is listed on the Nasdaq Capital Market
and trades under the symbol “JAGX.” On July 31, 2017, we completed the acquisition of Napo pursuant to the
Agreement and Plan of Merger, dated March 31, 2017, by and among the Company, Napo, Napo Acquisition
Corporation, and Napo’s representative (the “Merger”).
Employees
As of December 31, 2022, we had 60 employees. Twelve employees hold M.D., D.V.M and/or Ph.D. degrees.
Twenty-two of our employees are engaged in research and development activities and 12 employees are engaged in sales
and marketing. We have 14 employees within Napo Therapeutics in Italy. None of our employees are represented by
labor unions or covered by collective bargaining agreements.
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Description of Properties
Our corporate headquarters are located in San Francisco, California, where we currently lease 10,526 rentable
square feet of office space from M & E, LLC.
ITEM 1A. RISK FACTORS
The business, financial condition and operating results of the Company may be affected by a number of factors,
whether currently known or unknown, including but not limited to those described below. Anyone or more of such
factors could directly or indirectly cause the Company’s actual results of operations and financial condition to vary
materially from past or anticipated future results of operations and financial condition. Any of these factors, in whole or
in part, could materially and adversely affect the Company’s business, financial condition, results of operations and
stock price. The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related
notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report.
Risk Factor Summary
The following is a summary of the principal risks that could adversely affect our business, operations and
financial results.
Risks Related to Our Business
● We have a limited operating history, expect to incur further losses as we grow and may be unable to achieve or
sustain profitability.
● We expect to incur significant additional costs as we continue commercialization efforts for current
prescription drug candidates or other product candidates, and undertake the clinical trials necessary to obtain
any necessary regulatory approvals, which will increase our losses.
● We will need to raise substantial additional capital in the future in the event that we conduct clinical trials for
new indications and we may be unable to raise such funds when needed and on acceptable terms, which would
force us to delay, limit, reduce or terminate one or more of our product development programs.
● We are substantially dependent on the success of Mytesi, our current lead prescription drug product, and
Canalevia-CA1, our conditionally approved prescription drug product for CID in dogs. We cannot be certain
that necessary approvals will be received for planned Mytesi or Canalevia-CA1 follow-on indications or that
these product candidates will be successfully commercialized, either by us or any of our partners.
● If we are not successful in identifying, licensing, developing and commercializing additional product
candidates and products, our ability to expand our business and achieve our strategic objectives could be
impaired.
● Mytesi faces significant competition from other pharmaceutical companies, both for its currently approved
indication and for planned follow-on indications, and our operating results will suffer if we fail to compete
effectively.
● We may be unable to obtain, or obtain on a timely basis, regulatory approval for our existing or future human
or animal prescription drug product candidates under applicable regulatory requirements, which would harm
our operating results.
● The results of our earlier studies of Mytesi may not be predictive of the results in any future clinical trials and
species-specific formulation studies, respectively, and we may not be successful in our efforts to develop or
commercialize line extensions of Mytesi.
● Development of prescription drug products is inherently expensive, time-consuming and uncertain, and any
delay or discontinuance of our current or future pivotal trials would harm our business and prospects.
● We will partially rely on third parties to conduct our development activities. If these third parties do not
successfully carry out their contractual duties, we may be unable to obtain regulatory approvals or
commercialize our current or future human or animal product candidates on a timely basis, or at all.
● Even if we obtain regulatory approval for planned follow-on indications of crofelemer, Canalevia or our
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other product candidates, they may never achieve market acceptance. Further, even if we are successful in the
ongoing commercialization of Mytesi and Canalevia, we may not achieve commercial success.
● Human and animal gastrointestinal health products are subject to unanticipated post-approval safety or
efficacy concerns, which may harm our business and reputation.
● Future federal and state legislation may result in increased exposure to product liability claims, which could
result in substantial losses.
● If we fail to retain current members of our senior management, or to identify, attract, integrate and retain
additional key personnel, our business will be harmed.
● We are dependent on two suppliers for the raw material used to produce the active pharmaceutical ingredient
in Mytesi and Canalevia. The termination of either of these contracts would result in a disruption to product
development and our business will be harmed.
● We are dependent upon third-party contract manufacturers, both for the supply of the active pharmaceutical
ingredient in Mytesi and Canalevia-CA1, as well as for the supply of finished products for commercialization.
● If we are unable to establish sales capabilities on our own or through third parties, we may not be able to
market and sell our current or future human products and product candidates, if approved, and generate
product or other revenue.
● We will need to increase the size of our organization and may not successfully manage such growth.
● Canalevia-CA1 and, our animal health prescription drug product candidates, may be marketed in the United
States only in the target animals and for the indications for which they are approved, and if we want to expand
the approved animals or indications, it will need to obtain additional approvals, which may not be granted.
● The misuse or extra-label use of Mytesi, Canalevia, and our human or animal prescription drug product
candidates if approved by regulatory authorities, may harm our reputation or result in financial or other
damages.
● We may be unable to obtain, or obtain on a timely basis, a renewal of conditional approval for Canalevia-CA1,
or to eventually obtain full regulatory approval of Canalevia-CA1, which would harm our operating results.
● We may not maintain the benefits associated with MUMS designation, including market exclusivity.
● The market for our human and animal products, and the gastrointestinal health market as a whole, is uncertain
and may be smaller than we anticipate, which could lead to lower revenue and harm our operating results.
● Insurance coverage for Mytesi for its current approved indication could decrease or end, or Mytesi might not
receive insurance coverage for any approved follow-on indications, which could lead to lower revenue and
harm our operating results.
● We may engage in future acquisitions that increase our capital requirements, dilute our stockholders, cause us
to incur debt or assume contingent liabilities and subject us to other risks.
● Certain of the countries in which we plan to commercialize our products in the future are developing
countries, some of which have potentially unstable political and economic climates.
● Fluctuations in the exchange rate of foreign currencies could result in currency transactions losses.
● Laws and regulations governing global trade compliance could adversely impact our business.
● There are other gastrointestinal-focused human pharmaceutical companies, and we face competition in the
marketplaces in which we operate or plan to operate.
● Our obligations to Streeterville are secured by a security interest in all of Napo’s NP-300 assets, so if we
default on those obligations, Streeterville could foreclose on our assets.
● Our royalty interests require us to make minimum royalty payments, even if we do not sell a sufficient amount
of products to cover the amount of such payments, which may strain our cash resources.
● Failure in our information technology systems, including by cyber-attacks or other data security incidents,
could significantly disrupt our operations.
● Global macroeconomic conditions may negatively affect us and may magnify certain risks that affect our
business.
● Unfavorable global economic conditions could adversely affect our business, financial condition, or results
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of operations.
● Substantially all of our revenue for recent periods has been received from three customers.
● The Company’s ability to attract and retain qualified members of our board of directors may be impacted due
to new state laws, including recently enacted gender quotas.
● Evolving expectations around corporate responsibility practices, specifically related to environmental, social
and governance (“ESG”) matters, may expose us to reputational and other risks.
Risks Related to Our Intellectual Property
● We cannot be certain that our patent strategy will be effective to protect against competition
● Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by governmental patent agencies, and our patent
protection could be reduced or eliminated for non-compliance with these requirements.
● Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights,
which would be costly, time-consuming and, if successfully asserted against us, delay or prevent the
development and commercialization of our current or future products and product candidates.
● Our proprietary position depends upon the botanical guidance of our drug approval and patents that are
formulation or method-of-use patents, which do not prevent a competitor from using the same human or
animal drug for another use.
● We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming
and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be
successful.
● If we are unable to prevent disclosure of our trade secrets or other confidential information to third parties, our
competitive position may be impaired.
● Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to
protect our products.
● We may not be able to protect our intellectual property rights throughout the world, which could impair our
business.
● Our business could be harmed if we fail to obtain certain registered trademarks in the United States or in other
countries.
● We may be subject to claims that our employees, consultants or independent contractors have wrongfully used
or disclosed confidential information of third parties.
● Even if we receive any of the required regulatory approvals for our current or future prescription drug product
candidates and non-prescription products, we will be subject to ongoing obligations and continued regulatory
review, which may result in significant additional expense.
● Any of our current or future prescription drug product candidates or non-prescription products may cause or
contribute to adverse medical events that we would be required to report to regulatory authorities and, if we
fail to do so, we could be subject to sanctions that would harm our business.
● Legislative or regulatory reforms with respect to animal health may make it more difficult and costly for us to
obtain regulatory clearance or approval of any of our current or future product candidates and to produce,
market, and distribute our products after clearance or approval is obtained.
● We believe that our non-prescription products are not subject to regulation by regulatory agencies in the
United States, but there is a risk that regulatory bodies may disagree with our interpretation, or may redefine
the scope of their regulatory reach in the future, which would result in additional expense and could delay or
prevent the commercialization of these products.
● Even if we receive the required regulatory approvals for our current or future prescription drug product
candidates and non-prescription products, we will be subject to ongoing obligations and continued regulatory
review, which may result in significant additional expense
Risks Related to Our Common Stock
● Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting
of our common stock.
● If our shares become subject to the penny stock rules, it would become more difficult to trade our shares.
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● The price of our common stock could be subject to volatility related or unrelated to our operations, and
purchasers of our common stock could incur substantial losses.
● A possible “short squeeze” due to a sudden increase in demand of our common stock that largely exceeds
supply may lead to further price volatility in our common stock.
● You may not be able to resell our common stock when you wish to sell them or at a price that you consider
attractive or satisfactory.
● If securities or industry analysts do not publish research or reports about our company, or if they issue adverse
or misleading opinions regarding us or our stock, our stock price and trading volume could decline.
● You may be diluted by conversions of outstanding shares of non-voting common stock, exercises of
outstanding options and warrants and issuances of securities pursuant to our ATM Agreement.
● Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders
may consider favorable and may lead to entrenchment of management.
● Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and
exclusive forum for certain actions and proceedings that may be initiated by our stockholders, which could
limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers
or other employees.
● We do not intend to pay dividends on our common stock, and your ability to achieve a return on your
investment will depend on appreciation in the market price of our common stock.
● The requirements of being a public company, including compliance with the reporting requirements of the
Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs
and distract management, and we may be unable to comply with these requirements in a timely or cost-
effective manner.
● We are a smaller reporting company and the reduced reporting requirements applicable to smaller reporting
companies may make our common stock less attractive to investors.
Risks Related to Our Business
We have a limited operating history, expect to incur further losses as we grow and may be unable to achieve or
sustain profitability.
Since the consummation of our merger with Napo Pharmaceuticals Inc. in 2017, our operations have been
primarily focused on research, development and the ongoing commercialization of our lead prescription drug product,
Mytesi, which is approved by the U.S. FDA for the symptomatic relief of noninfectious diarrhea in adults with
HIV/AIDS on antiretroviral therapy. As a result, we have limited meaningful historical operations upon which to
evaluate our business and prospects and have not yet demonstrated an ability to broadly commercialize any of our
human health products beyond Mytesi for HIV-related diarrhea or animal health products, obtain any required marketing
approval for any of our animal prescription drug product candidates or successfully overcome the risks and uncertainties
frequently encountered by companies in emerging fields such as the animal health industry or the gastrointestinal health
industry in general. Our revenues to date have been insufficient to offset our expenses, and we expect to continue to
incur significant research and development and other expenses. Our net losses and comprehensive losses for the years
ended December 31, 2022, and 2021 were $49.1 million and $52.6 million, respectively. As of December 31, 2022, we
had total stockholders’ deficit of $1.4 million. We expect to continue to incur losses for the foreseeable future, which
will increase significantly from historical levels as we expand our product development activities, seek necessary
approvals for our human and veterinary drug product candidates, conduct species-specific formulation studies for our
non-prescription products and increase commercialization activities. Even if we succeed in developing and broadly
commercializing one or more of our products or product candidates, we expect to continue to incur losses for the
foreseeable future, and we may never become profitable. If we fail to achieve or maintain profitability, then we may be
unable to continue our operations at planned levels and be forced to reduce or cease operations.
As more fully discussed in Note 1 to our consolidated financial statements, we believe there is substantial doubt
about our ability to continue as a going concern as we do not currently have sufficient cash resources to fund our
operations through March 20, 2024, or one year from the filing date of our Form 10-K. Our financial statements
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do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to continue as a
viable entity, our stockholders may lose their investment.
We expect to incur significant additional costs as we continue commercialization efforts for current prescription drug
candidates or other product candidates, and undertake the clinical trials necessary to obtain any necessary regulatory
approvals, which will increase our losses.
Napo commenced sales of Mytesi for adults with HIV/AIDS on antiretroviral therapy in September 2016.
Jaguar launched Canalevia-CA1 for chemotherapy-induced diarrhea (“CID”) in dogs in December 2021. We will need to
continue to invest in developing our internal and third-party sales and distribution network and outreach efforts to key
opinion leaders in the gastrointestinal health industry, including physicians and veterinarians as applicable.
We are actively identifying additional products for development and commercialization, and will continue to
expend substantial resources for the foreseeable future to develop Mytesi, NP-300 and Canalevia-CA1. These
expenditures will include costs associated with:
● identifying additional potential prescription drug product candidates and non-prescription products;
● formulation studies;
● conducting pilot, pivotal and toxicology studies;
● completing other research and development activities;
● payments to technology licensors;
● maintaining our intellectual property;
● obtaining necessary regulatory approvals;
● establishing commercial supply capabilities; and
● sales, marketing and distribution of our commercialized products.
We also may incur unanticipated costs in connection with developing and commercializing our products.
Because the outcome of our development activities and commercialization efforts is inherently uncertain, the actual
amounts necessary to successfully complete the development and commercialization of our current or future products
and product candidates may be greater than we anticipate.
Because we anticipate incurring significant costs for the foreseeable future, if we are not successful in broadly
commercializing any of our current or future products or product candidates or raising additional funding to pursue our
research and development efforts, we may never realize the benefit of our development efforts and our business may be
harmed.
In the event that we conduct clinical trials for new indications and new products, we will need to raise substantial
additional capital in the future and we may be unable to raise such funds when needed and on acceptable terms,
which would force to limit new indications and new product development.
We are forecasting continued losses and negative cash flows as we continue to fund our operating and
marketing activities and research and development programs, and to complete the development of all the current
products in our pipeline, or any additional products we may identify. We will need to seek additional funds through
public or private equity or debt financings or other sources such as strategic collaborations. Any such financings or
collaborations may result in dilution to our stockholders, the imposition of debt covenants and repayment obligations or
other restrictions that may harm our business or the value of our common stock. We may also seek from time to
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time to raise additional capital based upon favorable market conditions or strategic considerations such as potential
acquisitions or potential license arrangements.
Our future capital requirements depend on many factors, including, but not limited to:
● the scope, progress, results and costs of researching and developing our current and future prescription
drug product candidates and non-prescription products;
● the timing of, and the costs involved in, obtaining any regulatory approvals for our current and any future
products;
● the number and characteristics of the products we pursue;
● the cost of manufacturing our current and future products and any products we successfully
commercialize;
● the cost of commercialization activities for Mytesi and Canalevia, if approved, including sales, marketing
and distribution costs;
● the expenses needed to attract and retain skilled personnel;
● the costs associated with being a public company;
● our ability to establish and maintain strategic collaborations, distribution or other arrangements and the
financial terms of such agreements; and
● the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent
claims, including litigation costs and the outcome of any such litigation.
General economic conditions, both inside and outside the U.S., including heightened inflation, capital market
volatility, interest rate and currency rate fluctuations, and economic slowdown or recession as well as the COVID-19
pandemic, including the evolution of new and existing variants of COVID-19, and geopolitical events, including civil or
political unrest (such as the ongoing war between Ukraine and Russia), have resulted in a significant disruption of global
financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital,
which could in the future negatively affect our capacity for certain corporate development transactions or our ability to
make other important, opportunistic investments. In addition, market volatility, high levels of inflation and interest rate
fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity. Additional
funds may not be available when we need them on terms that are acceptable to us, or at all or we may not have sufficient
authorized shares to raise additional capital. If adequate funds are not available to us on a timely basis, we may be
required to delay, limit, reduce or terminate one or more of our product development programs or future
commercialization efforts.
We are substantially dependent on the success of Mytesi, our current lead prescription drug product, and Canalevia-
CA1, our conditionally approved prescription drug product for CID in dogs. We cannot be certain that necessary
approvals will be received for planned Mytesi and Canalevia-CA1 follow-on indications or that these product
candidates will be successfully commercialized, either by us or any of our partners.
Other than Mytesi and Canalevia-CA1 (for which we have conditional approval), we currently do not have
regulatory approval for any of our prescription drug product candidates. Our current efforts are primarily focused on the
ongoing commercialization of Mytesi and Canalevia-CA1, and development efforts related to Mytesi and Canalevia-
CA1. With regard to Mytesi, we are focused on marketing the product in the United States as well as on development
efforts related to a follow-on indication for Mytesi in CTD, an important supportive care indication for patients
undergoing primary or adjuvant chemotherapy for cancer treatment. Mytesi is also in development for other possible
follow-on indications, including the rare disease indications of SBS with intestinal failure and CDD; and for IBS-D and
idiopathic/functional diarrhea. With regard to Canalevia-CA1, we are focused on the ongoing
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commercialization of the product in the United States for CID in dogs. In addition, a second-generation proprietary anti-
secretory agent is in development for symptomatic relief and treatment of moderate-to-severe diarrhea, with or without
concomitant antimicrobial therapy, from bacterial, viral and parasitic infections including Vibrio cholerae, the bacterium
that causes cholera. Crofelemer has been granted orphan-drug designation for SBS and MVID, a CDD condition, by
both the FDA and EMA. Accordingly, our near-term prospects, including our ability to generate material product
revenue, obtain any new financing if needed to fund our business and operations or enter into potential strategic
transactions, will depend heavily on the success of Mytesi and Canalevia-CA1.
Substantial time and capital resources have been previously devoted by third parties in the development of
crofelemer, the active pharmaceutical ingredient (“API”), in Mytesi and Canalevia, and the development of the botanical
extract used in Equilevia and Neonorm. Both crofelemer and the botanical extract used in Equilevia and Neonorm were
originally developed at Shaman Pharmaceuticals, Inc. (“Shaman”), by certain members of our management team,
including Lisa A. Conte, our chief executive officer and president, and Steven R. King, Ph.D., our executive vice
president of sustainable supply, ethnobotanical research and intellectual property and secretary. Shaman spent significant
development resources before voluntarily filing for bankruptcy in 2001 pursuant to Chapter 11 of the U.S. Bankruptcy
Code. The rights to crofelemer and the botanical extract used in Equilevia and Neonorm, as well as other intellectual
property rights, were subsequently acquired by Napo from Shaman in 2001 pursuant to a court approved sale of assets.
Ms. Conte founded Napo in 2001 and was the current interim chief executive officer of Napo and a member of Napo’s
board of directors prior to the Merger. While at Napo, certain members of our management team, including Ms. Conte
and Dr. King, continued the development of crofelemer. Following the merger of Jaguar and Napo in July 2017, Napo
became Jaguar’s wholly-owned subsidiary. If we are not successful in the development and commercialization of
Mytesi, our business and our prospects will be harmed.
The successful development and commercialization of Mytesi and Canalevia-CA1 will depend on a number of
factors, including the following:
● our ability to demonstrate to the satisfaction of the FDA and any other regulatory bodies, the safety and
efficacy of Canalevia;
● our ability and that of our contract manufacturers to manufacture supplies of Mytesi and Canalevia-CA1
and to develop, validate and maintain viable commercial manufacturing processes that are compliant with
current good manufacturing practices, or cGMPs, if required;
● our ability to successfully market Mytesi and Canalevia-CA1, whether alone or in collaboration with
others;
● the availability, perceived advantages, relative cost, relative safety and relative efficacy of our prescription
drug product candidates compared to alternative and competing treatments;
● the acceptance of our prescription drug product candidates and non-prescription products as safe and
effective by physicians, veterinarians, patients, animal owners and the human and animal health
community, as applicable;
● our ability to achieve and maintain compliance with all regulatory requirements applicable to our business;
and
● our ability to obtain and enforce our intellectual property rights and obtain marketing exclusivity for our
prescription drug product candidates and non-prescription products, and avoid or prevail in any third-party
patent interference, patent infringement claims or administrative patent proceedings initiated by third
parties or the U.S. Patent and Trademark Office (“USPTO”).
Many of these factors are beyond our control. Accordingly, we may not be successful in developing or
commercializing Mytesi, Neonorm, Equilevia, Canalevia or any of our other potential products. If we are unsuccessful
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or are significantly delayed in commercializing Mytesi, our business and prospects will be harmed and you may lose all
or a portion of the value of your investment in our common stock.
If we are not successful in identifying, licensing, developing and commercializing additional product candidates and
products, our ability to expand our business and achieve our strategic objectives could be impaired.
Although a substantial amount of our efforts is focused on the commercial performance of Mytesi and
Canalevia-CA1, a key element of our strategy is to identify, develop and commercialize a portfolio of products to serve
the gastrointestinal health market. Most of our potential products are based on our knowledge of medicinal plants. Our
current focus is primarily on product candidates whose active pharmaceutical ingredient or botanical extract has been
successfully commercialized or demonstrated to be safe and effective in human or animal trials. In some instances, we
may be unable to further develop these potential products because of perceived regulatory and commercial risks. Even if
we successfully identify potential products, we may still fail to yield products for development and commercialization
for many reasons, including the following:
● competitors may develop alternatives that render our potential products obsolete;
● an outside party may develop a cure for any disease state that is the target indication for any of our
planned or approved drug products;
● potential products we seek to develop may be covered by third-party patents or other exclusive rights;
● a potential product may on further study be shown to have harmful side effects or other characteristics that
indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
● a potential product may not be capable of being produced in commercial quantities at an acceptable cost,
or at all; and
● a potential product may not be accepted as safe and effective by physicians, veterinarians, patients, animal
owners, key opinion leaders and other decision-makers in the gastrointestinal health market, as applicable.
While we are developing specific formulations, including flavors, methods of administration, new patents and
other strategies with respect to our current potential products, we may be unable to prevent competitors from developing
substantially similar products and bringing those products to market earlier than we can. If such competing products
achieve regulatory approval and commercialization prior to our potential products, our competitive position may be
impaired. If we fail to develop and successfully commercialize other potential products, our business and future
prospects may be harmed and we will be more vulnerable to any problems that we encounter in developing and
commercializing our current potential products.
Mytesi faces significant competition from other pharmaceutical companies, both for its currently approved indication
and for planned follow-on indications, and our operating results will suffer if we fail to compete effectively.
The development and commercialization of products for human gastrointestinal health is highly competitive
and our success depends on our ability to compete effectively with other products in the market. During the ongoing
commercialization of Mytesi for its currently approved indication, and during the future commercialization of Mytesi for
any planned follow-on indications, if such follow-on indications receive regulatory approval, we expect to compete with
major pharmaceutical and biotechnology companies that operate in the gastrointestinal space, such as Takeda
Pharmaceuticals, Allergan, Inc., Ironwood Pharmaceuticals, Inc., Synergy Pharmaceuticals Inc., Sebela Pharmaceuticals,
Inc. and Salix Pharmaceuticals.
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Many of our competitors and potential competitors in the human gastrointestinal space have substantially more
financial, technical and human resources and greater ability to lower costs of manufacturing and sales and marketing
than we do. Many also have more experience in the development, manufacture, regulation and worldwide
commercialization of human gastrointestinal health products.
For these reasons, we cannot be certain that we and Mytesi can compete effectively.
We may be unable to obtain, or obtain on a timely basis, regulatory approval for our existing or future human or
animal prescription drug product candidates under applicable regulatory requirements, which would harm our
operating results.
The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of human and animal
health products are subject to extensive regulation. We are typically not permitted to market our prescription drug
product candidates in the United States until we receive approval of the product from the FDA through the filing of an
NDA or NADA, as applicable. To gain approval to market a prescription drug, we must provide the FDA with safety and
efficacy data from pivotal trials that adequately demonstrate that our prescription drug product candidates are safe and
effective for the intended indications. Likewise, to gain approval to market an animal prescription drug for a particular
species, we must provide the FDA with safety and efficacy data from pivotal trials that adequately demonstrate that our
prescription drug product candidates are safe and effective in the target species (e.g., dogs, cats or horses) for the
intended indications. In addition, we must provide manufacturing data evidencing that we can produce our product
candidates in accordance with cGMPs. For the FDA, we must also provide data from toxicology studies, also called
target animal safety studies, and in some cases environmental impact data. In addition to our internal activities, we will
partially rely on contract research organizations (“CROs”), and other third parties to conduct our toxicology studies and
for certain other product development activities. The results of toxicology studies, other initial development activities,
and/or any previous studies in humans or animals conducted by us or third parties may not be predictive of future results
of pivotal trials or other future studies, and failure can occur at any time during the conduct of pivotal trials and other
development activities by us or our CROs. Our pivotal trials may fail to show the desired safety or efficacy of our
prescription drug product candidates despite promising initial data or the results in previous human or animal studies
conducted by others. Success of a prescription drug product candidate in prior animal studies, or in the treatment of
humans, does not ensure success in subsequent studies. Clinical trials in humans and pivotal trials in animals sometimes
fail to show a benefit even for drugs that are effective because of statistical limitations in the design of the trials or other
statistical anomalies. Therefore, even if our studies and other development activities are completed as planned, the
results may not be sufficient to obtain a required regulatory approval for a product candidate.
Regulatory authorities can delay, limit or deny approval of any of our prescription drug product candidates for
many reasons, including:
● if they disagree with our interpretation of data from our pivotal studies or other development efforts;
● if we are unable to demonstrate to their satisfaction that our product candidate is safe and effective for the
target indication and, if applicable, in the target species;
● if they require additional studies or change their approval policies or regulations;
● if they do not approve the formulation, labeling or the specifications of our current and future product
candidates; and
● if they do not approve the manufacturing processes of our third-party contract manufacturers.
Further, even if we receive a required approval, such approval maybe for a more limited indication than we
originally requested, and the regulatory authority may not approve the labeling that we believe is necessary or desirable
for successful commercialization.
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Any delay or failure in obtaining any necessary regulatory approval for the intended indications of our human
or animal product candidates would delay or prevent commercialization of such product candidates and would harm our
business and our operating results.
The results of our earlier studies of Mytesi may not be predictive of the results in any future clinical trials and
species-specific formulation studies, respectively, and we may not be successful in our efforts to develop or
commercialize line extensions of Mytesi.
Our human and animal product pipeline includes a number of potential indications of Mytesi, our lead
prescription product. The results of our studies and other development activities and of any previous studies in humans
or animals conducted by us or third parties may not be predictive of future results of these clinical studies and
formulation studies, respectively. Failure can occur at any time during the conduct of these trials and other development
activities. Even if our formulation/clinical studies and other development activities are completed as planned, the results
may not be sufficient to pursue a particular line extension for Mytesi. Further, even if we obtain promising results from
our clinical trials or species-specific formulation studies, as applicable, we may not successfully commercialize any line
extension. Because line extensions are developed for a particular market, we may not be able to leverage our experience
from the commercial launch of Mytesi in new markets. If we are not successful in developing and successfully
commercializing these line extension products, we may not be able to grow our revenue and our business may be
harmed.
Development of prescription drug products is inherently expensive, time-consuming and uncertain, and any delay or
discontinuance of our current or future pivotal trials would harm our business and prospects.
Development of prescription drug products for human and animal gastrointestinal health remains an inherently
lengthy, expensive and uncertain process, and our development activities may not be successful. We do not know
whether our current or planned pivotal trials for any of our product candidates will begin or conclude on time, and they
may be delayed or discontinued for a variety of reasons, including if we are unable to:
● address any safety concerns that arise during the course of the studies;
● complete the studies due to deviations from the study protocols or the occurrence of adverse events;
● add new study sites;
● address any conflicts with new or existing laws or regulations; or
● reach agreement on acceptable terms with study sites, which can be subject to extensive negotiation and
may vary significantly among different sites.
Further, we may not be successful in developing new indications for Mytesi and Canalevia-CA1, and Neonorm
may be subject to the same regulatory regime as prescription drug products in jurisdictions outside the United States.
Any delays in completing our development efforts will increase our costs, delay our development efforts and approval
process and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm
our business, financial condition and prospects. In addition, factors that may cause a delay in the commencement or
completion of our development efforts may also ultimately lead to the denial of regulatory approval of our product
candidates, which, as described above, would harm our business and prospects.
We will partially rely on third parties to conduct our development activities. If these third parties do not successfully
carry out their contractual duties, we may be unable to obtain regulatory approvals or commercialize our current or
future human or animal product candidates on a timely basis, or at all.
We will partially rely upon CROs to conduct our toxicology studies and for other development activities. We
intend to rely on CROs to conduct one or more of our planned pivotal trials. These CROs are not our employees, and
except for contractual duties and obligations, we have limited ability to control the amount or timing of resources that
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they devote to our programs or manage the risks associated with their activities on our behalf. We are responsible for
ensuring that each of our studies is conducted in accordance with the development plans and trial protocols presented to
regulatory authorities. Any deviations by our CROs may adversely affect our ability to obtain regulatory approvals,
subject us to penalties or harm our credibility with regulators. The FDA and foreign regulatory authorities also require us
and our CROs to comply with regulations and standards, GCPs or GLPs, for conducting, monitoring, recording and
reporting the results of our studies to ensure that the data and results are scientifically valid and accurate.
Agreements with CROs generally allow the CROs to terminate in certain circumstances with little or no
advance notice. These agreements generally will require our CROs to reasonably cooperate with us at our expense for an
orderly winding down of the CROs’ services under the agreements. If the CROs conducting our studies do not comply
with their contractual duties or obligations, or if they experience work stoppages, do not meet expected deadlines, or if
the quality or accuracy of the data they obtain is compromised, we may need to secure new arrangements with
alternative CROs, which could be difficult and costly. In such event, our studies also may need to be extended, delayed
or terminated as a result, or may need to be repeated. If any of the foregoing were to occur, regulatory approval, if
required, and commercialization of our product candidates may be delayed and we may be required to expend
substantial additional resources.
Even if we obtain regulatory approval for planned follow-on indications of crofelemer, Canalevia or our other
product candidates, they may never achieve market acceptance. Further, even if we are successful in the ongoing
commercialization of Mytesi and Canalevia, we may not achieve commercial success.
If we obtain necessary regulatory approvals for planned follow-on indications of crofelemer or our other
product candidates, such products may still not achieve market acceptance and may not be commercially successful.
Market acceptance of Mytesi, Canalevia, and any of our other products depends on a number of factors, including:
● the safety of our products as demonstrated in our target animal studies;
● the indications for which our products are approved or marketed;
● the potential and perceived advantages over alternative treatments or products, including generic
medicines and competing products currently prescribed by physicians or veterinarians, as applicable, and,
in the case of animal products, products approved for use in humans that are used extra-label in animals;
● the acceptance by physicians, veterinarians, companion animal owners, as applicable, of our products as
safe and effective;
● the cost in relation to alternative treatments and willingness on the part of physicians, veterinarians,
patients and animal owners, as applicable, to pay for our products;
● the prevalence and severity of any adverse side effects of our products;
● the relative convenience and ease of administration of our products; and
● the effectiveness of our sales, marketing and distribution efforts.
Any failure by Mytesi or Canalevia to achieve market acceptance or commercial success would harm our
financial condition and results of operations.
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Human and animal gastrointestinal health products are subject to unanticipated post-approval safety or efficacy
concerns, which may harm our business and reputation.
The success of our commercialization efforts will depend upon the perceived safety and effectiveness of human
and animal gastrointestinal health products, in general, and of our products, in particular. Unanticipated safety or
efficacy concerns can subsequently arise with respect to approved prescription drug products, such as Mytesi, or non-
prescription products, such as Neonorm, which may result in product recalls or withdrawals or suspension of sales, as
well as product liability and other claims. Any safety or efficacy concerns, or recalls, withdrawals or suspensions of
sales of our products could harm our reputation and business, regardless of whether such concerns or actions are
justified.
Future federal and state legislation may result in increased exposure to product liability claims, which could result in
substantial losses.
Under current federal and state laws, companion and production animals are generally considered to be the
personal property of their owners and, as such, the owners’ recovery for product liability claims involving their
companion and production animals may be limited to the replacement value of the animal. Companion animal owners
and their advocates, however, have filed lawsuits from time to time seeking non-economic damages such as pain and
suffering and emotional distress for harm to their companion animals based on theories applicable to personal injuries to
humans. If new legislation is passed to allow recovery for such non-economic damages, or if precedents are set allowing
for such recovery, we could be exposed to increased product liability claims that could result in substantial losses to us if
successful. In addition, some horses can be worth millions of dollars or more, and product liability for horses may be
very high. While we currently have product liability insurance, such insurance may not be sufficient to cover any future
product liability claims against us.
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If we fail to retain current members of our senior management, or to identify, attract, integrate and retain additional
key personnel, our business will be harmed.
Our success depends on our continued ability to attract, retain and motivate highly qualified management and
scientific personnel. We are highly dependent upon our senior management, particularly Lisa A. Conte, our president
and Chief Executive Officer. The loss of services of any of our key personnel would cause a disruption in our ability to
develop our current or future product pipeline and commercialize our products and product candidates. Although we
have offer letters with these key members of senior management, such agreements do not prohibit them from resigning
at any time. To help attract, retain, and motivate qualified management and other personnel, we use share-based
incentive awards such as employee stock options and restricted stock units. However, given the volatility in our stock
price, it may be more difficult and expensive to recruit and retain employees, particularly senior management, through
grants of stock or stock options. If our share-based compensation ceases to be viewed as a valuable benefit, our ability to
attract, retain, and motivate qualified management and other personnel could be weakened, which could harm our results
of operations and adversely affect the timing or outcomes of our current and planned studies, as well as the prospects for
commercializing our products.
In addition, competition for qualified personnel in the human gastrointestinal health field is intense because
there are a limited number of individuals who are trained or experienced in the field. We will need to hire additional
personnel as we expand our product development and commercialization activities. Even if we are successful in hiring
qualified individuals, as we are a growing organization, we do not have a track record for integrating and retaining
individuals. If we are not successful in identifying, attracting, integrating or retaining qualified personnel on acceptable
terms, or at all, our business will be harmed.
We are dependent on two suppliers for the raw material used to produce the active pharmaceutical ingredient in
Mytesi and Canalevia. The termination of either of these contracts would result in a disruption to product
development and our business will be harmed.
The raw material used to manufacture Mytesi and Canalevia-CA1 is CPL derived from the Croton lechleri tree,
which is found in countries in South America, principally Peru. The ability of our contract suppliers to harvest CPL is
governed by the terms of their respective agreements with local government authorities. Although CPL is available from
multiple suppliers, we only have contracts with two suppliers to obtain CPL and arrange the shipment to our contract
manufacturer. Accordingly, if our contract suppliers do not or are unable to comply with the terms of our respective
agreements, and we are not able to negotiate new agreements with alternate suppliers on terms that we deem
commercially reasonable, it may harm our business and prospects. The countries from which we obtain CPL could
change their laws and regulations regarding the export of the natural products or impose or increase taxes or duties
payable by exporters of such products. Restrictions could be imposed on the harvesting of the natural products or
additional requirements could be implemented for the replanting and regeneration of the raw material. Such events could
have a significant impact on our cost and ability to produce Mytesi, Canalevia-CA1 and anticipated line extensions.
We are dependent upon third-party contract manufacturers, both for the supply of the active pharmaceutical
ingredient in Mytesi and Canalevia-CA1, as well as for the supply of finished products for commercialization.
We are in negotiations with Indena for the purification of the CPL received from our suppliers into the API
used to manufacture Canalevia-CA1 and Mytesi , as well as the botanical extract in Neonorm. Indena has never
manufactured either such ingredient to commercial scale. Glenmark is the current manufacturer of crofelemer, the active
API in Canalevia-CA1 and Mytesi. As announced in October of 2015, we have entered into an agreement with Patheon,
a provider of drug development and delivery solutions, under which Patheon provides enteric-coated tablets to us for use
in humans and animals. We also may contract with additional third parties for the formulation and supply of finished
products, which we will use in our planned studies and commercialization efforts.
We are dependent upon our contract manufacturers for the supply of the API in Mytesi and Canalevia-CA1. We
currently have sufficient quantities of the API used in Mytesi and Canalevia to support our projected sales efforts. We
are working with our contract manufacturers to increase API manufacturing capacity of the API to support the
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sales forecast for 2023 and beyond. If our contract manufacturer cannot manufacture sufficient quantities of the API in a
timely manner, we could suffer losses due to lost sales opportunities. We currently have sufficient quantities of the
botanical extract used in Neonorm and Equilevia to support planned commercialization efforts for Neonorm and
Equilevia. If we are not successful in reaching agreements with third parties on terms that we consider commercially
reasonable for manufacturing and formulation of Mytesi and Canalevia-CA1, or if our contract manufacturer and
formulator are not able to produce sufficient quantities or quality of the Mytesi and Canalevia-CA1 API or finished
product under their agreements, it could delay our plans and harm our business prospects. For example, as a result of the
outbreak in 2020 of SARS-CoV-2, the virus that causes COVID-19, that originated in Wuhan, China and then spread
globally, our suppliers and contract manufacturer could be disrupted by worker absenteeism, quarantines, or other travel
or health-related restrictions or could incur increased costs associated with ensuring the safety and health of their
personnel. If our suppliers or contract manufacturer is so affected, our supply chain could be disrupted, our product
shipments could be delayed, our costs could be increased and our business could be adversely affected.
The facilities used by our third-party contractors are subject to inspections, including by the FDA, and other
regulators, as applicable. We also depend on our third-party contractors to comply with cGMPs. If our third-party
contractors do not maintain compliance with these strict regulatory requirements, they and we will not be able to secure
or maintain regulatory approval for their facilities, which would have an adverse effect on our operations. In addition, in
some cases, we also are dependent on our third-party contractors to produce supplies in conformity to our specifications
and maintain quality control and quality assurance practices and not to employ disqualified personnel. If the FDA or a
comparable foreign regulatory authority does not approve the facilities of our third-party contractors if so required, or if
it withdraws any such approval in the future, we may need to find alternative manufacturing or formulation facilities,
which could result in delays in our ability to develop or commercialize our products, if at all. We and our third-party
contractors also may be subject to penalties and sanctions from the FDA and other regulatory authorities for any
violations of applicable regulatory requirements. The European Medicines Agency (the “EMA”) employs different
regulatory standards than the FDA, so we may require multiple manufacturing processes and facilities for the same
product candidate or any approved product. We are also exposed to risk if our third-party contractors do not comply with
the negotiated terms of our agreements, or if they suffer damage or destruction to their facilities or equipment.
If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and
sell our current or future human products and product candidates, if approved, and generate product or other
revenue.
We currently have limited sales, marketing or distribution capabilities, and prior to Napo’s launch of Mytesi for
the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy, and our launch of
Neonorm for pre-weaned dairy calves and Canalevia for CID in dogs, we had no experience in the sale, marketing and
distribution of human or animal health products. There are significant risks involved in building and managing a sales
organization, including our potential inability to attract, hire, retain and motivate qualified individuals, generate
sufficient sales leads, provide adequate training to sales and marketing personnel and effectively oversee a
geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales,
marketing and distribution capabilities and entry into adequate arrangements with distributors or other partners would
adversely impact the commercialization of Mytesi, and Canalevia-CA1. If we are not successful in commercializing
Mytesi and/or Canalevia-CA1, for their respective currently approved or conditionally approved indications or for any
potential follow-on indications, either on our own or through one or more distributors, or in generating upfront licensing
or other fees, including through the previously announced licensing arrangement between Napo Pharmaceuticals, Inc.
and Napo Therapeutics S.p.A., we may never generate significant revenue and may continue to incur significant losses,
which would harm our financial condition and results of operations.
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We will need to increase the size of our organization and may not successfully manage such growth.
As of December 31, 2022, we had 60 employees. Our ability to manage our growth effectively will require us
to hire, train, retain, manage and motivate additional employees and to implement and improve our operational, financial
and management systems. These demands also may require the hiring of additional senior management personnel or the
development of additional expertise by our senior management personnel. If we fail to expand and enhance our
operational, financial and management systems in conjunction with our potential future growth, it could harm our
business and operating results.
Canalevia-CA1 and our animal health prescription drug product candidates, if approved, may be marketed in the
United States only in the target animals and for the indications for which they are approved, and if we want to
expand the approved animals or indications, it will need to obtain additional approvals, which may not be granted.
We may market or advertise Canalevia-CA1 and our animal health prescription drug product candidates that are
approved by regulatory authorities only in the specific species and for treatment of the specific indications for which
they were approved, which could limit use of the products by veterinarians and animal owners. We intend to develop,
promote and commercialize approved products for new animal treatment indications in the future, but we cannot be
certain whether or at what additional time and expense we will be able to do so. If we do not obtain marketing approvals
for new indications, our ability to expand our animal health business may be harmed.
Under the Animal Medicinal Drug Use Clarification Act of 1994, veterinarians are permitted to prescribe extra-
label uses of fully approved animal drugs and approved human drugs for animals under certain conditions. While
veterinarians may in the future prescribe and use human-approved products or use our products for extra-label uses, we
may not promote our animal health products for extra-label uses. We note that extra-label uses are uses for which the
product has not received approval. If the FDA determines that any of our marketing activities constitute promotion of an
extra-label use, we could be subject to regulatory enforcement, including seizure of any misbranded or mislabeled drugs,
and civil or criminal penalties, any of which could have an adverse impact on our reputation and expose us to potential
liability. We will continue to spend resources ensuring that our promotional claims for our animal health products and
product candidates remain compliant with applicable FDA laws and regulations, including materials we post or link to
on our website. For example, in 2012, our Chief Executive Officer received an “untitled letter” from the FDA while at
Napo regarding preapproval promotion statements constituting misbranding of crofelemer, which was then an
investigational drug. These statements were included in archived press releases included on Napo’s website. Napo was
required to expend time and resources to revise its website to remove the links in order to address the concerns raised in
the FDA’s letter.
The misuse or extra-label use of Mytesi, Canalevia and our human or animal prescription drug product candidates
approved by regulatory authorities may harm our reputation or result in financial or other damages.
If our human or animal prescription drug product candidates are approved by regulatory authorities, there may
be increased risk of product liability if physicians, veterinarians, patients, animal owners or others, as applicable, attempt
to use such products extra-label, including the use of our products for indications or in species for which they have not
been approved. Furthermore, the use of an approved human or animal drug such as Mytesi and Canalevia for indications
other than those indications for which such products have been approved may not be effective, which could harm our
reputation and lead to an increased risk of litigation. If we are deemed by a governmental or regulatory agency to have
engaged in the promotion of any approved human or animal product for extra-label use, such agency could request that
we modify our training or promotional materials and practices and we could be subject to significant fines and penalties,
and the imposition of these sanctions could also affect our reputation and position within the gastrointestinal health
industry. Any of these events could harm our reputation and our operating results.
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We may be unable to obtain, or obtain on a timely basis, a renewal of conditional approval for Canalevia-CA1, or to
eventually obtain full regulatory approval of Canalevia-CA1, which would harm our operating results.
On December 21, 2021, the FDA conditionally approved Canalevia-CA1 (crofelemer delayed-release tablets)
for the treatment of CID in dogs under application number 141-552. FDA’s conditional approval allows the Company to
legally sell Canalevia-CA1 before proving it meets the “substantial evidence” standard of effectiveness for full approval.
The Company may request renewal of the conditional approval annually for up to four more years, for a total of five
years of conditional approval. To receive a renewal from FDA, the Company must show active progress toward proving
“substantial evidence of effectiveness” for full approval.
If FDA grants all four annual renewals, the Company has up to four-and-a-half years to develop and submit the
necessary data to complete the effectiveness requirement. If the Company does not submit all necessary information to
support full approval of Canalevia-CA1 by this four-and-a-half-year deadline, the conditional approval terminates
immediately. The Company would then be required to stop marketing the drug because it would be considered to be
unapproved.
If the Company submits the necessary information before the four-and-a-half-year deadline, the conditional
approval period runs another six months, for a total of five years, while FDA reviews the application for full approval.
The conditional approval automatically terminates five years after the date of the initial conditional approval. If FDA
does not fully approve the drug before the five-year termination date, the Company would then have to stop marketing
the drug because it would be considered to be unapproved.
We may not maintain the benefits associated with MUMS designation, including market exclusivity.
Although we have received MUMS designation for Canalevia-CA1 for the treatment of CID in dogs, we may
not maintain the benefits associated with MUMS designation. MUMS designation is a status similar to “orphan drug”
status for human drugs. When we were granted MUMS designation for Canalevia-CA1 for the indication of CID in
dogs, we became eligible for incentives to support the approval or conditional approval of the designated use. This
designation does not allow us to commercialize a product until such time as we obtain approval or conditional approval
of the product.
Because Canalevia-CA1 has received MUMS designation for the identified particular intended use, we are
eligible to obtain seven years of exclusive marketing rights upon approval (or conditional approval) of Canalevia-CA1
for that intended use and become eligible for grants to defray the cost of our clinical work. Each designation that is
granted must be unique, i.e., only one designation can be granted for a particular API in a particular dosage form for a
particular intended use. The intended use includes both the target species and the disease or condition to be treated.
At some point, we could lose MUMS designation. The basis for a lost designation can include but is not limited
to, our failure to engage with due diligence in moving forward with a non-conditional approval. In addition, MUMS
designation may be withdrawn for a variety of reasons such as where the FDA determines that the request for
designation was materially defective, or if the manufacturer is unable to assure sufficient quantity of the prescription
drug product to meet the needs of animals with the rare disease or condition. If this designation is lost, it could have a
negative impact on the product and us, which includes but is not limited to, market exclusivity related to MUMS
designation, or eligibility for grants as a result of MUMS designation.
The market for our human and animal products, and the gastrointestinal health market as a whole, is uncertain and
may be smaller than we anticipate, which could lead to lower revenue and harm our operating results.
It is very difficult to estimate the commercial potential of any of our human or animal products because the
gastrointestinal health market continues to evolve and it is difficult to predict the market potential for our products. The
market will depend on important factors such as safety and efficacy compared to other available treatments, changing
standards of care, preferences of physicians, as applicable, the willingness of patients, as applicable, to pay for such
products, and the availability of competitive alternatives that may emerge either during the product development process
or after commercial introduction. If the market potential for our human or animal products is less
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than we anticipate due to one or more of these factors, it could negatively impact our business, financial condition and
results of operations. Further, the willingness of patients to pay for our products may be less than we anticipate, and may
be negatively affected by overall economic conditions.
Insurance coverage for Mytesi for its current approved indication could decrease or end, or Mytesi might not receive
insurance coverage for any approved follow-on indications, which could lead to lower revenue and harm our
operating results.
For its current approved indication, Mytesi is currently reimbursed by almost all of commercial and Medicare
insurance plans. Mytesi is currently covered on Medicaid in all 50 states. However, the nature or extent of coverage for
Mytesi by any of these plans or programs could change or be terminated, or Mytesi might not receive insurance
coverage for any approved follow-on indications. Either outcome could lead to significantly lower revenue and
significantly harm our operating results.
We may engage in future acquisitions that increase our capital requirements, dilute our stockholders, cause us to
incur debt or assume contingent liabilities and subject us to other risks.
We may evaluate various strategic transactions, including licensing or acquiring complementary products,
technologies or businesses. Any potential acquisitions may entail numerous risks, including increased operating
expenses and cash requirements, assimilation of operations and products, retention of key employees, diversion of our
management’s attention and uncertainties in our ability to maintain key business relationships of the acquired entities. In
addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large
one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover,
we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or
obtain access to technology or products that may be important to the development of our business.
Certain of the countries in which we plan to commercialize our products in the future are developing countries, some
of which have potentially unstable political and economic climates.
We may commercialize our products in jurisdictions that are developing and emerging countries. This may
expose us to the impact of political or economic upheaval, and we could be subject to unforeseen administrative or fiscal
burdens. At present, we are not insured against the political and economic risks of operating in these countries. Any
significant changes to the political or economic climate in any of the developing countries in which we operate or plan to
sell products either now or in the future may have a substantial adverse effect on our business, financial condition,
trading performance and prospects.
Fluctuations in the exchange rate of foreign currencies could result in currency transactions losses.
As we expand our operations, we expect to be exposed to risks associated with foreign currency exchange rates.
We anticipate that we may commercialize Mytesi and Canalevia-CA1 and its line extensions in jurisdictions outside the
United States. As a result, we may also be further affected by fluctuations in exchange rates in the future to the extent
that sales are denominated in currencies other than U.S. dollars. We do not currently employ any hedging or other
strategies to minimize this risk, although we may seek to do so in the future.
Laws and regulations governing global trade compliance could adversely impact our business.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), and the Bureau of Industry
and Security (“BIS”) at the U.S. Department of Commerce, administer certain laws and regulations that restrict U.S.
persons and, in some instances, non-U.S. persons, in conducting activities, transacting business with or making
investments in certain countries, governments, entities and individuals subject to U.S. economic sanctions. In addition,
engaging in sales activities to foreign governments introduces additional compliance risks, including risks specific to
anti-bribery regulations, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.K.
Bribery Act 2010 and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in
which we operate. The FCPA prohibits U.S. corporations and their representatives from offering,
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promising, authorizing or making payments to any foreign government official, government staff member, political party
or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA includes interactions with
certain healthcare professionals in many countries. Other countries have enacted similar anti-corruption laws and/or
regulations.
Our international operations subject us to these laws and regulations, which are complex, restrict our business
dealings with certain countries, governments, entities, and individuals, and are constantly changing. Further restrictions
may be enacted, amended, enforced or interpreted in a manner that materially impacts our operations.
Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges,
injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as
criminal fines and imprisonment. We have established policies and procedures designed to assist with our compliance
with such laws and regulations. However, there can be no assurance that our policies and procedures will prevent us
from violating these regulations in every transaction in which we may engage, or that any businesses that we may
acquire have complied with such regulations, and such a violation could adversely affect our reputation, business,
financial condition, results of operations and cash flows.
There are other gastrointestinal-focused human pharmaceutical companies, and we face competition in the
marketplaces in which we operate or plan to operate.
Our commercial success in the human drug arena remains dependent on maintaining or establishing a
competitive position in the market for the current, approved specialty indication of Mytesi as well as for planned Mytesi
follow-on indications. In the IBS-D market in particular, several competitors have commercially available products
approved for our planned IBS-D indication. The availability of our competitors’ products could limit the demand, and
the price we are able to charge, for any drug candidate we develop. The inability to compete with existing or
subsequently introduced drug candidates would have a material adverse impact on our business, financial condition and
prospects.
Our obligations to Streeterville are secured by a security interest in all of Napo’s NP-300 assets, so if we default on
those obligations, Streeterville could foreclose on our assets.
Our obligations under the secured promissory note issued to Streeterville Capital, LLC (“Streeterville”) are
secured by a first priority security interest in all existing and future NP-300 technology held by Napo, including
intellectual property, as provided in the Security Agreement, dated January 19, 2021 between Napo and Streeterville. As
a result, if we default on our obligations under these agreements, Streeterville could foreclose on its security interests
and liquidate some or all of these assets, which would harm our plans to develop and commercialize NP-300, financial
condition and results of operations and could require us to reduce or cease operations with respect to NP-300.
Our royalty interests require us to make minimum royalty payments, even if we do not sell a sufficient amount of
products to cover such payments, which may strain our cash resources.
Since March 2020, we have sold royalty interests to certain lenders that entitle such lenders to receive future
royalties on sales of our products. These royalty interests require us to make minimum royalty payments beginning
2021, even if we do not sell a sufficient amount of product to cover such payments, which may strain our cash resources.
The total minimum royalty payments will be approximately $16.0 million in 2023, $14.6 million in 2024, $19.5 million
in 2025 and $5.3 million in 2026.
Failure in our information technology systems, including by cyber-attacks or other data security incidents, could
significantly disrupt our operations.
Our operations depend, in part, on the continued performance of our information technology systems. Our
information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses, phishing
attacks and other types of disruptions. We have and continue to experience cyber-attacks of varying degrees.
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Our security measures may also be breached due to employee error, malfeasance, system errors or other vulnerabilities.
Such breach or unauthorized access or attempts by outside parties to fraudulently induce employees or users to disclose
sensitive information in order to gain access to our data could result in significant legal and financial exposure, and
damage to our reputation that could potentially have an adverse effect on our business. Because the techniques used to
obtain unauthorized access, or sabotage systems change frequently, become more sophisticated, and often are not
recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate
preventative measures. Additionally, cyber-attacks could also compromise trade secrets and other sensitive information
and result in such information being disclosed to others and becoming less valuable, which could negatively affect our
business. Although we have information technology security systems, a successful cybersecurity attack or other data
security incident could result in the misappropriation and/or loss of confidential or personal information, create system
interruptions, deploy malicious software that attacks our systems, or result in financial losses. It is possible that a
cybersecurity attack might not be noticed for some period of time. The occurrence of a cyber-security attack or incident
could result in business interruptions from the disruption of our information technology systems, or negative publicity
resulting in reputational damage with our stockholders and other stakeholders and/or increased costs to prevent, respond
to or mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or
proprietary or confidential information could expose us or other third-parties to regulatory fines or penalties, litigation
and potential liability, or otherwise harm our business.
Global macroeconomic conditions may negatively affect us and may magnify certain risks that affect our business.
Our business is sensitive to general economic conditions, both inside and outside the U.S. Slower global
economic growth, credit market crises, high levels of unemployment, reduced levels of capital expenditures, government
deficit reduction, changes in inflation and interest rate environments, sequestration and other austerity measures and
other challenges affecting the global economy adversely affects us and our distributors, customers, and suppliers. It is
uncertain how long these effects will last or whether economic and financial trends will worsen or improve. Changes in
economic conditions and supply chain constraints and steps taken by governments and central banks could lead to higher
inflation than previously experienced or expected, which could, in turn, lead to an increase in costs. In an inflationary
environment, we may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation. Such
uncertain economic times may have a material adverse effect on our revenues, results of operations, financial condition
and, if circumstances worsen, our ability to raise capital at reasonable rates. If slower growth in the global economy or in
any of the markets we serve continues for a significant period, if there is significant deterioration in the global economy
or such markets or if improvements in the global economy don’t benefit the markets we serve, our business and financial
statements could be adversely affected.
Additionally, as a result of any future global economic downturn, our third-party payers may delay or be unable
to satisfy their reimbursement obligations. Sales of our principal products are dependent, in part, on the availability and
extent of reimbursement from third-party payers, including government programs such as Medicare and Medicaid and
private payer healthcare and insurance programs. A reduction in the availability or extent of reimbursement from
government and/or private payer healthcare programs could have a material adverse effect on the sales of our products,
our business and results of operations.
Current economic conditions may adversely affect the ability of our distributors, customers, suppliers and
service providers to obtain the liquidity required to pay for our products or to buy necessary inventory or raw materials
and to perform their obligations under agreements with us, which could disrupt our operations, and could negatively
impact our business and cash flow. Although we make efforts to monitor these third parties’ financial condition and their
liquidity, our ability to do so is limited, and some of them may become unable to pay their bills in a timely manner, or
may even become insolvent, which could negatively impact our business and results of operations. These risks may be
elevated with respect to our interactions with third parties with substantial operations in countries where current
economic conditions are the most severe, particularly where such third parties are themselves exposed to sovereign risk
from business interactions directly with fiscally challenged government payers.
At the same time, significant changes and volatility in the financial markets, in the consumer and business
environment, in the competitive landscape and in the global political and security landscape make it increasingly
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difficult for us to predict our revenues and earnings into the future. As a result, any revenue or earnings guidance or
outlook which we have given or might give may be overtaken by events or may otherwise turn out to be inaccurate.
Though we endeavor to give reasonable estimates of future revenues and earnings at the time we give such guidance,
based on then-current conditions, there is a significant risk that such guidance or outlook will turn out to be, or to have
been, incorrect.
Unfavorable global economic conditions could adversely affect our business, financial condition, or results of
operations.
Our business, financial condition, results of operations, or prospects could be adversely affected by general
conditions in the global economy and in the global financial markets. A severe or prolonged economic downturn,
including as a result of the COVID-19 pandemic, the ongoing war in Ukraine, interest rate fluctuations, rising inflation,
recession, or other global financial or geopolitical crises, could result in a variety of risks to our business, including
weakened demand for our product candidates, if approved, or our ability to raise additional capital when needed on
acceptable terms, if at all. A weak or declining economy could also strain our suppliers and contract manufacturing
organizations (“CMO”), possibly resulting in supply or manufacturing disruption. Any of the foregoing could harm our
business and we cannot anticipate all the ways in which such conditions could adversely impact our business.
Substantially all of our revenue for recent periods has been received from three customers.
Substantially all of our revenue has been derived from three customers. Except for the shelter-in-place mandate,
we have not been made aware by our customers if they have experienced other issues arising due to COVID-19 that may
materially impact our financial condition, liquidity or results of operations. We will continue to have dialogues with our
customers.
The Company’s ability to attract and retain qualified members of our board of directors may be impacted due to new
state laws, including recently enacted gender quotas.
In September 2018, California enacted SB 826 requiring public companies headquartered in California to
maintain minimum female representation on their boards of directors as follows: requiring public companies
headquartered in California to maintain minimum female representation on their boards of directors as follows: by
December 31, 2019, public company boards must have a minimum of one female director; by December 31, 2021,
public company boards with five members must have at least two female directors, and public company boards with six
or more members will be required to have at least three female directors.
Additionally, on September 30, 2020, California enacted AB 979, requiring public companies with principal
executive offices in California to each have at least one director from an underrepresented community based on ethnicity
and sexual orientation by December 31, 2021. By December 31, 2022, each of these companies must have at least two
directors from such underrepresented communities if such company has more than four but fewer than nine directors, or
at least three directors from underrepresented communities if the company has nine or more directors.
Each of these measures has been challenged in court, and although judges of the California Superior Court
ruled that AB 979 and SB 826 violate the California constitution in April 2022 and May 2022, respectively, the
Secretary of State of the State of California has appealed such rulings, and the ultimate enforceability of these or similar
laws remains uncertain.
In addition, the Company is subject to the listing rules from Nasdaq related to board diversity and disclosure,
which require all companies listed on Nasdaq’s U.S. exchanges to publicly disclose consistent, transparent diversity
statistics regarding their board of directors. Additionally, the rules require most Nasdaq-listed companies to have, or
explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who
self-identifies as either an underrepresented minority or LGBTQ+.
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Failure to achieve designated minimum gender and diversity levels in a timely manner exposes such companies to
financial penalties and reputational harm. While we are currently in compliance with these regulations, we cannot assure
that we can recruit, attract and/or retain qualified members of the board and meet gender and diversity quotas as a result
of the California laws or Nasdaq rules, which may expose us to penalties and/or reputational harm.
Evolving expectations around corporate responsibility practices, specifically related to ESG matters, may expose us to
reputational and other risks.
Investors, stockholders, customers, suppliers and other third parties are increasingly focusing on ESG and
corporate social responsibility endeavors and reporting. Companies that do not adapt to or comply with the evolving
investor or stakeholder expectations and standards, or which are perceived to have not responded appropriately, may
suffer from reputational damage and result in the business, financial condition and/or stock price of a company being
materially and adversely affected. Further, this increased focus on ESG issues may result in new regulations and/or third-
party requirements that could adversely impact our business, or certain stockholders reducing or eliminating their
holdings of our stock. Additionally, an allegation or perception that we have not taken sufficient action in these areas
could negatively harm our reputation.
Risks Related to Intellectual Property
We cannot be certain that our patent strategy will be effective to protect against competition.
Our commercial success depends in large part on obtaining and maintaining patent, trademark and trade secret
protection of our human or animal products, both prescription and non-prescription, our current human or animal
product candidates and any future human or animal product candidates, and their respective components, formulations,
methods used to manufacture them and methods of treatment, as well as successfully defending our patents and other
intellectual property rights against third-party challenges. Our ability to stop unauthorized third parties from making,
using, selling, offering to sell or importing our products or our product candidates is dependent upon the extent to which
we have rights under valid and enforceable patents, trade secrets and other similar intellectual property that cover these
activities. The patent prosecution process is expensive and time-consuming, and we may not be able to prepare, file and
prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that
we will fail to identify patentable aspects of inventions made in the course of development and commercialization
activities in time to obtain patent protection on them.
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We have a portfolio of United States and foreign issued patents and pending applications related to our products
and product candidates. We have three issued United States patents listed in the FDA’s Orange Book for Mytesi. We plan
to rely on certain of these issued patents as protection for Canalevia. The strength of patents in the field of
pharmaceuticals and animal health involves complex legal and scientific questions and can be uncertain. We cannot be
certain that pending applications will issue as patents. For those patents that are already issued and even if other patents
do successfully issue, third parties may challenge their validity, enforceability or scope, which may result in such patents
being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents may not
adequately protect our intellectual property or prevent others from designing around their claims. If the patents we have
are not maintained or their scope is significantly narrowed or if we are not able to obtain issued patents from pending
applications, our business and prospects would be harmed.
The Leahy-Smith America Invents Act, patent reform legislation enacted in 2011, could increase the
uncertainties and costs surrounding the prosecution of any patent applications and the enforcement or defense of any
patents that issue. The Leahy-Smith Act introduced significant changes to U.S. patent law. These include provisions that
affect the way patent applications are prosecuted, redefine prior art, may affect patent litigation, and switch the U.S.
patent system from a “first-to-invent” system to a “first-to-file” system. Under a “first-to-file” system, assuming the
other requirements for patentability are met, the first inventor to file a patent application generally is entitled to the
patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed
regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to
patent law associated with the Leahy-Smith Act, and in particular, the first-to-file provisions, became effective on March
16, 2013. Among some of the other changes to the patent laws are changes that limit where a patentee may file a patent
infringement suit and that provide opportunities for third parties to challenge any issued patent in the USPTO. The
Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our
patent applications and the enforcement or defense of our patents and any other patents that issue, all of which could
harm our business and financial condition.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance and annuity fees on any issued patent and, in certain jurisdictions, pending applications,
are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The
USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse
can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are
situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in
partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in
abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed
time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the
patents and patent applications covering our prescription drug products, prescription drug product candidates and non-
prescription products, our competitors might be able to enter the market, which would harm our business.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, which
would be costly, time-consuming and, if successfully asserted against us, delay or prevent the development and
commercialization of our current or future products and product candidates.
Our research, development and commercialization activities may infringe or otherwise violate or be claimed to
infringe or otherwise violate patents owned or controlled by other parties. There may be patents already issued of which
we are unaware that might be infringed by a product or one of our current or future prescription drug product candidates
or non-prescription products. Moreover, it is also possible that patents may exist that we are aware of, but that we do not
believe are relevant to our current or future prescription drug product candidates or non-prescription products, which
could nevertheless be found to block our freedom to market these products. Because patent applications can take many
years to issue and may be confidential for 18 months or more after filing, there may be
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applications now pending of which we are unaware and which may later result in issued patents that may be infringed by
our current or future prescription drug product candidates or non-prescription products. We cannot be certain that our
products, current or future prescription drug product candidates or non-prescription products will not infringe these or
other existing or future third-party patents. In addition, third parties may obtain patents in the future and claim that use
of our technologies infringes upon these patents.
To the extent we become subject to future third-party claims against us or our collaborators, we could incur
substantial expenses and, if any such claims are successful, we could be liable to pay substantial damages, including
treble damages and attorney’s fees if we or our collaborators are found to be willfully infringing a third party’s patents. If
a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay
research, development, manufacturing or sales of the human or animal prescription drug or non-prescription product that
is the subject of the suit. Even if we are successful in defending such claims, infringement and other intellectual property
claims can be expensive and time-consuming to litigate and divert management’s attention from our business and
operations. As a result of or in order to avoid potential patent infringement claims, we or our collaborators may be
compelled to seek a license from a third party for which we would be required to pay license fees or royalties, or both.
Moreover, these licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to
obtain such a license, the rights may be nonexclusive, which could allow our competitors access to the same intellectual
property. Any of these events could harm our business and prospects.
Our proprietary position depends upon the botanical guidance of our drug approval and patents that are formulation
or method-of-use patents, which do not prevent a competitor from using the same human or animal drug for another
use.
Composition-of-matter patents on the API in prescription drug products are generally considered to be the
strongest form of intellectual property protection because such patents provide protection without regard to any
particular method of use or manufacture or formulation of the API used. The composition-of-matter patents for
crofelemer, the API in Mytesi and Canalevia-CA1, have expired, and the issued patents and applications relevant to our
products and product candidates cover methods of use for crofelemer and the botanical extract in Neonorm and
Equilevia.
Method-of-use patents protect the use of a product for the specified method and formulation patents cover
formulations of the API or botanical extract. These types of patents do not prevent a competitor from developing or
marketing an identical product for an indication that is outside the scope of the patented method or from developing a
different formulation that is outside the scope of the patented formulation. Moreover, with respect to method-of-use
patents, even if competitors do not actively promote their product for our targeted indications or uses for which we may
obtain patents, physicians may recommend that patients use our products extra-label, and veterinarians may recommend
that animal owners use these products extra-label, or animal owners may do so themselves. Although extra-label use
may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement
is difficult to prevent or prosecute.
We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and
unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful.
We intend to rely upon a combination of regulatory exclusivity periods, patents, trade secret protection, and
confidentiality agreements to protect the intellectual property related to Mytesi, our current prescription drug product
candidates, non-prescription products and our development programs.
If the breadth or strength of protection provided by any patents, patent applications or future patents we may
own, license, or pursue with respect to any of our current or future product candidates or products is threatened, it could
threaten our ability to commercialize any of our current or future human or animal product candidates or products.
Further, if we encounter delays in our development efforts, the period of time during which we could market any of our
current or future product candidates or products under any patent protection we obtain would be reduced.
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Given the amount of time required for the development, testing and regulatory review of new product
candidates or products, patents protecting such candidates might expire before or shortly after such product candidates or
products are commercialized. The United States Patent and Trademark Office (“USPTO”) has issued a patent term
extension certificate extending the term of US 7,341,744 by 1,075 days under 35 USC 156. With respect to requests for
patent term extensions, the applicable authorities, including the USPTO and the FDA, and any equivalent regulatory
authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse
to grant extensions to patents, or may grant more limited extensions than requested. If this occurs, our competitors may
take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch
their product earlier than might otherwise be the case.
Even where laws provide protection or we are able to obtain patents, costly and time-consuming litigation may
be necessary to enforce and determine the scope of our proprietary rights, and the outcome of such litigation would be
uncertain. Moreover, any actions we may bring to enforce our intellectual property against our competitors could
provoke them to bring counterclaims against us, and some of our competitors have substantially greater intellectual
property portfolios than we have. To counter infringement or unauthorized use of any patents we may obtain, we may be
required to file infringement claims, which can be expensive and time-consuming to litigate. In addition, if we or one of
our future collaborators were to initiate legal proceedings against a third party to enforce a patent covering one of our
products, current product candidates, or one of our future products, the defendant could counterclaim that the patent is
invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or
unenforceability are commonplace and challenges to validity of patents in certain foreign jurisdictions is common as
well. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness, non-enablement or lack of statutory subject matter. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld
relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Under
the Hatch-Waxman Act, a competitor seeking to market a generic form of Mytesi before the expiration of any of the
patents listed in the FDA’s Orange Book for Mytesi could file an ANDA with a certification under 21 U.S.C. § 3559(j)
(2)(A)(iv) that each of these patents (except for those which the ANDA filer states it will market only after its
expiration) is either invalid, unenforceable or not infringed. We may assert the patents in Hatch-Waxman litigation
against the party filing the ANDA to keep the competing product off of the market until the patents expire but there is a
risk that we will not succeed. The party filing the ANDA may also counterclaim in the litigation that our patents are not
valid or unenforceable, and the court may find one or more claims of our patents invalid or unenforceable. If this occurs,
a competing generic product could be marketed prior to expiration of our patents listed in the Orange Book, which
would harm our business.
Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex
parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United
States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of
invalidity and unenforceability is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or
unenforceability, we would lose at least part, and perhaps all, of any future patent protection on one or more of our
products or our current or future product candidates. Such a loss of patent protection could harm our business. We
cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during
prosecution or other basis for a finding of invalidity. Litigation proceedings may fail and, even if successful, may result
in substantial costs and distract our management and other employees. Furthermore, because of the substantial amount
of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or
investors perceive these results to be unsuccessful, it could have an adverse effect on the price of our common stock.
Finally, we may not be able to prevent, misappropriation of our trade secrets or confidential information, particularly in
countries where the laws may not protect those rights as fully as in the United States.
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If we are unable to prevent disclosure of our trade secrets or other confidential information to third parties, our
competitive position may be impaired.
We also rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is
not patentable or for which we have not filed patent applications, processes for which patents are difficult to enforce and
other elements of our product development processes that involve proprietary know-how, information or technology that
is not covered by patents. Although we require all of our employees to assign their inventions to us, and endeavor to
execute confidentiality agreements with all of our employees, consultants, advisors and any third parties who have
access to our proprietary know-how, information or technology, we cannot be certain that we have executed such
agreements with all parties who may have helped to develop our intellectual property or had access to our proprietary
information, or that our agreements will not be breached. We cannot guarantee that our trade secrets and other
confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade
secrets or independently develop substantially equivalent information and techniques. If we are unable to prevent
disclosure of our intellectual property to third parties, we may not be able to maintain a competitive advantage in our
market, which would harm our business.
Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable
competitors to quickly duplicate or surpass our technological achievements, and erode our competitive position in our
market.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect
our products.
As is the case with other human or animal pharmaceutical product companies, our success is heavily dependent
on intellectual property, particularly patents. Obtaining and enforcing patents in the human and animal health industries
involves both technological and legal complexity. Therefore, obtaining and enforcing patents is costly, time-consuming
and inherently uncertain. In addition, the United States has recently enacted and implemented wide-ranging patent
reform legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope
of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In
addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has
created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the
federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that
would weaken our ability to obtain new patents or to enforce patents that we have or that we might obtain in the future.
We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Filing, prosecuting and defending patents on human and animal drug products, product candidates and non-
prescription products throughout the world would be prohibitively expensive. Competitors may use our technologies in
jurisdictions where we have not obtained patent protection to develop their own products and, further, may export
otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not
as strong as that in the United States. These products may compete with our products in jurisdictions where we do not
have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective
or sufficient to prevent them from so competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights
in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the
enforcement of patents and other intellectual property protection, particularly those relating to animal health products,
which could make it difficult for us to stop the infringement of our future patents, if any, or patents we have in licensed,
or marketing of competing products in violation of our proprietary rights generally. Further, the laws of some foreign
countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a
result, we may encounter significant problems in protecting and defending our intellectual
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property both in the United States and abroad. Proceedings to enforce our future patent rights, if any, in foreign
jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.
Our business could be harmed if we fail to obtain certain registered trademarks in the United States or in other
countries.
Our registered and pending U.S. trademarks include MYTESI®, JAGUAR HEALTH®, the Jaguar Health
Logo®, NAPO®, Napo Logo®, Napo Therapeutics, CANALEVIA, CANALEVIA-CA1, CANALEVIA-CA2,
EQUILEVIA, NEONORM®, JAGUAR ANIMAL HEALTH®, and the Jaguar Animal Health Logo®. We also own
registered and pending applications for the CANALEVIA mark in a number of foreign countries. During trademark
registration proceedings, we may receive rejections of our trademark applications. If so, we will have an opportunity to
respond, but we may be unable to overcome such rejections. In addition, the USPTO and comparable agencies in many
foreign jurisdictions may permit third parties to oppose pending trademark applications and to seek to cancel registered
trademarks. If opposition or cancellation proceedings are filed against any of our trademark applications or any
registered trademarks, our trademarks may not survive such proceedings. Moreover, any name we propose to use with
our prescription drug product candidates in the United States, including CANALEVIA and CANALEVIA-CA1, must be
approved by the FDA, regardless of whether we have registered or applied to register as a trademark. The FDA typically
conducts a review of proposed prescription drug product names, including an evaluation of potential for confusion with
other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to
expend significant additional resources in an effort to identify a suitable substitute name that would qualify under
applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or
disclosed confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we employ
individuals who were previously employed at other biotechnology, pharmaceutical or animal health companies. We may
be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise
improperly used or disclosed confidential information of these third parties or our employees’ former employers.
Litigation may be necessary to defend against any such claims. Even if we were successful in defending against any
such claims, such litigation could result in substantial cost and be a distraction to our management and employees.
Even if we receive any of the required regulatory approvals for our current or future prescription drug product
candidates and non-prescription products, we will be subject to ongoing obligations and continued regulatory review,
which may result in significant additional expense and delays.
If the FDA or any other regulatory body approves any of our current or future prescription drug product
candidates, or if necessary, our non-prescription products, the manufacturing processes, clinical development, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product may
be subject to extensive and ongoing regulatory requirements. These requirements could include, but are not limited to,
submissions of efficacy and safety and other post-marketing information and reports, establishment registration, and
product listing, compliance with new rules promulgated under the FSMA, as well as continued compliance with cGMPs,
GLPs and GCPs for any studies that we conduct post-approval. Later discovery of previously unknown problems with a
product, including adverse events of unanticipated severity or frequency, or with our contract manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, are reportable events to the FDA and may
result in, among other things:
● restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market,
revised labeling, or voluntary or involuntary product recalls;
● additional clinical studies, fines, warning letters or holds on target animal studies;
● refusal by the FDA, or other regulators to approve pending applications or supplements to approved
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applications filed by us or our strategic collaborators related to the unknown problems, or suspension or
revocation of the problematic product’s license approvals;
● product seizure or detention, or refusal to permit the import or export of products; and
● injunctions and/or the imposition of civil or criminal penalties.
The FDA or other regulatory agency’s policies may change and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval of our product candidates or require certain changes to the
labeling or additional clinical work concerning safety and efficacy of the product candidates. We cannot predict the
likelihood, nature or extent of government regulation that may arise from future legislation or administrative action,
either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the
adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any
marketing approval that we may have obtained and we may not achieve or sustain profitability, which would harm our
business. In addition, failure to comply with these regulatory requirements could result in significant penalties and
delays.
In addition, from time to time, we may enter into consulting and other financial arrangements with physicians
or veterinarians, who prescribe or recommend our products, once approved. As a result, we may be subject to state,
federal and foreign healthcare and/or veterinary medicine laws. If our financial relationships with veterinarians are found
to be in violation of such laws that apply to us, we may be subject to penalties.
Further, our commercial supply is regulated by the FDA, which requires regular filings, annual reports, and
may include modifications by the Company to our approvals. Failure to gain agreement from the FDA on a timely basis
could adversely affect our commercial supply of product.
Lastly, if we obtain conditional approval for our current or future drug product candidates, this conditional
approval is renewable annually for five years and may be withdrawn or terminated under certain circumstances either
during or at the end of the five-year period. For example, even though we have obtained conditional approval for
Canalevia-CA1, if we do not undertake substantial efforts to do additional clinical research each year for the next five
years, the FDA could terminate such conditional approval by refusing to renew the conditional approval.
Any of our current or future prescription drug product candidates or non-prescription products may cause or
contribute to adverse medical events that we would be required to report to regulatory authorities and, if we fail to do
so, we could be subject to sanctions that would harm our business.
If we are successful in commercializing any of our current or future prescription drug product candidates or
non-prescription products, certain regulatory authorities will require that we report certain information about adverse
medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to
report would be triggered by the date we become aware of the adverse event as well as the nature of the event. We may
fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we
have become aware of a reportable adverse event, especially if such event is not reported to us as an adverse event or if
it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our
reporting obligations, the regulatory authorities could take action including, but not limited to, criminal prosecution,
seizure of our products, facility inspections, removal of our products from the market, recalls of certain lots or batches,
or cause a delay in approval or clearance of future products.
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Legislative or regulatory reforms with respect to animal health may make it more difficult and costly for us to obtain
regulatory clearance or approval of any of our current or future product candidates and to produce, market, and
distribute our products after clearance or approval is obtained.
From time to time, legislation is drafted and introduced in the U.S. Congress or other jurisdictions in which we
intend to operate that could significantly change the statutory provisions governing the testing, regulatory clearance or
approval, manufacture, and marketing of regulated products. In addition, the FDA’s regulations and guidance are often
revised or reinterpreted by the FDA and such other regulators in ways that may significantly affect our business and our
products and product candidates. Similar changes in laws or regulations can occur in other countries. Any new
regulations or revisions or reinterpretations of existing regulations in the United States or in other countries may impose
additional costs or lengthen review times of any of our current or future products and product candidates. We cannot
determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted
or adopted may have on our business in the future. Such changes could, among other things, require:
● changes to manufacturing methods;
● additional clinical trials or testing;
● new requirements related to approval to enter the market;
● recall, replacement, or discontinuance of certain products; and
● additional record keeping or the development of certain regulatory required hazard identification plans.
Each of these would likely entail substantial time and cost and could harm our financial results. In addition,
delays in receipt of or failure to receive regulatory clearances or approvals for any future products would harm our
business, financial condition, and results of operations.
We believe that our non-prescription products are not subject to regulation by regulatory agencies in the United
States, but there is a risk that regulatory bodies may disagree with our interpretation, or may redefine the scope of
their regulatory reach in the future, which would result in additional expense and could delay or prevent the
commercialization of these products.
The FDA retains jurisdiction over all animal prescription drug products. However, in many instances, the
Federal Trade Commission will exercise primary or concurrent jurisdiction with FDA on non-prescription products as to
post marketing claims made regarding the product. On April 22, 1996, the FDA published a statement in the Federal
Register, 61 FR 17706, that it believes that the Dietary Supplement and Health Education Act (“DSHEA”) does not
apply to animal health supplement products, such as our non-prescription products. Accordingly, the FDA’s Center for
Veterinary Medicine only regulates those animal supplements that fall within the FDA’s definition of an animal drug,
animal food or animal feed additive. The Federal Food Drug and Cosmetic Act defines food as “articles used for food or
drink for man or other animals and articles used as components of any such article.” Animal foods are not subject to pre-
market approval and are designed to provide a nutritive purpose to the animals that receive them. Feed additives are
defined as those articles that are added to an animal’s feed or water as illustrated by the guidance documents. Our non-
prescription products are not added to food, are not ingredients in food nor are they added to any animal’s drinking
water. Therefore, our non-prescription products do not fall within the definition of a food or feed additive. In light of the
pronouncement by the FDA that the DSHEA was not intended to apply to animals, the FDA seeks to regulate such
supplements as food or food additives depending on the intended use of the product. The intended use is demonstrated
by how the article is included in a food, or added to the animals’ intake (i.e., through its drinking water). If the intended
use of the product does not fall within the proscribed use making the product a food, it cannot be regulated as a food.
There is no intent to make our non-prescription products a component of an animal food, either directly or indirectly. A
feed additive is a product that is added to a feed for any reason including the top dressing of an already prepared feed.
Some additives, such as certain forage, are deemed to be Generally Recognized as Safe, or GRAS, and therefore, not
subject to a feed Additive Petition approval prior to use. However, the
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substances deemed GRAS are generally those that are recognized as providing nutrients as a food does. We do not
believe that our non-prescription products fit within this framework either. Finally, a new animal drug refers to drugs
intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in animals. Our non-prescription
Neonorm Foal and Neonorm Calf products are not intended to diagnose, cure, mitigate, treat or prevent disease and
therefore, do not fit within the definition of an animal drug. Additionally, because a previously marketed human
formulation of the botanical extract in our non-prescription products was regulated as a human dietary supplement
subject to the DSHEA (and not regulated as a drug by the FDA), we do not believe that the FDA would regulate the
animal formulation used in our non-prescription products in a different manner. We do not believe that our non-
prescription products fit the definition of an animal drug, food or food additive and therefore are not regulated by the
FDA at this time.
However, despite many such unregulated animal supplements currently on the market, the FDA may choose in
the future to exercise jurisdiction over animal supplement products in which case, we may be subject to unknown
regulations thereby inhibiting our ability to launch or to continue marketing our non-prescription products. In the past,
the FDA has redefined or attempted to redefine some non-prescription non-feed products as falling within the definition
of drug, feed or feed additive and therefore subjected those products to the relevant regulations. We have not discussed
with the FDA its belief that the FDA currently does not exercise jurisdiction over our non-prescription products. Should
the FDA assert regulatory authority over our non-prescription products, we would take commercially reasonable steps to
address the FDA’s concerns, potentially including but not limited to, seeking registration for such products,
reformulating such products to further distance such products from regulatory control, or ceasing sale of such products.
Further, the Animal and Plant Health Inspection Service, an agency of the USDA, may at some point choose to exercise
jurisdiction over certain non-prescription products that are not intended for production animals. We do not believe we
are currently subject to such regulation, but could be in the future. If the FDA or other regulatory agencies, such as the
USDA, try to regulate our non-prescription products, we could be required to seek regulatory approval for our non-
prescription products, which would result in additional expense and could delay or prevent the commercialization of
these products.
Even if we receive the required regulatory approvals for our current or future prescription drug product candidates
and non-prescription products, we will be subject to ongoing obligations and continued regulatory review, which may
result in significant additional expense.
If the FDA or any other regulatory body approves any of our current or future prescription drug product
candidates, or if necessary, our non-prescription products, the manufacturing processes, clinical development, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product is
subject to extensive and ongoing regulatory requirements. These requirements could include, but are not limited to,
submissions of efficacy and safety and other post-marketing information and reports, establishment registration, and
product listing, compliance with new rules promulgated under the FSMA, as well as continued compliance with cGMPs,
GLPs and GCPs for any studies that Napo conducts post-approval. Later discovery of previously unknown problems
with a product, including adverse events of unanticipated severity or frequency, or with our contract manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, are reportable events to the FDA and may
result in, among other things:
● restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market,
revised labeling, or voluntary or involuntary product recalls;
● additional clinical studies fines, warning letters or holds on studies;
● refusal by the FDA, or other regulators to approve pending applications or supplements to approved
applications filed by Napo or Napo’s strategic collaborators related to the unknown problems, or
suspension or revocation of the problematic product’s license approvals;
● product seizure or detention, or refusal to permit the import or export of products; and
● injunctions or the imposition of civil or criminal penalties.
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The FDA or other regulatory agency’s policies may change and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval of our product candidates or require certain changes to the
labeling or require additional clinical work concerning safety and efficacy of the product candidates. We cannot predict
the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action,
either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the
adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any
marketing approval that we may have obtained and we may not achieve or sustain profitability, which would harm our
business. In addition, failure to comply with these regulatory requirements could result in significant penalties.
In addition, from time to time, we may enter into consulting and other financial arrangements with physicians,
who prescribe or recommend our products, once approved. As a result, we may be subject to state, federal and foreign
healthcare laws, including but not limited to anti-kickback laws. If our financial relationships with physicians or
veterinarians are found to be in violation of such laws that apply to us, we may be subject to penalties.
Risks Related to Our Common Stock
Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of
our common stock.
Our common stock is listed on the Nasdaq Capital Market under the symbol “JAGX”. In order to maintain that
listing, we must satisfy minimum financial and other requirements including, without limitation, the minimum
stockholders’ equity requirement and the minimum bid price requirement. There can be no assurances that we will be
successful in maintaining, or if we fall out of compliance, in regaining compliance with the continued listing
requirements and maintaining the listing of our common stock on the Nasdaq Capital Market. Delisting from Nasdaq
could adversely affect our ability to raise additional financing through the public or private sale of equity securities and
we would incur additional costs under requirements of state “blue sky” laws in connection with any sales of our
securities. Delisting could also have other negative results, including the potential loss of confidence by employees, the
loss of institutional investor interest and fewer business development opportunities. If our common stock is delisted by
Nasdaq, the price of our common stock may decline and our common stock may be eligible to trade on the OTC Bulletin
Board, another over-the-counter quotation system, or on the pink sheets, which would negatively affect the liquidity of
our common stock and an investor may find it more difficult to dispose of their common stock or obtain accurate
quotations as to the market value of our common stock.
On January 23, 2023, we effected a 1-for-75 reverse stock split of our outstanding voting common stock. All
share amounts and warrant or option exercise prices contained in this report reflect that adjustment. Additionally, in
2020, the SEC approved a Nasdaq rule change to expedite delisting of securities of companies that have had one or more
reverse stock splits with a cumulative ratio of one for 250 or more shares over the prior two-year period. Under the new
rules, if a company falls out of compliance with the $1.00 minimum bid price after completing reverse stock splits over
the immediately preceding two years that cumulatively result in a ratio one for 250 shares, the company will not be able
to avail itself of any compliance periods and Nasdaq will instead require the issuance of a Staff delisting determination,
which is appealable to a hearings panel. Our ability to remain listed on the Nasdaq Capital Market may be negatively
impacted by this new Nasdaq rule.
We continue to actively monitor our performance with respect to the listing standards and will consider
available options to resolve any deficiency and maintain compliance with the Nasdaq rules. There can be no assurance
that we will be able to maintain compliance or, if we fall out of compliance, regain compliance with any deficiency, or if
we implement an option that regains our compliance, maintain compliance thereafter.
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If our shares become subject to the penny stock rules, it would become more difficult to trade our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny
stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on
certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that
current price and volume information with respect to transactions in such securities is provided by the exchange or
system. If we do not retain a listing on The Nasdaq Capital Market and if the price of our common stock is less than
$5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a
transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document
containing specified information. In addition, the penny stock rules require that before effecting any transaction in a
penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the
receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks and (iii) a signed
and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the
trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling
their shares.
The price of our common stock could be subject to volatility related or unrelated to our operations, and purchasers of
our common stock could incur substantial losses.
We have experienced and may continue to experience significant volatility in the price of our common stock.
From January 29, 2021 through January 20, 2023, the share price of our common stock ranged from a high of $711.00 to
a low of $6.00. The reason for the volatility in our stock is not well understood and may continue. Factors that may have
contributed to such volatility include, but are not limited to, those discussed previously in this “Risk Factors” section of
this report and others, such as:
● delays in the commercialization of Mytesi, Canalevia-CA1, or our other current or future prescription drug
product candidates and non-prescription products;
● any delays in, or suspension or failure of, our current and future studies;
● announcements of regulatory approval or disapproval of any of our current or future product candidates or
of regulatory actions affecting our company or our industry;
● manufacturing and supply issues that affect product candidate or product supply for our studies or
commercialization efforts;
● quarterly variations in our results of operations or those of our competitors;
● changes in our earnings estimates or recommendations by securities analysts;
● the payment of licensing fees or royalties in shares of our common stock;
● announcements by us or our competitors of new prescription drug products or product candidates or non-
prescription products, significant contracts, commercial relationships, acquisitions or capital
commitments;
● announcements relating to future development or license agreements including termination of such
agreements;
● adverse developments with respect to our intellectual property rights or those of our principal
collaborators;
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● commencement of litigation involving us or our competitors;
● any major changes in our board of directors or management;
● new legislation in the United States relating to the prescription, sale, distribution or pricing of
gastrointestinal health products;
● product liability claims, other litigation or public concern about the safety of our prescription drug product
or product candidates and non-prescription products or any such future products;
● market conditions in the human or animal industry, in general, or in the gastrointestinal health sector, in
particular, including performance of our competitors;
● future issuances of shares of common stock or other securities;
● uncertainties related to COVID-19;
● general economic conditions in the United States and abroad; and
● market speculation regarding
In addition, the stock market, in general, or the market for stocks in our industry, in particular, may experience
broad market fluctuations, which may adversely affect the market price or liquidity of our common stock. Any sudden
decline in the market price of our common stock could trigger securities class-action lawsuits against us. If any of our
stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the time
and attention of our management would be diverted from our business and operations. We also could be subject to
damages claims if we were found to be at fault in connection with a decline in our stock price.
A possible “short squeeze” due to a sudden increase in demand of our common stock that largely exceeds supply may
lead to further price volatility in our common stock.
Investors may purchase shares of our common stock to hedge existing exposure in our common stock or to
speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short
exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for
purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common stock
for delivery to lenders of our common stock. Those repurchases may in turn, dramatically increase the price of our
common stock until investors with short exposure are able to purchase additional shares of common stock to cover their
short position. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in
shares of our common stock that are not directly correlated to the performance or prospects of our company and once
investors purchase the shares necessary to cover their short position the price of our common stock may decline.
You may not be able to resell our common stock when you wish to sell them or at a price that you consider attractive
or satisfactory.
The listing of our common stock on The Nasdaq Capital Market does not assure that a meaningful, consistent
and liquid trading market exists. Although our common stock is listed on The Nasdaq Capital Market, trading volume in
our common stock has been limited and an active trading market for our shares may never develop or be sustained. If an
active market for our common stock does not develop, you may be unable to sell your shares when you wish to sell them
or at a price that you consider attractive or satisfactory. The lack of an active market may also adversely affect our ability
to raise capital by selling securities in the future, or impair our ability to license or acquire other product candidates,
businesses or technologies using our shares as consideration.
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If securities or industry analysts do not publish research or reports about our company, or if they issue adverse or
misleading opinions regarding us or our stock, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that industry or financial
analysts publish about us or our business. We do not influence or control the reporting of these analysts. If one or more
of the analysts who do cover us downgrade or provide a negative outlook on our company or our industry, or the stock of
any of our competitors, the price of our common stock could decline. If one or more of these analyst’s ceases coverage
of our company, we could lose visibility in the market, which in turn could cause the price of our common stock to
decline.
You may be diluted by conversions of outstanding shares of non-voting common stock, exercises of outstanding
options and warrants and issuances of securities pursuant to our ATM Agreement.
As of December 31, 2022 we had (i) outstanding options to purchase an aggregate of 26,606 shares of our
common stock at a weighted average exercise price of $785.05 per share, (ii) outstanding options to purchase an
aggregate of 1,552 shares of our common stock issuable upon exercise of outstanding inducement options, with a
weighted-average exercise price of $345.85 per share, (iii) 7,508 shares of our common stock issuable upon exercise of
warrants outstanding, with weighted-average exercise price of $538.5, (iv) 44,889 shares of our common stock issuable
upon vesting of outstanding RSUs, (v) 37,237 shares of our common stock issuable to third parties upon exercise of
those shares, and (vi) 9 shares of our non-voting common stock issuable at an equivalent share of voting common stock.
The exercise of such options, warrants, vesting of RSUs, and conversion of the non-voting common stock will result in
further dilution of your investment.
In addition, you may experience further dilution if we issue common stock in the future, including common
stock issued pursuant to our existing At The Market Offering Agreement (the “ATM Agreement”). Pursuant to the ATM
Agreement with Ladenburg Thalmann & Co. Inc. (“Ladenburg”), we may offer and sell up to $75.0 million of our
common stock from time to time through Ladenburg as our sales agent. During the year ended December 31, 2022, we
sold 923,164 shares of common stock pursuant to the ATM Agreement for net proceeds of $20.5 million.
As a result of this dilution, you may receive significantly less in net tangible book value than the full purchase
price you paid for the shares in the event of liquidation.
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Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may
consider favorable and may lead to entrenchment of management.
Our third amended and restated certificate of incorporation and amended and restated bylaws contain
provisions that could delay or prevent changes in control or changes in our management without the consent of our
board of directors. These provisions to include the following:
● a classified board of directors with three-year staggered terms, which may delay the ability of stockholders
to change the membership of a majority of our board of directors;
● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect
director candidates;
● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of
the board of directors or the resignation, death or removal of a director, which prevents stockholders from
being able to fill vacancies on our board of directors;
● the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine
the terms of those shares, including preferences and voting rights, without stockholder approval, which
could adversely affect the rights of our common stockholders or be used to deter a possible acquisition of
our company;
● the ability of our board of directors to alter our bylaws without obtaining stockholder approval;
● the required approval of the holders of at least 75% of the shares entitled to vote at an election of directors
to adopt, amend or repeal our bylaws or repeal the provisions of our third amended and restated certificate
of incorporation regarding the election and removal of directors;
● a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an
annual or special meeting of our stockholders;
● the requirement that a special meeting of stockholders may be called only by the chairman of the board of
directors, the chief executive officer, the president or the board of directors, which may delay the ability of
our stockholders to force consideration of a proposal or to take action, including the removal of directors;
and
● advance notice procedures that stockholders must comply with in order to nominate candidates to our
board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may
discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s
own slate of directors or otherwise attempting to obtain control of us.
These provisions could inhibit or prevent possible transactions that some stockholders may consider attractive.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General
Corporation Law. Under Section 203, a corporation generally may not engage in a business combination with any holder
of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the
board of directors has approved the transaction.
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Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive
forum for certain actions and proceedings that may be initiated by our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other
employees.
Our amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court
of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or
other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the
Delaware General Corporation Law, (iv) any action asserting a claim that is governed by the internal affairs doctrine or
(v) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws. Any
person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice
of and to have consented to this provision of our amended and restated bylaws. This choice-of-forum provision may
limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our
directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this
provision of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of the specified
types of actions or proceedings, we may incur additional costs associated with resolving such matters in other
jurisdictions, which could harm our business and financial condition.
We do not intend to pay dividends on our common stock, and your ability to achieve a return on your investment will
depend on appreciation in the market price of our common stock.
We currently intend to invest our future earnings, if any, to fund our growth and not to pay any cash dividends
on our common stock. Because we do not intend to pay dividends, your ability to receive a return on your investment
will depend on any future appreciation in the market price of our common stock. We cannot be certain that our common
stock will appreciate in price.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange
Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and distract
management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
Our initial public offering had a significant, transformative effect on us. Prior to our initial public offering, our
business operated as a privately-held company, and we were not required to comply with public reporting, corporate
governance and financial accounting practices and policies required of a publicly-traded company. As a publicly-traded
company, we incur significant additional legal, accounting and other expenses compared to historical levels. In addition,
new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the
Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations thereunder, as well as under
the Sarbanes-Oxley Act, the JOBS Act and the rules and regulations of the SEC and The Nasdaq Capital Market, may
result in an increase in our costs and the time that our board of directors and management must devote to our compliance
with these rules and regulations. These rules and regulations have substantially increased our legal and financial
compliance costs and diverted management time and attention from our product development and other business
activities.
The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control
over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular,
Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to perform system and process evaluation and testing
of our internal control over financial reporting to allow management to report on, and our independent registered public
accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. We have needed
to expend time and resources on documenting our internal control over financial reporting so that we are in a position to
perform such evaluation when required. As a smaller reporting company (“SRC”), we expect to avail ourselves of the
exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our
internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this
exemption when we cease to be an SRC. When our independent registered
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public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of
our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section
404 requires that we incur substantial accounting expense and expend significant management time on compliance-
related issues as we implement additional corporate governance practices and comply with reporting requirements.
Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if
we or our independent registered public accounting firm identifies deficiencies in our internal control over financial
reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject
to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and
management resources.
We are a smaller reporting company and the reduced reporting requirements applicable to smaller reporting
companies may make our common stock less attractive to investors.
We are a smaller reporting company (“SRC”) and a non-accelerated filer, which allows us to take advantage of
exemptions from various reporting requirements that are applicable to other public companies that are not SRCs or non-
accelerated filers, including not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations regarding executive compensation in our
Annual Report and our periodic reports and proxy statements and providing only two years of audited financial
statements in our Annual Report and our periodic reports. We will remain an SRC so long as (a) the aggregate market
value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed
second fiscal quarter is less than $250 million or (b) (1) we have less than $100 million in annual revenues and (2) the
aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our most
recently completed second fiscal quarter is less than $700 million. We cannot predict whether investors will find our
common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock
less attractive as a result, there may be a less active trading market for our common stock and our stock price may be
more volatile and may decline.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters are located at 200 Pine Street, Suite 400, San Francisco, California.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course
of our business activities. Regardless of the outcome, litigation can have a material adverse effect on us due to defense
and settlement costs, diversion of our management resources, and other factors. We are not currently subject to any
material legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Market Information
Our common stock trades on The Nasdaq Capital Market under the symbol “JAGX.”
Holders
As of March 24, 2023, there were approximately 18 stockholders of record of our common stock. These figures
do not reflect the beneficial ownership or shares held in nominee name, nor do they include holders of any RSUs.
Dividend Policy
We have never paid any cash dividends on our common stock to date. We currently anticipate that we will
retain all future earnings, if any, to fund the development and growth of our business and do not anticipate paying any
cash dividends for at least the next five years, if ever.
Recent Sales of Unregistered Securities
On September 1, 2022, the Company entered into an agreement, dated September 1, 2022, with Corporate
Profile LLC, pursuant to which the Company agreed to issue 560 shares of the Company’s common stock to Corporate
Profile LLC as partial consideration for investor relations services, which shares are issuable in three tranches: 160
shares were issued on September 26, 2022, 200 shares were issued on December 1, 2022 and 200 shares will be issued
on April 1, 2023.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(a)(2) of the Securities Act, Regulation D or Regulation S promulgated
thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these
transactions acquired the securities for investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the
recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through
employment, business or other relationships, to information about us.
Other than equity securities issued in transactions disclosed above and on our Current Report on Form 8-K filed
with the SEC on August 18, 2022, August 23, 2022 and August 30, 2022, there were no unregistered sales of equity
securities during the period.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration
under the Securities Act in reliance on Section 3(a)(9) of the Securities Act, Section 4(a)(2) of the Securities Act, or
Regulation D or Regulation S promulgated thereunder as transactions by an issuer not involving a public offering. The
recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or
for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these
transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had
adequate access, through employment, business or other relationships, to information about us.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read together with our financial statements and the related
notes appearing elsewhere in this report.
Overview
Jaguar Health, Inc. (“Jaguar” or the “Company”) is a commercial stage pharmaceuticals company focused on
developing novel, plant-based, sustainably derived prescription medicines for people and animals with gastrointestinal
(“GI”) distress, including chronic, debilitating diarrhea. Jaguar Health's wholly owned subsidiary, Napo
Pharmaceuticals, Inc. (“Napo”), focuses on developing and commercializing proprietary plant-based human
pharmaceuticals from plants harvested responsibly from rainforest areas. Our crofelemer drug product candidate is the
subject of the OnTarget study, an ongoing pivotal Phase 3 clinical trial for prophylaxis of diarrhea in adult cancer
patients receiving targeted therapy. As announced, patient enrollment in OnTarget reached approximately 75% in
February 2023, and target trial enrollment of 256 patients is expected to complete in the second quarter of 2023. Jaguar
is the majority stockholder of Napo Therapeutics S.p.A. (“Napo Therapeutics”), an Italian corporation established by
Jaguar in Milan, Italy in 2021 that focuses on expanding crofelemer access in Europe. Napo Therapeutics’ core mission
is to provide access to crofelemer in Europe to address significant rare/orphan disease indications, including, initially,
two key rare disease target indications: Short bowel syndrome (“SBS”) with intestinal failure and/or congenital diarrheal
disorders (“CDD”). Jaguar Animal Health is a tradename of Jaguar Health.
Jaguar was founded in San Francisco, California as a Delaware corporation on June 6, 2013 (inception). The
Company was a majority-owned subsidiary of Napo until the close of the Company's initial public offering on May 18,
2015. The Company was formed to develop and commercialize first-in-class prescription and non-prescription products
for companion animals.
On July 31, 2017, Jaguar completed a merger with Napo pursuant to the Agreement and Plan of Merger dated
March 31, 2017, by and among Jaguar, Napo, Napo Acquisition Corporation (“Merger Sub”), and Napo's representative
(the “Merger Agreement”). In accordance with the terms of the Merger Agreement, upon the completion of the merger,
Merger Sub merged with and into Napo, with Napo surviving as the wholly owned subsidiary (the “Merger” or “Napo
Merger”). Immediately following the Merger, Jaguar changed its name from “Jaguar Animal Health, Inc.” to “Jaguar
Health, Inc.” Napo now operates as a wholly owned subsidiary of Jaguar focused on human health including the ongoing
development of crofelemer and commercialization of Mytesi.
Napo’s marketed drug Mytesi (crofelemer 125 mg delayed-release tablets) is a first-in-class oral botanical drug
product approved by the U.S. Food and Drug Administration (“FDA”) for the symptomatic relief of noninfectious
diarrhea in adults with HIV/AIDS on antiretroviral therapy. To date, this is the only oral plant-based botanical
prescription medicine approved under the FDA’s Botanical Guidance. The Company’s Canalevia-CA1 (crofelemer
delayed-release tablets) drug is the first and only oral plant-based prescription product that is FDA conditionally
approved to treat chemotherapy-induced diarrhea (“CID”) in dogs.
Crofelemer was granted ODD by the U.S. FDA in February 2023 for microvillus inclusion disease (“MVID”), a
rare CDD condition, and granted ODD for MVID by the European Medicines Agency (“EMA”) in October 2022.
Crofelemer was granted ODD for SBS by the EMA in December 2021 and by the FDA in August 2017. The Company
is currently supporting investigator-initiated proof-of-concept (“POC”) studies of crofelemer in patients with SBS with
intestinal failure or CDD, focused on obtaining POC of reduction of requirements of parenteral support including
parenteral nutrition and/or intravenous fluids, throughout 2023. In accordance with the guidelines of specific European
Union countries, publications of POC data from these trials could support early patient access to crofelemer for SBS
with intestinal failure or CDD in 2023 through programs in Europe. Early access programs are revenue generating, and
reimbursable for participating patients.
Napo Therapeutics is initiating efforts to commence clinical development of crofelemer in SBS patients in
support of the company’s key focus on leveraging the EMA’s accelerated conditional marketing authorization
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pathway in Europe for these rare diseases. SBS affects approximately 10,000 to 20,000 people in the U.S., according to
the Crohn's & Colitis Foundation, and it is estimated that the population of SBS patients in Europe is approximately the
same size. Despite limited treatment options, the global SBS market exceeded $568 million in 2019 and is expected to
reach $4.6 billion by 2027, according to a report by Vision Research Reports.
Most of the activities of the Company are focused on the development and/or commercialization of Mytesi,
including the ongoing clinical development of crofelemer for the prophylaxis of diarrhea in adult patients receiving
targeted cancer therapy, and our prioritized clinical program centered around the approved investigator-initiated POC
trial of crofelemer for SBS and CDD. Napo’s pivotal OnTarget Phase 3 clinical trial of crofelemer for prophylaxis of
cancer therapy-related diarrhea (“CTD”) was initiated in October 2020 and is ongoing.
In the field of animal health, we are continuing limited activities related to developing and commercializing
first-in-class gastrointestinal products for dogs, dairy calves and foals.
Crofelemer is a novel, first-in-class anti-secretory antidiarrheal drug which has a normalizing effect on
electrolyte and fluid balance in the gut, and this mechanism of action has the potential to benefit multiple disorders that
cause gastrointestinal distress, including diarrhea and abdominal discomfort. Mytesi is in development for multiple
possible follow-on indications, including prophylaxis of diarrhea related to targeted therapy with or without standard
chemotherapy. Crofelemer delayed-release tablets are also being evaluated in diarrhea-predominant irritable bowel
syndrome (“IBS-D”) and idiopathic/functional diarrhea.
Crofelemer powder for oral solution is being developed to support orphan or rare disease indications for infants
and/or children with SBS and/or CDD, such as MVID.
In addition, a second-generation proprietary anti-secretory antidiarrheal drug (“NP-300”) is in development for
symptomatic relief and treatment of moderate-to-severe diarrhea, with or without concomitant antimicrobial therapy,
from bacterial, viral and parasitic infections including Vibrio cholerae, the bacterium that causes cholera.
In January 2023, Jaguar and Filament Health (“Filament”), with funding from One Small Planet, formed the
U.S.-based joint venture Magdalena Biosciences, Inc. (“Magdalena”). Magdalena’s focus is on the development of
novel, natural prescription medicines derived from plants for mental health indications including, initially, attention-
deficit/hyperactivity disorder (“ADHD”) in adults. The goal of the collaboration is to extend the botanical drug
development capabilities of Jaguar and Filament in order to develop pharmaceutical-grade, standardized drug candidates
for mental health disorders, and to partner with a potential future licensee to develop and commercialize these novel
plant-based drugs. This new venture aligns with Jaguar's mental health Entheogen Therapeutics Initiative (“ETI”) and
Filament's corporate mission to develop novel, natural prescription medicines from plants. Magdalena will leverage
Jaguar's proprietary medicinal plant library and Filament's proprietary drug development technology. Jaguar’s library of
2,300 highly characterized medicinal plants and 3,500 plant extracts, all from firsthand ethnobotanical investigation by
Jaguar and members of the ETI Scientific Strategy Team, is a key asset we have generated over 30 years that bridges the
knowledge of traditional healers and Western medicine. Magdalena holds an exclusive license to plants and plant
extracts in Jaguar's library, not including any sources of crofelemer or NP-300, for specific indications and is in the
process of identifying plant candidates in the library that may prove beneficial for addressing indications such as ADHD.
In December 2021 we received conditional approval from the FDA to market Canalevia-CA1 (crofelemer
delayed-release tablets), our oral plant-based prescription drug and the only available veterinary drug for the treatment of
chemotherapy-induced diarrhea (“CID”) in dogs, and Canalevia-CA1 is now available to multiple leading veterinary
distributors in the U.S. Canalevia-CA1 is a tablet that is given orally and can be prescribed for home treatment of CID.
Canalevia-CA1 is conditionally approved by the FDA under application number 141-552. Conditional approval allows
for commercialization of the product while Jaguar Animal Health continues to collect the substantial evidence of
effectiveness required for full approval. We have received Minor Use in a Major Species (“MUMS”) designation from
the FDA for Canalevia-CA1 to treat CID in dogs. FDA has established a "small number" threshold for minor use in each
of the seven major species covered by the MUMS act. The small number threshold is
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currently 80,000 for dogs, representing the largest number of dogs that can be affected by a disease or condition over the
course of a year and still have the use qualify as a minor use.
We believe Jaguar is poised to realize a number of synergistic, value adding benefits—an expanded pipeline of
potential blockbuster human follow-on indications of crofelemer, and a second-generation anti-secretory agent—upon
which to build global partnerships. Jaguar, through Napo, holds global unencumbered rights for crofelemer, Mytesi, and
Canalevia-CA1. Additionally, several of the drug product opportunities in Jaguar’s crofelemer pipeline are backed by
Phase 2 and proof of concept evidence from human clinical trials.
Financial Operations Overview
On a consolidated basis, we have not yet generated enough revenue to date to achieve break-even or positive
cash flow, and we expect to continue to incur significant research and development and other expenses. Our net losses
and comprehensive losses were $49.1 million and $52.6 million for the years ended December 31, 2022 and 2021,
respectively. As of December 31, 2022, we had total stockholders' deficit of $1.4 million, an accumulated deficit of
$266.9 million, an accumulated other comprehensive loss of $680,000 and cash of $5.5 million. We expect to continue
to incur losses and experience increased expenditures for the foreseeable future as we expand our product development
activities, seek necessary approvals for our product candidates, conduct species-specific formulation studies for our non-
prescription products, establish active pharmaceutical ingredient (“API”) manufacturing capabilities and begin
additional commercialization activities.
Revenue
Our product and collaboration revenue consists of the following:
● Revenues from the sale of our human drug Mytesi, which is sold through distributors and wholesalers and
specialty pharmacies.
● Revenues from the sale of our animal products branded as Canalevia-CA1, Neonorm Calf and Neonorm
Foal. Our Canalevia-CA1, Neonorm and botanical extract products are primarily sold to distributors, who
then sell the products to the end customers.
● Our policy typically permits returns if the product is damaged, defective, or otherwise cannot be used
when received by the customer if the product has expired. Returns are accepted for product that will expire
within six months or that have expired up to one year after their expiration dates. Estimates for expected
returns of expired products are based primarily on an ongoing analysis of our historical return patterns.
See “Results of Operations” below for more detailed discussion on revenues
Cost of Revenue
Cost of revenue consists of direct drug substance and drug product materials expense, direct labor, distribution
fees, royalties and other related expenses associated with the sale of our products.
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Research and Development Expense
Research and development expenses consist primarily of clinical and contract manufacturing expense,
personnel and related benefit expense, stock-based compensation expense, employee travel expense and reforestation
expenses. Clinical and contract manufacturing expense consists primarily of costs to conduct stability, safety and
efficacy studies, and manufacturing startup expenses at an outsourced API provider in Italy. It also includes expenses
with a third-party provider for the transfer of the Mytesi manufacturing process, and the related feasibility and validation
activities.
We typically use our employee and infrastructure resources across multiple development programs. We track
outsourced development costs by prescription drug product candidate and non-prescription product but do not allocate
personnel or other internal costs related to development to specific programs or development compounds.
The timing and amount of our research and development expenses will depend largely upon the outcomes of
current and future trials for our prescription drug product candidates as well as the related regulatory requirements, the
outcomes of current and future species-specific formulation studies for our non-prescription products, manufacturing
costs and any costs associated with the advancement of our line extension programs. We cannot determine with certainty
the duration and completion costs of the current or future development activities.
The duration, costs and timing of trials, formulation studies and development of our prescription drug and non-
prescription products will depend on a variety of factors, including:
● the scope, rate of progress, and expense of our ongoing, as well as any additional clinical trials,
formulation studies and other research and development activities;
● future clinical trial and formulation study results;
● potential changes in government regulations; and
● the timing and receipt of any regulatory approvals.
A change in the outcome of any of these variables with respect to the development of a prescription drug
product candidate or non-prescription product could mean a significant change in the costs and timing associated with
our development activities.
We expect research and development expense to increase due to the start-up costs associated with our clinical
trials for other indications.
Sales and Marketing Expense
Sales and marketing expenses consist of personnel and related benefit expense, stock-based compensation
expense, direct sales and marketing expense, employee travel expense, and management consulting expense. We
currently incur sales and marketing expenses to promote Mytesi. We do not currently have any marketing or promotional
expenses related to Canalevia-CA1, Neonorm Calf or Neonorm Foal for the years ended December 31, 2022 and 2021.
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We expect sales and marketing expense to increase going forward as we focus on expanding our market access
activities and commercial partnerships for the development of follow-on indications of Mytesi and crofelemer.
General and Administrative Expense
General and administrative expenses consist of personnel and related benefit expense, stock-based
compensation expense, employee travel expense, legal and accounting fees, rent and facilities expense, and management
consulting expense.
In the near term, we expect general and administrative expense to remain flat as we focus on our pipeline
development and market access expansion. This will include efforts to grow the business.
Interest Expense
Interest expense consists primarily of non-cash and cash interest costs related to our borrowings.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S.
GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues
and expenses, and related disclosures in the financial statements. Critical accounting policies are those accounting
policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain
matters or the susceptibility of such matters to change, and that have a material impact on financial condition or
operating performance. While we base our estimates and judgments on our experience and on various other factors that
we believe to be reasonable under the circumstances, actual results may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting policies used in the preparation of our financial
statements require significant judgments and estimates. For additional information relating to these and other accounting
policies, see Note 2 to the consolidated financial statements, appearing elsewhere in this report.
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Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
The following table summarizes the Company’s results of operations with respect to the items set forth in such
table for the years ended December 31, 2022 and 2021 together with the change in such items in dollars and as
a percentage.
(in thousands)
Product revenue
Operating Expenses
Cost of product revenue
Research and development
Sales and marketing
General and administrative
Series 3 warrants inducement expense
ELOC warrants inducement expense
Total operating expenses
Loss from operations
Interest expense
Loss on extinguishment of debt
Change in fair value of financial instruments and hybrid
instrument designated at Fair Value Option
Other income (expense)
Loss before income tax
Income tax expense
Net loss
Net loss attributable to noncontrolling interest
Net loss attributable to common stockholders
$
Revenue
Product revenue
Year Ended
December 31,
2022
2021
Variance
Variance %
$
11,956
$
4,335
$
7,621
175.8 %
2,019
17,647
8,837
17,868
—
—
46,371
(34,415)
(12,723)
(2,187)
2,333
15,079
8,894
17,103
1,462
172
45,043
(40,708)
(8,421)
(753)
(20)
950
(48,395)
—
(48,395)
(941)
(47,454) $
(1,953)
(765)
(52,600)
—
(52,600)
(5)
(52,595) $
(314)
2,568
(57)
765
(1,462)
(172)
1,328
6,293
(4,302)
(1,434)
1,933
1,715
4,205
—
4,205
(936)
5,141
(13.5)%
17.0 %
(0.6)%
4.5 %
(100.0)%
(100.0)%
2.9 %
(15.5)%
51.1 %
190.4 %
(99.0)%
(224.2)%
(8.0)%
100.0 %
(8.0)%
18,720 %
(9.8)%
We transitioned from selling to the wholesalers that resell the product to retail pharmacies to the closed
Specialty Pharmacy distribution networks throughout the year 2021 and we fully transitioned in the fourth quarter of the
same year. The transition caused a one-time inventory draw-down of Mytesi across our third-party logistics warehouse,
wholesalers, distributors, and retail stores. This significantly contributed to the decrease of $853,000 of Mytesi gross
revenue and $1.5 million of wholesaler fees for the year 2022 compared to 2021.
Sales discounts were $1.2 million and $6.3 million for the years ended December 31, 2022, and 2021,
respectively, a decrease of $5.1 million. In line with our switch to the closed Specialty Pharmacy distribution network.
No wholesaler fees were recognized for the year ended December 31, 2022.
Medicaid and AIDS Drug Assistance Program (“ADAP”) rebates accounted for $1.8 million and $3.5 million
for the years ended December 31, 2022 and 2021, respectively, a decrease of $1.6 million primarily due to the WAC
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increase implemented by the Company which resulted in higher government rebates from Medicaid, ADAP, public
health services programs.
Due to the Company’s arrangements, including elements of variable consideration, gross product sales are
reduced in order to reflect the expected consideration to arrive at net product sales. Deductions to reduce gross product
sales to net product sales for the years ended December 31, 2022 and 2021 are as follows:
(in thousands)
Gross product sales
Mytesi
Canalevia
Neonorm
Total gross product sales
Medicaid rebates
Sales discounts
Sales returns
Wholesaler fee
Net product sales
Year Ended
December 31,
2022
2021
Variance
Variance %
$
$
14,804
167
48
15,019
(1,836)
(1,182)
(45)
—
11,956
$
$
15,657
$
—
62
15,719
(3,484)
(6,268)
(104)
(1,528)
4,335
$
(853)
167
(14)
(700)
1,648
5,086
59
1,528
7,621
(5.4)%
100.0 %
(22.6)%
(4.5)%
(47.3)%
(81.1)%
(56.7)%
(100.0)%
175.8 %
Our gross product revenues were $15.0 million and $15.7 million for the years ended December 31, 2022 and
2021, respectively. These figures reflect revenue from the sale of our human drug Mytesi, our animal products branded
as Neonorm Calf and Neonorm Foal, and our new animal drug Canalevia that is designed for dogs released only this
2022 amounting to $167,000. The majority of the decrease were contributed from the decrease of $853,000 of Mytesi
gross revenue for the year 2022 compared to 2021. Although Mytesi gross product sales decreased, net product sales
increased by $7.6 million for the year 2022 compared to 2021 largely due to the transition from selling to the
wholesalers to the closed Specialty Pharmacy distribution networks.
Our Neonorm product revenues were $48,000 and $62,000 for the years ended December 31, 2022 and 2021,
respectively. Sales and marketing expenses for Neonorm products are not significant during 2022 compared to 2021.
Cost of Product Revenue
(in thousands)
Cost of Product Revenue
Material cost
Direct labor
Royalties
Distribution fees
Other
Total
Year Ended
December 31,
2022
2021
Variance
Variance %
$
$
1,011
755
54
15
184
2,019
$
$
$
998
996
—
199
140
2,333
$
13
(241)
54
(184)
44
(314)
1.3 %
(24.2)%
100.0 %
(92.5)%
31.4 %
(13.5)%
The change in cost of product revenue of $314,000 for the year ended December 31, 2022 compared to 2021
was primarily due to:
● Direct labor decreased $241,000 from $996,000 for the year ended December 31, 2021 to $755,000 in
2022, due to decreased resources in manufacturing.
● Distribution fees decreased $184,000 from $199,000 for the year ended December 31, 2021, to $15,000 in
2022 anticipated as cost savings in line with our transition from Title model to Specialty Pharmacy
distribution network.
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● Royalties increased $54,000 from a zero balance for the year ended December 31, 2021.
● Other costs increased $44,000 from $140,000 for the year ended December 31, 2021 to $184,000 in 2022
mainly consisting of $118,000 less in write-offs of non-conforming inventory, and an increase in
equipment maintenance of $9,000 in 2022.
Research and Development Expense
The following table presents the components of research and development (“R&D”) expense for the years
ended December 31, 2022 and 2021:
(in thousands)
Research and Development:
Clinical and contract manufacturing
Personnel and related benefits
Stock-based compensation
Materials expense and tree planting
Travel, other expenses
Other
Total
Year Ended
December 31,
2022
2021
Variance
Variance %
$
$
8,326
5,543
1,263
309
122
2,084
17,647
$
$
6,257
3,954
1,319
361
40
3,148
15,079
$
$
2,069
1,589
(56)
(52)
82
(1,064)
2,568
33.1 %
40.2 %
(4.2)%
(14.4)%
205.0 %
(33.8)%
17.0 %
The change in R&D expense of $2.6 million for the year ended December 31, 2022 compared to 2021 was
primarily due to:
● Clinical and contract manufacturing expenses increased $2.1 million from $6.3 million for the year ended
December 31, 2021, to $8.3 million in 2022 largely due to increased clinical trial activities related to the
start-up of CTD and other indications, additional CMC manufacturing, consulting and contractors’
expenses, and cholera/NP-300 research expenses.
● Personnel and related benefits increased $1.6 million for the year ended December 31, 2022, from $4.0
million in 2021 to $5.5 million in 2022 largely from the additional headcount.
● Other expenses decreased $1.1 million from $3.1 million for the year ended December 31, 2021, to $2.1
million in 2022 mainly due to decreased consulting fees.
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Sales and Marketing Expense
The following table presents the components of sales and marketing (“S&M”) expense for the years ended
December 31, 2022 and 2021:
(in thousands)
Sales and Marketing:
Direct marketing fees and expense
Personnel and related benefits
Stock-based compensation
Other
Total
Year Ended
December 31,
2022
2021
Variance
Variance %
$
$
3,596
3,415
267
1,559
8,837
$
$
3,415
3,916
319
1,244
8,894
$
$
181
(501)
(52)
315
(57)
5.3 %
(12.8)%
(16.3)%
25.3 %
(0.6)%
The change in S&M expense of $57,000 for the year ended December 31, 2022 compared to 2021 was
primarily due to:
● Personnel and related benefits decreased $501,000 from $3.9 million for the year ended December 31,
2021 to $3.4 million in 2022 due to reduction in resources in Commercial Operations and Sales.
● Direct marketing fees and expense increased $181,000 from $3.4 million for the year ended December 31,
2021 to $3.6 million in 2022 due to an increase in marketing programs for Mytesi related to the expanding
market access through Specialty Pharmacy channels.
● Other expenses increased $315,000 from $1.2 million for the year ended December 31, 2021 to $1.6
million in 2022 largely due to additional marketing consulting costs.
General and Administrative Expense
The following table presents the components of general and administrative (“G&A”) expense for the years
ended December 31, 2022 and 2021:
(in thousands)
General and Administrative:
Personnel and related benefits
Public company expense
Stock-based compensation
Legal services
Third-party consulting services
Audit, tax and accounting services
Rent and lease expense
Travel, other expenses
Other
Total
Year Ended
December 31,
2022
2021
Variance
Variance %
$
$
5,582
2,692
1,788
1,225
507
454
629
378
4,613
17,868
$
$
3,390
2,270
2,336
2,303
859
982
282
197
4,484
17,103
$
$
2,192
422
(548)
(1,078)
(352)
(528)
347
181
129
765
64.7 %
18.6 %
(23.5)%
(46.8)%
(41.0)
(53.8)%
123.0 %
91.9 %
2.9 %
4.5 %
The change in G&A expenses of $765,000 for the year ended December 31, 2022 compared to 2021 was due
primarily to:
● Personnel and related benefits increased $2.2 million from $3.4 million for the year ended December 31,
2021 to $5.6 million in 2022 due to increased number of hires for the year.
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● Legal services decreased $1.1 million from $2.3 million for the year ended December 31, 2021 to $1.2
million in 2022 primarily due to a decrease in fees related to legal proceedings and other regulatory filings.
● Stock-based compensation expense decreased $548,000 from $2.3 million for the year ended December
31, 2021 to $1.8 million in 2022 primarily due to lower expense incurred for options granted with
immediate vesting to existing employees.
● Audit, tax and accounting services fees decreased $528,000 from $982,000 for the year ended December
31, 2021 to $454,000 in 2022, mostly due to the decreased audit fees related to complex debt and equity
transactions.
● Public company expenses increased $422,000 from $2.3 million for the year ended December 31, 2021 to
$2.7 million in 2022 largely attributable to the investor relations and communications consulting expenses,
and expenses for the annual stockholder meeting.
● Third-party consulting services decreased $352,000 from $859,000 for the year ended December 31, 2021
to $507,000 in 2022, mostly due to the decrease in outsourced legal and accounting transactions.
● Rent and lease expense increased $347,000 from $282,000 for the year ended December 31, 2021 to
$629,000 in 2022 as a result of the transfer to a higher-cost facility and the occupancy of more space,
including office space in Italy.
● Travel, other expenses increased $181,000 from $197,000 for the year ended December 31, 2021 to
$378,000 in 2022 due to other corporate and investor relations activities.
● Other general and administrative expenses increased $129,000 from $4.5 million for the year ended
December 31, 2021 to $4.6 million in 2022 largely due to increase recruitment and insurance expense in
2022.
Series 3 Warrants Inducement Expense
In January 2021, the Company issued 135,416 Series 3 Warrants to a certain investor for the exercise of
135,416 Bridge Note Warrants in accordance with the May 2020 Modification of the 2019 Bridge Note Warrants and
Inducement Offer. These Series 3 Warrants were valued at $1.5 million using the Black-Scholes-Merton option pricing
model on the issuance date. In 2022, the value of Series 3 Warrants Inducement Expense is zero.
ELOC Warrants Inducement Expense
In April 2021, in consideration for Oasis Capital’s entry into the amendment to the March 2020 Equity Line of
Credit, the Company issued Oasis Capital a common stock purchase warrant exercisable for 444 shares of common
stock with an exercise price per share equal to $420.75 on the date of the amendment. These warrants were valued at
$172,000 on the issuance date. In 2022, the value of ELOC Warrants Inducement Expense is zero.
Interest Expense, net
Interest expense increased $4.3 million from $8.4 million for the year ended December 31, 2021 to $12.7
million in 2022 primarily due to additional interest expense incurred on royalty interest agreements primarily as result of
the change in the timing of payments due to exchanges and a new royalty interest purchase agreement.
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Loss on Extinguishment of Debt
The loss on extinguishment of debt increased $1.4 million from $753,000 for the year ended December 31,
2021 to $2.2 million in 2022 due to the extinguishment loss from the exchange of the outstanding balance of Iliad’s
royalty agreements for shares of the Company’s common stock.
Change in Fair Value of Financial Instruments and Hybrid Instrument Designated at FVO
Change in fair value of financial instruments increased $1.9 million from a loss of $2.0 million for the year
ended December 31, 2021, to a loss of $21,000 in 2022 primarily due to fair value adjustments in liability classified
warrants and notes payable designated at FVO.
Other income (expenses)
Other income (expenses) increased $1.7 million from $765,000 other expense for the year ended December 31,
2021 to $950,000 other income in 2022 due to write-off of extinguished liabilities as a result of legal release and reversal
of long outstanding accruals with reasonable uncertainty to not be incurred.
Liquidity and Capital Resources
Sources of Liquidity
We have incurred net losses since our inception. For the years ended December 31, 2022 and 2021, we had net
losses and comprehensive losses of $49.1 million and $52.6 million, respectively, and we expect to incur additional
losses in the near-term future. At December 31, 2022, we had an accumulated deficit of $266.9 million and accumulated
comprehensive loss of $680,000. To date, we have generated only limited revenue, and we may never achieve revenue
sufficient to offset our expenses. The Company expects to incur substantial losses and negative cash flows in future
periods. Further, the Company’s future operations, which include the satisfaction of current obligations, are dependent
on the success of the Company’s ongoing development and commercialization efforts, as well as securing of additional
financing and generating positive cash flows from operations. There is no assurance that the Company will have
adequate cash balances to maintain its operations.
We had cash of $5.5 million as of December 31, 2022 to fund our operating plan through one year from the
issuance of these consolidated financial statements.
Although the Company plans to finance its operations and cash flow needs through equity and/or debt
financing, collaboration arrangements with other entities, license royalty agreements, joint ventures, as well as revenue
from future product sales, the Company does not believe its current cash balances are sufficient to funds its operating
plan through one year from the issuance of these consolidated financial statements. The Company has an immediate
need to raise cash. There can be no assurance that additional funding will be available to the Company on acceptable
terms, or on a timely basis, if at all, or that the Company will generate sufficient cash from operations to adequately fund
operating needs. If the Company is unable to obtain an adequate level of financing needed for the long-term
development and commercialization of our products, the Company will need to curtail planned activities and reduce
costs. Doing so will likely have an adverse effect on our ability to execute our business plan; accordingly, there is
substantial doubt about the ability of the Company to continue in existence as a going concern. The accompanying
consolidated financial statements do not include any adjustments that might result from the outcome of these
uncertainties.
We have funded our operations primarily through the issuance of debt and equity securities, in addition to sales
of our commercial products. Cash provided by financing activities for the year ended December 31, 2022 were generated
from the issuance of an aggregate of 923,164 shares of common stock under the ATM Agreement for total net proceeds
of $20.5 million.
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The Company also raised an additional net proceeds of $17.5 million from the issuance of 10,135,550 shares of
common stock under the ATM agreement between January 1, 2023 to March 23, 2023.
We expect our expenditures will continue to increase as we continue our efforts to develop our products and
continue development of our pipeline in the near term. We may seek additional capital due to favorable market
conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating
plans. We may also not be successful in entering into partnerships that include payment of upfront licensing fees for our
products and product candidates for markets outside the United States, where appropriate. If we do not generate upfront
fees from any anticipated arrangements, it would have a negative effect on our operating plan. We still plan to finance
our operations and capital funding needs through equity and/or debt financing as well as revenue from future product
sales. However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely
basis, if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately
achieve profitability. If we are unable to obtain an adequate level of financing needed for the long-term development and
commercialization of our products, we will need to curtail planned activities and reduce costs. Doing so will likely have
an adverse effect on our ability to execute on our business plan.
Cash Flows for Year Ended December 31, 2022 compared to the Year Ended December 31, 2021
The following table shows a summary of cash flows for the years ended December 31, 2022 and 2021:
(in thousands)
Total cash used in operating activities
Total cash used in investing activities
Total cash provided by financing activities
Effects of foreign exchange rate changes on assets and
liabilities
Net (decrease) increase in cash
$
$
Year Ended December 31,
2022
2021
(33,104)
(1,675)
23,181
16
(11,582)
$
$
(34,970)
(6)
43,937
—
8,961
Cash Used in Operating Activities
During the year ended December 31, 2022, net cash used in operating activities of $33.1 million resulted from
our net loss and comprehensive loss of $49.1 million adjusted by amortization of debt issuance costs, debt discount, and
non-cash interest expense of $11.8 million, stock-based compensation of $3.3 million, loss on extinguishment of debt of
$2.2 million, depreciation and amortization expenses of $2.0 million, shares issued in exchange for services of $823,000,
amortization of operating lease right-of-use assets of $311,000, change in fair value of financial instruments and hybrid
instruments designated at FVO of $21,000, and net changes in operating assets and liabilities of $4.4 million.
During the year ended December 31, 2021, net cash used in operating activities of $35.0 million resulted from
our net loss and comprehensive loss of $52.6 million adjusted by amortization of debt discounts, debt issuance costs, and
non-cash interest expense of $5.2 million, stock-based compensation of $4.0 million, change in fair value of financial
instruments and hybrid instruments designated at FVO of $2.0 million, depreciation and amortization expenses of $1.7
million, Series 3 and ELOC warrants inducement expense of $1.6 million, a loss on extinguishment of debt of $753,000,
amortization of operating lease right-of-use assets of $94,000, derecognition of debt discount on settlement of
receivables of secured borrowing of $49,000, shares issued in exchange for services of $16,000, and net changes in
operating assets and liabilities of $2.3 million.
Cash Used in Investing Activities
During the year ended December 31, 2022, cash used in investing activities was $1.7 million which consisted
of cash used in software development activities of $1.6 million and cash used to purchase property and equipment of
$77,000.
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During the year ended December 31, 2021, cash used in investing activities was $6,000 which consisted of cash
used to purchase property and equipment.
Cash Provided by Financing Activities
During the year ended December 31, 2022, net cash provided by financing activities of $23.2 million consisted
of $20.5 million in net proceeds from shares issued in an At the Market offering, $4.0 million in net proceeds from notes
payable with Streeterville, offset by $1.2 million repayment of insurance financing and $100,000 payment of Tempesta
Note.
During the year ended December 31, 2021, net cash provided by financing activities of $43.9 million consisted
of $23.2 million in net proceeds received from shares issued in registered public offering, $11.0 million in net proceeds
received from issuance of notes payable, $8.6 million in net proceeds from shares issued in an At the Market offering,
$2.0 million in net proceeds received from shares issued on conversion of Series 1, Series 2, and 2019 Bridge Note
Warrants, $1.8 million in net proceeds received from shares issued in PIPE financing, $247 million noncontrolling
interest, and $3,000 in net proceeds from exercise of stock options, offset by $1.8 million repayment of receivables
secured borrowing, $943,000 repayment of insurance financing, $100,000 in principal payments of the notes payable
and $35,000 payment of ELOC warrants offering costs.
Off-Balance Sheet Arrangements
Since inception, we have not engaged in the use of any off-balance sheet arrangements, such as structured
finance entities, special purpose entities or variable interest entities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Jaguar Health, Inc.
Index to Financial Statements
Financial Statements
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022 and 2021
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
Page
87
90
91
92
93
95
97
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Stockholders of Jaguar Health, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Jaguar Health, Inc., and subsidiaries (the “Company”)
as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, changes
in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2022, and 2021 and the results of its operations and its cash flows for each of the years in the two-year period ended
December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit,
recurring losses, and expects continuing future losses. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans
regarding these matters are also described in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of
internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Impairment of Intangible Assets, Net—Refer to Note 2 and Note 6 to the financial statements
Critical Audit Matter Description
As of December 31, 2022, the Company had intangible assets, net, of $22.4 million. Intangible assets are evaluated
based on the asset group based on product as well as being evaluated between definite-lived and indefinite-lived
intangible assets for the purpose of the impairment assessment. The Company assesses potential impairments whenever
events or circumstances indicate that the asset may be impaired. For finite-lived intangibles assets the impairment is
based on recoverability. Recoverability of an asset group is measured by a comparison of the carrying amount of an
asset group to its forecasted cash flows expected to be generated by the asset group. If the carrying amount of the asset
group exceeds its estimated forecasted cash flows, an impairment charge is recognized as the amount by which the
carrying amount of the asset group exceeds the fair value of the asset group. An indefinite-lived intangible asset is
considered impaired if the carrying amount exceeds the fair value of the asset group. The fair value of the asset group
was determined using the income approach. The Company did not recognize an impairment loss in the financial
statements for the year ended December 31, 2022.
We identified the evaluation of intangible asset impairment as a critical audit matter because the determination of the
forecasted individual asset group’s cash flows, including revenue, expenses, and other items, requires a high degree of
auditor judgment and increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
The principal considerations for our determination that performing procedures relating to the valuation of intangible
assets as a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying
procedures relating to the fair value of intangible assets acquired due to the significant judgment by management when
developing the estimates and (2) significant audit effort was required in evaluating the significant assumptions relating to
the estimates, including the income projections and discount rates. In addition, the audit effort involved the use of
professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit
evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included the following:
● Inquiry of management regarding the development of the assumptions used in the valuation of the intangible
assets.
● Testing management’s process included evaluating the appropriateness of the valuation models, testing the
completeness, accuracy, and relevance of underlying data used in the models, and testing the reasonableness of
significant assumptions, including the income projections and discount rates.
● Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of
significant assumptions.
● Evaluated the experience, qualifications and objectivity of the Company’s specialist, a third-party valuation
firm.
● Obtained an understanding of the nature of the work the Company’s specialist performed, including the
objectives and scope of the specialist’s work; the methods or assumptions used; and a comparison of the
methods or assumptions used with those used in the preceding period. Identified and evaluated assumptions
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developed by the specialist considering assumptions generally used in the specialist’s field; supporting
evidence provided by the specialist; existing market data; historical or recent experience and changes in
conditions and events affecting the Company.
● Tested the accuracy and completeness of company-produced data used by the specialist, and evaluated the
relevance and reliability of externally obtained data. For assumptions provided to the specialist by the
company, evaluated whether there is a reasonable basis for using each assumption considering whether other
reasonably likely outcomes could materially affect the relevant financial statement assertions. Identified and
evaluated significant assumptions used by the specialist for reasonableness.
● Evaluated the Company’s estimates of future revenue projections by completing a retrospective comparison to
historical revenue projections. We tested the significant assumptions discussed above, as well as the
completeness and accuracy of the underlying data used in the projected cash flows and valuations.
● To reflect the uncertainty inherent in the projections, we performed our own sensitivity analyses by increasing
or decreasing the significant assumptions and evaluated the potential impact on the fair value. In addition, we
tested the reconciliation of the fair value of the asset group developed by management to the market
capitalization of the Company as of the valuation date.
/s/ RBSM, LLP
We have served as the Company's auditor since 2021.
Larkspur, California
March 24, 2023
PCAOB ID Number 587
89
JAGUAR HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
Table of Contents
(In thousands, except share and per share data)
Assets
Current assets:
Cash
Accounts receivable
Other receivable
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease - right-of-use asset
Intangible assets, net
Other assets
Total assets
Liabilities and Stockholders' equity (deficit)
Current liabilities:
Accounts payable
Accrued liabilities
Warrant liability
Operating lease liability, current
Notes payable, current
Total current liabilities
Operating lease liability, net of current portion
Notes payable, net of discount, net of current portion (includes hybrid instrument designated at Fair Value
Option amounting to $7.8 million as of December 31, 2022 and December 31, 2021, respectively)
Total liabilities
Commitments and contingencies (See Note 5)
Stockholders' equity (deficit)
Series B-2 convertible preferred stock: 10,165 shares authorized at December 31, 2022 and December 31,
2021; zero shares issued and outstanding at December 31, 2022 and December 31, 2021
Series C perpetual preferred stock: 1,011,000 shares authorized at December 31, 2022 and December 31,
2021; zero shares issued and outstanding at December 31, 2022 and December 31, 2021
Series E perpetual preferred stock: 4,475,074 shares authorized at December 31, 2022 and December 31,
2021; zero shares issued and outstanding at December 31, 2022 and December 31, 2021
Common stock - voting: $0.0001 par value, 298,000,000 shares authorized at December 31, 2022 and
December 31, 2021; 2,182,084 and 644,700 issued and outstanding at December 31, 2022 and December 31,
2021
Common stock - non-voting: $0.0001 par value, 50,000,000 shares authorized at December 31, 2022 and
December 31, 2021; 2,120,786 shares issued and outstanding at December 31, 2022 and December 31, 2021
Additional paid-in capital
Noncontrolling interest
Accumulated deficit
Accumulated other comprehensive loss
Total Stockholders' equity (deficit)
Total liabilities and Stockholders' equity (deficit)
December 31,
2022
2021
5,469
1,879
588
7,024
7,361
22,321
557
1,140
22,439
995
47,452
5,808
8,165
—
483
15,883
30,339
725
17,744
48,808
—
—
—
—
—
266,971
(699)
(266,948)
(680)
(1,356)
47,452
$
$
$
$
17,051
1,709
435
4,900
4,339
28,434
650
1,084
22,651
446
53,265
4,929
7,117
1
240
3,184
15,471
919
25,022
41,412
—
—
—
—
—
231,105
242
(219,494)
—
11,853
53,265
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
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JAGUAR HEALTH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Product revenue
Total revenue
Operating expenses
Cost of product revenue
Research and development
Sales and marketing
General and administrative
Series 3 warrants inducement expense
ELOC warrants inducement expense
Total operating expenses
Loss from operations
Interest expense
Loss on extinguishment of debt
Change in fair value of financial instruments and hybrid
instrument designated at Fair Value Option
Other income (expense)
Loss before income tax
Income tax expense
Net loss
Net loss attributable to noncontrolling interest
Net loss attributable to common stockholders
Net loss per share, basic and diluted
Weighted-average common shares outstanding, basic and diluted
$
$
$
$
Year Ended
December 31,
2022
2021
11,956
11,956
$
2,019
17,647
8,837
17,868
—
—
46,371
(34,415)
(12,723)
(2,187)
(20)
950
(48,395)
—
(48,395)
(941)
(47,454)
(36.18)
1,311,519
$
$
$
4,335
4,335
2,333
15,079
8,894
17,103
1,462
172
45,043
(40,708)
(8,421)
(753)
(1,953)
(765)
(52,600)
—
(52,600)
(5)
(52,595)
(88.22)
596,154
The accompanying notes are an integral part of these consolidated financial statements.
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JAGUAR HEALTH, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except share and per share data)
Net loss
Other comprehensive loss
Translation adjustments
Net loss and comprehensive loss
Year Ended
December 31,
2022
2021
(48,395)
(680)
(49,075)
$
$
$
(52,600)
—
(52,600)
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
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JAGUAR HEALTH, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Common
Stock - voting
Common
Stock - non-voting Additional Noncontrolling Accumulated
Shares
506,765 $ — 2,120,786 $ — $
Amount
Shares Amount paid-in capital
interest
deficit
— $ (166,899) $
Accumulated
other
comprehensive
loss
Total
Stockholders'
Equity
(In thousands, except share data)
Balances as of January 1, 2021
Shares issued on exercise of Series 1,
Series 2, and 2019 Bridge Note
Warrants
Shares issued in PIPE financing
Shares issued in At the Market
offering, net of issuance and offering
costs of $465
Shares issued to Iliad in exchange of
notes payable and accrued interest
Shares issued to third party for services
Shares issued in registered public
offering, net of issuance and offering
costs of $2,550
Shares issued in extinguishment of
Exchange Note 2
Shares issued on exercise of Series 3
warrants
Shares issued upon exercise of stock
options
Shares issued on conversion of Napo
merger common shares
Acquisition of a subsidiary
Fractional shares
Warrants issued to Oasis for ELOC
amendment, net of offering costs of
$48
Stock-based compensation
Net loss
Balances as of December 31, 2021
18,447
9,679
39,086
7,843
75
53,711
6,283
2,759
42
10
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
184,101 $
2,034
1,751
8,595
2,982
16
23,232
2,516
1,776
4
—
—
—
124
3,974
—
—
—
—
—
—
—
—
—
—
—
247
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(5)
—
—
(52,595)
644,700 $ — 2,120,786 $ — $
231,105 $
242 $ (219,494) $
The accompanying notes are an integral part of these consolidated financial statements.
93
— $
17,202
—
—
—
—
—
—
—
—
—
—
—
—
2,034
1,751
8,595
2,982
16
23,232
2,516
1,776
4
—
247
—
—
—
—
— $
124
3,974
(52,600)
11,853
Table of Contents
(In thousands, except share
data)
Balances as of January 1,
2022
Shares issued in At the
Market offering, net of
issuance and offering costs
of $103
Shares issued to Streeterville
in exchange of notes
payable and accrued interest
Shares issued to Iliad in
exchange of notes payable
and accrued interest
Shares issued to Synworld
for services
Shares issued to other third
party for services
Shares issued upon vesting
and release of restricted
stock units
Stock-based compensation
Net loss
Translation adjustments
Balances as of December
31, 2022
Common
Stock - voting
Common
Stock - non-voting
Additional Noncontrolling Accumulated
Accumulated
other
comprehensive
Total
Stockholders'
Shares
Amount
Shares
Amount paid-in capital
interest
deficit
loss
Equity
644,700 $ — 2,120,786 $ — $
231,105 $
242 $ (219,494) $
— $
11,853
923,164
310,196
235,461
45,896
20,151
2,516
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,462
5,056
6,207
800
23
100
3,218
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,462
5,056
6,207
800
23
—
—
(941)
—
—
—
(47,454)
—
—
—
—
(680)
100
3,218
(48,395)
(680)
2,182,084 $ — 2,120,786 $ — $
266,971 $
(699) $ (266,948) $
(680) $
(1,356)
The accompanying notes are an integral part of these consolidated financial statements
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JAGUAR HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net loss and comprehensive loss
Adjustments to reconcile net loss and comprehensive loss to net cash used in operating activities:
Amortization of debt issuance costs, debt discount, and non-cash interest expense
Stock-based compensation, vested and released restricted stock units and exercised stock options
Loss on extinguishment of debt
Depreciation and amortization expense
Shares issued in exchange for services
Amortization of operating lease - right-of-use-asset
Change in fair value of financial instruments and hybrid instrument designated at Fair Value Option
Series 3 warrants inducement expense
ELOC warrants inducement expense
Derecognition of debt discount on settlement of receivables secured borrowing
Changes in assets and liabilities
Accounts receivable
Other receivable
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued liabilities
Operating lease liability
Total cash used in operating activities
Cash flows from investing activity
Purchase of equipment
Costs incurred in software development activities
Total cash used in investing activity
Cash flows from financing activities
Proceeds from issuance of shares in At the Market offering, net of issuance and offering costs of $103 and
$465 in 2022 and 2021, respectively
Proceeds from notes payable with Streeterville
Payment of Tempesta Note
Repayment of insurance financing
Proceeds from issuance of shares in registered public offering, net of issuance and offering costs of $2,550
Proceeds from issuance of notes payable, net of issuance costs of $50
Proceeds from issuance of shares on conversion of Series 1, Series 2, and 2019 Bridge Note warrants
Proceeds from issuance of shares in PIPE financing
Noncontrolling interest
Proceeds from exercise of stock options
Repayment of receivables secured borrowing
Payment of ELOC warrants offering costs
Repayment of notes payable
Total cash provided by financing activities
Effects of foreign exchange rate changes on assets and liabilities
Net (decrease) increase in cash
Cash at beginning of the year
Cash at end of the year
$
95
Year Ended
December 31,
2022
2021
$
(49,075)
$
(52,600)
11,758
3,318
2,187
1,981
823
311
21
—
—
—
(170)
(251)
(2,124)
(1,560)
(550)
902
(360)
(315)
(33,104)
(77)
(1,598)
(1,675)
20,462
3,975
(100)
(1,156)
—
—
—
—
—
—
—
—
23,181
16
(11,582)
17,051
5,469
$
5,171
3,974
753
1,719
16
94
1,953
1,462
172
49
2,823
(407)
(2,118)
(796)
(408)
158
3,034
(19)
(34,970)
(6)
—
(6)
8,595
—
—
(943)
23,232
10,975
2,034
1,751
247
3
(1,822)
(35)
(100)
43,937
—
8,961
8,090
17,051
Table of Contents
JAGUAR HEALTH, INC.
STATEMENTS OF CASH FLOWS (continued)
Supplemental schedule of cash flow information
Cash paid for interest
Supplemental schedule of non-cash financing and investing activities
Shares issued to Iliad in exchange of notes payable and accrued interest
Insurance financing
Shares issued to Streeterville in exchange of notes payable and accrued interest
Recognition of operating lease - right-of-use asset and operating lease liability
Shares issued on exercise of Series 3 warrants
Shares issued in exchange of partial settlement of royalty interest
Lease modification
Offering costs included in accounts payable and accrued liabilities
$
$
$
$
$
$
$
$
23
10,472
1,056
792
365
—
—
—
$
$
$
$
$
$
$
$
28
—
1,183
—
1,087
1,776
91
13
The accompanying notes are an integral part of these consolidated financial statements.
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Jaguar Health, Inc.
Notes to Financial Statements
1. Organization and Business
Jaguar Health, Inc. (“Jaguar” or the “Company”) was founded in San Francisco, California as a Delaware
corporation on June 6, 2013 (inception). The Company was a majority-owned subsidiary of Napo until the close of the
Company's initial public offering on May 18, 2015. The Company was formed to develop and commercialize first-in-
class prescription and non-prescription products for companion animals.
On July 31, 2017, Jaguar completed a merger with Napo pursuant to the Agreement and Plan of Merger dated
March 31, 2017, by and among Jaguar, Napo, Napo Acquisition Corporation (“Merger Sub”), and Napo's representative
(the “Merger Agreement”). In accordance with the terms of the Merger Agreement, upon the completion of the merger,
Merger Sub merged with and into Napo, with Napo surviving as the wholly owned subsidiary (the “Merger” or “Napo
Merger”). Immediately following the Merger, Jaguar changed its name from “Jaguar Animal Health, Inc.” to “Jaguar
Health, Inc.” Napo now operates as a wholly owned subsidiary of Jaguar focused on human health including the ongoing
development of crofelemer and commercialization of Mytesi.
On March 15, 2021, Jaguar established Napo EU S.p.A (which changed its name in December 2021 to “Napo
Therapeutics”) in Milan, Italy as a subsidiary of Napo. Napo Therapeutics’ core mission is to provide access to
crofelemer in Europe to address significant rare/orphan disease indications, including, initially, two key orphan target
indications: Short bowel syndrome (“SBS”) with intestinal failure and congenital diarrheal disorders (“CDD”).
The Company manages its operations through two segments – human health and animal health and is
headquartered in San Francisco, California.
Nasdaq Communication and Compliance
Minimum Stockholders’ Equity Requirement
On February 18, 2022 the Company received a letter from the Staff of Nasdaq indicating that the bid price of
the Company’s common stock for the last 30 consecutive business days had again closed below the minimum $1.00 per
share required for the continued listing under Nasdaq Listing Rule 5550(a)(2).
On January 23, 2023, the Company effected a one-for-seventy-five reverse split of the Company’ issued and
outstanding shares of common stock, par value $0.0001 per share. As a result of the Reverse Split every seventy-five
shares of common stock issued and outstanding were automatically combined into one share of issued and outstanding
common stock, without any change in the par value per share. All information related to Common Stock, stock options,
restricted stock units, warrants and earnings per share have been retroactively adjusted to give effect to the Reverse
Stock Split for all periods presented.
On February 7, 2023, the Company received a letter from the Nasdaq Office of General Counsel notifying that
the minimum bid price deficiency had been cured and that the Nasdaq had determined to continue the listing of the
Company’s common stock on the Nasdaq stock market.
Liquidity and Going Concern
The Company, since its inception, has incurred recurring operating losses and negative cash flows from
operations and has an accumulated deficit of $266.9 million as of December 31, 2022. The Company expects to incur
substantial losses and negative cash flows in future periods. Further, the Company’s future operations, which include the
satisfaction of current obligations, are dependent on the success of the Company’s ongoing development and
commercialization efforts, as well as securing of additional financing and generating positive cash flows from
operations. There is no assurance that the Company will have adequate cash balances to maintain its operations.
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Although the Company plans to finance its operations and cash flow needs through equity and/or debt
financing, collaboration arrangements with other entities, license royalty agreements, joint ventures, as well as revenue
from future product sales, the Company does not believe its current cash balances are sufficient to funds its operating
plan through one year from the issuance of these consolidated financial statements. The Company has an immediate
need to raise cash. There can be no assurance that additional funding will be available to the Company on acceptable
terms, or on a timely basis, if at all, or that the Company will generate sufficient cash from operations to adequately fund
operating needs. If the Company is unable to obtain an adequate level of financing needed for the long-term
development and commercialization of our products, the Company will need to curtail planned activities and reduce
costs. Doing so will likely have an adverse effect on our ability to execute our business plan; accordingly, there is
substantial doubt about the ability of the Company to continue in existence as a going concern. The accompanying
consolidated financial statements do not include any adjustments that might result from the outcome of these
uncertainties.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP").
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. GAAP and applicable rules
and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its
subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. The reporting currency
of the Company is the U.S. dollar.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the
Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its audited
consolidated financial statements and the accompanying notes. The accounting policies that reflect the Company’s more
significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and
evaluating its reported financial results are the valuation of stock options, restricted stock units (“RSUs”), valuation of
hybrid instruments designated at fair value option (“FVO”), valuation of warrant liabilities, acquired in-process research
and development (“IPR&D”), and useful lives assigned to long-lived assets; impairment assessment of non-financial
assets; valuation adjustments for excess and obsolete inventory; allowance for doubtful accounts; deferred taxes and
valuation allowances on deferred tax assets; evaluation and measurement of contingencies; and recognition of revenue,
including estimates for product returns. Those estimates could change, and as a result, actual results could differ
materially from those estimates.
In March 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. During the
year ended December 31, 2022, the Company’s financial results were not significantly affected by the COVID-19
outbreak. The Company has considered all information available as of the date of issuance of these financial statements
and the Company is not aware of any specific events or circumstances that would require an update to its estimates or
judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur
and additional information becomes available. The extent to which the COVID-19 outbreak affects the Company’s
future financial results and operations will depend on future developments which are highly uncertain and cannot be
predicted, including new information which may emerge concerning the severity of the outbreak, and current or future
domestic and international actions to contain and treat it.
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Cash
The Company’s cash on deposit may exceed United States federally insured limits at certain times during the
year. The Company maintains cash accounts with certain major financial institutions in the United States. The Company
does not have cash equivalents as of December 31, 2022 and 2021.
Accounts Receivable
Accounts receivable is recorded net of allowances for discounts for prompt payment and credit losses. The
Company estimates an allowance for credit losses by considering factors such as historical experience, credit quality, the
age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The
credit loss allowance was immaterial as of December 31, 2022 and 2021.The corresponding expense for the credit loss
allowance is reflected in general and administrative expenses. The credit loss allowance was immaterial as of December
31, 2022 and 2021.
Concentrations
Cash is the financial instrument that potentially subjects the Company to a concentration of credit risk as cash is
deposited with banks and cash balances are generally in excess of Federal Deposit Insurance Corporation (“FDIC”)
insurance limits.
For the years ended December 31, 2022 and 2021, substantially all of the Company’s revenue was derived from
the sale of Mytesi. In looking at sales by the Company to distributors whose net revenue percentage of total net revenue
was equal to or greater than 10%, for fiscal years 2022 and 2021, the Company earned Mytesi revenue primarily from
three and one major pharmaceutical distributor(s) located in the United States, respectively. Revenue earned from each
major customer as a percentage of total revenue is as follows:
Customer 1
Customer 2
Customer 3
Year Ended
December 31,
2022
2021
— %
35 %
53 %
73 %
11 %
12 %
On September 3, 2021, the Company ended its engagement with Cardinal Health as its exclusive title model
customer for commercial sales and fully implemented its limited distribution Specialty Pharmacy model. Cardinal
Health continues to provide third-party logistics services for Mytesi.
The Company is subject to credit risk from its accounts receivable related to its sales. The Company generally
does not perform evaluations of customers' financial condition and generally does not require collateral. Accounts
receivable balance of the significant customers as a percentage of total accounts receivable is as follows:
Customer 1
Customer 2
Customer 3
December 31,
2022
2021
— %
38 %
54 %
16 %
37 %
37 %
The Company is subject to concentration risk from its suppliers. The Company sources raw material used to
produce the active pharmaceutical ingredient (“API”) in Mytesi from two suppliers and is dependent on a single third-
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party contract manufacturer for the supply of API in Mytesi and a single third-party contract manufacturer as well for the
supply of finished products for commercialization.
Other Risks and Uncertainties
The Company’s future results of operations involve a number of risks and uncertainties. Factors that could
affect the Company’s future operating results and cause actual results to vary materially from expectations include, but
are not limited to, rapid technological change, obtaining second source suppliers, regulatory approval from the FDA or
other regulatory authorities, the results of clinical trials and the achievement of milestones, market acceptance of the
Company’s product candidates, competition from other products and larger companies, protection of proprietary
technology, strategic relationships and dependence on key individuals.
Recent Global Events
Macroeconomic conditions, including the war in Ukraine and related sanctions, exchange rate and interest rate
volatility, and inflationary pressures, will continue to evolve globally. The greatest impact was a decline in Europe where
the impacts of foreign currency exchange rates, the war in Ukraine, and energy inflation were the greatest. The
Company’s partially owned subsidiary in Italy, Napo Therapeutics, does not generate any revenue yet for the year ended
December 31, 2022. There were no significant changes in the subsidiary’s operations for the year ended December 31,
2022, because of these recent global events.
Silicon Valley Bank (SVB) Failure
On March 2023, SVB, has been closed by regulators after the bank’s announcement of a $1.8 billion securities
loss following a deposit outflow and plans to raise $2.25 billion by selling its common and preferred stocks. As a result,
venture capital firms urged companies to withdraw their cash and investments from SVB to prevent being possibly
caught-up of its failure. After its close, SVB became under the receivership of FDIC. As of December 31, 2022, the
Company has no cash deposits nor investments within the bank and does not expect any impact from its cash deposits
from its financial institutions.
Fair Value
The Company’s financial instruments include accounts receivable, accounts payable, accrued liabilities, warrant
liability, operating lease liability, equity-linked financial instruments, and debt. The recorded carrying amount of
accounts receivable, accounts payable and accrued liabilities reflect their fair value due to their short-term nature. Other
financial liabilities are initially recorded at fair value, and subsequently measured at either fair value or amortized cost
using the effective interest method. See Note 3 for the fair value measurements.
Fair Value Option
ASC 825-10, Financial Instruments, provides FVO election that allows companies an irrevocable election to
use fair value as the initial and subsequent accounting measurement attribute for certain financial assets and liabilities.
ASC 825-10 permits entities to elect to measure eligible financial assets and liabilities at fair value on an ongoing basis.
Unrealized gains and losses on items for which the FVO has been elected are reported in earnings. The decision to elect
the FVO is determined on an instrument-by-instrument basis, must be applied to an entire instrument and is irrevocable
once elected. Assets and liabilities measured at fair value pursuant to ASC 825-10 are required to be reported separately
from those instruments measured using another accounting method. In accordance with the options presented in ASC
825-10, the Company elected to present the aggregate of fair value and non-fair-value amounts in the same line item in
the consolidated balance sheets and parenthetically disclose the amount measured at fair value in the aggregate amount.
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Inventory
Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out
method. Cost is initially recorded at the invoiced amount of raw materials or API, including the sum of qualified
expenditures and charges in bringing the inventory to its existing condition and location. The Company calculates
inventory valuation adjustments when conditions indicate that net realizable value is less than cost due to physical
deterioration, usage, obsolescence, reductions in estimated future demand or reduction in selling price. Inventory write-
downs are measured as the difference between the cost of inventory and net realizable value. The Company does not
have an allowance for inventory obsolescence as of December 31, 2022 and 2021.
Prelaunch Inventory
The Company’s policy is to capitalize costs for prelaunch inventories within the drug development phase that
evidence that the product’s reasonably likely critical attributes for success are present and feasible, and the key causes of
failures are absent based on management’s assumptions.
Property and Equipment
Land is stated at cost, reflecting fair value of the property at July 31, 2017, the date of the Napo merger.
Equipment is stated at cost, net of accumulated depreciation. Equipment begins to be depreciated when it is placed into
service. Depreciation is calculated using the straight-line method over estimated useful lives ranging between 3 to 10
years.
Expenditures for repairs and maintenance of assets are charged to expense as incurred. Costs of major additions
and betterments are capitalized and depreciated on a straight-line basis over their estimated useful lives. Upon retirement
or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any
resulting gain or loss is included in the consolidated statements of operations.
Software Developed for Internal Use
The Company capitalizes the costs of developing software for internal use. These costs include both purchased
software and internally developed software. Costs of developing software are expensed until technological feasibility
has been established. Thereafter, all costs are capitalized and are carried at the lower of unamortized cost or net
realizable value. Internally developed and purchased software costs are generally amortized over five years.
Long-Lived Assets
The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including
property and equipment and definite-lived intangible assets, to determine whether indicators of impairment exist that
warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include
management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future
periods as well as the strategic significance of the assets to the Company’s business objectives. If the Company
determines that an impairment trigger has been met, the Company evaluates the realizability of its long-lived assets
(asset group) based on a comparison of projected undiscounted cash flows from use and eventual disposition with the
carrying value of the related asset. Any write-downs (which are measured based on the difference between the fair value
and the carrying value of the asset) are treated as permanent reductions in the carrying amount of the assets (asset
group). Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, none of the
Company’s long-lived assets were impaired. The Company’s had no impairment of long-lived assets for the years ended
December 31, 2022 and 2021.
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Indefinite-lived Intangible Assets
Acquired IPR&D are intangible assets acquired in the July 2017 Napo merger. Under ASC 805, IPR&D are
initially recognized at fair value and classified as indefinite-lived assets until the successful completion or abandonment
of the associated research and development efforts. During the development period, these assets will not be amortized as
charges to earnings; instead, these assets will be tested for impairment on an annual basis or more frequently if
impairment indicators are identified. An impairment loss is measured based on the excess of the carrying amount over
the asset’s fair value. The Company recorded an impairment of zero for the years ended December 31, 2022 and 2021.
Leases
The Company accounts for its leases in accordance with ASC 842, Leases.
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease
based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use
assets are recorded based on the present value of lease payments over the expected lease term. Because the interest rate
implicit in lease contracts is typically not readily determinable, the Company utilizes its incremental borrowing rate,
which is the rate incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments
in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial
direct costs paid or incentives received.
The Company elected to include both the lease and non-lease components as a single component and account
for it as a lease.
Research and Development Expense
Research and development expense consists of expenses incurred in performing research and development
activities including related salaries, clinical trial and related drug and non-drug product costs, contract services and other
outside service expenses. Research and development expense is charged to operating expense in the period incurred.
Clinical Trial Accruals
Clinical trial costs are a component of research and development expenses. The Company accrues and expenses
clinical trial activities performed by third parties based upon actual work completed in accordance with agreements
established with clinical research organizations and clinical sites. The Company determines the costs to be recorded
based upon validation with the external service providers as to the progress or stage of completion of trials or services
and the agreed-upon fee to be paid for such services.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers
(“ASC 606”).
The Company’s policy typically permits returns if the product is damaged, defective, or otherwise cannot be
used when received by the customer if the product has expired. Returns are accepted for product that will expire within
six months or that have expired up to one year after their expiration dates. Estimates for expected returns of expired
products are based primarily on an ongoing analysis of our historical return patterns.
The Company recognizes revenue in accordance with the core principle of ASC 606 or when there is a transfer
of control of promised goods to customers in an amount that reflects the consideration that the Company expects to be
entitled to in exchange for those goods.
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The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the
amortization period of the asset that the Company otherwise would have recognized is one year or less.
The Company does not adjust the amount of consideration for the effects of a significant financing component
if, at contract inception, the expected period between the transfer of promised goods and customer payment is one year
or less.
The Company has elected to treat shipping and handling activities as fulfillment costs.
Additionally, the Company elected to record revenue net of sales and other similar taxes.
Contracts and Agreements
Effective January 16, 2019, Napo engaged Cardinal Health SPS as its exclusive third-party logistics distribution
agent for commercial sales for the Company’s Mytesi product and to perform certain other services which include,
without limitation, storage, distribution, returns, customer support, financial support, Electronic Data Interchange and
system access support (the “Exclusive Distribution Agreement”).
On September 3, 2021, the Company ended its engagement with Cardinal Health as its exclusive title model
customer for commercial sales and fully implemented its limited distribution Specialty Pharmacy model. Cardinal
Health continues to provide third-party logistics services for Mytesi.
The Company's Canalevia-CA1 and Neonorm products are primarily sold to distributors, who then sell the
products to the end customers. Since 2021, the Company has entered into two distribution agreements with established
distributors to distribute the Company’s animal health products in the United States. The distribution agreements and
the related purchase orders together meet the contract existence criteria under ASC 606 10 25 1. The Company sells
directly to its customers without the use of an agent.
Performance obligations
For animal health products sold by the Company, the single performance obligation identified above is the
Company’s promise to transfer the Company’s animal health products to distributors based on specified payment and
shipping terms in the arrangement. Product warranties are assurance-type warranties that do not represent a performance
obligation. For the Company’s human health product, Mytesi, the single performance obligation identified above is the
Company’s promise to transfer Mytesi to specialty pharmacies, based on specified payment and shipping terms as
outlined in the Exclusive Distribution Agreement.
Transaction price
For contracts with Cardinal Health and other distributors, the transaction price is the amount of consideration to
which the Company expects to collect in exchange for transferring the promised goods or services. The transaction price
of Mytesi is the Wholesaler Acquisition Cost (“WAC”), and the transaction price of Canalevia-CA1 and Neonorm is the
manufacturer’s list price, net of discounts, returns, and price adjustments.
Allocate transaction price
For contracts with Cardinal Health and other distributors, the entire transaction price is allocated to the single
performance obligation contained in each contract.
Revenue recognition
For contracts with Cardinal Health, for the Company, a single performance obligation is satisfied at a point in
time, upon the FOB terms of each contract when control, including title and all risks, has transferred to the customer.
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Disaggregation of Product Revenue
Human
Sales of Mytesi are recognized as revenue at a point in time when the products are delivered to the wholesaler.
Net revenues from the sale of Mytesi were $11.7 million and $4.3 million for the years ended December 31, 2022 and
2021, respectively.
Animal
The Company recognized Canalevia-CA1 products revenues of $167,000 and zero for the years ended
December 31, 2022 and 2021, respectively. The Company recognized Neonorm revenues of $48,000 and $62,000 for the
years ended December 31, 2022 and 2021, respectively. Revenues are recognized at a point in time upon shipment,
which is when title and control is transferred to the buyer. Sales of Canalevia-CA1, Neonorm Calf and Foal to
distributors are made under agreements that may provide distributor price adjustments and rights of return under certain
circumstances.
Contracts – Specialty Pharmacies
Effective October 1, 2020, the Company engaged a private company as its third-party logistics distribution
agent for commercial sales of the Company’s Mytesi product. Under the Specialty Product Distribution Agreement, the
Company shall supply the products to the private company’s specialty pharmacies, through a designated wholesaler, in
such amounts as may be ordered. There is no minimum purchase or inventory requirement. The specialty pharmacies
were authorized distributors of record for all National Drug Codes (“NDCs”) of Mytesi.
Effective April 20, 2021, the Company engaged another private company as an authorized specialty pharmacy
provider of Mytesi. Under the Specialty Pharmacy Distribution and Services Agreement, the private company shall sell
and dispense the Mytesi directly ordered from the Company at the agreed price to patients within the territories
identified in the agreement.
The Company has entered into agreements with a total of five different specialty pharmacy chains that are
authorized to provide Mytesi to patients.
Performance obligations
The single performance obligation is the Company’s promise to transfer Mytesi to specialty pharmacies, based
on specified payment and shipping terms outlined in the agreements.
Transaction price
The transaction price is the amount of consideration to which the Company expects to collect in exchange for
transferring the promised goods or services. The transaction price of Mytesi is the WAC, net of estimated discounts,
returns, and price adjustments.
Allocate transaction price
The entire transaction price is allocated to the single performance obligation contained in each contract.
Revenue recognition
The single performance obligation is satisfied at a point in time, upon the free on board (“FOB”) terms of each
contract, when control, including title and all risks, has transferred to the customer.
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Product Revenue
Sales of Mytesi are recognized as revenue at a point in time when the products are delivered to the specialty
pharmacies. Net revenues from the sale of Mytesi to the specialty pharmacies were $10.3 million and $993,000 for the
years ended December 31, 2022 and 2021, respectively.
Collaboration Revenue
Revenue recognition for collaboration agreements requires significant judgment. The Company’s assessments
and estimates are based on contractual terms, historical experience and general industry practice. Revisions in these
values or estimations have the effect of increasing or decreasing collaboration revenue in the period of revision.
On September 24, 2018, the Company entered into a Distribution, License and Supply Agreement (“License
Agreement”) with Knight Therapeutics ("Knight"). The License Agreement has a term of 15 years (with automatic
renewals) and provides Knight with an exclusive right to commercialize current and future Jaguar human health
products (including crofelemer, NP-300, and any product containing a proanthocyanidin or with an anti-secretory
mechanism) in Canada and Israel. Knight forfeited its right of first negotiation for expansion to Latin America. Under
the License Agreement, Knight is responsible for applying for and obtaining necessary regulatory approvals in the
territory of Canada and Israel, as well as marketing, sales and distribution of the licensed products. Knight will pay a
transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, the Company
may receive payments from Knight in an aggregate amount of up to approximately $18 million payable throughout the
initial 15-year term of the agreement. The Company did not have any license revenues for the years ended December 31,
2022 and 2021.
Modifications to Liability-classified Instruments
In accounting for debt modifications and exchange transactions, it is the Company’s policy to first determine
whether it qualifies as a Troubled Debt Restructuring (“TDR”) pursuant to the guidance provided in ASC 470-60. A debt
modification or exchange transaction that is not within the scope of the ASC 470-60 is accounted for under ASC 470-50
to determine if the transaction is a mere modification or an extinguishment.
For the year December 31, 2022, the Company entered into another amendment on the terms of its October
2020 and March 2021 Purchase Agreements (see Note 7).
Modifications to Equity-classified Instruments
In accounting for modifications of equity-classified warrants, it is the Company’s policy to determine the
impact by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation (“ASC
718”). The model for a modified share-based payment award that is classified as equity and remains classified in equity
after the modification is addressed in ASC 718-20-35-3. Pursuant to that guidance, the incremental fair value from the
modification is recognized as an expense in the statements of operations to the extent the modified instrument has a
higher fair value; however, in certain circumstances, such as when an entire class of warrants are modified, the measured
increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the
warrant modification.
The Company did not modify any equity-classified warrants in the year 2022 and 2021.
In accounting for amendments to equity-classified preferred stock, it is the Company’s policy to measure the
impact by analogy to ASC 470-50 in determining if such an amendment is an extinguishment or a modification. If the
amendment results in an extinguishment, the Company follows the SEC staff guidance in ASC 260-10-S99-2 and ASC
470-20. If the amendment results in a modification, the Company follows the model in either ASC 718 or ASC 470-50,
depending on the nature of the amendment.
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The Company did not modify any equity-classified preferred stock in the year 2022 and 2021.
Stock-Based Compensation
The Company's Stock Incentive Plan (see Note 11) provides for the grant of stock options, restricted stock and
restricted stock unit awards. The Company measures stock awards granted to employees, non-employees and directors at
estimated fair value on the date of grant and recognizes the corresponding compensation expense of the awards, net of
estimated forfeitures, over the requisite service periods, which correspond to the vesting periods of the awards.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates. The Company issues stock awards with only service-based vesting conditions, and records
compensation expense for these awards using the straight-line method.
The Company uses the grant date fair market value of its common stock to determine the grant date fair value
of options granted to employees, non-employees and directors. The Company measures and recognizes compensation
expense for all stock options and restricted stock units (“RSUs”) granted to its employees and directors based on the
estimated fair value of the award on the grant date. The Company uses the Black-Scholes valuation model to estimate
the fair value of stock option awards. The fair value is recognized as expense, net of estimated forfeitures, over the
requisite service period, which is generally the vesting period of the respective award, on a straight-line basis. The
Company believes that the fair value of stock options granted to non-employees is more reliably measured than the fair
value of the services received. The determination of the grant date fair value of options using an option pricing model is
affected by the Company’s estimated Common Stock fair value and requires management to make a number of
assumptions including the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and
expected dividends.
The Company estimates the fair value of stock options using the Black-Scholes option valuation model. The
fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the
awards. The fair market value of common stock is based on the closing price of the Company’s common stock as
reported on the date of the grant.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred
tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of
assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a
deferred tax asset will not be realized.
The Company has adopted the provisions of ASC 740, Income Taxes Related to Uncertain Tax Positions. Under
these principals, tax positions are evaluated in a two-step process. The Company first determines whether it is more-
likely-than-not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not
recognition threshold, it is then measured to determine the amount of benefit to be recognized in the financial
statements. The tax position is measured as the largest amount of benefit that has a greater than 50 percent likelihood of
being realized upon ultimate settlement.
Foreign Currency Remeasurement and Translation
The functional currency of Napo Therapeutics is Euro. The Company follows ASC 830, Foreign Currency
Matters (“ASC 830”). ASC 830 requires the assets, liabilities, and results of operations of a foreign operation to be
measured using the functional currency of that foreign operation. Exchange gains or losses from remeasuring
transactions and monetary accounts in a currency other than the functional currency are included in current earnings.
For certain subsidiaries, translation adjustments resulting from the process of translating the functional currency
of subsidiary financial statements into the U.S. Dollar reporting currency. These translation adjustments are
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reported separately and accumulated in the consolidated balance sheets as a component of accumulated other
comprehensive loss.
Comprehensive Loss
The Company follows ASC 220, Comprehensive Income, which establishes standards for reporting and
displaying comprehensive income and its components (revenue, expenses, gains and losses) in a full set of general-
purpose financial statements.
For the years ended December 31, 2022 and 2021, the amount of other comprehensive losses from translation
adjustments were $680,000 and zero, respectively.
Basic and Diluted Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss attributable to common stockholders for the
year by the weighted-average number of common shares outstanding during the year. Diluted net loss per share is
computed by dividing the net loss attributable to common stockholders for the year by the weighted-average number of
common shares, including potential dilutive shares of common stock assuming the dilutive effect of potential dilutive
securities. For years in which the Company reports a net loss, diluted net loss per common share is the same as basic net
loss per common share, because their impact would be anti-dilutive to the calculation of net loss per common share.
Diluted net loss per common share is the same as basic net loss per common share for the years ended December 31,
2022 and 2021.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments
with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.
The Company adopted the standard on January 1, 2022. The adoption of this standard did not have a material effect on
the Company’s audited consolidated financial statements and related disclosures.
In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modification or Exchanges of
Freestanding Equity-Classified Written Call Options – a consensus of the FASB Emerging Issues Task Force. The ASU
provides a principles-based framework to determine whether an issue should recognize the modification or exchange as
an adjustment to equity or an expense. The Company adopted the standard on January 1, 2022. The adoption of this
standard did not have a material effect on the Company’s audited consolidated financial statements and related
disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments. The main objective of the standard is to provide financial statement users
with more decision-useful information about the expected credit losses on financial instruments and other commitments
to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this
standard replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected
credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit
loss estimates. The update is effective for the Company beginning January 1, 2023 with early adoption permitted. The
Company is still evaluating the impact of the adoption of this standard.
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In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for
Contract Assets and Contract Liabilities from Contracts with Customers, to provide specific guidance to eliminate
diversity in practice on how to recognize and measure acquired contract assets and contract liabilities from revenue
contracts from customers in a business combination consistent with revenue contracts with customers not acquired in an
acquisition. The amendments in this update provide that the acquirer should consider the terms of the acquired contracts,
such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price
to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the
date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the
acquisition date. These amendments are effective for the Company beginning with fiscal year 2023. The impact of the
adoption of the amendments in this update will depend on the magnitude of any customer contracts assumed in a
business combination in 2023 and beyond.
3. Fair Value Measurements
ASC 820 "Fair Value Measurements," defines fair value, establishes a framework for measuring fair value
under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the
exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and
minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of
which the first two are considered observable and the last unobservable, that may be used to measure fair value which
are the following:
● Level 1 – Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.
● Level 2 – Observable inputs such as quoted prices for similar instruments in active markets, quoted prices
for identical or similar instruments in markets that are not active, or model‑derived valuations whose
significant inputs are observable.
● Level 3 – Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables set forth the fair value of the Company’s consolidated financial instruments that were
measured at fair value on a recurring basis as of December 31, 2022 and 2021:
(in thousands)
Warrant liability
Streeterville note
Total fair value
(in thousands)
Warrant liability
Streeterville note
Total fair value
$
$
$
$
$
Level 1
Level 2
Level 3
Total
December 31, 2022
— $
—
— $
— $
—
— $
— $
7,839
7,839
Level 1
Level 2
Level 3
December 31, 2021
— $
— $
— $
— $
— $
— $
1
7,818
7,819
—
7,839
7,839
Total
1
7,818
7,819
$
$
$
$
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The change in the estimated fair value of the Level 3 liability is summarized below:
(in thousands)
Beginning fair value of Level 3 liability
Additions
Exercises
Change in fair value
Ending fair value of Level 3 liability
Year Ended
December 31, 2022
Warrant liability
Streeterville note
$
$
1 $
—
—
(1)
— $
7,818
—
—
21
7,839
Warrant Liability
The warrants associated with the Level 3 warrant liability were valued at zero and $1,000, respectively, in the
Company’s audited consolidated balance sheet. Warrants as at December 31, 2022 and 2021 were computed using the
Black-Scholes-Merton pricing model.
Streeterville Note
The fair value of the Streeterville Note at January 13, 2021, date of issuance and as of December 31, 2022 and
2021 amounting to $6.0 million and $7.8 million, respectively, were based on the weighted average discounted expected
future cash flows representing the terms of the note, discounting them to their present value equivalents. This was
classified as Level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including the
Company’s own credit risk.
The Company determined and performed the valuations of the Streeterville Note with the assistance of an
independent valuation service provider. On a quarterly basis, the Company considers the main Level 3 inputs used as
follows:
● Discount rate for the Streeterville note was determined using a comparison of various effective yields on
bonds as of the valuation date.
● Market indications for vouchers, which affect the Return Bonus from the sale of Tropical Disease Priority
Review Voucher (“TDPRV”).
● Weighted probability of cash outflows was estimated based on the entity's knowledge of the business and
how the current economic environment is likely to impact the timing of the cash outflows, attributed to the
different repayment features of the note.
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The following table summarizes the quantitative information about the significant unobservable inputs used in
Level 3 fair value measurement:
Unobservable Inputs
Risk Adjusted Discount Rate
Range of Inputs
(probability-weighted average)
2022
2021
11.53%-26.06%
(26.06%)
6.78% - 21.31%
(21.31%)
Sales Proceeds: Amount of
comparable TDPRV
$67.5 million to
$350 million
($100 million)
$67.5 million to
$350.0 million
($100.0 million)
Relationship of unobservable inputs
to fair value
If discount rate is adjusted to total of
additional 100 basis points (bps), fair value
would have decreased by $364,000.
If discount rate is adjusted to total deduction
of 100 bps, fair value would have increased
by $364,000.
If expected cash flows by Management
considered the lowest amount of market
indications for vouchers, FV would have
decreased by $940,000.
If expected cash flows by Management
considered the highest amount of market
indications for vouchers, FV would have
increased by $7.23 million.
Range of Probability for
Timing of Cash Flows:
Variations of the terms and
conditions of the timing of
cash flows, including
settlement of the note
principal, interest, penalties,
and acceleration clause.
Fair Value Option
0.39%-46.55%
0.35%-46.06% If expected cash flows by Management
considered the Scenario with the least amount
of indicated value, FV would have decreased
by $692,000.
If expected cash flows by Management
considered the scenario with the greatest
amount of indicated value, FV would have
increased by $1.51 million.
Beginning January 1, 2021, the Company elected to apply the FVO accounting to selected financial instruments
to align the measurement attributes of those instruments under U.S. GAAP and to simplify the accounting model applied
to those financial instruments. The Company elected to apply FVO accounting to the entire class of hybrid instruments,
including structured notes, of which there are assessed embedded derivatives that would be eligible for bifurcation.
Changes in the fair value of FVO assets and liabilities as well as the mark-to-market adjustment on the entire class of
hybrid instruments, including derivatives and the net realized gains or losses on these instruments are reported in the
change in fair value of financial instruments and hybrid instrument designated at FVO in the consolidated statements of
operations.
For the year ended December 31, 2022, the Company did not note any fair value movement on FVO liabilities
attributable to any instrument-specific credit risk, which should be recorded in other comprehensive income (loss).
Hybrid Instruments
The Company elected to apply FVO accounting to all of the hybrid instruments issued, including structured
notes. The valuation of the hybrid instruments is predominantly driven by the derivative features embedded within the
instruments. The Company determined and performed the valuations of the hybrid instruments with the assistance of an
independent valuation service provider. The valuation methodology utilized is consistent with the income approach for
estimating the fair value of the interest-bearing portion of the instrument and the related derivatives. Cash flows of
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the hybrid instruments in their entirety, including the embedded derivatives, are discounted at an appropriate rate for the
applicable duration of the instrument. Interest on the interest-bearing portion of the instrument that is held to maturity is
aggregated as gain (loss) on instruments designated at fair value and related derivatives in the change in fair value of
financial instruments and hybrid instruments designated at FVO in the consolidated statements of operations.
The following table summarizes the fair value and unpaid principal balance for items the Company accounts
under FVO:
(in thousands)
At December 31, 2022
Hybrid Instrument:
Streeterville note
(in thousands)
At December 31, 2021
Hybrid Instrument:
Streeterville note
4. Related Party Transactions
BOD Cash Compensation
Fair value
Unpaid Principal
Balance
Fair Value Over
(Under) Unpaid
Principal Balance
7,839
$
6,221
$
1,618
Fair value
Unpaid Principal
Balance
Fair Value Over
(Under) Unpaid
Principal Balance
7,818
$
6,221
$
1,597
$
$
The Company makes BOD cash compensation on a quarterly basis based on the Director Compensation
Program. For the years ended December 31, 2022, and 2021, the Company paid approximately $241,000 and $124,000
cash compensation to its directors.
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5. Commitments and Contingencies
Commitments
Leases
August 31, 2020, the Company entered into an office sublease of approximately 5,263 square feet of office
space in San Francisco. The term of the sublease expired on May 31, 2021. The rent sublease is $15,000 per month
beginning on October 1, 2020, which includes operating expenses and taxes. The Company recognizes rent expense on a
straight-line basis over the non-cancellable lease period. Rent expense, included in general and administrative expenses
in the consolidated statements of operations, was zero and $75,000 for the years ended December 31, 2022 and 2021,
respectively. As of December 31, 2022, there were no remaining commitment under the lease.
On April 6, 2021, the Company entered into an office lease agreement of approximately 10,526 square feet of
office space in San Francisco, inclusive of office space covered under the previous sublease agreement. The term of the
lease began on September 1, 2021 and will expire on February 28, 2025, unless terminated earlier. The lease had an
early occupancy provision which entitled the Company to use a portion of the leased premises on June 1, 2021, free of
rent obligation. In addition, the Company has the option to extend the lease for one three-year period after the expiration
date. This option was not included as part of the lease term as the Company was not reasonably certain to exercise it,
hence the lease term only includes the noncancellable period of three years plus the period of early occupancy.
The base rent under the lease were $42,000 monthly for the first 12 months, $43,000 monthly for the next 12
months and $45,000 for the last twelve months. The lease agreement only contained one lease component, that is, the
lease of the office space. Non-lease components such as payment of building operating costs and share in real property
taxes were accounted for separately and were not considered as part of the total lease payments. The lease was classified
as an operating lease.
On October 7, 2021, the Company entered into an agreement for the lease of office premises from November 1,
2021 to April 30, 2022, subject to automatic renewal for subsequent periods until terminated by either party. Base rent
amounted to €10,000 or approximately $10,500. If the contract is not terminated within 12 months, the lease amount will
be increased in line with the index of relevant inflation at each annual expiration of the start date of the contract. The
lessor has the right to decline the renewal of the contract. Upon the happening of certain specified events, the lessor may
immediately withdraw from the contract. The Company is required leave the occupied spaces immediately in the same
condition in which they were found in the event of contract termination or expiry. The Company paid deposit of €20,000
or approximately $21,000 to the lessor. On January 26, 2022, the lease agreement was amended whereby the term was
extended by 20 months from May 1, 2022 to December 31, 2023. All other contract provisions remained the same.
On October 10, 2021, the Company also entered into a short-term office lease in Milan, Italy. The term of the
lease began on November 1, 2021, subject to automatic renewal equal to the present term until terminated by mutual
agreement. On January 26, 2022, the lease agreement was amended whereby the term was extended by 20 months from
May 1, 2022 to December 31, 2023. The Company recognizes rent expense on a straight-line basis over the non-
cancellable lease period.
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On December 22, 2021, the Company entered into an agreement for the lease of two separate vehicles for 48
months expiring on November 30, 2025. Total monthly lease payment amounted to €2,000 or approximately $2,100
payable in advance. The Company elected to include both the lease and non-lease components as a single component
and account for it as a lease. The Company also paid a total deposit of €19,000 or approximately $20,000, exclusive of
VAT. Early termination of the contracts requires the payment of specified amounts.
On December 24, 2021, the Company entered into the first amendment of the lease of office space in San
Francisco. The expiration of the lease was extended to February 28, 2025 due to the change in the commencement date
of one of the leased premises to March 1, 2022. The base rent under the lease amendment remained the same but will
only be due starting March 1, 2022. The rent in one of the leased premises currently being occupied by the Company
was and will still be $21,000 until the new commencement date. The lease amendment constituted a lease modification
where the Company remeasured the original lease liability using a discount rate determined at the effective date of the
modification and the amount of remeasurement of the lease liability was recognized as an adjustment to the
corresponding right-of-use asset without affecting profit or loss.
On January 25, 2022, the Company entered into an agreement for the lease of office premises from March 1,
2022 to December 31, 2023, subject to automatic renewal for subsequent periods until terminated by either party. Base
rent amounted to €4,000 or approximately $4,200. A similar agreement was entered with the lessor for the lease of
premises to be used as office space from November 1, 2022 to December 31, 2023, subject to automatic renewal for
subsequent periods until terminated by either party. Base rent amounted to €3,817 or approximately $4,000. If the
contracts are not terminated within 12 months, the lease amounts will be increased in line with the index of relevant
inflation at each annual expiration of the start date of the contract. The lessor has the right to decline the renewal of the
contracts. Upon the happening of certain specified events, the lessor may immediately withdraw from the contracts. The
Company is required leave the occupied spaces immediately in the same conditions in which they were found in the
event of contract termination or expiry. The Company paid a deposit of €9,000 or approximately $9,500 to the Lessor.
In May 2022, the Company entered into an agreement for the lease of one vehicle for 48 months expiring on
April 30, 2026. Total monthly lease payment amounted to €833 or approximately $880 payable in advance. The
Company elected to include both the lease and non-lease components as a single component and account for it as a lease.
The Company also paid a total deposit of €21,000 or approximately $22,000, exclusive of VAT. Early termination of the
contracts requires the payment of specified amounts.
In October 2022, the Company entered into an agreement for the lease of three vehicles for 48 months expiring
on September 30, 2026. Total monthly lease payment amounted to €2,094 or approximately $2,200 payable in advance.
The Company elected to include both the lease and non-lease components as a single component and account for it as a
lease.
In November 2022, the Company entered into an agreement for the lease of two vehicles for 48 months
expiring on October 31, 2026. Total monthly lease payment amounted to €1,459 or approximately $1,500 payable in
advance. The Company elected to include both the lease and non-lease components as a single component and account
for it as a lease.
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The table below provided additional details of the office space lease presented in the consolidated balance
sheet:
(in thousands)
Operating lease - right-of-use asset
Operating lease liability, current
Operating lease liability, net of current portion
Total
Weighted-average remaining life (years)
Weighted-average discount rate
$
$
December 31,
2022
2021
1,140
$
1,084
483
725
1,208
$
2.36
17.89%
240
919
1,159
3.21
21.10%
Lease cost included in general and administrative expenses in the consolidated statements of operations for the
years ended December 31, 2022 and 2021 was approximately $629,000 and $282,000.
For the years ended December 31, 2022 and 2021, cash paid for operating lease liabilities recognized under
operating cash flows amounted to $315,000 and $105,260, respectively. Non-cash investing and financing activities for
the years ended December 31, 2022 and 2021 include addition to right-of-use asset obtained from new operating
liabilities amounting to $365,000 and $1.1 million, respectively, and lease modification amounting to zero and $91,000
respectively.
The following table summarizes the undiscounted cash payment obligations for the operating lease liability:
(in thousands)
2023
2024
2025
2026
Total undiscounted operating lease payments
Imputed interest expenses
Total operating lease liability
Less: Operating lease liability, current
Operating lease liability, net of current portion
December 31,
2022
642
605
160
32
1,439
(231)
1,208
483
725
$
Rent and lease expense included in the general and administrative expenses in the audited consolidated
statements of operations for the year ended December 31, 2022 and December 31, 2021 was approximately $629,000
and $282,000, respectively.
Purchase Commitment
On September 3, 2020, the Company entered into a manufacturing and supply agreement (the “Agreement”)
with Glenmark Life Sciences Limited (“Glenmark”), pursuant to which Glenmark will continue to serve as the
Company’s manufacturer of crofelemer for use in Mytesi, the Company’s human prescription drug product approved by
the U.S. Food and Drug Administration, and for other crofelemer-based products manufactured by the Company or its
affiliates for human or animal use. The term of the Agreement is approximately 2.5 years (i.e., until March 31, 2023) and
may be extended for successive two-year renewal terms upon mutual agreement between the parties
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thereto. Pursuant to the terms of the Agreement, Glenmark will supply crofelemer to the Company. The Agreement
contains provisions regarding the rights and responsibilities of the parties with respect to manufacturing specifications,
forecasting and ordering, delivery arrangements, payment terms, confidentiality and indemnification, as well as other
customary provisions. The Agreement includes a commitment for the purchase from Glenmark of a minimum quantity
of 500 kilograms of crofelemer per year, pro-rated for partial years, where the Company may be obligated to pay any
shortfall. Either party may terminate the Agreement for any reason with 12 months prior written notice to the other party.
In addition, either party may terminate the Agreement upon written notice as a result of a material breach of the
Agreement that remains uncured for a period of 90 days. If the Company terminates the Agreement as a result of a
material breach caused by Glenmark, the Company will not be obligated to pay for any minimum quantity shortfall. As
of December 31, 2022, the remaining commitment is 125 kilograms.
Master Services Agreement (“MSA”)
On October 5, 2020, the Company entered into another MSA for clinical research organization services (the
“2020 MSA”) and a service order under such 2020 MSA with Integrium. The service order covers the Company’s
planned upcoming pivotal Phase 3 clinical trial for cancer-therapy related diarrhea. As consideration for its services, the
Company will pay Integrium a total amount of up to approximately $12.4 million that will be paid over the term of the
engagement and based on the achievement of certain milestones. The 2020 MSA will terminate upon the satisfactory
performance of all services to be provided thereunder unless earlier terminated by the parties. For the years ended
December 31, 2022 and 2021, the Company paid Integrium $1.9 million and $1.7 million, respectively.
Asset Transfer and Transition Commitment
On September 25, 2017, Napo entered into the Termination, Asset Transfer and Transition Agreement dated
September 22, 2017 with Glenmark. As a result of the agreement, Napo now controls commercial rights for Mytesi for
all indications, territories and patient populations globally, and also holds commercial rights to the existing regulatory
approvals for crofelemer in Brazil, Ecuador, Zimbabwe and Botswana. In exchange, Napo agrees to pay Glenmark 25%
of any payment it receives from a third party to whom Napo grants a license or sublicense or with whom Napo partners
in respect of, or sells or otherwise transfers any of the transferred assets, subject to certain exclusions, until Glenmark
has received a total of $7.0 million. For the years ended December 31, 2022 and 2021, the Company paid Glenmark $2.6
million and $2.0 million, respectively.
Revenue Sharing Commitment Update
On December 14, 2017, the Company announced its entry into a collaboration agreement with Seed Mena
Businessmen Services LLC (“SEED”) for Equilevia™, the Company's non-prescription, personalized, premium product
for total gut health in equine athletes. According to the terms of the Agreement, the Company will pay SEED 15% of
total revenue generated from any clients or partners introduced to the Company by SEED in the form of fees,
commissions, payments or revenue received by the Company or its business associates or partners, and the agreed-upon
revenue percentage increases to 20% after the first million dollars of revenue. In return, SEED will provide the
Company access to its existing United Arab Emirates (“UAE”) network and contacts and assist the Company with any
legal or financial requirements. The agreement became effective on December 13, 2017 and will continue indefinitely
until terminated by either party pursuant to the terms of the Agreement. No payments have been made to date.
Contingencies
From time to time, the Company maybe a party to various legal actions, both inside and outside the U.S.,
arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be
reasonably estimated, that the Company believes will result in a probable loss (including, among other things, probable
settlement value), to adequately address any liabilities related to legal proceedings and other loss contingencies. A loss
or a range of loss is disclosed when it is reasonably possible that a material loss will incur and can be estimated, or when
it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision. The Company did
not have any material accruals for any currently active legal action in its consolidated
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balance sheets as of December 31, 2022, as the Company could not predict the ultimate outcome of these matters, or
reasonably estimate the potential exposure.
6. Balance Sheet Components
Inventory
Inventory at December 31, 2022 and 2021 consisted of the following:
(in thousands)
Raw Material
Work in Process
Finished Goods
Inventory
Prelaunch Inventory
December 31,
2022
2021
$
$
2,101
3,599
1,324
7,024
$
$
1,248
2,760
892
4,900
Costs capitalized for the Company’s lyophilized drug amounting to $2.1 million and zero as of December 31,
2022, and 2021 are included in the prepayments and other assets account. As of December 31, 2022, the Company has
filed the POC for the lyophilized drug to European FDA and expects approval at the end of the first half of 2023. Upon
approval, the prelaunch inventory shall be reclassed as part of the Company’s inventory.
Property and Equipment, net
Property and equipment at December 31, 2022 and 2021 consisted of the following:
December 31,
2022
2021
(in thousands)
Land
Lab equipment
Clinical equipment
Software
Furniture and fixtures
Computers and peripherals
Total property and equipment at cost
Accumulated depreciation
Property and equipment, net
$
$
$
396
477
—
63
18
7
961
(404)
557
$
396
424
65
63
—
—
948
(298)
650
Depreciation and amortization expense was $171,000 and $33,000 for the years ended December 31, 2022 and
2021, respectively.
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Intangible assets, net
Intangible assets, net of amortization, at December 31, 2022 and 2021 consisted of the following:
December 31,
2022
2021
(in thousands)
Developed technology
Accumulated developed technology amortization
$
Developed technology, net
In-process research and development
In process research and development, net
Trademarks
Accumulated trademark amortization
Trademarks, net
Internal use software costs - registry
Accumulated internal use software costs amortization
Internal use software costs - registry, net
Patents
Total intangible assets, net
$
25,000
(9,028)
15,972
4,800
4,800
300
(108)
192
1,236
(122)
1,114
361 —
$
22,439
$
25,000
(7,361)
17,639
4,800
4,800
300
(88)
212
—
—
—
—
22,651
Amortization expense of finite-lived intangible assets was $1.8 million and $1.7 million for the years ended
December 31, 2022 and 2021.
The following table summarizes the Company’s estimated future amortization expense of intangible assets with
finite lives as of December 31, 2022:
(in thousands)
2023
2024
2025
2026
Thereafter
Amounts
1,952
1,952
1,952
1,952
9,831
17,639
$
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Accrued Liabilities
Accrued liabilities at December 31, 2022 and 2021 consisted of the following:
(in thousands)
Accrued interest
Accrued audit and tax services
Accrued vacation
Accrued payroll and commission
Accrued legal costs
Accrued local tax
Accrued payroll tax
Accrued chargebacks and discounts
Accrued distributor services fees
Accrued consulting
Accrued other
Total
December 31,
2022
December 31,
2021
5,489
575
310
263
36
9
1
—
—
—
1,482
8,165
$
$
3,456
167
281
120
414
285
58
335
250
47
1,704
7,117
$
$
Other accrued liabilities as of December 31, 2022 largely consist of other accrued interests, contract fees and
scientific advisory board fees while other accrued liabilities as of December 31, 2021 significantly comprise of contract
fees and scientific advisory board fees.
7. Debt
Notes payable at December 31, 2022 and 2021 consisted of the following:
(in thousands)
Royalty Interest
Streeterville Note
Insurance Financing
Tempesta Note
Less: unamortized discount and debt issuance costs
Note payable, net of discount
Notes payable - non-current, net
Notes payable - current, net
December 31,
2022
2021
$
$
$
$
$
38,931
7,840
234
250
47,255
(13,628)
33,627 $
$
17,744
$
15,883
37,000
7,818
335
350
45,503
(17,297)
28,206
25,022
3,184
Future maturities of the notes payable as of December 31, 2022 are as follows:
(in thousands)
Years ended December 31,
2023
2024
2025
2026
2027
Less: unamortized discount and debt issuance costs
Total
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Amounts
15,882
23,483
50
—
—
39,415
(13,628)
25,787
$
$
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Future maturities are based on contractual minimum payments. Timing of maturities may fluctuate based on
future revenue.
Sale of Future Royalty Interest
October 2020 Purchase Agreement
On October 8, 2020, the Company entered into another royalty interest purchase agreement (the “October 2020
Purchase Agreement”) with Iliad, pursuant to which the Company sold to Iliad a royalty interest entitling Iliad to receive
$12.0 million of future royalties on sales of Mytesi and certain up-front license fees and milestone payments from
licensees and/or distributors (the “Royalty Repayment Amount”) for an aggregate purchase price of $6.0 million.
Until such time as the Royalty Repayment Amount has been paid in full, the Company will pay Iliad 10% of
the Company’s net sales on included products and 10% of worldwide revenues related to upfront licensing fees and
milestone payments from licensees and/or distributors, but specifically excluding licensing fees and/or milestone
payments that are reimbursements of clinical trial expenses (the “Royalty Payments”). Beginning on the six-month
anniversary of the delivery of the October 2020 Purchase Agreement to the Company (the “Purchase Price Date”) and
continuing until the 12-month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be the greater
of (a) $250,000, and (b) the actual Royalty Payment amount Iliad is entitled to for such month. Beginning on the 12-
month anniversary of the Purchase Price Date and continuing until 18-month anniversary of the Purchase Price Date, the
monthly Royalty Payment shall be the greater of (a) $400,000 and (b) the actual Royalty Payment amount Iliad is
entitled to for such month. Beginning on the 18-month anniversary of the Purchase Price Date and continuing until 24-
month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be the greater of (a) $600,000 and (b)
the actual Royalty Payment amount Iliad is entitled to for such month. Beginning on the 24-month anniversary of the
Purchase Price Date and continuing until the Royalty Repayment Amount has been paid in full, the monthly Royalty
Payment shall be the greater of (a) $750,000, and (b) the actual Royalty Payment amount Iliad is entitled to for such
month.
The Royalty Interest amount of $12.0 million is classified as debt, net of a $6.0 million discount. Under ASC
470-10-35-3, royalty payments to Iliad will be amortized under the interest method per ASC 835-30. Because there is no
set interest rate, and because the royalty payments are variable, the discount rate is variable. After each royalty payment,
the Company will use a prospective method to determine a new discount rate based on the revised estimate of remaining
cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash
flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining periods.
At issuance, based on projected cash outflows from future revenue streams, the discount rate was 34.51%.
Pursuant to the October 2020 Purchase Agreement, if the weekly volume weighted average price (“VWAP”) of
the Company’s common stock is not equal or greater than the minimum VWAP of $0.9105 at least twice during each
calendar month during the six-month period beginning on November 1, 2020, then the Royalty Repayment Amount will
be automatically increased by $6.0 million at the end of such six-month period. During the observation period starting
November 1, 2020, the Company’s weekly VWAP failed to reach the minimum VWAP of $0.9105 and on November 13,
2020, the Company concluded that the contingent clause has been met, warranting an additional $6.0 million Royalty
Repayment Amount, to be added to the outstanding balance commencing on May 10, 2021 for the purpose of cash
interest calculation. The change in the Royalty Repayment Amount was accounted for as a debt modification and
resulted in a new discount rate of 45.42%.
On April 13, 2021, the Company entered into an exchange agreement with Iliad, pursuant to which the parties
agreed to partition $3.0 million from the original outstanding balance of the royalty interest. The parties further agreed to
exchange the partitioned royalty for 7,843 shares of the Company’s common stock. The exchange consisted of Iliad
surrendering the partitioned royalty in exchange for the exchange shares. The exchange agreement was accounted for as
a modification and resulted in a new discount rate of 77.09%. As of December 31, 2022, the forecasted future revenues
changed which resulted to a new discount rate of 74.59%.
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On February 11, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the
parties agreed to partition $2.4 million from the outstanding balance of the royalty interest. The parties further agreed to
exchange the partitioned royalty for 23,117 shares of the Company’s common stock. The exchange consisted of Iliad
surrendering the partitioned royalty in exchange for the exchange shares.
On March 2, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties
agreed to partition $1.1 million from the outstanding balance of the royalty interest. The parties further agreed to
exchange the partitioned royalty for 32,333 shares of the Company’s common stock. The exchange consisted of Iliad
surrendering the partitioned royalty in exchange for the exchange shares.
On March 4, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties
agreed to partition $800,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange
the partitioned royalty for 26,667 shares of the Company’s common stock. The exchange consisted of Iliad surrendering
the partitioned royalty in exchange for the exchange shares.
On March 9, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties
agreed to partition $700,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange
the partitioned royalty for 24,667 shares of the Company’s common stock. The exchange consisted of Iliad surrendering
the partitioned royalty in exchange for the exchange shares.
Because the period between the first and last exchanges occurred within a 12-month period and each was
individually assessed as a modification, the debt terms that existed prior to the February 13 exchange was used in the
application of the 10% test on the cumulative assessment performed. The exchanges were cumulatively accounted for as
an extinguishment and resulted in a loss of $2.2 million.
On April 14, 2022, the Company entered into amendments (the “Royalty Interest Global Amendments”) to its
existing royalty interests including the Royalty Interest in the original principal amount of $12.0 million under the
October 2020 Royalty Interest. The amendment grants the Company at its sole discretion, the right to exchange from
time to time, all or any portion of the Royalty Interests for shares of the Company’s common stock at a price per share
equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of date of the applicable exchange.
Under the Royalty Interest Global Amendments, the Company’s ability to exchange the Royalty Interests for shares of
the Company’s common stock is subject to certain limitations, on which the Company will not have such right and issue
any common stock to investors if (a) the issuance of the Company’s common shares would cause investor’s beneficial
ownership to exceed 4.99% of Company’s issued and outstanding common stock as of such date; (b) any of the
exchange conditions has not been satisfied as of the applicable exchange date; and (c) the total cumulative number of
shares of the Company’s common stock issued pursuant to the Royalty Interests would exceed the requirements of The
Nasdaq Capital Market (including the rules related to the aggregation of offerings under Nasdaq Listing Rule 5635(d) if
applicable) (the “Exchange Cap”), unless stockholder approval is obtained to issue more than the Exchange Cap. The
Exchange Cap shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split,
reverse stock split or other similar transaction.
On May 13, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties
agreed to partition $400,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange
the partitioned royalty for 15,249 shares of the Company’s common stock. The exchange consisted of Iliad surrendering
the partitioned royalty in exchange for the exchange shares.
On July 25, 2022, the Company entered into an exchange agreement with Iliad, pursuant to which the parties
agreed to partition $750,000 from the outstanding balance of the royalty interest. The parties further agreed to exchange
the partitioned royalty for 31,546 shares of the Company’s stock. The exchange consisted of Iliad surrendering the
partitioned royalty in exchange for the exchange shares.
On November 18, 2022, the Company entered into another exchange agreement with Iliad, pursuant to which
the parties agreed to partition $715,000 from the outstanding balance of the royalty interest. The parties further agreed
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to exchange the partitioned royalty for 73,333 shares of the Company’s stock. The exchange consisted of Iliad
surrendering the partitioned royalty in exchange for the exchange shares.
Although there were exchanges that occurred within the 12-month period prior to the May 13, 2022, July 25,
2022 and November 18, 2022 exchanges, these were previously accounted for as extinguishment and, therefore,
cumulative assessment was not anymore performed. The exchange agreements were accounted for as a modification. As
of December 31, 2022, the forecasted future revenues changed which resulted to a new discount rate of 41.35%.
Interest expense for the years ended December 31, 2022 and 2021 was $3.6 million and $4.2 million,
respectively. As of December 31, 2022 and 2021, the carrying value of the debt was $7.3 million and $6.3 million,
respectively.
December 2020 Purchase Agreement
On December 22, 2020, the Company entered into a royalty interest purchase agreement (the “December 2020
Purchase Agreement”) with Irving Park Capital, LLC (“Irving”), pursuant to which the Company sold to Irving a royalty
interest entitling Irving to receive $12.0 million of future royalties on sales of Mytesi and certain up-front license fees
and milestone payments from licensees and/or distributors (the “Royalty Repayment Amount”) for an aggregate
purchase price of $6.0 million.
Until such time as the Royalty Repayment Amount has been paid in full, the Company will pay Irving 10% of
the Company’s Net Sales on Included Products and 10% of worldwide revenues related to upfront licensing fees and
milestone payments from licensees and/or distributors, but specifically excluding licensing fees and/or milestone
payments that are reimbursements of clinical trial expenses (the “Royalty Payments”). Beginning on the payment start
date and continuing until the 12-month anniversary of the Purchase Price Date, the monthly Royalty Payment shall be
the greater of (a) $750,000, and (b) the actual Royalty Payment amount Irving is entitled to for such month.
The Royalty Interest amount of $12.0 million is classified as debt, net of a $6.0 million discount. Under ASC
470-10-35-3, royalty payments to Irving will be amortized under the interest method per ASC 835-30. Because there is
no set interest rate, and because the royalty payments are variable, the discount rate is variable. After each royalty
payment, the Company will use a prospective method to determine a new discount rate based on the revised estimate of
remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of
remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the
remaining periods. At issuance, based on projected cash outflows from future revenue streams, the discount rate was
23.70%. As of December 31, 2022, the forecasted future revenues changed which resulted to a new discount rate of
29.55%.
On April 14, 2022, under the Royalty Interest Global Amendments, the Company is granted at its sole
discretion, the right to exchange from time to time, all or any of the Royalty Interest under the original principal amount
of $12.0 million or any portion of the December 2020 Purchase Agreement for shares of the Company’s common stock
at a price per share equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of date of the
applicable exchange, subject to certain limitations.
Interest expense for the years ended December 31, 2022 and 2021 was $3.9 million and $2.9 million,
respectively. As of December 31, 2022 and 2021, the carrying value of the debt was $10.0 million and $7.6 million,
respectively
March 2021 Purchase Agreement
On March 8, 2021, the Company entered into a purchase agreement (the “March 2021 Purchase Agreement”)
with Streeterville Capital, LLC (“Streeterville”), a company affiliated with CVP, pursuant to which the Company sold a
royalty interest entitling Streeterville to $10.0 million and any interest, fees, and charges as royalty repayment amount
for an aggregate purchase price of $5.0 million. Interest will accrue on the royalty repayment amount at a rate
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of 5% per annum, compounding quarterly, and will increase to 10% per annum, compounding quarterly on the 12-month
anniversary of the closing date.
The Company will be obligated to make minimum royalty payments on a monthly basis beginning at the earlier
of (a) 36 months following the closing date or (b) 30 days following the satisfaction of all existing royalties to
Streeterville, and its affiliates namely Iliad and Irving, but not earlier than 18 months following the closing date in an
amount equal to the greater of (i) $250,000 beginning on the royalty payment start date and continuing until either the
royalty repayment amount has been paid in full or the 6-month anniversary of the royalty payment start date, $400,000
beginning on the 6-month anniversary of the royalty payment start date and continuing until either the royalty repayment
amount has been paid in full or the 12-month anniversary of the royalty payment start date, $600,000 beginning on the
12-month anniversary of the royalty payment start date and continuing until either the royalty repayment amount has
been paid in full or the 18-month anniversary of the royalty payment start date, $750,000 beginning on the 18-month
anniversary of the royalty payment start date and continuing until the royalty repayment amount has been paid in full,
and (ii) 10% of the Company’s net sales on included products, 10% of worldwide revenues related to upfront licensing
fees and milestone payments from licensees and/or distributors but specifically excluding licensing fees and/or milestone
payments that are reimbursements of clinical trial expenses or associated with the license of Included Products from the
Company to Napo Therapeutics, including but not limited to the upfront fee payable by Napo Therapeutics to Napo for
included products and Crofelemer for other indications; and 50% of royalties collected from licenses of the included
products to third parties.
The Royalty Interest amount of $10.0 million is classified as debt, net of a $5.0 million discount, at initial
recognition. Under ASC 470-10-35-3, royalty payments to Streeterville will be amortized under the interest method per
ASC 835-30. Because there is no set interest rate, and because the royalty payments are variable, the discount rate is
variable. After each royalty payment, the Company will use a prospective method to determine a new discount rate
based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of
the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize
interest expense for the remaining periods. At issuance, based on projected cash outflows from future revenue streams,
the discount rate was 19.36%. As of December 31, 2022, the forecasted future revenues changed which resulted to a new
discount of 19.14%.
On April 14, 2022, under the Royalty Interest Global Amendments, the Company is granted at its sole
discretion, the right to exchange from time to time, all or any of the Royalty Interest under the original principal amount
of $10.0 million of the March 2021 Purchase Agreement for shares of the Company’s common stock at a price per share
equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of date of the applicable exchange,
subject to certain limitations.
On August 17, 2022, the Company entered into an exchange agreement (the “Royalty Interest Exchange
Agreement”) with Streeterville to (i) partition a new royalty interest in the royalty repayment amount of $3.4 million
(“Partitioned Royalty”) from the royalty interest of the March 2021 Purchase Agreement and then cause the outstanding
balance of the royalty interest to be reduced by an amount equal to the initial outstanding balance of the Partitioned
Royalty, and (ii) exchange (“Royalty Exchange”) the Partitioned Royalty for 153,333 million shares of the Company’s
common stock with a par value of $0.0001 in accordance with the term of the Royalty Interest Exchange Agreement.
Under the terms of the Royalty Interest Exchange Agreement, the Royalty Exchange will consist of Streeterville
surrendering the Partitioned Royalty in exchange for the shares, free of any restrictive securities legend, and Streeterville
shall give no consideration of any kind whatsoever to the Company in connection with the Royalty Interest Exchange
Agreement.
On September 30, 2022, the Company entered into an exchange agreement with Streeterville, pursuant to which
the parties agreed to partition $2.0 million from the outstanding balance of the royalty interest. The parties further agreed
to exchange the partitioned royalty for 156,863 shares of the Company’s common stock. The exchange consisted of
Streeterville surrendering the partitioned royalty in exchange for the exchange shares. The exchange was accounted for
as a debt modification and resulted to a reduction in the outstanding balance of the royalty interest amounting to $2.0
million. As of December 31, 2022 the forecasted future revenues changed which resulted to a new discount of 53.85%.
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Interest expense for the years ended December 31, 2022 and 2021 was $1.9 million and $1.2 million,
respectively. As of December 31, 2022 and 2021, the carrying value of the debt was $3.1 million and $5.8 million,
respectively.
August 2022 Purchase Agreement
On August 24, 2022, the Company entered into another royalty interest purchase agreement (the “August 2022
Purchase Agreement”) with Streeterville, pursuant to which the Company sold to Streeterville (the entitling “Investor”) a
royalty interest to receive $12.0 million of future royalties on sales of Mytesi® (crofelemer) for any indications that
could cannibalize crofelemer indications or any other chronic indication and certain up-front license fees and milestone
payments from licensees and/or distributors for an aggregate purchase price of $4.0 million (“the Royalty Financing”).
The Company will use the proceeds to support the ongoing pivotal phase 3 clinical trial of crofelemer for prophylaxis of
diarrhea in adults receiving targeted cancer therapy. Interest will accrue on the Royalty Repayment Amount at a rate of
5% per annum from the closing of the Royalty Financing until the one-year anniversary of such closing and 10% per
annum thereafter, simple interest computed on the basis of a 360-day year comprised of twelve 30-day months.
The Company will be obligated to make minimum royalty payments on a monthly basis beginning on January
1, 2024 in an amount equal to the greater of (A) $250,000 (which increases to $400,000 beginning 6 months following
the closing of the Royalty Financing, $600,000 beginning 12 months following the closing of the Royalty Financing, and
$750,000 beginning 18 months following the closing of the Royalty Financing) and (B) the royalty payments to which
Investor is entitled, consisting of (1) 10% of the Company’s net sales of crofelemer for any indications that could
cannibalize crofelemer indications or any other chronic indication (including any improvements, modifications and
follow-on products, collectively referred to as “Included Products”) (2) 10% of worldwide revenues related to upfront
licensing fees and milestone payments from licensees and/or distributors, but specifically excluding licensing fees and/or
milestone payments that are (A) reimbursements of clinical trial expenses or (B) associated with the license of the of the
Included Products from the Company to Napo EU S.p.A. and (3) 50% of royalties collected from licenses of the
Included Products to third parties.
Pursuant to the terms of the Royalty Interest, the Company has the right to exchange from time to time at the
Company’s sole discretion all or any portion of the Royalty Interest for shares of Common Stock at a price per share
equal to the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) as of the date of the applicable
exchange. At issuance, based on projected cash outflows from future revenue streams, the discount rate was 55.97%.
Interest expense for the year ended December 31, 2022 was $1.1 million. As of December 31, 2022, the
carrying value of the debt is $4.8 million.
Streeterville Note
On January 13, 2021, the Company issued a secured promissory note to Streeterville in the original principal
amount of $6.2 million for an aggregate purchase price of $6.0 million. The Company will use the proceeds to fund
development of the Company’s NP-300 drug product candidate for the indication of the symptomatic relief of diarrhea
from cholera and general corporate purposes, including the Company’s product pipeline activities. The note is due after
four years and bears interest at 3.25% per annum. Interest on the note is payable annually in advance by adding the
interest charge for each upcoming year to the outstanding balance on the date each such interest charge is accrued. The
Company also paid $25,000 to cover legal fees, accounting costs, due diligence, monitoring and other transaction costs
incurred in connection with the issuance of the note. The first year of prepaid interest and the transaction expenses are
included in the original principal amount.
At any time following the occurrence of a trial failure which refers to any of the following: (i) the Company
abandons the clinical trial with NP-300 for an indication for the symptomatic relief of infectious diarrhea for cholera; (ii)
the Company fails to start the Phase 1 clinical trial of NP-300 for the symptomatic relief of infectious diarrhea for
cholera by July 1, 2022; or (iii) the Company fails to meet all primary endpoints in the pivotal trials of NP-300 for the
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symptomatic relief if infectious diarrhea for cholera with statistical significance, Streeterville may elect to increase the
outstanding balance as of the date of the trial failure by 25% without acceleration (the “Trial Failure Effect”). If
Streeterville elects to apply the Trial Failure Effect, it reserves the right to declare the outstanding balance immediately
due and payable at any time. As of December 31, 2022, no trial failure occurred.
Streeterville is entitled to a maximum of 18% and a minimum of 1% of the gross proceeds received by the
Company from the sale of TDPRV (the “Return Bonus”). The Return Bonus percentage is reduced pro rata based on the
percentage of the original principal balance of the note that has been repaid as of the date of the sale of the TDPRV. Even
if the note has been paid in full at the time of the sale of the TDPRV, the Company is still obliged to pay Streeterville a
Return Bonus of 1%. If Streeterville applies the Trial Failure Effect, the Return Bonus will automatically be reduced to
1%. If the TDPRV has not been sold as of the day immediately preceding the maturity date of the note, the Return Bonus
percentage will be fixed as of such date. As of December 31, 2022, the Company has not sold any TDPRV.
Beginning on the earlier of (a) 6 months after January 2021, and (b) initiation of human trials with NP-300 for
symptomatic relief of infectious diarrhea for cholera, the Company may pay all or any portion of the outstanding balance
earlier than it is due. In the event the Company elects to prepay all or any portion of the outstanding balance, it shall pay
to Streeterville 112.5% of the portion of the outstanding balance the Company elects to prepay. The Company may not
prepay the note without the Streeterville’s consent on the date the last patient is enrolled in a pivotal trial.
After Streeterville becomes aware of the occurrence of any default, Streeterville may accelerate the note, with
the outstanding balance becoming immediately due and payable in cash at the Mandatory Default Amount (i.e., the
outstanding balance following the application of the Default Effect). Streeterville reserves the right to declare the
outstanding balance immediately due and payable at any time following the default. Default Effect means multiplying
the outstanding balance as of the date of default by 5% or 15% for each occurrence of default, capped at an aggregate of
25%, and then adding the resulting product to the outstanding balance. The percentage to be used depends on whether
the default is viewed as minor or major as defined in the agreement. Furthermore, interest accrues on the outstanding
balance beginning on the date of default at an interest rate equal to the lesser of 18% per annum or the maximum rate
permitted under applicable law. As of December 31, 2022, no default has occurred.
In connection with the note issuance, the Company has entered into a security agreement with Streeterville,
pursuant to which Streeterville will receive a first priority security interest in all existing and future NP-300 technology,
and any TDPRV and the sale proceeds therefrom that may be granted to the Company by the FDA in connection with
the development of NP-300 for the cholera-related indication. The Company also agreed, with certain exceptions, not to
grant any lien on any of the collateral securing the note and not to grant any license under any of the intellectual property
relating to such collateral. The grant of security interest has become effective upon the receipt of the Salix Waiver on
April 6, 2021 in observance to the requirement of the settlement agreement previously entered by the Company with
Salix Pharmaceuticals, Inc.
The Company irrevocably elected to initially and subsequently apply the FVO accounting to the entire note.
The fair value at transaction date was equal to the cash proceeds received of $6.0 million. The transaction expense of
$25,000 was recognized in profit and loss as incurred. The Company used the valuation report from an independent
valuation service provided to measure the reporting date fair value of the note. At December 31, 2022 and 2021, the fair
value was determined to be $7.8 million. For the year ended December 31, 2022, the net increase in the fair value of
$20,000 was recorded as loss included in the change in fair value of financial instruments and hybrid instrument
designated at FVO in the consolidated statements of operations.
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Insurance Financing
March 2021 First Insurance Financing
In March 2021, the Company entered into a premium finance agreement for $98,000 with First Insurance
Funding (“First Insurance”) representing the unpaid balance of the total premiums, taxes, and fees of $115,000 with an
annual interest rate of 4.6%. The total finance charge was $2,000. Payment of principal and interest is due in equal
monthly installments over ten months. The Company granted and assigned First Insurance a first priority lien on and
security interest in the financed policies and any additional premium required under the financed policies. Interest
expense for the year ended December 31, 2022 was $2,000. The financing balance was zero and $10,000 at December
31, 2022 and 2021.
May 2021 First Insurance Financing
In May 2021, the Company entered into another premium finance agreement for $1.1 million with First
Insurance representing the unpaid balance of the total premiums, taxes, and fees of $1.4 million with an annual interest
rate of 4.15%. The total finance charge was $21,000. Payment of principal and interest is due in equal monthly
installments over ten months. Interest expense for the years ended December 31, 2022 and 2021 was $6,000 and
$13,000, respectively. The financing balance was zero and $326,000 at December 31, 2022 and 2021, respectively.
March 2022 First Insurance Financing
In March 2022, the Company entered into another premium finance agreement for $100,000 with First
Insurance representing the unpaid balance of the total premiums, taxes, and fees of $115,000 with an annual interest rate
of 4.6%. The total finance charge was $15,000. Payment of principal and interest is due in equal monthly installments
over ten months. Interest expense for the year ended December 31, 2022 was zero. The financing balance was $9,000 at
December 31, 2022.
May 2022 First Insurance Financing
In May 2022, the Company entered into another premium finance agreement for $752,000 with First Insurance
representing the unpaid balance of the total premiums, taxes, and fees of $941,000 with an annual interest rate of 4.3%.
The total finance charge was $15,000. Payment of principal and interest is due in equal monthly installments over ten
months. Interest expense for the year ended December 31, 2022 was $4,000. The financing balance was $226,000 at
December 31, 2022.
2019 Tempesta Note
In October 2019, the Company entered into a License Termination and Settlement Agreement with Dr. Michael
Tempesta, pursuant to which certain royalty payment disputes between Napo and Tempesta were settled. Per the terms of
the Agreement, Tempesta received $50,000 in cash, an unsecured promissory note issued by the Company in the
aggregate principal amount of $550,000 and 178 shares of the Company’s common stock in exchange for the cessation
of all royalty payments by Napo to Dr. Tempesta under the License Agreements. The $550,000 promissory note bears
interest at the rate of 2.5% per annum and matures on March 1, 2025. The promissory note provides for the Company to
make semiannual payments equal to $50,000 plus accrued interest beginning on March 1, 2020 until the Note is paid in
full. Interest expense for the years ended December 31, 2022 and 2021 was $10,000 and $10,000, respectively. At
December 31, 2022 and 2021, the net carrying value of the Tempesta note was $250,000 and $350,000 respectively.
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Oasis Secured Borrowing
The Purchase Agreement
In May 2020, the Company, entered into a one-year Accounts Receivable Purchase Agreement (the “Purchase
Agreement”) with Oasis Capital (“Oasis”).
In December 2020, the Company received cash proceeds of $1.6 million from Oasis (the “Tranche #6 Secured
Note”). Oasis purchased accounts receivable with a carrying value of $2.2 million, or gross accounts receivable of $3.8
million net of chargebacks and discounts of $1.6 million.
In February 2021, the Company made its final required payment to Oasis under Tranche #6 Secured Note, with
total payments equaling the $1.8 million Threshold amount plus the transaction fee, and the Tranche #6 Secured Note
was extinguished.
Exchange Note 2
In May 2019, CVP and the Company agreed to exchange two Napo convertible notes for a single CVP Note
(“Exchange Note 1”). Per agreement, in consideration of the extension of the maturity date of Exchange Note 1 from
December 31, 2019 to December 31, 2021, the Company issued a note (“Exchange Note 2”) with a principal balance of
$2.3 million. As of December 31, 2021, the carrying value of Exchange Note 1 was zero.
In September 2020, the Company and CVP also entered into a global amendment agreement, pursuant to which
the maturity date of Exchange Note 2 is extended to December 31, 2022. In consideration of CVP’s grant of extension,
together with the related fees and other accommodation set forth, principal debt was increased by 5% of the outstanding
balance of Exchange Note 2, which was $2.6 million as of the global amendment date. The global amendment requires
redemption of Series D Perpetual Preferred Stock prior to payment of principal of Exchange Note 2. The global
amendment agreement was accounted for as modification.
Pursuant to the global amendment agreement, the Company issued 842,500 shares of Series D Perpetual
Preferred Stock. The Series D Perpetual Preferred shares were redeemable upon the option or discretion of the Company.
The Series D Perpetual Preferred stockholders were entitled to receive 8% cumulative stock dividends, to be payable in
arrears on a monthly basis for 24 consecutive months. Dividends payable on the Series D perpetual preferred shares shall
be payable through the Company’s issuance of Series D Perpetual Preferred share by delivering to each record holder the
calculated number of payment-in-kind (“PIK”) dividend shares. The Series D Perpetual Preferred shares were classified
as liability and were measured at fair value using the income approach, which considered the weighted probability of
discounted cash flows at various scenarios of redemption and perpetual holding of the shares. The Company determined
the fair value of $6.4 million at contract inception date with the assistance of an independent valuation service provider
to be based on discounted cash flows representing the settlement value of the shares and cumulative dividends issued
using an effective borrowing rate of 12% to 15% adjusted for counterparty and a maturity date of September 30, 2021. In
consideration of the global amendment agreement, no principal payment shall be made to the Exchange Note 2 until the
redemption of Series D Perpetual Preferred shares. Due to the restrictive nature of the timing of cash outflows in
response to the settlement of the Exchange Note 2, Series D Perpetual Preferred shares were implicitly deemed to be
mandatorily redeemable upon the ultimate settlement of the outstanding balance of Exchange Note 2. The shares were
redeemable at $8.00 per share on or before December 31, 2024, the date in which contractual cash outflows of the
Exchange Note 2 require the entire settlement or redemption of the Series D Perpetual Preferred shares. In December
2020, the Company entered into a series of exchange agreements with a stockholder pursuant to which the Company
agreed to issue a total of 70,622 shares of common stock in exchange for redeeming 859,348 shares of Series D
Perpetual Preferred Stock. The series of exchanges was accounted for as an extinguishment which resulted to a loss
amounting to $1.3 million. This is included in loss on extinguishment of debt and conversion of Series D Perpetual
Preferred Stock on the statement of operations as of December 31, 2021. As of December 31, 2022 and 2021, there were
no Series D Perpetual Preferred shares outstanding.
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In December 2020, the Company and CVP entered into a note exchange agreement to which the Company
made a prepayment of principal amounting to $1.0 million, in lieu of making cash payments to CVP on Exchange Note
2, by issuing 5,556 shares of the Company’s common stock to CVP on December 31, 2021. The exchange agreement
was accounted for as a modification.
In January 2021, the Company and CVP entered into another note exchange agreement to which the Company
made a prepayment of the remaining outstanding balance of Exchange Note 2 amounting to $1.8 million, in lieu of
making cash payments to CVP by issuing 6,283 shares of the Company’s common stock to CVP on January 4, 2021.
The exchange was accounted for as debt extinguishment which resulted in a loss of $753,000.
8. Warrants
The following table summarizes information about warrants outstanding and exercisable into shares of the
Company’s common stock for the years ended December 31, 2022 and 2021:
Warrants outstanding, beginning balance
Issuances
Exercises
Expirations and cancelations
Warrants outstanding, ending balance
December 31,
2022
2021
7,513
—
—
(8)
7,505
32,024
2,250
(26,761)
—
7,513
As of December 31, 2022 and 2021, the Company’s outstanding warrants have an exercise price ranging from
$1.47 to $157.5 per common share and generally expires prior to December 31, 2024.
9. Preferred Stock
At December 31, 2022 and 2021, preferred stock consisted of the following:
(in thousands, except share and per share data)
Series
B-2
C
E
Total
Shares
Authorized
Issued and
Outstanding
Carrying
Value
10,165
1,011,000
4,475,074
5,496,239
— $
—
—
— $
Liquidation
Preference
per Share
—
—
—
— $
—
—
—
Series C Perpetual Preferred Stock
In September 2020, the Company entered into an exchange agreement with Iliad to issue 842,500 shares of the
Company's Series C Perpetual Preferred Stock at $0.0001 par value per share, for a non-cash exchange of equity
instruments. The exchange agreement was contemporaneously entered with the issuance of Series D Perpetual Preferred
shares, in exchange of remaining Series A Convertible Preferred shares totaling 5,524,926 shares, and accreted value of
$11.2 million as of the exchange date. An amendment agreement of the Exchange Note 2 was also entered into, with
issuance value of $2.3 million and carrying value of $2.6 million as of the exchange date, to extend maturity from
December 31, 2020 to December 31, 2021, in consideration of 5% increase in the outstanding balance.
The preferred stock has been classified as permanent stockholders' equity in accordance with authoritative
guidance for the classification and measurement of perpetual shares without mandatory redemption period because the
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redemption option was ultimately in the control of the Company. There were no series C Preferred Shares outstanding at
December 31, 2022 and 2021.
Series E Preferred Stock
On August 18, 2022, the Company entered into an agreement (the “Securities Purchase Agreement”) with
Synworld to issue 10 Series E Preferred Stock with a par value of $0.0001, amounting to $100. In consideration of the
Securities Purchase Agreement, the Company and Synworld agree to amend the existing definition of the term “Service
Share Amount” in the License Agreement entered by both parties (See Note 2) and include a subsection for lock-up
wherein Synworld agrees not to sell, transfer, loan, grant any option of the purchase of, or otherwise dispose of any
shares of common stock acquired pursuant to the License Agreement until after the 90-day period following the date of
acquisition.
On October 4, 2022, the Company redeemed all 10 shares of Series E Preferred Stock in accordance with the
terms of such securities. As a result, no shares of Series E Preferred Stock remain outstanding.
10. Stockholders’ Equity
As of December 31, 2022 and 2021, the Company had reserved shares of common stock, on an as-if converted
basis, for issuance as follows:
Options issued and outstanding
Inducement options issued and outstanding
Options available for grant under stock option plans
Restricted stock unit awards issued and outstanding
Warrants issued and outstanding
Total
Common Stock
December 31,
2022
26,533
1,546
122,978
44,865
7,505
203,427
2021
31,221
2,065
8,417
6,499
7,513
55,715
The holders of common stock are entitled to one vote for each share of common stock held. The common
stockholders are also entitled to receive dividends whenever funds and assets are legally available and when declared by
the Board of Directors.
The holders of non-voting common stock are not entitled to vote, except on an as converted basis with respect
to any change of control of the Company that is submitted to the stockholders of the Company for approval. Shares of
the Company's non-voting common stock have the same rights to dividends and other distributions and are convertible
into shares of the Company's common stock on a one-for-one basis.
At a special meeting of stockholders of Jaguar Health, Inc. (the “Company”) held on September 30, 2022 (the
“Special Meeting”), the Company’s stockholders approved an amendment (the “Sixth Amendment”) to the Company’s
Third Amended and Restated Certificate of Incorporation (the “COI”) to effect an increase in the number of authorized
shares of the Company’s voting common stock, par value $0.0001 per share (the “Common Stock”), from 150,000,000
to 298,000,000 shares of Common Stock (the “Authorized Share Increase”) on September 30, 2022.
Pursuant to such authority granted by the Company’s stockholders, the Company’s board of directors approved
the Authorized Share Increase and the filing of the Sixth Amendment to effectuate the Authorized Share Increase. On
September 30, 2022, the Company filed the Sixth Amendment with the Secretary of State of the State of
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Delaware (the “DE Secretary of State”), and the Authorized Share Increase became effective in accordance with the
terms of the Sixth Amendment immediately upon filing with the DE Secretary of State (the “Effective Time”).
The Company is now authorized to issue a total number of 352,475,074 shares, of which 298,000,000 shares
are common stock, 50,000,000 are non-voting common stock and 4,475,074 are preferred stock.
Reverse Stock-Split
On September 3, 2021, the Company filed an amendment to its Third Amended and Restated Certificate of
Incorporation with the Secretary of State of Delaware to effect a 1-for-3 reverse stock split of the Company’s issued and
outstanding shares of voting common stock, effective September 8, 2021. Upon effectivity, every three shares of the
Company’s issued and outstanding common stock immediately prior to the effective time shall automatically be
reclassified into one share of common stock without any change in the par value.
On January 20, 2023, the Company approved another amendment to the Company’s Third Amendment and
Restated Certificate of Incorporation to effect a 1-for-75 reverse stock split of the Company’s issued and outstanding
shares of voting common stock, effective January 23, 2023. Upon effectivity, every seventy-five shares of the
Company’s issued outstanding common stock immediately prior to the effective time shall automatically be reclassified
into one share of common stock without any change in the par value.
The reverse stock splits reduces the number of shares of common stock issuable upon the conversion of the
Company’s outstanding non-voting common stock and the exercise or vesting of its outstanding stock options and
warrants in proportion to the ratio of the reverse stock split and causes a proportionate increase in the conversion and
exercise prices of such non-voting common stock, stock options and warrants. In addition, the number of shares reserved
for issuance under the Company’s equity compensation plans immediately prior to the effective time will be reduced
proportionately. The reverse stock split did not change the total number of authorized shares of common stock or
preferred stock.
March 2020 ELOC (Equity Line of Credit)
In March 2020, the Company entered into an equity purchase agreement (the “March 2020 ELOC”) with Oasis
Capital, which provides that Oasis Capital is committed to purchase up to an aggregate of $2.0 million shares of the
Company’s common stock over the 36-month term of the March 2020 ELOC.
In April 2020, the Company sold 231 common shares to Oasis for gross proceeds of $23,000. As of December
31, 2022 and 2021, the Company had not exercised any further put options to require Oasis Capital to purchase common
stock under the equity purchase agreement.
At The Market Offering (“ATM”)
October 2020 ATM Agreement
On October 5, 2020, the Company entered into an ATM Agreement (“October 2020 ATM Agreement”) with
Ladenburg, pursuant to which the Company may offer and sell, from time to time through Ladenburg, shares of common
stock, subject to the terms and conditions of the October 2020 ATM Agreement. The October 2020 ATM Agreement
will terminate upon the earlier of (i) October 5, 2022 and (ii) termination of the October 2020 ATM Agreement as
permitted therein.
During January and February 2021, the Company issued an aggregate of 8,931 shares under the October 2020
ATM Agreement for total net proceeds of $5.4 million after commissions and expenses of approximately $311,000. As
of December 31, 2022, all shares under the October 2020 ATM Agreement have been issued.
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December 2021 ATM Agreement
On December 10, 2021, the Company entered into another ATM Agreement (“December 2021 ATM
Agreement”) with Ladenburg, pursuant to which the Company may offer and sell, from time to time through Ladenburg,
shares of common stock having an aggregate offering price of up to $15.0 million, subject to the terms and conditions of
the December 2021 ATM Agreement. The offering will terminate upon the earlier of (i) December 10, 2024 and (ii)
termination of the December 2021 ATM Agreement as permitted therein.
On February 2, 2022, the Company entered into an amendment to the December 2021 ATM Agreement,
pursuant to which, the aggregate offering amount of the shares of the Company’s common stock which the Company
may sell and issue through Ladenburg, as the sales agent, was increased from $15.0 million to $75.0 million (the “ATM
Upsize”).
As of December 31, 2022, the Company has issued 923,164 shares under the December 2021 ATM Agreement
for a total net proceeds of $20.5 million.
Securities Purchase Agreement
On January 13, 2021, the Company entered into a securities purchase agreement, pursuant to which the
Company agreed to issue and sell, in a registered public offering an aggregate of 19,724 shares of common stock at an
offering price of $760.50 per share for gross proceeds of approximately $15.0 million before deducting $1.6 million
placement agent fee and related offering expenses. The offering closed on January 15, 2021.
On April 29, 2021, the Company entered into another securities purchase agreement, pursuant to which the
Company agreed to issue and sell, in a registered public offering through Ladenburg as the placement agent, an
aggregate of 33,987 shares of common stock at an offering price of $317.25 per share for gross proceeds of
approximately $10.8 million before deducting placement agent fees and related offering expenses of $948,000. The
offering closed on May 3, 2022.
Subscription Agreement
On June 1, 2021, the Company entered into a subscription agreement with the SPAC and its sponsor, pursuant
to which Dragon SPAC agreed to issue and sell, in a private placement by Dragon SPAC directly to the Company, units
of Dragon SPAC, with each unit consisting of one ordinary share of Dragon SPAC and a warrant to purchase a share, for
gross proceeds of approximately €8.8 million (corresponding, as at June 1, 2021, to $10.8 million). Dragon SPAC is an
Italy special purpose acquisition company formed for the purpose of entering into a business combination with Napo
Therapeutics, with the aim of developing the pharmaceutical activities of Dragon SPAC/Napo Therapeutics combined
entity in Europe. Each warrant will entitle the holder thereof to purchase one share at an exercise price of €750 per share
at any time prior to the earlier of (i) the 10-year anniversary of the consummation of the business combination and (ii)
the five-year anniversary of the listing of the combined entity on a public exchange.
On November 3, 2021, Dragon SPAC issued 883,000 ordinary shares, each reserved to the exercise of warrants
pursuant to the warrant agreement approved by Dragon SPAC. As a result, Dragon SPAC became a substantially owned
subsidiary, at the same time, the related advances were converted to investment at a stand-alone level eliminated at the
consolidated level.
September 2021 PIPE Financing
On September 13, 2021, the Company entered into a securities purchase agreement (the “September 2021 PIPE
Financing”) with certain investors, pursuant to which the Company agreed to issue and sell to the investors in a private
placement an aggregate of 4,123 unregistered shares of the Company’s common stock for an aggregate purchase price of
approximately $776,197 or $188.25 per share.
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Noncontrolling Interest
As a result of the merger last November 3, 2021 between Napo EU and Dragon SPAC, the Company assumed a
non-controlling interest amounting to $242,000 as of December 31, 2021 which represents minority interest held by an
investor in Napo Therapeutics.
For the year ended December 31, 2022, noncontrolling interest decreased by $941,000 due to the share in net
loss on Napo Therapeutics’ financial performance.
11. Stock-Based Compensation
2013 Equity Incentive Plan
In November 2013, the Company's board of directors and sole stockholder adopted the Jaguar Health, Inc. 2013
Equity Incentive Plan (the “2013 Plan”). The 2013 Plan allows the Company's board of directors to grant stock options,
restricted stock awards and restricted stock unit awards to employees, officers, directors and consultants of the
Company. Following the effective date of the IPO and after effectiveness of any grants under the 2013 Plan that were
contingent on the IPO, no additional stock awards will be granted under the 2013 Plan. Outstanding grants continue to
be exercisable, however, any unissued shares under the plan and any forfeitures of outstanding options do not rollover to
the 2014 Stock Incentive Plan. There were 2 option shares outstanding at December 31, 2022 and 2021.
2014 Stock Incentive Plan
Effective May 12, 2015, the Company adopted the Jaguar Health, Inc. 2014 Stock Incentive Plan (“2014
Plan”). The 2014 Plan provides for the grant of options, restricted stock and restricted stock units to eligible employees,
directors and consultants to purchase the Company's common stock. The term of an incentive stock option may not
exceed 10 years, except that with respect to any participant who owns more than 10% of the voting power of all classes
or our outstanding stock, the term must not exceed 5 years. The 2014 Plan provides for automatic share increases on the
first day of each fiscal year in the amount of 2% of the outstanding number of shares of the Company's common stock
on last day of the preceding calendar year. The 2014 Plan replaced the 2013 Plan except that all outstanding options
under the 2013 Plan remain outstanding until exercised, cancelled or expired.
On April 13, 2022, the Board of Directors of the Company approved a Registration Statement to register an
additional 2,417,660 shares of the Company’s common stock for issuance pursuant to the awards granted under the 2014
Plan.
As of December 31, 2022, there were 26,533 options outstanding and 116,011 options available for grant. As of
December 31, 2021, there were 31,740 options outstanding and 8,260 options available for grant.
2020 New Employee Inducement Award Plan
Effective June 16, 2020, the Company adopted the Jaguar Health, Inc. New Employee Inducement Award Plan
(“2020 Inducement Award Plan”) and, subject to the adjustment provisions of the Inducement Award Plan, reserved
2,222 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement
Award Plan. The term of an incentive stock option may not exceed 10 years, except that with respect to any participant
who owns more than 10% of the voting power of all classes or our outstanding stock, the term must not exceed 5 years.
The 2020 Inducement Award Plan provides for the grant of non-statutory stock options, restricted stock units, restricted
stock, and performance shares. The 2020 Inducement Award Plan was adopted without stockholder approval pursuant to
Rule 5635(c)(4) of the Nasdaq Listing Rules. The terms and conditions of the 2020 Inducement Award Plan are
substantially similar to the Company’s 2014 Stock Incentive Plan, but with such other terms and conditions intended to
comply with the Nasdaq inducement award rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, the
only persons eligible to receive grants of equity awards under the
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Inducement Award Plan are individuals who were not previously an employee or director of the Company, or following
a bona fide period of non-employment, as an inducement material to such persons entering into employment with the
Company.
On April 13, 2022, the Board of Directors of the Company approved an amendment to the 2020 Inducement
Award Plan to reserve an additional 471,833 shares of the Company’s common stock for issuance pursuant to equity
awards granted under the Inducement Award Plan, thereby increasing the number of shares of the Company’s common
stock issuable thereunder from 500,000 shares to 971,833 shares.
As of December 31, 2022, there were 1,546 options outstanding and 6,967 options available for grant. As of
December 31, 2021, there were 1,546 options outstanding and 157 options available for grant. The Company authorized
an additional 151,079 shares for the stock incentive plans.
Stock Options and Restricted Stock Units (“RSUs”)
The following table summarized the incentive plan activity for the year ended December 31, 2022 and 2021:
(in thousands, except share and per share data)
Outstanding at January 1, 2021
Additional shares authorized
Options granted
Options exercised
Options canceled
RSUs granted
RSUs vested and released
RSUs cancelled
Outstanding at December 31, 2021
Additional shares authorized
Options granted
Options exercised
Options canceled
RSUs granted
RSUs vested and released
RSUs cancelled
Outstanding at December 31, 2022
Exercisable at December 31, 2022
Vested and expected to vest at
December 31, 2022
Shares
Available
Stock
Options
RSUs
Weighted
Average
Stock Option
for Grant Outstanding Outstanding Exercise Price
2,652
25,358
(13,547)
—
448
(6,494)
—
—
8,417
151,079
(44)
—
5,251
(41,725)
—
—
122,978
20,229
—
13,547
(42)
(448)
—
—
—
33,286
—
44
—
(5,251)
—
—
—
28,079
26,102
27,901
5
—
—
—
—
6,494
—
—
6,499
—
—
—
—
41,725
(2,516)
(843)
44,865
$
$
$
$
$
950.90
—
405.45
100.35
2,285.32
—
—
—
707.97
—
23.46
—
418.34
—
—
—
592.73
614.51
594.38
*Fair market value of Jaguar stock on December 31, 2022 was $6.52 per share.
Weighted Average
Remaining
Contractual Life
(Years)
8.71
8.35
$
Aggregate
Intrinsic
Value*
364
—
—
—
—
—
—
—
3
$
—
—
—
—
—
—
—
—
—
—
7.19
7.11
7.18
$
$
$
The intrinsic value is calculated as the difference between the exercise price of the underlying options and the
fair market value of the Company's common stock for options that were in-the-money.
The number of options exercised during the year ended December 31, 2022 and 2021 were zero and 42,
respectively.
The weighted average grant date fair value of stock options granted was $22.04 and $379.66 per share during
the years ended December 31, 2022, and 2021, respectively.
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The number of options that vested in the years ended December 31, 2022, and 2021 was 7,492 and 9,280,
respectively. The grant date weighted average fair value of options that vested in the years ended
December 31, 2022, and 2021 was $304.57 and $336.60, respectively.
Stock-Based Compensation
The following table summarizes stock-based compensation expense related to stock options, inducement stock
options and RSUs for the years ended December 31, 2022 and 2021, and are included in the consolidated statements of
operations as follows:
(in thousands)
Research and development expense
Sales and marketing expense
General and administrative expense
Total
Year Ended
December 31,
2022
2021
$
$
1,263
267
1,788
3,318
$
$
1,319
319
2,336
3,974
As of December 31, 2022, the Company had $2.7 million of unrecognized stock-based compensation expense
for options and RSU’s, which is expected to be recognized over a weighted-average period of 1.70 years.
The fair value of options granted during the years ended December 31, 2022 and 2021, respectively, were
calculated using the range of assumptions set forth below:
Volatility
Expected term (years)
Risk-free interest rate
Expected dividend yield
401(k) Plan
Year Ended
December 31,
2022
164.0%
5.0
3.2%
—
2021
163.8 - 164.0 %
5.0
0.5 - 1.2 %
—
The Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer
contributions to the plan from plan inception through December 31, 2022.
12. Net Loss Per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted net loss per common share for the years ended
December 31, 2022 and 2021:
(In thousands, except share and per share data)
Net loss attributable to common stockholders (basic
and diluted)
Shares used to compute net loss per common share,
basic and diluted
Net loss per share attributable to common stockholders,
basic and diluted
$
$
Year Ended December 31,
2022
2021
(47,454)
$
(52,595)
1,311,519
596,154
(36.18)
$
(88.22)
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Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares
outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average
number of common shares and common share equivalents outstanding for the period. Common stock equivalents are
only included when their effect is dilutive. The Company's potentially dilutive securities which include stock options,
convertible preferred stock, RSUs and common stock warrants have been excluded from the computation of diluted net
loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares
used to compute basic and diluted shares outstanding due to the Company's net loss position.
The following outstanding common stock equivalents have been excluded from diluted net loss per common
share for the years ended December 31, 2022 and 2021 because their inclusion would be anti-dilutive:
Options issued and outstanding
Inducement options issued and outstanding
Restricted stock units issued and outstanding
Warrants issued and outstanding
Total
Year Ended
December 31,
2022
2021
26,533
1,546
44,865
7,505
80,449
31,221
2,065
6,499
7,513
47,298
As of March 24, 2023, there were 11,680,245 shares of common stock issued after the balance sheet date.
Including these shares will have a material effect on the diluted net loss per common share in future periods.
13. Income Taxes
The Company's loss before provision for income taxes during the years ended December 31, 2022 and 2021,
was a domestic loss of $42.1 million and $48.0 million, and a foreign loss of $6.3 million and $4.6 million, respectively.
The effective tax rate for 2022 and 2021 was 0%. As a result of the Company's history of net operating losses
(“NOL”) and a full valuation allowance against its deferred tax assets, there was minimal current income tax and no
deferred income tax provision for the years ended December 31, 2022 and 2021.
The Company’s effective tax during the years ended December 31, 2022 and 2021, differed from the federal
statutory rate as follows:
Statutory rate
State taxes
Intercompany transactions
Valuation allowance
Nondeductible warrant expense
Book loss on debt extinguishment
Foreign rate differential
Other
Effective tax rate
134
December 31,
2022
2021
(21.0)%
(1.8)%
0.2 %
18.3 %
(0.3)%
1.0 %
(0.7)%
4.3 %
— %
(21.0)%
— %
— %
13.4 %
— %
4.2 %
— %
3.4 %
— %
Table of Contents
Net deferred tax assets as of December 31, 2022 and 2021 consisted of the following:
(In thousands)
Non-current deferred tax assets:
Net operating losses
Tax credits
Stock compensation
Other
Valuation allowance
Net non-current deferred tax assets
Non-current deferred tax liabilities:
Other
Property and equipment
Net non-current deferred tax liability
December 31,
2022
2021
$
$
24,773
241
3,042
1,006
29,062
(28,454)
608
(566)
(42)
(608)
21,153
241
2,161
450
24,005
(19,865)
4,140
(678)
(3,462)
(4,140)
—
Net non-current deferred tax asset (liability)
$
— $
A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be
realized. The Company has established a valuation allowance to offset net deferred tax assets as of December 31, 2022
and 2021, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax
assets.
The valuation allowance increased by $8.6 million during the year ended December 31, 2022.
As of December 31, 2022, the Company had federal and California NOL carryovers of approximately $96.7
million and $29.4 million, respectively. Of the federal NOL, $20.7 million will begin to expire in 2034 and $114.4
million will carryforward indefinitely. The California NOL will begin to expire in 2033.
As of December 31, 2022, the Company had California research credit carryovers of approximately $382,000.
The California research credits carry forward indefinitely. The Company had no Federal research credit carryovers.
Utilization of the domestic NOL and tax credit forwards may be subject to a substantial annual limitation due to
ownership change limitations that may have occurred or that could occur in the future, as required by the Internal
Revenue Code Section 382, as well as similar state provisions. In general, an "ownership change," as defined by the
code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of
more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Any
limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization. The
Company has previously reduced its federal and California R&D credit carryforwards by $1.4 million and $697,000,
respectively.
Enacted on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”)
authorizes more than $2.0 trillion to battle COVID-19 and its economic effects, including immediate cash relief for
individual citizens, loan programs for small business, support for hospitals and other medical providers, and various
types of economic relief for impacted businesses and industries. The CARES Act does not have a material impact on the
Company’s financial results for the year ended December 31, 2022 and 2021.
The Consolidated Appropriations Act, 2021 (the "Act") was enacted in the United States on December 27,
2020. The Act enhances and expands certain provisions of the CARES Act. The Act does not have a material impact on
the Company’s financial results for the year ended December 31, 2022 and 2021.
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Uncertain Tax Positions
The Company has adopted the provisions of ASC 740, “Income Taxes Related to Uncertain Tax Positions.”
Under these principals, tax positions are evaluated in a two-step process. The Company first determines whether it is
more-likely-than-not that a tax position will be sustained upon examination. If a tax position meets the more-likely-
than-not recognition threshold it is then measured to determine the amount of benefit to be recognized in the financial
statements. The tax position is measured as the largest amount of benefit that has a greater than 50 percent likelihood of
being realized upon ultimate settlement.
As of December 31, 2022, all unrecognized tax benefits were offset against deferred tax assets which are
subject to a full valuation allowance, and if recognized, will not affect the Company's tax rate.
The Company does not anticipate that the total amounts of unrecognized tax benefits will significantly increase
or decrease in the next 12 months.
The Company's policy is to include interest and penalties related to unrecognized tax benefits within its
provision for income taxes. Due to the Company's net operating loss position, the Company has not recorded an accrual
for interest or penalties related to uncertain tax positions for the years ended December 31, 2022 or 2021.
The following is a reconciliation of the beginning and ending amount of the Company’s total gross
unrecognized tax benefit liabilities:
(In thousands)
Gross Unrecognized Tax Benefit--Beginning Balance
Increases Related to Tax Positions from Prior Years
Increases Related to Tax Positions Taken During the Current Year
Gross Unrecognized Tax Benefit--Ending Balance
December 31,
2022
2021
$
$
77
—
—
77
$
$
77
—
—
77
14. Segment Data
The Company has two reportable segments-human health and animal health. The animal health segment is
focused on developing and commercializing prescription and non-prescription products for companion and production
animals. The human health segment is focused on developing and commercializing of human products and the ongoing
commercialization of Mytesi, which is approved by the U.S. FDA for the symptomatic relief of non-infectious diarrhea
in adults with HIV/AIDS on antiretroviral therapy.
The Company’s reportable segments sales and net income consisted of:
(in thousands)
Revenue from external customers
Human Health
Animal Health
Consolidated Totals
Segment net loss
Human Health
Animal Health
Consolidated Totals
Year Ended
December 31,
2022
2021
11,741
215
11,956
(18,278)
(30,117)
(48,395)
$
$
$
$
4,273
62
4,335
(24,276)
(28,324)
(52,600)
$
$
$
$
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The Company’s reportable segments assets consisted of the following:
(in thousands)
Segment assets
Human Health
Animal Health
Total
The reconciliation of segments assets to the consolidated assets is as follows:
(in thousands)
Total assets for reportable segments
Less: Investment in subsidiary
Less: Intercompany loan
Consolidated Totals
December 31,
2022
169,505
(29,232)
(92,821)
47,452
$
$
15. Subsequent Events
December 2021 ATM Agreement
December 31,
2022
2021
$
$
40,898
128,607
169,505
$
$
$
$
42,250
115,580
157,830
December 31,
2021
157,830
(29,232)
(75,333)
53,265
Subsequent to December 31, 2022, the Company has issued an additional 10,135,550 shares under the
December 2021 ATM Agreement with a total net proceeds of $17.5 million.
Formation of Joint Venture Magdalena Biosciences, Inc.
In January 2023, Jaguar and Filament Health (“Filament”), with Funding from One Small Planet, formed the
U.S.-based joint venture Magdalena Biosciences, Inc. (“Magdalena”). Magdalena’s focus is on the development of
novel, natural prescription medicines derived from plants for mental health indications including, initially, attention-
deficit/hyperactivity disorder (“ADHD”) in adults. The goal of the collaboration is to extend the botanical drug
development capabilities of Jaguar and Filament in order to develop pharmaceutical-grade, standardized drug candidates
for mental health disorders, and to partner with a potential future licensee to develop and commercialize these novel
plant-based drugs. This new venture aligns with Jaguar's mental health Entheogen Therapeutics Initiative (“ETI”) and
Filament's corporate mission to develop novel, natural prescription medicines from plants. Magdalena will leverage
Jaguar's proprietary medicinal plant library and Filament's proprietary drug development technology. Jaguar’s library of
2,300 highly characterized medicinal plants and 3,500 plant extracts, all from firsthand ethnobotanical investigation by
Jaguar and members of the ETI Scientific Strategy Team, is a key asset we have generated over 30 years that bridges the
knowledge of traditional healers and Western medicine. Magdalena holds an exclusive license to plants and plant
extracts in Jaguar's library, not including any sources of crofelemer or NP-300, for specific indications and is in the
process of identifying plant candidates in the library that may prove beneficial for addressing indications such as ADHD.
December 2020 Royalty Interest Exchange Agreement
On February 8, 2023, the Company entered into an exchange agreement (the “December 2020 Royalty Interest
Exchange Agreement”) with Irving to (i) partition a new royalty interest in the royalty repayment amount of $675,000
(“Partitioned Royalty”) from the royalty interest of the December 2020 Purchase Agreement and then cause the
outstanding balance of the royalty interest to be reduced by an amount equal to the initial outstanding balance of the
Partitioned Royalty, and (ii) exchange (“Royalty Exchange”) the Partitioned Royalty for 150,000 shares of the
Company’s common stock with a par value of $0.0001 in accordance with term of the December 2020 Royalty Interest
Exchange Agreement. Under the terms of the December 2020 Royalty Interest Exchange Agreement, the
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Royalty Exchange will consist of Irving surrendering the Partitioned Royalty in exchange for the shares, free of any
restrictive securities legend, and Irving shall give no consideration of any kind whatsoever to the Company in
connection with the December 2020 Royalty Interest Exchange Agreement.
October 2020 Royalty Interest Exchange Agreements
On March 17 and 23, 2023, the Company entered into exchange agreements (the “October 2020 Royalty
Interest Exchange Agreements”) with Iliad to (i) partition new royalty interests in the royalty repayment amounts of
$992,000 and $227,000, respectively (“Partitioned Royalties”) from the royalty interest of the October 2020 Purchase
Agreement and then cause the outstanding balance of the royalty interest to be reduced by an amount equal to the initial
outstanding balance of the Partitioned Royalties, and (ii) exchange (“Royalty Exchanges”) the Partitioned Royalties for
1,090,000 and 280,005 shares, respectively of the Company’s common stock with a par value of $0.0001 in accordance
with term of the October 2020 Royalty Interest Exchange Agreements. Under the terms of the October 2020 Royalty
Interest Exchange Agreements, the Royalty Exchanges will consist of Iliad surrendering the Partitioned Royalties in
exchange for the shares, free of any restrictive securities legend, and Iliad shall give no consideration of any kind
whatsoever to the Company in connection with the October 2020 Royalty Interest Exchange Agreements.
Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard
On January 5, 2023, the Company received notice from the Listing Qualifications Staff (“Staff”) of Nasdaq
indicating that, because the bid price for the Company’s voting common stock, par value $0.0001 per share had closed
below $0.10 per share for the preceding ten consecutive trading days, in contravention of Nasdaq Listing Rule 5810(3)
(A)(iii) (the “$0.10 Rule”), the Company’s securities were subject to delisting unless the Company timely requested a
hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal the Staff’s decision. The Company intends to timely
request a hearing before the Panel, which request will stay any further delisting action by Nasdaq at least pending the
Company’s hearing and the expiration of any extension that the Panel may grant to the Company following such hearing.
There are no assurances that a stay will be granted or that a favorable decision will be obtained.
Nasdaq previously granted the Company a 180-calendar grace period to regain compliance with the minimum
$1.00 bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) through February 13,
2023.
At the Special Meeting of Stockholders of the Company held on January 20, 2023, the Company received
stockholder approval for the implementation of a reverse stock split of the Company’s issued and outstanding Common
Stock at a ratio of not less than 1-for-3 and not greater than 1-for-75 to regain compliance with the Bid Price rule.
The Company believes that, after taking into account (i) the sale of shares of common stock between January 1,
2023 and March 23, 2023 pursuant to the Company’s December 2021 agreement, (ii) the issuance of 150,000 shares of
common stock on February 8, 2023 to Irving in exchange for a $675,000 reduction in the outstanding balance of the
royalty interest held by such holder, and (iii) the issuance of 1,090,000 shares of common stock on March 17, 2023 and
280,005 shares of common stock on March 24, 2023 to Iliad in exchange for a $992,000 and $227,000, respectively
reduction in the outstanding balance of the royalty interest held by such holder, and based on interim financial data
available to the Company, the Company’s stockholders’ equity as of March 24, 2023, exceeds $2.5 million, which is the
minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. In addition, the
Company’s cash balance as of March 24, 2023, is approximately $13.6 million.
Termination of a Material Definitive Agreement
On October 11, 2022, the Company entered into an Amended and Restated License and Services Agreement
(the “License Agreement”) with SynWorld Technologies Corporation (“Licensee”), C&E Telecom, LTD (“C&E
Telecom”), and Tao Wang (“Wang”), which License Agreement amended and restated in entirety the License and
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Services Agreement, dated as of June 28, 2022, by and among the same parties, as amended by that certain First
Amendment to the License and Services Agreement, dated as of August 18, 2022, by and between the Company and
Licensee, for the grant of certain licenses by the Company to Licensee to commercialize the Product (as defined in the
License Agreement) and the engagement of Licensee by the Company to obtain regulatory approval for the Product to
treat all forms of diarrhea in dogs in the Licensee Territory (as defined in the License Agreement).
On January 31, 2023, the Company, Licensee, C&E Telecom and Wang entered into a Mutual Termination of
License Agreement (the “Termination Agreement”), pursuant to which the parties agreed to mutually terminate the
License Agreement, effective as of January 31, 2023. Following its termination, the License Agreement is void, and
there is no liability thereunder on the part of any party thereto except as set forth in the Termination Agreement.
The Termination Agreement contains mutual releases by all parties thereto, for all claims known and unknown,
relating and arising out of, or relating to, among other things, the License Agreement, or the transactions contemplated
by the License Agreement.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, Chief Executive Officer and Principal Financial and Accounting Officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2022. The term "disclosure controls and
procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures
of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive Officer and Principal Financial and Accounting
Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief
Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures
were effective at the reasonable assurance level as of December 31, 2022.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) and 15d-15(c) under the Exchange Act. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of the
effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Under the
supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial
and Accounting Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2022 using the criteria established in Internal Control-Integrated Framework (“2013 Framework”)
issued by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”). Based on our evaluation
using those criteria, our management has concluded that, as of December 31, 2022, our internal control over financial
reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles for
the reasons discussed above.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting
firm on our internal control over financial reporting because we are an SRC and are not subject to auditor attestation
requirements under applicable SEC rules.
Changes in Internal Control over Financial Reporting
Other than the changes disclosed above regarding the remediation efforts to address the material weaknesses,
there were no changes in our internal control over financial reporting that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting during the year ended December 31, 2022.
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ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference from the Proxy Statement for the 2022
Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the information under the captions
“Compensation of Directors and Executive Officers” contained in the Proxy Statement for the 2022 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from the information under the captions
“Security Ownership of Certain Beneficial Owners and Management” and “Compensation of Directors and Executive
Officers—Equity Compensation “contained in the Proxy Statement for the 2022 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item is incorporated by reference from the information under the caption
“Proposal 1—Election of Directors—Director Independence” and “Certain Relationships and Related Transactions”
contained in the Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days
of the fiscal year ended December 31, 2022.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference from the information under the caption
“Proposal 2—Ratification of the Appointment of Independent Registered Public Accounting Firm—Principal
Accountant Fees and Services” contained in the Proxy Statement for the 2022 Annual Meeting of Stockholders to be
filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit No.
Description
PART IV
2.1 Agreement and Plan of Merger, dated as of March 31, 2017, by and among Jaguar Health, Inc. (f/k/a
Jaguar Animal Health, Inc.), Napo Acquisition Corporation, Napo Pharmaceuticals, Inc. and Gregory
Stock (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Jaguar Health, Inc.
filed March 31, 2017, File No. 001-36714).
3.1 Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K (No. 001-36714) filed with the Securities and Exchange Commission on
August 1, 2017).
3.2 Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 9, 2018).
3.3 Certificate of Second Amendment of the Third Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 1, 2018).
3.4 Certificate of Third Amendment of the Third Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 1, 2018).
3.5 Certificate of Fifth Amendment of the Third Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 6, 2019).
3.6 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Current Report on
Form 8-K (No. 001-36714) filed with the Securities and Exchange Commission on May 18, 2015).
3.7 Certificate of Designation of Series C Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1
to the Current Report on Form 8-K (No. 001-036714) filed with the Securities and Exchange Commission
on September 2, 2020).
3.8 Certificate of Designation of Series D Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2
to the Current Report on Form 8-K (No. 001-036714) filed with the Securities and Exchange Commission
on September 2, 2020).
3.9 Certificate of Retirement of Series A Convertible Participating Preferred Stock, Series B Convertible
Preferred Stock and Series B-1 Convertible Preferred Stock of Jaguar Health, Inc. (incorporated by
reference to Exhibit 3.1 to the Current Report on Form 8-K (No. 001-036714) filed with the Securities
and Exchange Commission on September 9, 2020)
3.10 Corrected Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Form 8-K of Jaguar Health, Inc. filed December 10, 2020,
File No. 001-36714).
3.11 Certificate of Fifth Amendment of the Third Amended and Restated Certificate of Incorporation of Jaguar
Health, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K of Jaguar Health, Inc. filed
September 3, 2021, File No. 001-36714).
3.12 First Amendment to the Amended and Restated Bylaws, dated March 17, 2022. (incorporated by
reference to Exhibit 3.1 to the Form 8-K of Jaguar Health, Inc. filed March 18, 2022, File No. 001-
36714).
3.13 Certificate of Designation of Series E Preferred Stock. (incorporated by reference to Exhibit 3.1 to the
Form 8-K of Jaguar Health, Inc. filed August 23, 2022, File No. 001-36714).
3.14 Certificate of Sixth Amendment of the Third Amended and Restated Certificate of Incorporation of
Jaguar Health, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K of Jaguar Health, Inc. filed
September 30, 2022, File No. 001-36714).
3.15 Certificate of Designation of Series F Preferred Stock. (incorporated by reference to Exhibit 3.1 to the
Form 8-K of Jaguar Health, Inc. filed November 16, 2022, File No. 001-36714).
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Exhibit No.
Description
3.16 Certificate of Seventh Amendment of the Third Amended and Restated Certificate of Incorporation of
Jaguar Health, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K of Jaguar Health, Inc. filed
January 23, 2023, File No. 001-36714).
4.1 Specimen Non-Voting Common Stock Certificate of Jaguar Health, Inc. (incorporated by reference to
Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed August 1, 2017, File No. 001-36714).
4.2 Common Stock Warrant, dated August 28, 2018, by and between Jaguar Health, Inc. and the holder
named therein (incorporated by reference to Ex. 4.1 to the Current Report on Form 8-K filed on
September 4, 2018).
4.3 Common Stock Warrant, dated September 11, 2018, by and between Jaguar Health, Inc. and L2 Capital,
LLC (incorporated by reference to Ex. 4.3 to the Current Report on Form 8-K filed on September 12,
2018).
4.4 Common Stock Warrant, dated September 11, 2018, by and between Jaguar Health, Inc. and Charles
Conte (incorporated by reference to Ex. 4.4 to the Current Report on Form 8-K filed on September 12,
2018).
4.5 Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.6 to the Registration Statement on
Form S-1 (No. 333-227292) filed with the Securities and Exchange Commission on October 1, 2018).
4.6 Form of Common Stock Warrant (incorporated by reference to Exhibit 4.3 to the Form 8-K of Jaguar
Health, Inc. filed March 22, 2019).
4.7 Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.1 to the Form 8-K/A of Jaguar
Health, Inc. filed March 26, 2019).
4.8 Form of LOC Common Stock Warrant (incorporated by reference to Exhibit 4.1 to the Form 8-K of
Jaguar Health, Inc. filed April 4, 2019, File No. 001-36714).
4.9 Specimen Common Stock Certificate of Jaguar Health, Inc. (incorporated by reference to Exhibit 4.1 to
the Form 8-K of Jaguar Health, Inc. filed June 1, 2018, File No. 001-36714).
4.10 Form of Series 1 Warrant (incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc.
filed July 23, 2019, File No. 001-36714).
4.11 Form of Series 2 Warrant (incorporated by reference to Exhibit 4.2 to the Form 8-K of Jaguar Health, Inc.
filed July 23, 2019, File No. 001-36714).
4.12 Promissory Note, dated October 1, 2019, between Napo Pharmaceuticals, Inc. and Michael Tempesta
(incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed October 7, 2019,
File No. 001-36714).
4.13 Form of Pre-Funded Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the
Form 8-K of Jaguar Health, Inc. filed November 14, 2019, File No. 001-36714).
4.14 Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Form 8-K of
Jaguar Health, Inc. filed December 26, 2019, File No. 001-36714).
4.15 Royalty Interest, dated March 4, 2020, by and between the Company and Iliad Research and Trading L.P.
(incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed March 6, 2020, File
No. 001-36714).
4.16 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange
Act of 1945, as amended (incorporated herein by reference to Exhibit 4.26 to the Annual Report on
Form 10-K filed on April 3, 2020).
4.17 Form of Series 3 Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Form
8-K of Jaguar health, Inc. filed May 22, 2020).
4.18 Global Amendment, dated September 1, 2020, by and among Jaguar Health, Inc., Napo Pharmaceuticals,
Inc. and Chicago Ventures, L.P. (incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar
health, Inc. filed September 2, 2020).
4.19 Royalty Interest, dated October 8, 2020, by and between Jaguar Health, Inc. and Iliad Research and
Trading, L.P. (incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed
October 9, 2020).
4.20 Form of Pre-Funded Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the
Form 8-K of Jaguar health, Inc. filed October 9, 2020).
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Exhibit No.
Description
4.21 Royalty Interest, dated December 22, 2020, by and between Jaguar Health, Inc. and Irving Park Capital,
LLC (incorporated by reference to Exhibit 4.1 to the Form 8-K filed December 29, 2020, File No. 001-
36714).
4.22 Secured Promissory Note, dated January 19, 2021, by and among Jaguar Health, Inc., Napo
Pharmaceuticals, Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 4.1 to the Form
8-K filed January 22, 2021, File No. 001-36714).
4.23 Common Stock Purchase Warrant, dated April 7, 2021, by and between Jaguar Health, Inc. and Oasis
Capital, LLC (incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed April
8, 2021, File No. 001-36714).
4.24 Global Amendment, dated April 14, 2022, by and between Jaguar Health, Inc. and Iliad Research and
Trading, L.P. (incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed April
15, 2022, File No. 001-36714).
4.25 Global Amendment, dated April 14, 2022, by and between Jaguar Health, Inc. and Uptown Capital, LLC
(incorporated by reference to Exhibit 4.2 to the Form 8-K of Jaguar Health, Inc. filed April 15, 2022, File
No. 001-36714).
4.26 Global Amendment, dated April 14, 2022, by and between Jaguar Health, Inc. and Streeterville Capital,
LLC (incorporated by reference to Exhibit 4.3 to the Form 8-K of Jaguar Health, Inc. filed April 15,
2022, File No. 001-36714).
4.27 Global Amendment, dated April 14, 2022, by and among Jaguar Health, Inc., Napo Pharmaceuticals, Inc.
and Streeterville Capital, LLC (incorporated by reference to Exhibit 4.4 to the Form 8-K of Jaguar
Health, Inc. filed April 15, 2022, File No. 001-36714).
4.28 Royalty Interest, dated August 24, 2022, by and between Jaguar Health, Inc. and Streeterville Capital,
LLC. (incorporated by reference to Exhibit 4.1 to the Form 8-K of Jaguar Health, Inc. filed August 30,
2022, File No. 001-36714).
10.1‡ Form of Indemnification Agreement by and between Jaguar Health, Inc. and its directors and officers
(incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 (No. 333-198383)
filed with the Securities and Exchange Commission on August 27, 2014).
10.2‡ Form of Notice of Grant of Stock Option and Stock Option Agreement under the 2014 Stock Incentive
Plan (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 (No. 333-
198383) filed with the Securities and Exchange Commission on August 27, 2014).
10.3‡ Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement under the 2014 Stock
Incentive Plan (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1
(No. 333-198383) filed with the Securities and Exchange Commission on August 27, 2014).
10.4‡ Form of Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement under the 2014
Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-
1 (No. 333-198383) filed with the Securities and Exchange Commission on August 27, 2014).
10.5‡ Offer Letter by and between Jaguar Health, Inc. and Lisa A. Conte, dated March 1, 2014 (incorporated by
reference to Exhibit 10.9 to the Registration Statement on Form S-1 (No. 333-198383) filed with the
Securities and Exchange Commission on August 27, 2014).
10.6‡ Offer Letter by and between Jaguar Health, Inc. and Steven R. King, Ph.D., dated February 28, 2014
(incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 (No. 333-198383)
filed with the Securities and Exchange Commission on August 27, 2014).
10.7† Formulation Development and Manufacturing Agreement between Jaguar Health, Inc. and Patheon
Pharmaceuticals Inc., dated October 8, 2015 (incorporated by reference to Exhibit 10.30 to the
Registration Statement on Form S-1 (No. 333-208905) filed with the Securities and Exchange
Commission on January 7, 2016).
10.8 Common Stock Warrant issued pursuant to the Letter Agreement, dated November 8, 2016, between
Jaguar Health, Inc. and Serious Change II LP, which expires July 28, 2022 (incorporated herein by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (No. 001-36714) filed on November 14,
2016).
10.9 Distribution Agreement, dated December 9, 2016, by and between Jaguar Health, Inc. and Henry
Schein, Inc. (incorporated herein by reference to Exhibit 10.41 to the Annual Report on Form 10-K filed
on February 15, 2017).
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Exhibit No.
Description
10.10 Alliance Agreement, dated May 23, 2005, by and among AsiaPharm Investment Limited and its
Affiliates, including Shandong Luye Pharmaceuticals Co. Ltd., and Napo Pharmaceuticals, Inc.
(incorporated herein by reference to Exhibit 10.61 to the Registration Statement on Form S-4/A filed
May 26, 2017 (No. 333-217364)).
10.11† Finder’s Agreement, dated April 9, 2010, by and among Luye Pharma Group Limited and its Affiliates,
including Shandong Luye Pharmaceuticals Co. Ltd., and Napo Pharmaceuticals, Inc. (incorporated herein
by reference to Exhibit 10.62 to the Registration Statement on Form S-4/A filed May 26, 2017 (No. 333-
217364)).
10.12† License Agreement, dated February 28, 2007, by and between Insmed Incorporated and Napo
Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 10.77 to the Registration Statement on
Form S-4/A filed May 26, 2017 (No. 333-217364)).
10.13† Amendment, Waiver & Consent, dated June 27, 2017, by and among Jaguar Health, Inc., Nantucket
Investments Limited, and Napo Pharmaceuticals, Inc. (incorporated by reference to Ex. 10.83 of the
Company’s Registration Statement on Form S-4 (Registration No. 333-217364) filed on July 5, 2017).
10.14† Termination, Asset Transfer and Transition Agreement, dated September 22, 2017, by and between Napo
Pharmaceuticals, Inc. and Glenmark Pharmaceuticals, Ltd. (incorporated by reference to Ex. 10.8 to the
Quarterly Report on Form 10-Q filed on November 20, 2017)
10.15 Registration Rights Agreement, dated March 23, 2018, by and between Jaguar Health, Inc. and Sagard
Capital Partners, L.P. (incorporated by reference to Ex. 10.2 to the Current Report on Form 8-K filed on
March 27, 2018).
10.16 Registration Rights Agreement, dated September 11, 2018, by and between Jaguar Health, Inc. and L2
Capital, LLC (incorporated by reference to Ex. 10.3 to the Current Report on Form 8-K filed on
September 12, 2018).
10.17 Registration Rights Agreement, dated September 11, 2018, by and between Jaguar Health, Inc. and
Charles Conte (incorporated by reference to Ex. 10.4 to the Current Report on Form 8-K filed on
September 12, 2018).
10.18 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K of
Jaguar Health, Inc. filed March 22, 2019).
10.19 Letter of Credit Cancellation & Warrant Issuance Agreement, dated March 29, 2019, by and between
Jaguar Health, Inc. and the letter of credit beneficiary named therein (incorporated by reference to
Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed April 4, 2019).
10.20 Amendment No. 1 to Registration Rights Agreement, dated May 30, 2019, by and between Jaguar
Health, Inc. and Sagard Capital Partners, L.P. (incorporated by reference to Exhibit 10.120 to the
Registration Statement on Form S-1 (No. 333-233989) filed with the Securities and Exchange
Commission on September 27, 2019).
10.21 Form of Amendment Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed July 5, 2019, File No. 001-36714).
10.22# Master Services Agreement, dated June 24, 2019, by and among Napo Pharmaceuticals, Inc., Integrium,
LLC, and POC Capital, LLC (incorporated by reference to Exhibit 10.24 to the Form 10-K of Jaguar
Health, Inc. filed on March 31, 2021, File No. 001-36714).
10.23 Form of Exchange Agreement, between Jaguar Health, Inc. and Chicago Venture Partners,
L.P. (incorporated by reference to Exhibit 10.6 to the Form 10-Q of Jaguar Health, Inc. filed on
August 14, 2019, File No. 001-36714).
10.24 Form of Warrant Agency Agreement between Jaguar Health, Inc. and American Stock Transfer & Trust
Company, LLC (incorporated by reference to Exhibit 10.117 to the Form S-1/A of Jaguar Health, Inc.
filed on July 15, 2019, File No. 333-231399).
10.25 License Termination and Settlement Termination Agreement, dated October 1, 2019, by and among
Jaguar Health, Inc., Napo Pharmaceuticals, Inc. and Michael Tempesta (incorporated by reference to
Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed October 7, 2019, File No. 001-36714).
10.26# Securities Purchase Agreement, dated November 13, 2019, by and between Jaguar Health, Inc. and the
purchasers named therein (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed November 14, 2019, File No. 001-36714).
145
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Exhibit No.
Description
10.27 Securities Purchase Agreement, dated December 20, 2019, by and between Jaguar Health, Inc. and the
investors named therein (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc.
filed December 26, 2019, File No. 001-36714).
10.28 Form of Warrant Exercise Agreement by and between Jaguar Health, Inc. and the Holder named therein
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 28, 2020, File No. 001-36714).
10.29 Securities Purchase Agreement, dated March 23, 2020, by and between Jaguar Health, Inc. and the
investors named therein (incorporated by reference to Exhibit 10.1 to the Form 8-K filed March 26, 2020,
File No. 001-36714).
10.30 Equity Purchase Agreement, dated March 24, 2020, by and between Jaguar Health, Inc. and Oasis
Capital, LLC (incorporated by reference to Exhibit 10.4 to the Form 8-K filed March 26, 2020, File No.
001-36714).
10.31 Registration Rights Agreement, dated March 24, 2020, by and between Jaguar Health, Inc. and Oasis
Capital, LLC (incorporated by reference to Exhibit 10.5 to the Form 8-K filed March 26, 2020, File No.
001-36714).
10.32‡ Jaguar Health, Inc. 2014 Stock Incentive Plan as amended and restated effective October 1, 2019
(incorporated by reference to Exhibit 10.101 to the Form 10-K of Jaguar Health, Inc. filed April 3, 2020,
File No. 001 36714).
10.33 Purchase Agreement, dated April 15, 2020, by and between Napo Pharmaceuticals, Inc. and Atlas
Sciences, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K filed April 16, 2020, File No.
001-36714).
10.34 License Agreement, dated April 15, 2020, by and between Jaguar Health, Inc. and Atlas Sciences, LLC
(incorporated by reference to Exhibit 10.2 to the Form 8-K filed April 16, 2020, File No. 001-36714).
10.35 Purchase Agreement, dated May 12, 2020, by and among Jaguar Health, Inc., Napo Pharmaceuticals, Inc.
and Oasis Capital, LLC (incorporated by reference to Exhibit 10,1 to the Form 8-K filed May 21, 2020,
File No. 001-36714).
10.36 Assignment Agreement, dated May 12, 2020, by and between Napo Pharmaceuticals, Inc. and Oasis
Capital, LLC (incorporated by reference to Exhibit 10.2 to the Form 8-K filed May 21, 2020, File No.
001-36714).
10.37‡ Jaguar Health, Inc. New Employee Inducement Award Plan (incorporated by reference to Exhibit 10.1 to
the Form 8-K filed June 19, 2020, File No. 001-36714).
10.38‡ Form of Notice of Grant of Stock Option and Stock Option Agreement under Jaguar Health, Inc. New
Employee Inducement Award Plan (incorporated by reference to Exhibit 10.2 to the Form 8-K filed June
19, 2020, File No. 001-36714).
10.39‡ Form of Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement under the Jaguar
Health, Inc. New Employee Inducement Award Plan (incorporated by reference to Exhibit 10.3 to the
Form 8-K filed June 19, 2020, File No. 001-36714).
10.40 Securities Purchase Agreement, dated March 4, 2020, by and between Jaguar Health, Inc. and Iliad
Research and Trading, L.P. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed March 6,
2020, File No. 001-36714).
10.41 First Amendment to Royalty Interest Purchase Agreement and Related Documents, dated July 10, 2020,
between Jaguar Health, Inc. and Iliad Research and Trading, L.P. (incorporated by reference to Exhibit
10.1 to the Form 8-K filed July 14, 2020, File No. 001-36714).
10.42‡ Form of Severance and Change of Control Agreement (incorporated by reference to Exhibit 10.11 to the
Form 10-Q filed August 13, 2020 File No. 001-36714).
10.43 First Amendment to Purchase Agreement, dated June 26, 2020, by and among Jaguar Health, Inc., Napo
Pharmaceuticals, Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.12 to the Form 10-
Q filed August 13, 2020 File No. 001-36714).
146
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Exhibit No.
Description
10.44 First Amendment to Assignment Agreement, dated June 26, 2020, by and between Napo
Pharmaceuticals, Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.13 to the Form 10-
Q filed August 13, 2020 File No. 001-36714).
10.45 Exchange Agreement, dated September 1, 2020, by and between Jaguar Health, Inc. and Iliad Research
and Trading, L.P. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed September 2, 2020,
File No. 001-36714).
10.46 Stock Plan Agreement for Payment of Consulting Services, dated September 1, 2020, by and among
Jaguar Health, Inc., Sagard Capital Partners Management Corp. and Sagard Capital Partners, L.P.
(incorporated by reference to Exhibit 10.2 to the Form 8-K filed September 2, 2020, File No. 001-36714).
10.47 Stock Plan Agreement, dated October 6, 2020, by and between Jaguar Health, Inc. and PoC Capital, LLC
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed October 7, 2020, File No. 001-36714).
10.48 Fee Settlement Agreement dated October 7, 2020, by and between Jaguar Health, Inc. and Atlas Sciences,
LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K filed October 9, 2020, File No. 001-
36714).
10.49 Royalty Interest Purchase Agreement, dated October 8, 2020, by and between Jaguar Health, Inc. and
Iliad Research and Trading, L.P. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed October
9, 2020, File No. 001-36714).
10.50 Exchange Agreement, dated October 8, 2020, by and between Jaguar Health, Inc. and Iliad Research and
Trading, L.P. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed October 9, 2020, File No.
001-36714).
10.51# Office Sublease Agreement, dated August 31, 2020, by and between Jaguar Health, Inc. and Peacock
Construction, Inc. (incorporated by reference to Exhibit 10.4 to the Form 10-Q filed November 16, 2020,
File No. 001-36714).
10.52 Consent to Sublease Agreement, dated August 31, 2020, by and among M&E, LLC, Jaguar Health, Inc.
and Peacock Construction, Inc. (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed
November 16, 2020, File No. 001-36714).
10.53# Manufacturing and Supply Agreement, dated September 3, 2020, by and between Glenmark Life
Sciences Limited and Napo Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.6 to the Form
10-Q filed November 16, 2020, File No. 001-36714).
10.54 Securities Purchase Agreement, dated December 22, 2020, by and between Jaguar Health, Inc. and Irving
Park Capital, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K filed December 29, 2020,
File No. 001-36714).
10.55 Note Purchase Agreement, dated January 19, 2021, by and among Jaguar Health, Inc., Napo
Pharmaceuticals, Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 to the
Form 8-K filed January 22, 2021, File No. 001-36714).
10.56 Security Agreement, dated January 19, 2021, by and between Napo Pharmaceuticals, Inc. and
Streeterville Capital, LLC (incorporated by reference to Exhibit 10.2 to the Form 8-K filed January 22,
2021, File No. 001-36714).
10.57# Master Services Agreement, dated October 5, 2020, by and between Napo Pharmaceuticals, Inc. and
Integrium, LLC (incorporated by reference to Exhibit 10.67 to the Form 10-K filed March 31, 2021, File
No. 001-36714.
10.58 Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K of
Jaguar Health, Inc. filed January 14, 2021, File No. 001-36714).
10.59# Office Lease Agreement, dated March 25, 2021, by and between Jaguar Health, Inc. and M & E LLC
(incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed April 8, 2021, File
No. 001-36714).
10.60 First Amendment to the Equity Purchase Agreement, dated April 7, 2021, by and between Jaguar Health,
Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.2 to the Form 8-K of Jaguar Health,
Inc. filed April 8, 2021, File No. 001-36714).
147
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Exhibit No.
Description
10.61 Registration Rights Agreement, dated April 7, 2021, by and between Jaguar Health, Inc. and Oasis
Capital, LLC (incorporated by reference to Exhibit 10.3 to the Form 8-K of Jaguar Health, Inc. filed April
8, 2021, File No. 001-36714).
10.62 Form of Securities Purchase Agreement, dated April 29, 2021 (incorporated by reference to Exhibit 10.1
to the Form 8-K of Jaguar Health, Inc. filed April 30, 2021, File No. 001-36714).
10.63# Subscription Agreement, dated June 1, 2021, by and among Dragon SPAC S.p.A., Napo Pharmaceuticals,
Inc. and Joshua Mailman (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health,
Inc. filed June 4, 2021, File No. 001-36714).
10.64# License Agreement, dated August 18, 2021, by and between Napo Pharmaceuticals, Inc. and Napo EU
S.p.A. (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed August 24,
2021, File No. 001-36714).
10.65 Securities Purchase Agreement, dated September 13, 2021, by and between Jaguar Health, Inc. and the
investors named therein (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc.
filed September 17, 2021, File No. 001-36714).
10.66 At The Market Offering Agreement, dated December 10, 2021, by and between Jaguar Health, Inc. and
Ladenburg Thalmann & Co. Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed December 10, 2021, File No. 001-36714).
10.67 First Amendment to the At the Market Offering Agreement, dated February 2, 2022, by and between
Jaguar Health, Inc. and Ladenburg Thalmann & Co. Inc. (incorporated by reference to Exhibit 10.1 to the
Form 8-K of Jaguar Health, Inc. filed February 2, 2022, File No. 001-36714).
10.68 First Amendment to the Jaguar Health, Inc. New Employee Inducement Award Plan (incorporated by
reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed April 15, 2022, File No. 001-
36714).
10.69 First Amendment to the Jaguar Health, Inc. New Employee Inducement Award Plan (incorporated by
reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed April 15, 2022, File No. 001-
36714).
10.70# Manufacturing Services Agreement, dated June 10, 2022, by and between Napo Pharmaceuticals, Inc.
and Patheon Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K/A of Jaguar
Health, Inc. filed August 24, 2022, File No. 001-36714).
10.71 License and Services Agreement, dated June 29, 2022, by and among Jaguar Health, Inc., SynWorld
Technologies Corporation, C&E Telecom, LTD and Tao Wang (incorporated by reference to Exhibit 10.1
to the Form 8-K of Jaguar Health, Inc. filed June 29, 2022, File No. 001-36714).
10.72# Amended and Restated License Agreement, dated July 19, 2022, by and between Napo Pharmaceuticals,
Inc. and Napo Therapeutics S.p.A. (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed July 20, 2022, File No. 001-36714).
10.73 Securities Purchase Agreement, dated August 18, 2022, by and between Jaguar Health, Inc. and
SynWorld Technologies Corporation (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed August 23, 2022, File No. 001-36714).
10.74 First Amendment to the License and Services Agreement, dated August 18, 2022, by and between Jaguar
Health, Inc. and SynWorld Technologies Corporation (incorporated by reference to Exhibit 10.2 to the
Form 8-K of Jaguar Health, Inc. filed August 23, 2022, File No. 001-36714).
10.75 Royalty Interest Purchase Agreement, dated August 24, 2022, by and between Jaguar Health, Inc. and
Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar Health,
Inc. filed August 30, 2022, File No. 001-36714).
10.76 Amended and Restated License and Services Agreement, dated October 11, 2022, by and among Jaguar
Health, Inc., SynWorld Technologies Corporation, C&E Telecom, LTD and Tao Wang (incorporated by
reference to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. October 14, 2022, File No. 001-36714).
10.77 Global Amendment, dated October 17, 2022, by and among Jaguar Health, Inc., Napo Pharmaceuticals,
Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed October 21, 2022, File No. 001-36714).
10.78 Securities Purchase Agreement, dated November 11, 2022, by and between Jaguar Health, Inc. and
SynWorld Technologies Corporation (incorporated by reference to Exhibit 10.1 to the Form 8-K of Jaguar
Health, Inc. filed November 16, 2022, File No. 001-36714).
148
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Exhibit No.
Description
10.79 Form of Company Stock Option Cancellation Agreement (incorporated by reference to Exhibit 10.1 to
the Form 8-K of Jaguar Health, Inc. filed December 30, 2022, File No. 001-36714).
10.80 Mutual Termination of License Agreement, dated as of January 31, 2023, by and among Jaguar Health,
Inc., SynWorld Technologies Corporation, C&E Telecom, LTD, and Tao Wang (incorporated by reference
to Exhibit 10.1 to the Form 8-K of Jaguar Health, Inc. filed February 6, 2023, File No. 001-36714).
16.1 Letter from Mayer Hoffman McCann P.C., dated November 23, 2021 (incorporated by reference to
Exhibit 16.1 to the Form 8-K of Jaguar Health, Inc. filed November 23, 2021, File No. 001-36714).
21.1* Subsidiaries of the Registrant.
23.1* Consent of RBSM LLP, Independent Registered Public Accounting Firm.
23.2* Consent of Mayer Hoffman McCann P.C., Independent Registered Public Accounting Firm.
31.1* Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002).
32.2** Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002).
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Filed herewith.
** In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications
furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or deemed to be
incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent
that the registrant specifically incorporates it by reference.
† Confidential treatment granted as to portions of the exhibit. Confidential materials omitted and filed separately with
the Securities and Exchange Commission.
‡ Management contract or compensatory plan or arrangement.
#
Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K promulgated under the Securities
Act because the information (i) is not material and (ii) would be competitively harmful if publicly disclosed.
ITEM 16. FORM 10-K SUMMARY
None.
149
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
JAGUAR HEALTH, INC.
By:
/s/ LISA A. CONTE
Lisa A. Conte
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Lisa A. Conte and Carol Lizak, jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and
to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by
the following persons in the capacities and on the date indicated.
Signature
Title
Date
/s/ LISA A. CONTE
Lisa A. Conte
/s/ CAROL LIZAK
Carol Lizak
Chief Executive Officer, President and Director
(Principal Executive Officer)
March 24, 2023
Chief Financial Officer and Treasurer (Principal
Financial and Accounting Officer)
March 24, 2023
/s/ JAMES J. BOCHNOWSKI
Chairman of the Board
March 24, 2023
James J. Bochnowski
/s/ JOHN MICEK III
Director
John Micek III
/s/ JONATHAN B. SIEGEL
Director
Jonathan B. Siegel
/s/ ANULA JAYASURIYA
Director
Anula Jayasuriya
150
March 24, 2023
March 24, 2023
March 24, 2023
SUBSIDIARIES OF JAGUAR HEALTH, INC.
Name of Subsidiary
State or Other Jurisdiction of Incorporation or Organization
Napo Pharmaceuticals, Inc.
Delaware
Napo Therapeutics S.p.A.
Italy
Exhibit 21.1
Exhibit 23.1
101 Larkspur Landing Circle
Suite 321
Larkspur, California 94939
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Jaguar Health, Inc.’s Registrations Statements as follows:
1. Registration Statements on Form S-1 (File Nos. 333-236016, 333-232082, 333-231399, 333-
232078, 333-232715, 333-233989 and No. 333-237587); and
2. Registration Statements on Form S-3 (File Nos. 333-238992, 333-248763, 333-220236, 333-
255154, 333-256634 and 333-261283); and
3. Registration Statements on Form S-8 (File Nos. 333-204280, 333-215303, 333-219939, 333-
225057, 333-237816, 333-256626, 333-256629, 333-264274, 333-264276).
of our report dated March 24, 2023, with respect to our audit of the consolidated financial statements of
Jaguar Health, Inc., as of December 31, 2022 and 2021 for each of the years in the two-year period ended
December 31, 2022, which report is included in this Annual Report on Form 10-K of Jaguar Health, Inc.,
for the year ended December 31, 2022.
/s/ RBSM LLP
RBSM LLP
Larkspur, California
March 24, 2023
New York, NY Washington DC Las Vegas, NV, San Francisco, CA Athens, GRE Beijing, CHN Mumbai, and Pune IND
Member ANTEA INTERNATIONAL with offices worldwide
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statements (Form S-1 Nos. 333-236016, 333-232082, 333-231399, 333-
232078, 333- 232715, 333-233989 and No. 333-237587) of Jaguar Health, Inc.; and
(2) Registration Statement (Form S-3 No. 333-238992, 333-248763, 333-220236, 333-255154,
333-256634 and 333-261283) of Jaguar Health, Inc.; and
(3) Registration Statements (Form S-8 Nos. 333-204280, 333-215303, 333-219939, 333-
225057, 333-237816, 333-256626 and 333-256629) of Jaguar Health, Inc.;
of our report dated March 31, 2021 (except for the effects of the reverse stock split described in
Note 1, as to which the date is March 24, 2023), with respect to the consolidated financial
statements of Jaguar Health, Inc. included in this Annual Report (Form 10-K) of Jaguar Health,
Inc. for the year ended December 31, 2022.
/s/ Mayer Hoffman McCann P.C.
San Diego, California
March 24, 2023
Exhibit 31.1
PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lisa A. Conte, certify that:
1. I have reviewed this annual report on Form 10-K of Jaguar Health, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 24, 2023
/s/ LISA A. CONTE
Lisa A. Conte
Chief Executive Officer and President
(Principal Executive Officer)
Exhibit 31.2
PRINCIPAL FINANCIAL OFFICER’S CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carol Lizak, certify that:
1. I have reviewed this annual report on Form 10-K of Jaguar Health, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 24, 2023
/s/ CAROL LIZAK
Carol Lizak
Principal Financial and Accounting Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the annual report of Jaguar Health, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 24, 2023
/s/ LISA A. CONTE
Lisa A. Conte
Chief Executive Officer and President
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the annual report of Jaguar Health, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: March 24, 2023
/s/ CAROL LIZAK
Carol. Lizak
Principal Financial and Accounting Officer