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TABLE OF CONTENTS
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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-220236
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED SEPTEMBER 14, 2017)
JAGUAR HEALTH, INC.
Up to 8,000,000 Shares of Common Stock
We are offering up to 8,000,000 shares ("Shares") of our voting common stock, par value $0.0001 per share ("Common Stock").
The
Shares represent securities that Oasis Capital, LLC ("Oasis Capital") agreed to purchase pursuant to a Common Stock Purchase Agreement dated January 7, 2018 (the
"CSPA"). We have the right to "put," or sell, the Shares to Oasis Capital at a price of $0.75 per share or such other price as mutually agreed upon the parties. We may issue Shares at any time on or
after the date of the CSPA until the date on which Oasis Capital has purchased 8,000,000 Shares or the agreement is otherwise terminated.
We
previously filed a prospectus supplement on January 8, 2019 that covered the issuance of 5,633,333 shares of Common Stock, consisting of 5,333,333 shares of Common Stock that
we had the right to "put" or sell to Oasis Capital pursuant to the CSPA (the "Original Purchase Shares") and 300,000 shares that were issued to Oasis Capital as an inducement to enter into the CSPA
(the "Commitment Shares") and the resale of the Original Purchase Shares by or on behalf of Oasis Capital. Pursuant to the terms of the CSPA, we elected to increase the total number of shares that we
have the right to "put", or sell, to Oasis Capital under the CSPA by 8,000,000 shares to 13,333,333 shares, and this prospectus supplement covers the issuance of such additional 8,000,000 shares to
Oasis and the resale of such shares by or on behalf of Oasis Capital. With regard to the Shares, Oasis Capital is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), in connection with the resale of the Shares. Any broker-dealers or agents that are involved in resales of Shares may be deemed "underwriters". We will not receive any proceeds from
the resale of the Shares by Oasis Capital, though we will receive proceeds from the sale of the Shares directly to them pursuant to the CSPA.We are not paying any underwriting discounts or
commissions.
Our
Common Stock is listed on the Nasdaq Capital Market under the symbol "JAGX." On March 18, 2019, the last reported sale price of our common stock on the Nasdaq Capital Market
was $0.47 per share.
The
aggregate market value of our outstanding voting and non-voting common stock held by non-affiliates, or public float, is approximately $18.1 million, which was calculated
based on 39,366,997 shares of outstanding voting and non-voting common stock held by non-affiliates on March 18, 2019 and on a closing price per share of $0.47 on March 18, 2019.
Following this offering, we will have sold securities with an aggregate
market value of approximately $2.6 million pursuant to General Instruction I.B.6 of Form S-3 during the prior 12 calendar month period that ends on and includes the date hereof.
Investing in our Common Stock involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully
the risks that we have described on page S-9 of this prospectus supplement under the caption "Risk Factors" and in the documents incorporated by reference into this prospectus supplement and
the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus supplement is March 19, 2019.
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ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus dated September 14, 2017 are part of a registration statement that we filed
with the Securities and Exchange Commission (the "SEC") using a "shelf" registration process. This prospectus supplement and the accompanying prospectus relate to the offer by us of shares of our
common stock to certain investors. We provide information to you about this offering of shares of our common stock in two separate documents that are bound together: (1) this prospectus
supplement, which describes the specific details regarding this offering; and (2) the accompanying prospectus, which provides general information, some of which may not apply to this offering.
Generally, when we refer to this "prospectus," we are referring to both documents combined. If information in this prospectus supplement is inconsistent with the accompanying prospectus, you should
rely on this prospectus supplement. However, if any statement in one of these documents is inconsistent with a statement in another document having a later datefor example, a document
incorporated by reference in this prospectus supplement or the accompanying prospectusthe statement in the document having the later date modifies or supersedes the earlier statement as
our business, financial condition, results of operations and prospects may have changed since the earlier dates. You should not assume that the information
contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or any free-writing prospectus is accurate as of any date other than as of the date of this prospectus
supplement, the accompanying prospectus or any related free-writing prospectus, as the case may be, or in the case of the documents incorporated by reference, the date of such documents regardless of
the time of delivery of this prospectus supplement and the accompanying prospectus or any sale of our securities. You should read this prospectus supplement, the accompanying prospectus, the documents
and information incorporated by reference in this prospectus supplement and the accompanying prospectus and any free writing prospectus that we have authorized for use in connection with this offering
when making your investment decision. You should also read and consider the information in the documents to which we have referred you under the captions "Where You Can Find More Information" and
"Incorporation of Information by Reference" in this prospectus supplement. We have not authorized anyone to provide you with information that is in addition to, or different from, that contained or
incorporated by reference in this prospectus supplement, the accompanying prospectus or in any free writing prospectuses we have prepared. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not offering to sell securities in any jurisdiction where the offer or sale is not permitted.
Unless
the context otherwise requires, references in this prospectus supplement to "Jaguar," the "Company," "we," "us," and "our" refer to Jaguar Health, Inc.
Jaguar
Health, our logo, Napo Pharmaceuticals, Mytesi, Canalevia, Equilevia and Neonorm are our trademarks that are used in this prospectus supplement. This prospectus supplement also
includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus 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.
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PROSPECTUS SUPPLEMENT SUMMARY
The following is a summary of what we believe to be the most important aspects of our business and the offering of our
securities under this prospectus supplement and in the accompanying prospectus. We urge you to read this entire prospectus supplement, the accompanying prospectus and any free writing prospectus that
we have authorized for use in connection with this offering, including the section entitled "Risk Factors" and the more detailed financial statements, notes to the financial statements and other
information incorporated by reference from our other filings with the SEC.
Overview
We are a commercial stage pharmaceutical company focused on developing novel, sustainably derived gastrointestinal products on a global basis.
Our wholly-owned subsidiary, Napo Pharmaceuticals, Inc. ("Napo"), focuses on developing and commercializing proprietary human gastrointestinal pharmaceuticals for the global marketplace from
plants used traditionally in rainforest areas. Our Mytesi (crofelemer) product is a first-in-class anti-secretory agent, 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. The full launch of Mytesi began in April 2018with the support of a full complement of patient and
healthcare practitioner programswhen Napo's direct sales force of 18 sales representatives, a national sales director and one regional sales director became fully deployed.
Jaguar
was founded in San Francisco, California as a Delaware corporation on June 6, 2013. The Company was a majority-owned subsidiary of Napo until the close of the Company's
initial public offering on May 18, 2015. On July 31, 2017 with the merger of Jaguar and Napo, Napo began operating as a wholly-owned subsidiary of Jaguar focused on human health and the
ongoing commercialization of, and development of follow-on indications for, Mytesi.
We
believe that Jaguar is poised to realize a number of value adding eventsincluding continued commercial growth of Mytesi for the current HIV-diarrhea indication, an
expanded pipeline of human follow-on indications, and a second-generation anti-secretory agent, upon which to build global partnerships. As previously announced, Jaguar, through Napo, now controls
commercial rights for Mytesi for all indications, territories and patient populations globally, and crofelemer manufacturing is being conducted at a new, multimillion-dollar commercial manufacturing
facility that has been FDA-inspected and approved. Additionally, several of the drug product candidates in Jaguar's Mytesi pipeline are backed by Phase 2 and/or proof of concept evidence from
completed human clinical trials. The current approved indication in HIV-related diarrhea is a chronic approval, with a safety package that supports chronic use of Mytesi for follow-on indications as
well.
Mytesi
is a novel, first-in-class anti-secretory agent which has a basic normalizing effect locally on the gut, and this mechanism of action has the potential to benefit multiple
gastrointestinal disorders. Mytesi is in development for multiple possible follow-on indications, including cancer therapy-related diarrhea; orphan-drug indications for infants and children with
congenital diarrheal disorders and short bowel syndrome (SBS); supportive care for inflammatory bowel disease (IBD); irritable bowel syndrome (IBS); idiopathic/functional diarrhea; and as a
second-generation anti-secretory agent for use in cholera patients. Mytesi has received orphan-drug designation for SBS.
Recent Developments
On March 14, 2019, Jaguar, with the written consent of the sole holder of Jaguar's issued and outstanding Series A convertible
participating preferred stock ("Series A Preferred Stock"), filed a Certificate of Amendment to the Certificate of Designation of Series A Convertible Participating Preferred Stock of
Jaguar (the "Amendment") with the Secretary of State of the State of Delaware to (a) adjust the conversion price of the shares of Series A Preferred Stock from $2.775 per share to
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$0.2775
per share, provided that with respect to the right to vote on an as-converted basis with holders of the Company's Common Stock, holders of Series A Preferred Stock will not be entitled
to vote on any matter presented to the stockholders of the Company to the extent that such vote would be in violation of Nasdaq Listing Rule 5640, and (b) adjust the 30-day
volume-weighted average price ("VWAP") threshold applicable to the Company's optional redemption right and the preferred stockholders' mandatory redemption right from $15.00 to $1.50. The Amendment
became effective upon filing with the Secretary of the State of Delaware.
Risks Related to Our Business
Our business, and our ability to execute our business strategy, is subject to a number of risks as more fully described in the section titled
"Risk Factors." These risks include, among others, the following:
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We have a limited operating history, have not yet generated any material revenues, expect to continue to incur significant research and
development and other expenses, and may never become profitable. Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
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We have never generated any material revenue from operations and may need to raise additional capital to achieve our goals.
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We are substantially dependent on the success of our current lead prescription drug product candidates, Mytesi and Canalevia, and cannot be
certain that necessary approvals will be received for planned Mytesi follow-on indications or Canalevia or that these product candidates will be successfully commercialized, either by us or any of our
partners.
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The results of earlier studies may not be predictive of the results of our pivotal trials or other future studies, and we may be unable to
obtain any necessary regulatory approvals for our existing or future prescription drug product candidates under applicable regulatory requirements.
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Development of prescription drug products, and, to a lesser extent, non-prescription products, for the human health and animal health market is
inherently expensive, time-consuming and uncertain, and any delay or discontinuance of our current or future pivotal trials, or dosage or formulation studies, would harm our business and prospects.
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Even if we obtain any required regulatory approvals for our current or future prescription drug product candidates, they may never achieve
market acceptance or commercial success.
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We are dependent upon contract manufacturers for supplies of our current prescription drug product candidates and non-prescription products and
intend to rely on contract manufacturers for commercial quantities of any of our commercialized products.
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If we are not successful in identifying, developing and commercializing additional prescription drug product candidates and non-prescription
products, our ability to expand our business and achieve our strategic objectives may be impaired.
Corporate Information
We were incorporated in the State of Delaware on June 6, 2013. Our principal executive offices are located at 201 Mission Street,
Suite 2375, San Francisco, CA 94015 and our telephone number is (415) 371-8300. Our website address is www.jaguar.health. The information contained on, or that can be accessed through,
our website is not part of this prospectus supplement. Our 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 (the "Merger") pursuant to the Agreement and Plan of Merger,
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dated
March 31, 2017, by and among the Company, Napo, Napo Acquisition Corporation, and Napo's representative (the "Merger Agreement").
Emerging Growth Company Information
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage
of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." In particular, while we are an "emerging
growth company" (i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) we will be subject to reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iii) we will not be required to hold nonbinding advisory votes on executive
compensation or stockholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can delay its adoption of any new or
revised accounting standards, but we have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other
public companies that are not emerging growth companies. In addition, investors may find our common stock less attractive if we rely on the exemptions and relief granted by the JOBS Act. 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 decline and/or become more volatile.
We
may remain an "emerging growth company" until as late as December 31, 2020 (the fiscal year-end following the fifth anniversary of the closing of our initial public offering,
which occurred on May 18, 2015), although we may cease to be an "emerging growth company" earlier under certain circumstances, including (i) if the market value of our common stock that
is held by non-affiliates exceeds $700.0 million as of any June 30, in which case we would cease to be an "emerging growth company" as of December 31 of such year, (ii) if
our gross revenue exceeds $1.07 billion in any fiscal year or (iii) if we issue more than $1.0 billion of non-convertible debt over a three-year period.
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THE OFFERING
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Common stock offered by us
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Up to 8,000,000 shares
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Public offering price for Purchase Shares
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$0.75 per share, or such price as mutually agreed upon between the Company and Oasis Capital from time to time
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Common stock outstanding prior to this offering
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39,366,997 shares
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Common stock to be outstanding after this offering
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47,366,997 shares
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Manner of offering
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"Equity line of credit" arrangement involving from time-to-time "puts" of shares of Common Stock to Oasis Capital pursuant
to the terms of the CSPA. See "Plan of Distribution" beginning on page S-92.
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Use of proceeds
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We intend to use the net proceeds from this offering for the commercialization of Mytesi and working capital and general
corporate purposes. See "Use of Proceeds" on page S-47.
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Plan of distribution
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Oasis Capital may, from time to time, sell any or all of the Shares in any manner that is in compliance with applicable
state and federal securities laws, including on the stock exchange on which our common stock is traded or in private transactions. These sales may be at fixed or negotiated prices; provided, that, short sales (as defined in Rule 200 of
Regulation SHO under the Exchange Act), whether by Oasis Capital or on its behalf, are prohibited under the CSPA. See "Plan of Distribution" beginning on page S-92.
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Risk factors
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You should read the "Risk Factors" section of this prospectus supplement and in the documents incorporated by reference in
this prospectus supplement for a discussion of factors to consider before deciding to invest in our Common Stock.
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NASDAQ Capital Market symbol
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"JAGX"
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We
have two classes of common stock: (i) voting common stock, par value $0.0001 per share, and (ii) non-voting common stock, par value $0.0001 per share. The shares offered
by us in this offering are voting common stock.
The
number of shares of our common stock to be outstanding after this offering is based on 24,603,104 shares of our voting common stock and 2,686,749 shares of our non-voting common
stock outstanding as of December 31, 2018, and excludes the following:
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3,314,956 shares of common stock issuable upon conversion of outstanding preferred stock as of December 31, 2018 with a weighted-average
conversion price of $2.775 per share;
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2,945,464 shares of voting common stock issuable upon exercise of outstanding options as of December 31, 2018, with a weighted average
exercise price of $5.80 per share;
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208,865 shares of common stock issuable upon exercise of outstanding inducement options as of December 31, 2018 with a weighted-average
exercise price of $1.75 per share;
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181,527 shares of voting common stock reserved for future issuance under the 2014 Stock Incentive Plan;
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2,360,682 shares of voting common stock issuable upon exercise of warrants outstanding as of December 31, 2018, with a weighted average
exercise price of $2.54 per share;
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392,904 shares of voting common stock issuable upon vesting of outstanding restricted stock unit awards, or RSUs, as of December 31,
2018;
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up to 720,721 shares of common stock issuable upon conversion of outstanding convertible promissory notes in the aggregate principal amount of
$10,000,000 issued as of December 31, 2018, convertible at a price of $13.875 per share; and
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38,675 shares of common stock issuable pursuant to a convertible promissory note issued to Chicago Venture Partners, L.P. ("CVP"), in
the aggregate principal amount of $580,127, convertible at a price of $15 per share of common stock as of December 31, 2018.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other
information contained in or incorporated by reference in this prospectus supplement, including our financial statements and the related notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as updated in our Quarterly Reports on Form 10-Q, before
deciding whether to invest in our Common Stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and prospects.
In such an event, the market price of our Common Stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently
deem immaterial also may harm our business, financial condition, results of operations and prospects.
Risks Related to Our Financial Position and Need for Additional Capital
We have a limited operating history, expect to incur further losses as we grow and may be unable to achieve
or sustain profitability. Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
From the date of our formation in June 2013, until the consummation of the Merger on July 31, 2017, our operations were primarily limited
to the research and development of our animal prescription drug product candidate, Canalevia, to treat various forms of diarrhea in dogs, our non-prescription product, Neonorm Calf, to help dairies
and calf farms proactively retain fluid in calves, the ongoing commercialization of Neonorm Foal, our antidiarrheal for newborn horses, and Equilevia, our non-prescription, personalized, premium
product for total gut health in high-performance equine athletes. Since the consummation of the Merger on July 31, 2017, our operations have been primarily focused on research, development and
the ongoing commercialization of our lead prescription drug product candidate, 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 or to successfully overcome the risks and uncertainties
frequently encountered by companies in emerging fields such as the gastrointestinal health industry in general. We also have not generated any material revenue to date, and expect to continue to incur
significant research and development and other expenses. Our net loss and comprehensive loss for the year ended December 31, 2017 was $22.0 million. As of September 30, 2018, we
had an accumulated deficit of $81.9 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 begin
commercialization activities. Even if we succeed in developing and broadly commercializing one or more of our products or product candidates beyond Mytesi, 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 for the year ended December 31, 2017 and the quarter ended September 30, 2018 incorporated
by reference in this prospectus supplement, 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 31, 2019. Our financial statements 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 entire investment.
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We currently generate limited revenue from the sale of products and may never become profitable.
We are a pharmaceuticals company focused on the development and commercialization of novel, sustainably derived gastrointestinal products for
human prescription use primarily and also for animals on a global basis. Napo, our wholly-owned subsidiary, began the commercial pre-launch activities of our first FDA approved product, Mytesi, in
February 2017. Accordingly, we have only generated limited revenue from product sales. There is no guarantee that our commercialization efforts for Neonorm Calf for preweaned dairy calves in the
United States and Neonorm Foal for newborn horses in the United States will be successful or that we will be able to generate a consistent revenue stream from the sale of any of these products in the
future. Further, in order to commercialize our other prescription drug product candidates, we must receive regulatory approval from the FDA in the United States and other regulatory agencies in
various jurisdictions. Other than Mytesi, we have not yet received any regulatory approvals for our prescription drug product candidates. In addition, certain of our non-prescription products, such as
Neonorm Calf, may be subject to regulatory approval outside the United States prior to commercialization in other countries. Accordingly, until and unless we receive any necessary regulatory
approvals, we cannot market or sell our products in many regions. Moreover, even if we receive the necessary approvals, we may not be successful in generating revenue from sales of our products as we
do not have any meaningful experience marketing or distributing our products. Accordingly, we may never generate any material revenue from our operations.
Raising additional capital may cause dilution to our stockholders, including purchasers of our common stock
in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Unless and until we can generate a substantial amount of revenue from our products or product candidates, we expect to finance our future cash
needs through public or private equity offerings, debt financings or collaborations, licensing arrangements and government funding arrangements. In addition, we may seek additional capital due to
favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.
To
the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be materially diluted, and
the terms of these securities could include liquidation or other preferences and anti-dilution protections that could
adversely affect your rights as a stockholder. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive
covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely affect our ability to conduct
our business. In addition, securing additional financing would require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away
from day-to-day activities, which may adversely affect our management's ability to oversee the development of our product candidates.
If
we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.
Our ability to continue as a going concern requires that we obtain sufficient funding to finance our
operations.
Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations. If we are unable to obtain
sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as
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a
going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial
statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial
doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
Risks Related to Our Business
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 February 2017. 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, as applicable. We will
also need to conduct clinical trials for Mytesi in order to broaden Mytesi to additional indications.
We
are actively identifying additional products for development and commercialization, and will continue to expend substantial resources for the foreseeable future to develop Mytesi, a
second generation anti-secretory agent, and Canalevia for the MUMS indication of chemotherapy-induced diarrhea in dogs. These expenditures will include costs associated
with:
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identifying additional potential prescription drug product candidates and non-prescription products;
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formulation studies;
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conducting pilot, pivotal and toxicology studies;
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completing other research and development activities;
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payments to technology licensors;
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maintaining our intellectual property;
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obtaining necessary regulatory approvals;
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establishing commercial supply capabilities; and
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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, including potential business development and/or strategic partnerships, to pursue our research and development efforts, we may never realize the benefit of
our development efforts and our business may be harmed.
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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 forecasting continued losses and negative cash flows as we continue to fund our operating and marketing activities and research and
development programs, and we will not have sufficient cash on hand to fund our operating plan through March 31, 2019 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 sooner than planned 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 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:
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the scope, progress, results and costs of researching and developing our current and future prescription drug product candidates and
non-prescription products;
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the timing of, and the costs involved in, obtaining any regulatory approvals for our current and any future products;
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the number and characteristics of the products we pursue;
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the cost of manufacturing our current and future products and any products we successfully commercialize;
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the cost of commercialization activities for Mytesi, Neonorm, Equilevia and Canalevia, if approved, including sales, marketing and distribution
costs;
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the expenses needed to attract and retain skilled personnel;
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the costs associated with being a public company;
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our ability to establish and maintain strategic collaborations, distribution or other arrangements and the financial terms of such agreements;
and
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs
and the outcome of any such litigation.
Additional
funds may not be available when we need them on terms that are acceptable to us, or at all. 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 our current lead prescription drug product candidate,
Mytesi, and cannot be certain that necessary approvals will be received for planned Mytesi follow-on indications or that these product candidates will be successfully commercialized, either by us or
any of our partners.
Other than Mytesi, we currently do not have regulatory approval for any of our prescription drug product candidates, including Canalevia. Our
current efforts are primarily focused on the ongoing commercialization of Mytesi, and development efforts related to Mytesi and Canalevia. With regard to Mytesi, we are focused on the commercial
launch of 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 cancer
treatment. Mytesi is in development for multiple possible follow-on indications, including diarrhea related to targeted cancer therapy; orphan-drug indications for
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infants
and children with congenital diarrheal disorders and short bowel syndrome (SBS); supportive care for inflammatory bowel disease (IBD); irritable bowel syndrome (IBS); and for
idiopathic/functional diarrhea. In addition, a second-generation proprietary anti-secretory agent is in development for cholera. Mytesi has received orphan-drug designation for SBS. 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 potential follow-on indications.
Substantial
time and capital resources have been previously devoted by third parties in the development of crofelemer, the active pharmaceutical ingredient, or 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.
In 2005, Napo entered into license agreements with Glenmark and Luye Pharma Group Limited for rights to various human indications of crofelemer in certain territories as defined in the respective
license agreements with these licensees. Subsequently, after expending significant sums developing crofelemer, including trial design and on-going patient enrollment in the final pivotal
Phase 3 trial for crofelemer for non-infectious diarrhea in adults with HIV/AIDS on antiretroviral therapy, in late 2008, Napo entered into a collaboration
agreement with Salix Pharmaceuticals, Inc., or Salix, for development and commercialization rights to certain indications worldwide and certain rights in North America, Europe, and Japan, to
crofelemer for human use. In January 2014, Jaguar entered into the Napo License Agreement pursuant to which Jaguar acquired an exclusive worldwide license to Napo's intellectual property rights and
technology, including crofelemer and the botanical extract used in Equilevia and Neonorm, for all veterinary treatment uses and indications for all species of animals. In February 2014, most of the
executive officers of Napo, and substantially all Napo's employees, became Jaguar's employees. In March 2016, Napo settled with Salix for the return of all commercial rights to 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, Neonorm, Equilevia and Canalevia,
our business and our prospects will be harmed.
The
successful development and commercialization of Mytesi, Equilevia and Neonorm, and, if approved, Canalevia will depend on a number of factors, including the
following:
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our ability to demonstrate to the satisfaction of the FDA and any other regulatory bodies, the safety and efficacy of Canalevia for
chemotherapy-induced diarrhea in dogs;
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our ability and that of our contract manufacturers to manufacture supplies of Mytesi, Neonorm, Equilevia and Canalevia
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our ability to successfully continue commercial efforts associated with Mytesi, whether alone or in collaboration with others;
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our ability to successfully launch Canalevia, assuming approval is obtained, and Equilevia, whether alone or in collaboration with others;
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the availability, perceived advantages, relative cost, relative safety and relative efficacy of our prescription drug product candidates and
non-prescription products compared to alternative and competing treatments;
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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;
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our ability to achieve and maintain compliance with all regulatory requirements applicable to our business; and
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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 or are significantly delayed in developing and commercializing Mytesi, Neonorm, Equilevia, Canalevia or any of our other potential products, 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, 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:
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competitors may develop alternatives that render our potential products obsolete;
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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;
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potential products we seek to develop may be covered by third-party patents or other exclusive rights;
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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;
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a potential product may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
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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.
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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 Sucampo AG, Takeda Pharmaceuticals, Allergan, Inc., Ironwood Pharmaceuticals, Inc., Synergy
Pharmaceuticals Inc., Heron Therapeutics, Inc., Sebela Pharmaceuticals, Inc. and Salix Pharmaceuticals.
Many
of our competitors and potential competitors in the human gastrointestinal space have substantially more financial, technical and human resources 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) for the intended indications. In addition, we must provide manufacturing data evidencing that we can produce our product candidates
in accordance with cGMP. 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
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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:
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if they disagree with our interpretation of data from our pivotal studies or other development efforts;
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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;
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if they require additional studies or change their approval policies or regulations;
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if they do not approve of the formulation, labeling or the specifications of our current and future product candidates; and
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if they fail to approve the manufacturing processes of our third-party contract manufacturers.
Further,
even if we receive a required approval, such approval may be 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.
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 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 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, 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
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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:
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address any safety concerns that arise during the course of the studies;
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complete the studies due to deviations from the study protocols or the occurrence of adverse events;
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add new study sites;
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address any conflicts with new or existing laws or regulations; or
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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 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 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, commonly referred to as good clinical practices
("GCPs"), or good laboratory practices ("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.
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Even if we obtain regulatory approval for planned follow-on indications of Mytesi, or for Canalevia or our
other product candidates, they may never achieve market acceptance. Further, even if we are successful in the ongoing commercialization of Mytesi, we may not achieve commercial success.
If we obtain necessary regulatory approvals for planned follow-on indications of Mytesi or for Canalevia or our other product candidates, such
products may still not achieve market
acceptance and may not be commercially successful. Market acceptance of Mytesi and Canalevia, and any of our other products depends on a number of factors,
including:
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the safety of our products as demonstrated in our target human and animal studies;
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the indications for which our products are approved or marketed;
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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;
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the acceptance by physicians, veterinarians, companion animal owners and production animal owners, as applicable, of our products as safe and
effective;
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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;
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the prevalence and severity of any adverse side effects of our products;
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the relative convenience and ease of administration of our products; and
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the effectiveness of our sales, marketing and distribution efforts.
Any
failure by Mytesi, Canalevia and Equilevia or any of our other products to achieve market acceptance or commercial success would harm our financial condition and results of
operations.
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
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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.
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. We currently do not maintain "key man" life insurance on any of our senior management team. The loss of Ms. Conte or other members of our current
senior management could 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 and animal gastrointestinal health fields 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 and the botanical extract in Neonorm and Equilevia. 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, Canalevia, Neonorm and Equilevia is crude plant latex ("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, Neonorm, Equilevia 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 and the botanical extract in Neonorm and Equilevia, as well as for the supply of finished products for commercialization.
We have contracted with third parties for the formulation of API and botanical extract into finished products for our studies. We have also
entered into memorandums of understanding with Indena S.p.A. for the manufacture of CPL received from our suppliers into the API in Canalevia to support our regulatory filings, as well as the
botanical extract in Neonorm and agreed to negotiate a commercial supply agreement. Indena S.p.A. has never manufactured either such ingredient to
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commercial
scale. Glenmark is the current manufacturer of crofelemer, the active API in Canalevia, for Mytesi, and the manufacturer on file for the NDA to which we have a right of reference. As
announced in October of 2015, we have entered an agreement with Patheon, a provider of drug development and delivery solutions, under which Patheon provides enteric-coated tablets to us. 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
will be dependent upon our contract manufacturers for the supply of the API in Mytesi and Canalevia. We currently have sufficient quantities of the botanical extract used in Neonorm
and Equilevia to support planned commercialization efforts for Neonorm and Equilevia. However, we will require additional quantities of the botanical extract if our ongoing commercialization efforts
for Neonorm or our ongoing commercial launch of Equilevia is successful. If we are not successful in reaching agreements with third parties on terms that we consider commercially reasonable for
manufacturing and formulation, or if our contract manufacturer and formulator are not able to produce sufficient quantities or quality of API, botanical extract or finished product under their
agreements, it could delay our plans and harm our business prospects.
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 cGMP. If our third-party contractors do not maintain compliance with these strict regulatory requirements, we and they 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 human and animal 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 USDA and the European Medicines Agency (the "EMA"), employ different regulatory standards than the FDA, so we
may require multiple manufacturing processes and facilities for the same human or animal 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 or animal 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 preweaned dairy calves, 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, Neonorm, Equilevia and, if approved, Canalevia. If we are not successful in commercializing Mytesi, Neonorm, Equilevia, Canalevia or any of our other line extension
products, either on our own or through one or more distributors, or in generating upfront licensing or
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other
fees, we may never generate significant revenue and may continue to incur significant losses, which would harm our financial condition and results of operations.
Changes in distribution channels for animal health prescription drugs may make it more difficult or expensive
to distribute our animal health prescription drug products.
In the United States, animal owners typically purchase their animal health prescription drugs from their local veterinarians who also prescribe
such drugs. There is a trend, however, toward increased purchases of animal health prescription drugs from Internet-based retailers, "big-box" retail stores and other over-the-counter distribution
channels, which follows an emerging shift in recent years away from the traditional veterinarian distribution channel. It is also possible that animal owners may come to rely increasingly on
Internet-based animal health information rather than on their veterinarians. We currently expect to market our animal health prescription drugs directly to veterinarians, so any reduced reliance on
veterinarians by animal owners could harm our business and prospects by making it more difficult or expensive for us to distribute our animal health prescription drug products.
Legislation
has been or may be proposed in various states that would require veterinarians to provide animal owners with written prescriptions and disclosures that the animal owner has
the right to fill the prescriptions through other means. If enacted, such legislation could lead to a reduction in the number of animal owners who purchase their animal health pharmaceuticals directly
from veterinarians, which also could harm our business.
Consolidation of our customers could negatively affect the pricing of our animal health products.
Veterinarians will be our primary customers for our prescription animal health drug products. In recent years, there has been a trend towards
the consolidation of veterinary clinics and animal hospitals. If this trend continues, these large clinics and hospitals could attempt to leverage their buying power to obtain favorable pricing from
us and other animal health product companies. Any downward pressure on the prices of any of our animal health products could harm our operating results and financial condition.
We will need to increase the size of our organization and may not successfully manage such growth.
As of December 31, 2018, we had 40 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.
Research and development with respect to our animal health products and product candidates relies on
evaluations in animals, which is controversial and may become subject to bans or additional regulations.
The evaluation of our animal health products and product candidates in target animals is required to develop, formulate and commercialize our
animal health products and product candidates. Although our animal testing will be subject to GLPs and GCPs, as applicable, animal testing in the human pharmaceutical industry and in other industries
continues to be the subject of controversy and adverse publicity. Some organizations and individuals have sought to ban animal testing or encourage the adoption of additional regulations applicable to
animal testing. To the extent that such bans or regulations are imposed, our research and development activities with respect to animal health products, and by extension our operating results and
financial condition, could be harmed. In addition,
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negative
publicity about animal practices by us or in our industry could harm our reputation among potential customers.
If approved, 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.
If our animal health prescription drug product candidates are approved by regulatory authorities, we may market or advertise them 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. Under the Animal Medicinal Drug
Use Clarification Act of 1994, veterinarians are permitted to prescribe extra-label uses of certain 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.
If our human or animal prescription drug product candidates are approved by regulatory authorities, the
misuse or extra-label use of such products 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 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.
We may not maintain the benefits associated with MUMS designation, including market exclusivity.
Although we have received MUMS designation for Canalevia 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 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.
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Because
Canalevia 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 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, or a competing product has received conditional approval or approval prior to our product candidate for the same indication or species. 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 or 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 and veterinarians, as applicable, the willingness of patients and companion and production animal owners, 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 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 and companion and production animal owners to pay for our products may be less than we anticipate, and may be negatively affected by overall economic conditions. Moreover, with respect to our
animal health products, the current penetration of animal insurance in the United States is low, animal owners are likely to have to pay out-of-pocket, and such owners may not be willing or able to
pay for our products.
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 covered by all of the top 10 commercial insurance plans, representing more than
245 million U.S. lives. In 50% of these plans it is currently on Tier 3 with no restrictions, and in 50% it is currently on Tier 3 with a prior authorization required. In the top
10 Managed Medicare plans, which represent more than 2.4 million covered lives, Mytesi is currently covered on 10% of 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.
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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 Neonorm for preweaned dairy calves and its line extensions, as well as possibly Canalevia 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.
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 CVP are secured by a security interest in substantially all of our veterinary related
assets, so if we default on those obligations, CVP could foreclose on our assets.
Our obligations under the secured promissory notes (the "CVP Notes") issued to Chicago Venture Partners, L.P. ("CVP") are secured by a
security interest in substantially all of our veterinary related assets, including intellectual property, as provided in the Security Agreement, dated June 29, 2017, between the Company and
CVP, the Security Agreement, dated December 8, 2017, between the
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Company
and CVP, the Security Agreement dated February 26, 2018 between the Company and CVP, and the Security Agreement dated March 21, 2018 between the Company and CVP. As a result, if
we default on our obligations under these agreements, CVP could foreclose on its security interests and liquidate some or all of these assets, which would harm our veterinary related business,
financial condition and results of operations and could require us to reduce or cease operations.
Napo's obligations to the holders of the Kingdon Notes are secured by a security interest in substantially
all of Napo's assets, so if we default on those obligations, the convertible note holders could foreclose on Napo's assets.
Napo's obligations under the convertible promissory notes (the "Kingdon Notes") issued pursuant to the Amended and Restated Note Purchase
Agreement, dated March 31, 2017, in the amount of $10 million, by and among Kingdon Associates, M. Kingdon Offshore Master Fund L.P., Kingdon Family Partnership, L.P. and
Kingdon Credit Master Fund L.P. (collectively, the "Kingdon Purchasers") and Napo and the related transaction documents are secured by a security interest in substantially all of Napo's assets,
including Napo intellectual property. As a result, if we default under our obligations under the Kingdon Notes or the transaction documents, the holders of such Kingdon Notes, acting through their
appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which would harm our business, financial condition and results of operations and could require
us to reduce or cease operations.
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. 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 cybersecurityattack or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity resulting in reputational damage
with our shareholders 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.
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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 and other exclusivity 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.
We
have a portfolio of United States and foreign issued patents and pending applications related to our products and product candidates. We have five issued United States patents listed
in the FDA's Orange Book for Mytesi of which three are in force, as the expiration date of US 7,341,744, has been adjusted to 2019. We plan to rely on US 7,341,744, as protection for Canalevia. 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.
Recent
patent reform legislation could increase the uncertainties and costs surrounding the prosecution of any patent applications and the enforcement or defense of any patents that
issue. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of 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 will be entitled
to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO has developed new 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.
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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 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.
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Our proprietary position depends upon 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, have expired, and the issued patents and applications relevant to our products and product candidates cover formulations and methods of use for crofelemer.
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.
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 has issued a patent term extension certificate extending the term of US 7,341,744 by
1075 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
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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. In particular, Mytesi had regulatory exclusivity as a new chemical
entity until December 31, 2017. 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 (and could have filed after December 31, 2016) an ANDA with a certification under 21 U.S.C. § 3559j)(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 the 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.
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
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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 licensed 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 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.
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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 NEONORM®, MYTESI®, NAPO®, Napo Logo®,
CANALEVIA, EQUILEVIA, JAGUAR ANIMAL HEALTH, and the Jaguar Animal Health logo. We also own pending applications for the CANALEVIA mark in a number of foreign countries. We have not yet filed
applications for our company name or our logo in the U.S. 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, 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.
Risks Related to Government Regulation
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.
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 cGMP, GLP and GCP 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;
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additional clinical studies, fines, warning letters or holds on target animal studies;
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refusal by the FDA, or other regulators to approve pending applications or supplements to approved applications filed by us or our strategic
collaborators related to the unknown problems, or suspension or revocation of the problematic product's license approvals;
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product seizure or detention, or refusal to permit the import or export of products; and
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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.
In
addition, from time to time, we may enter into consulting and other financial arrangements with 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.
The issuance by the FDA of protocol concurrences for our pivotal studies does not guarantee ultimate approval
of our NADA.
A pivotal study protocol is submitted to the FDA by a drug sponsor for purposes of obtaining FDA review of the protocol. Prior FDA review of the
protocol for a pivotal study makes it more likely that the study design will generate information the sponsor needs to demonstrate to the satisfaction of the FDA whether the drug is safe and effective
for its intended use. It creates an expectation by the sponsor that the FDA should not later alter its perspectives on these issues unless public or animal health concerns appear that were not
recognized at the time of protocol assessment. Even if the FDA issues a protocol concurrence, ultimate approval of an NADA by the FDA is not guaranteed because a final determination that the
agreed-upon protocol satisfies a specific objective, such as the demonstration of efficacy, or supports an approval decision, will be based on a complete review of all the data submitted to the FDA
including the outcome of the study for which protocol concurrence was received.
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
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products
from the market, recalls of certain lots or batches, or cause a delay in approval or clearance of future products.
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
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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 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 chemically distinct
from crofelemer and 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 new animal drug 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 Napo receives the required regulatory approvals for Napo's current or future prescription drug
product candidates and non-prescription products, Napo 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 Napo's current or future prescription drug product candidates, or if necessary, Napo's
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 cGMP, GLP and GCP 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
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with
Napo's 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.
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 Napo's product
candidates or require certain changes to the labeling or require additional clinical work concerning safety and efficacy of the product candidates. Napo 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 Napo is slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if Napo is not able to maintain regulatory compliance, Napo may lose any marketing approval that Napo may have obtained and Napo may not achieve or
sustain profitability, which would harm Napo's business. In addition, failure to comply with these regulatory requirements could result in significant penalties.
In
addition, from time to time, Napo may enter into consulting and other financial arrangements with physicians and other healthcare practitioners, who prescribe or recommend Napo's
products, once approved. As a result, Napo may be subject to state, federal and foreign healthcare laws, including but not limited to anti-kickback laws. If Napo's financial relationships with
physicians or other healthcare practitioners are found to be in violation of such laws that apply to Napo, Napo may be subject to penalties.
Any of Napo's current or future prescription drug product candidates may cause or contribute to adverse
medical events that Napo would be required to report to regulatory authorities and, if Napo fails to do so, Napo could be subject to sanctions that would harm Napo's business.
If Napo is successful in commercializing any of Napo's current or future prescription drug product candidates, certain regulatory authorities
will require that Napo report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of Napo's obligation to report would
be triggered by the date Napo becomes aware of the adverse event as well as the nature of the event. Napo may fail to report adverse events Napo becomes aware of within the prescribed timeframe. Napo
may also fail to appreciate that Napo has become aware of a reportable adverse event, especially if it is not reported to Napo as an adverse event or if it is an adverse event that is unexpected or
removed in time from the use of Napo's products. If Napo fails to comply with Napo's reporting obligations, the regulatory authorities could take action including, but not limited to, criminal
prosecution, seizure of Napo's products, facility inspections, removal of Napo's 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 make it more difficult and costly for Napo to obtain regulatory clearance
or approval of any of Napo's current or future product candidates and to produce, market, and distribute Napo's 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 Napo intends 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 Napo's business and Napo's 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 Napo's current or future products and product candidates. Napo cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and
if promulgated, enacted or adopted may have on Napo's 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 Napo's financial results. In addition, delays in receipt of or failure to receive regulatory clearances or
approvals for any future products would harm Napo's business, financial condition, and results of operations.
We and our employees and contractors are subject, directly or indirectly, to federal, state and foreign
healthcare fraud and abuse laws, including false claims laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Our operations are subject to various federal, state and foreign fraud and abuse laws. These laws may constrain our operations, including the
financial arrangements and relationships through which we market, sell and distribute our products.
U.S.
federal and state laws that affect our ability to operate include, but are not limited to:
-
-
The federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving,
offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, the purchase, recommendation, leasing or
furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare or Medicaid programs;
-
-
Federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payers that are false or fraudulent;
-
-
Section 242 of HIPAA codified at 18 U.S.C. § 1347, which created new federal criminal statutes that prohibit a person
from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program (i.e., public or private);
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-
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Federal transparency laws, including the so-called federal "sunshine" law, which requires the tracking and disclosure to the federal government
by pharmaceutical manufacturers of direct and indirect payments and other transfers of value to physicians and teaching hospitals as well as ownership and investment interests that are held by
physicians and their immediate family members; and
-
-
State law equivalents of each of these federal laws, such as anti-kickback and false claim laws that may apply to items or services reimbursed
by any third-party payer, including commercial insurers; state laws that require pharmaceutical companies to comply with their industry's voluntary compliance guidelines and the applicable compliance
guidance promulgated by the federal government or otherwise restrict certain payments that may be made to healthcare providers and other potential referral sources; state laws that require drug
manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that prohibit giving gifts to
licensed healthcare professionals; and state laws governing 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 effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.
In
particular, activities and arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, waste, and other abusive practices. These
laws and regulations may restrict or prohibit a wide range of activities or other arrangements related to the development, marketing or promotion of products, including pricing and discounting of
products, provision of customer incentives, provision of reimbursement support, other customer support services, provision of sales commissions or other incentives to employees and independent
contractors and other interactions with healthcare practitioners, other healthcare providers and patients.
Because
of the breadth of these laws and the narrow scope of the statutory or regulatory exceptions and safe harbors available, our business activities could be challenged under one or
more of these laws. Relationships between pharmaceutical manufacturers and health care providers are an area of heightened scrutiny by the government. We engage in various activities, including the
frequent conduct of speaker programs to educate physicians, the provision of reimbursement advice and support to customers, and the provision of customer and patient support services, that have been
the subject of government scrutiny and enforcement action within the pharmaceutical industry. Government expectations and industry best practices for compliance continue to evolve and past activities
may not always be consistent with current industry best practices. Further, there is a lack of government guidance as to whether various industry practices comply with these laws, and government
interpretations of these laws continue to evolve, all of which creates compliance uncertainties. Any non-compliance could result in regulatory sanctions, criminal or civil liability and serious harm
to our reputation. Although we have an ethics and compliance program designed to ensure that our employees' and commercial partners' activities and interactions with healthcare professionals and
patients are appropriate, ethical, and consistent with all applicable laws, regulations, guidelines, policies and standards, it is not always possible to identify and deter misconduct, and the
precautions we take to detect and prevent this activity may not be effective in preventing such conduct, mitigating risks, or reducing the chance of governmental investigations or other actions or
lawsuits stemming from a failure to comply with these laws or regulations.
If
a government entity opens an investigation into possible violations of any of these laws (which may include the issuance of subpoenas), we would have to expend significant resources
to defend ourselves against the allegations. Allegations that we, our officers, or our employees violated any one of these laws can be made by individuals called "whistleblowers" who may be our
employees, customers, competitors or other parties. Government policy is to encourage individuals to become whistleblowers and file a complaint in federal court alleging wrongful conduct. The
government is required to
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investigate
all of these complaints and decide whether to intervene. If the government intervenes and we are required to pay money back to the government, the whistleblower, as a reward, is awarded a
percentage. If the government declines to intervene, the whistleblower may proceed on her own and, if she is successful, she will receive a percentage of any judgment or settlement amount the company
is required to pay. The government may also initiate an investigation on its own. If any such actions are instituted against us, those actions could have a significant impact on our business,
including the imposition of significant fines, and other sanctions that may materially impair our ability to run a profitable business. In particular, if our operations are found to be in violation of
any of the laws described above or if we agree to settle with the government without admitting to any wrongful conduct or if we are found to be in violation of any other governmental regulations that
apply to us, we, our officers and employees may be subject to sanctions, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such
as Medicare and Medicaid, imprisonment, the curtailment or restructuring of our operations and the imposition of a corporate integrity agreement, any of which could adversely affect our business,
results of operations and financial condition.
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, which imposes, among other requirements a minimum bid requirement. The closing bid
price for our common stock must remain at or above $1.00 per share to comply with Nasdaq's minimum bid requirement for continued listing. If the closing bid price for our common stock is less than
$1.00 per share for 30 consecutive business days, Nasdaq may send us a notice stating that we will be provided a period of 180 days to regain compliance with the minimum bid requirement or else
Nasdaq may make a determination to delist our common stock. Our common stock traded for less than $1.00 for 30 consecutive trading days, and we received notice of this from the Listing Qualifications
Staff of The Nasdaq Stock Market LLC on November 9, 2018. Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has been granted a 180 calendar day grace period, or until
May 8, 2019, to regain compliance with the minimum bid price requirement. The minimum bid price requirement will be met if our common stock has a minimum closing bid price of at least $1.00 per
share for a minimum of 10
consecutive business days during the 180 calendar day grace period. We are diligently working to evidence compliance with the minimum bid requirement for continued listing on Nasdaq; however, there
can be no assurance that we will be able to regain compliance or that Nasdaq will grant us a further extension of time to regain compliance, if necessary.
The
delisting of our common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future. Such a delisting would likely have a negative effect on
the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Further, if we were to be delisted from The Nasdaq Capital Market, our common
stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which it offers its securities. Moreover, there is no assurance that any actions that we
take to restore our compliance with the Nasdaq minimum bid requirement would stabilize the market price or improve the liquidity of our common stock, prevent our common stock from falling below the
Nasdaq minimum bid price required for continued listing again or prevent future non-compliance with Nasdaq's listing requirements.
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We have a material weakness in our internal control over financial reporting related to the accounting for
income taxes, and if we fail to remediate the material weakness, or experience any additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls
in the future, we may not be able to accurately report our financial condition or results of operations which may adversely affect investor confidence in us and, as a result, the value of our common
stock.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Preparing
our consolidated financial statements involves a number of complex manual and automated processes, which are dependent upon individual data input or review and require
significant management judgment. One or more of these elements may result in errors that may not be detected and could result in a material misstatement of our consolidated financial statements. If we
fail to maintain the adequacy of our internal controls over financial reporting, our business and operating results may be harmed and we may fail to meet our financial reporting obligations. If
material weaknesses in our internal control are discovered or occur, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.
In
connection with the audit of our financial statements as of and for the year ended December 31, 2017, we identified a material weakness in our internal control over financial
reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States. Our management has determined that we had a material weakness in our internal
control over financial reporting as of December 31, 2017 because we did not adequately and timely review the accounting for income taxes. While the Company utilizes the assistance of an
external income tax specialist to prepare its annual tax provision, management has concluded there to be a material weakness in the design of the Company's income tax controls in that the Company's
policy that governs the data validation controls over data provided to and received from the external income tax specialist and the management review controls were not designed with appropriate levels
of precision and were not undertaken in a timely manner.
We
are enhancing our internal controls, processes and related documentation necessary to remediate our material weakness. We may not be able to complete our remediation, evaluation and
testing in a timely fashion. If we are unable to remediate this material weakness, or if we identify one or more other material weaknesses in our internal control over financial reporting, we will
continue to be unable to conclude that our internal controls are effective. If we are unable to confirm that our internal control over financial reporting is effective we could lose investor
confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline.
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
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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.
The trading price of our common stock could be subject to wide fluctuations in response to various factors, some of which are beyond our
control. These factors include those discussed previously in this "Risk Factors" section of this report and others, such as:
-
-
delays in the commercialization of Mytesi, Neonorm, Canalevia, Equilevia 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;
-
-
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; and
-
-
general economic conditions in the United States and abroad.
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
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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.
No active market for our common stock exists or may develop, and 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.
Prior to our initial public offering in May 2015, there was no public market for shares of our common stock. 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.
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 analysts 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 convertible notes, Series A Preferred shares, and
exercises of outstanding options and warrants.
As of December 31, 2018, we had (i) 3,314,956 shares of common stock issuable upon conversion of outstanding preferred stock as of
December 31, 2018 with a weighted-average conversion price of $2.775 per share; (ii) 2,954,464 shares of common stock issuable upon exercise of outstanding options as of
December 31, 2018 with a weighted-average exercise price of $5.80 per share; (iii) 208,865 shares of common stock issuable upon exercise of outstanding inducement options as of
December 31, 2018 with a weighted-average exercise price of $1.75 per share; (iv) 392,904 shares of common stock issuable upon exercise of outstanding restricted stock unit awards, or
RSUs, as of December 31, 2018; (v) 2,360,682 shares of common stock issuable upon exercise of outstanding warrants as of December 31, 2018 with a weighted-average exercise price
of $2.54 per share; (vi) up to 720,721 shares of common stock issuable upon conversion of outstanding convertible promissory notes in the aggregate principal amount of $10,000,000 as of
December 31, 2018, convertible at a price of $13.875
per share; and (vii) 38,675 shares of common stock issuable pursuant to a convertible promissory note as of December 31, 2018 issued to Chicago Venture Partners, L.P. ("CVP"), in
the aggregate principal amount of $580,127, convertible at a price of $15 per share of common stock.
If shares of our non-voting common stock are converted into shares of our voting common stock, your voting
power will be diluted.
As of March 18, 2019, we had 39,366,997 shares of voting common stock and 2,686,749 shares of voting common stock issuable upon
conversion of non-voting common stock outstanding. Generally, holders of our non-voting common stock have no voting power (other than in connection with a change of control of our company) and have no
right to participate in any meeting of stockholders or to have notice thereof. However, shares of our non-voting common stock that are converted into voting common stock will have all the voting
rights of the voting common stock. Shares of our non-voting
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common
stock are convertible into shares of our voting common stock (i) at the option of the respective holders thereof, at any time or (ii) automatically, without any payment of
additional consideration by the holder thereof, (x) upon a transfer of such shares to any person or entity that is neither an affiliate of Nantucket nor an investment fund, investment vehicle
or other account, that is, directly or indirectly, managed or advised by Nantucket or any of its affiliates pursuant to a sale of such stock to a third-party for cash, or (y) upon the
subsequent release or transfer of such shares to the registered pre-Merger legacy stockholders of Napo's outstanding shares of common stock as of July 31, 2017 (the "Napo Legacy Stockholders").
Upon conversion of any non-voting common stock, your voting power will be diluted in proportion to the decrease in your ownership of the total outstanding voting common stock.
We will have broad discretion to use the net proceeds from this offering, and may use them in ways that do
not enhance our operating results or the market price of our common stock.
Our management will have broad discretion regarding the use of the net proceeds from this offering, and we could spend the net proceeds in ways
our stockholders may not agree with or that do not yield a favorable return, if at all. We intend to use the net proceeds from this offering for general corporate and working capital purposes. We may
also use a portion of the net proceeds to acquire additional product candidates or complementary assets or businesses; however, we currently
have no agreements or commitments to complete any such transaction. Our use of these proceeds may differ substantially from our current plans. If we do not invest or apply the net proceeds from this
offering in ways that improve our operating results or our prospects, our stock price could decline.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their
investment.
The public offering price per share of our voting common stock will be substantially higher than the net tangible book value per share of our
voting common stock immediately after the offering. At the public offering price of $0.75 per share, purchasers of our voting common stock will incur an estimated immediate dilution of $1.42 per share
in the net tangible book value of their purchased shares. Conversely, the shares of voting common stock that our existing stockholders currently own will receive an increase in net tangible book value
of $1.57 per share. For a further description of the dilution that you will experience immediately after this offering, see the section in this prospectus supplement titled "Dilution."
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, as amended, 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
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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.
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 employee 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.
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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. Moreover,
so long as either (i) Nantucket or any of its affiliates owns any shares of our non-voting common stock or (ii) Sagard Capital Partners, L.P. ("Sagard") or any of its affiliates
owns 35% or more of the shares of our Series A Convertible Participating Preferred Stock (the "Series A Preferred Stock"), we cannot pay dividends on our common stock or non-voting
common stock without obtaining the prior written consent of Nantucket or Sagard, respectively. Because we do not intend to pay dividends and may be required to obtain written consent if we were to do
so, 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.
Our principal stockholders own a significant percentage of our voting stock and will be able to exert
significant control over matters subject to stockholder approval.
As of December 31, 2018, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates
beneficially owned in the aggregate approximately 51.9% of the outstanding shares of our voting common stock. As a result of their stock ownership, these stockholders may have the ability to influence
our management and policies, and will be able to significantly affect the outcome of matters requiring stockholder approval such as elections of directors, amendments of our organizational documents
or approvals of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are
in your best interest as one of our stockholders.
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 its 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
an "emerging growth company," we expect to avail ourselves of the exemption from the requirement that our independent registered public
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accounting
firm attest to the effectiveness of our internal control over financial reporting under Section 404. However, we may no longer avail itself of this exemption when we cease to be an
"emerging growth company." When our independent registered 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 an "emerging growth company" and we cannot be certain if the reduced disclosure requirements
applicable to "emerging growth companies" will make our common stock less attractive to investors.
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage
of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." In particular, while we are an "emerging
growth company" (i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) we will be subject to reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iii) we will not be required to hold nonbinding advisory votes on executive
compensation or stockholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can delay its adoption of any new or
revised accounting standards, but we have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other
public companies that are not emerging growth companies. In addition, investors may find our common stock less attractive if we rely on the exemptions and relief granted by the JOBS Act. 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 decline and/or become more volatile.
We
may remain an "emerging growth company" until as late as December 31, 2020 (the fiscal year-end following the fifth anniversary of the closing of our initial public offering,
which occurred on May 18, 2015), although we may cease to be an "emerging growth company" earlier under certain circumstances, including (i) if the market value of our common stock that
is held by non-affiliates exceeds $700.0 million as of any June 30, in which case we would cease to be an "emerging growth company" as of December 31 of such year, (ii) if
our gross revenue exceeds $1.07 billion in any fiscal year or (iii) if we issue more than $1.0 billion of non-convertible debt over a three-year period.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the documents incorporated by reference into it contain forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have made these statements in reliance on the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in or incorporated by reference into this prospectus supplement,
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 prospectus supplement 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 prospectus supplement and are subject to a number of risks, uncertainties and
assumptions including those listed in the "Risk Factors" incorporated by reference into this prospectus supplement from our Annual Report on Form 10-K, as updated by subsequent reports.
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.
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USE OF PROCEEDS
The net proceeds received by us from the sale of the Shares described in this prospectus supplement will be used for general corporate and
working capital purposes. We will not receive any proceeds from the sale of the Shares by Oasis Capital.
As
of the date of this prospectus supplement, we cannot specify with certainty all of the particular uses of the proceeds from this offering. As a result, our management will have broad
discretion in the allocation and use of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the proceeds of this offering.
The actual use and allocation of proceeds realized from this offering will depend upon our operating revenues and cash position and our working capital requirements and may change. We may also invest
the net proceeds temporarily in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities, until we use them
for their stated purposes.
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DILUTION
The sale of our common stock to Oasis Capital in this offering will have a dilutive impact on our stockholders. As a result, our net
income/(loss) per share would decrease/increase in future periods and the market price of our common stock could decline.
After
giving effect to (i) the issuance of the 300,000 Commitment Shares and (ii) the sale of up to 13,333,333 shares of common stock at an offering price of $0.75, and
after deducting estimated offering expenses of approximately $40,000 payable by us, our as adjusted net tangible book value as of September 30, 2018 would have been $(17.3) million, or $(.67)
per share of common stock. This represents an immediate increase in as adjusted net tangible book value of $1.57 per share to our existing shareholders and an immediate dilution in as adjusted net
tangible book value of approximately $1.42 per share to investors participating in this offering.
The
following table illustrates this dilution:
|
|
|
|
|
|
|
|
Public offering price per share
|
|
|
|
|
$
|
0.75
|
|
Historical net tangible book value per share as of September 30, 2018
|
|
$
|
(2.23
|
)
|
|
|
|
Increase in net tangible book value per share attributable to this offering
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted net tangible book value per share after this offering
|
|
|
|
|
$
|
(.67
|
)
|
|
|
|
|
|
|
|
|
Dilution per share to new investors in this offering
|
|
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
number of shares of our common stock to be outstanding after this offering is based on 24,603,104 shares of our voting common stock and 2,686,749 shares of our non-voting common
stock outstanding as of December 31, 2018, and excludes the following:
-
-
3,314,956 shares of common stock issuable upon conversion of outstanding preferred stock as of December 31, 2018 with a weighted-average
conversion price of $2.775 per share;
-
-
2,945,464 shares of voting common stock issuable upon exercise of outstanding options as of December 31, 2018, with a weighted average
exercise price of $5.80 per share;
-
-
208,865 shares of common stock issuable upon exercise of outstanding inducement options as of December 31, 2018 with a weighted-average
exercise price of $1.75 per share;
-
-
181,527 shares of voting common stock reserved for future issuance under the 2014 Stock Incentive Plan;
-
-
2,360,682 shares of voting common stock issuable upon exercise of warrants outstanding as of December 31, 2018, with a weighted average
exercise price of $2.54 per share;
-
-
392,904 shares of voting common stock issuable upon vesting of outstanding restricted stock unit awards, or RSUs, as of December 31,
2018; and
-
-
Up to 720,721 shares of common stock issuable upon conversion of outstanding convertible promissory notes in the aggregate principal amount of
$10,000,000 issued as of December 31, 2018, convertible at a price of $13.875 per share;
-
-
38,675 shares of common stock issuable pursuant to a convertible promissory note issued to Chicago Venture Partners, L.P. ("CVP"), in
the aggregate principal amount of $580,127, convertible at a price of $15 per share of common stock as of December 31, 2018;
To
the extent any of these outstanding options or warrants are exercised or RSUs vest, there will be further dilution to new investors. If all of such outstanding options or warrants had
been exercised or RSUs vested as of December 31, 2018, the as adjusted net tangible book value after this offering would be $0.80 per share, and total dilution to new investors would be $0.05
per share.
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BUSINESS
Overview
We are a commercial stage pharmaceutical company focused on developing novel, sustainably derived gastrointestinal products on a global basis.
Our wholly-owned subsidiary, Napo, focuses on developing and commercializing proprietary human gastrointestinal pharmaceuticals for the global marketplace from plants used traditionally in rainforest
areas. Our Mytesi (crofelemer) product is a first-in-class anti-secretory agent, approved by the FDA for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral
therapy. The full launch of Mytesi began in April
2018with the support of a full complement of patient and healthcare practitioner programswhen Napo's direct sales force of 18 sales representatives, a national sales director
and one regional sales director became fully deployed.
Jaguar
was founded in San Francisco, California as a Delaware corporation on June 6, 2013. The Company was a majority-owned subsidiary of Napo Pharmaceuticals, Inc. ("Napo"
or the "Former Parent") until the close of the Company's initial public offering on May 18, 2015. On July 31, 2017, with the merger of Jaguar and Napo, Napo began operating as a
wholly-owned subsidiary of Jaguar focused on human health and the ongoing commercialization of, and development of follow-on indications for, Mytesi.
We
believe Jaguar is poised to realize a number of synergistic, value adding benefitsand an expanded pipeline of potential blockbuster human follow-on indications, a
second-generation anti-secretory agent, as well as a pipeline of important animal indications for crofelemerupon which to build global partnerships. As previously announced, Jaguar,
through Napo, now holds extensive global rights for Mytesi, and crofelemer manufacturing is being conducted at a new, multimillion-dollar commercial manufacturing facility that has been FDA-inspected
and approved. Additionally, several of the drug product candidates in Jaguar's Mytesi pipeline are backed by strong Phase 2 evidence from completed Phase 2 trials.
Mytesi
is a novel, first-in-class anti-secretory agent which has a basic normalizing effect locally on the gut, and this mechanism of action has the potential to benefit multiple
disorders. Mytesi is in development for multiple possible follow-on indications, including diarrhea related to targeted cancer therapy; orphan-drug indications for infants and children with congenital
diarrheal disorders and short bowel syndrome (SBS); supportive care for inflammatory bowel disease (IBD); irritable bowel syndrome (IBS); and for idiopathic/functional diarrhea. In addition, a
second-generation proprietary anti-secretory agent is in development for cholera. Mytesi has received orphan-drug designation for SBS.
In
April 2018, Napo's direct sales force of 18 sales representatives, a national sales director and one regional sales director became fully deployed to cover U.S. geographies with the
highest potential. Additionally, in June 2018, we hired Robert J. Griffing, a seasoned industry veteran with a broad range of experience that includes commercializing supportive care and HIV
treatments, as chief commercial officer for Napo. With support provided by concomitant marketing, promotional activities, patient empowerment programs and medical education initiatives described
below, we expect a proportional response in the number of patients treated with Mytesi.
The
goal of Napo's internal sales team is to deliver a frequent and consistent selling message to targeted, high-volume prescribers of antiretroviral therapies (ART) and to
gastroenterologists who see large numbers of HIV patients. In December 2017 we released the results of a survey of 350 people living with HIV and AIDS regarding the topic of "Talking to Your Doctor
About Symptoms". The survey results show that diarrhea remains prevalent in those living with HIV/AIDS, as 27% of respondents living with HIV/AIDS reported that they currently have diarrhea, while 56%
reported that they have had diarrhea in the past. Additionally, the results of a recent Napo-sponsored survey of
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271 U.S.
board certified gastroenterologists indicate that the number one GI complaint for people living with HIV/AIDS is diarrhea, and 93% of U.S. gastroenterologists see patients with
HIV/AIDS in their practice.
Key
to the success of our sales representatives in growing Mytesi is differentiating and targeting the right doctorsthose HIV specialists who are high prescribers of ART
medications and those gastrointestinal doctors who see large populations of people living with HIV/AIDS. The target list of prescribers for our sales reps includes a pool of approximately 3,100 high
volume ART prescribing HIV specialists, and gastroenterologists who see the largest number of people living with HIV/AIDs, and we've strategically placed our sales force in the US geographies with the
highest potential, including San Francisco, southern California, Arizona, Nevada, Miami/southern Florida, northern Florida, New York City/Long Island, Massachusetts, Rhode Island, New Hampshire,
Connecticut, New Jersey, northern Texas, southern Texas, Chicago, Alabama, Mississippi, Louisiana, North Carolina/South Carolina, Michigan, Indianapolis, Ohio and Atlanta.
In
June 2018, Napo entered into an agreement with RedHill Biopharma, a specialty biopharmaceutical company primarily focused on late clinical-stage development and commercialization of
proprietary drugs for gastrointestinal diseases and cancer, to establish a U.S. co-promotion program for Mytesi.
RedHill's
specialized, GI-focused field sales force is promoting Mytesi to health care practitioners in 36 U.S. territories that contain significant numbers of HIV patients and health
care practitioners that are not currently covered by Napo's field sales force. In these geographies, RedHill sales representatives target gastroenterologists who see large populations of people living
with HIV, along with nurse practitioners and physician assistants. RedHill field representatives also target lower-level prescribers of anti-retroviral infectious disease specialists in regions
currently covered by Napo's sales force. Four RedHill inside sales representatives actively target health care practitioners in other regions not covered by the Napo or RedHill field representatives.
We believe this copromotion program will play a significant role in extending the reach of our commercial efforts into the GI medical community in support of the treatment of people living with HIV
(PLWH) with Mytesi. Under the terms of the Agreement, RedHill is compensated based on performance, and the program can be extended by agreement between the two companies.
Medical
education presentations led by health care practitioners (HCPs) participating in the Napo Speakers Bureaua group that includes HIV/AIDS specialists, infectious
disease specialists, gastroenterologists, colorectal surgeons, and nurse practitionersfocus on the prevalence and pathophysiology of gastrointestinal consequences of HIV infection and on
the latest treatment options for HIV-related diarrhea. Presentations given by patient advocate members provide
information to PLWH about the prevalence of diarrhea in PLWH and offer guidance about talking to HCPs regarding diarrhea-related concerns.
On
July 24, 2018, we announced the results of an analysis conducted to examine whether the rate of HIV-associated diarrhea has changed over time. The analysis of data, sourced
from the National Institutes of Health (NIH) clinicaltrials.gov database, revealed that 18% of HIV patients experience diarrhea and the rates have not declined significantly over time. The analysis
includes data from 38 U.S. clinical trials from 2008-2016 in more than 21,000 patients. The results were reported at the International AIDS 2018 Conference (AIDS 2018) on Tuesday,
July 24 in Amsterdam, Netherlands. The poster is available on the AIDS 2018 website at this link: https://programme.aids2018.org//PAGMaterial/eposters/4900.pdf.
With
the introduction of newer antiretroviral (ARV) drug therapy, 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 direct and indirect effects of HIV on the intestinal mucosa. Chronic diarrhea remains a significant complaint of
people living with HIV/
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AIDS,
particularly those who are older and have lived the virus in their gut for 10+ years. According to data from the U.S. Centers for Disease Control and Prevention, currently more than 50% of
people living with HIV are over age 50; by 2020 this figure will increase to 70%.
New
crofelemer (Mytesi) data from a supplemental analysis of the ADVENT trial was featured in a poster presentation at the 9th International Aids Society (IAS) Conference on HIV
Science held in July 2017 in Paris, France. The presentation was titled Long-Term Crofelemer Use Gives Clinically Relevant Reductions in HIV-Related Diarrhea. IAS features the latest HIV science,
including basic, clinical and prevention research, and brings together a broad cross section of HIV professionals from around the world with a focus on implementationmoving scientific
advances into practice. The results indicate that at the end of the study period, more than 50% of the patients treated had complete resolution of their diarrhea; and 83% had at least a 50% reduction
in diarrhea. Entry criteria required at least 7 watery stools in a week, and the average was 20 (with some patients having as high at 67 stools in a week).
On
August 24, 2018, Napo launched its first integrated social digital campaign targeting patients living with HIV who are interested in information on non-infectious diarrhea (who
are on ART) coupled with activating healthcare providers. Phase I of this campaign is focused on contextual and native display ads focused on informing patients of options that may assist them
with getting on with their daily lives for the long term and restoring their confidence with relief from HIV-related diarrhea. Phase II will kick off
with improving the user experience (UX) once patients land on Mytesi.com coupled with an email marketing campaign to appropriate patients and healthcare providers.
Napo
is pursuing AIDS Drug Assistance Program (ADAP) formulary listing in states where Mytesi is not currently on ADAP formulary. ADAPs provide life-saving HIV treatments to low income,
uninsured, and underinsured individuals living with HIV/AIDS in all 50 states and the territories. The ADAP program provides Mytesi free of charge to patients who qualify and copay support for some
patients who have insurance coverage. In the third quarter of 2018, Mytesi was added to the ADAP formularies in New York, Tennessee, Mississippi and DC. As announced January 24, 2019, Mytesi
has also been added to the formulary for Florida's ADAP, which is the third largest in the U.S. based on enrollment. As a result of this addition, based on data from healthcare research firm Decision
Resource Group, approximately 86% of ADAP-eligible US lives now have access to Mytesi, which is now on the ADAP formularies for 30 states, including the five programs with the largest enrollment.
As
we announced April 10, 2018, Napo has signed an agreement with the ADAP Crisis Task Force. The agreement establishes a reduced price provided by Napo ADAPs in all U.S. states
and territories for purchases of Mytesi. Formed in 2002, the Task Force negotiates reduced drug prices for all ADAPs. Task Force membership is currently comprised of representatives from Arizona,
California, Florida, Illinois, Massachusetts, New York, North Carolina, Tennessee, Texas, Virginia, and Washington state HIV/AIDS divisions. Per the terms of the agreement, all state ADAPs are
guaranteed the same reduced price for the drug. ADAPs provide HIV-related services and approved medications to more than half a million people in the U.S. each year, and we expect this agreement to
help further expand the number of patients able to benefit from the novel, first-in-class anti-secretory mechanism of action of Mytesi.
Mytesi
is currently reimbursed by Medicaid in all 50 states. It is also currently covered on 100% of the top 10 commercial insurance plan national formularies, representing more than
245 million U.S. lives. Additionally, Napo operates a co-pay coupon program, which helps ensure that the majority of participating patients do not have a Mytesi co-pay greater than $25.
Information about the NapoCares Patient Assistance Program, which assists patients with benefit verification, prior authorization, and claims appeals, can be found at mytesi.com/mytesi-savings.html.
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Pipeline within a productcrofelemer
According to the World Health Organization, there are nearly 1.7 billion cases of diarrheal disease globally every year. Although not all
types of diarrhea are secretory in nature, we view the current, initial approval of Mytesi as the opening of the door to an important pipelineunderscored by the current approval by the
FDA of the Chemistry, Manufacturing and Controls (CMC) for this natural product, as well as acknowledgement by the FDA of the safety of the product for chronic use for the approved indication.
Crofelemer
is in development for targeted cancer therapy (TCT) for the symptomatic relief of TCT-related diarrhea. Diarrhea continues to be an area of concern for patients undergoing
cancer treatment. Novel targeted agents, such as epidermal growth factor receptor antibodies and tyrosine kinase inhibitors, may block natural chloride secretion regulation pathways in the normal
gastrointestinal mucosa, thereby leading to secretory diarrhea. We recognize the importance of supportive care for patients being treated with these cancer-related therapies, analogous to the
supportive care of managing diarrhea in people living with HIV/AIDS.
Our
planned study for diarrhea related to TCT is analogous to the successful pivotal program we ran for Mytesi's currently-approved HIV indication, and as part of risk mitigation we
intend to use the same formulation and dosing as the current commercialized Mytesi. As part of Jaguar's near-term plan, Jaguar has scheduled a meeting with the FDA in March 2019 to discuss the
anticipated protocol for a planned pivotal trial for the evaluation of crofelemer in TCT-related diarrhea.
There
are two ongoing investigator-initiated trials (IITs) utilizing Mytesi to address cancer therapy-related diarrhea. Enrollment is ongoing for the HALT-D study at Georgetown
University in breast cancer patients on treatment with Herceptin, which is being funded by Genentech Roche, and interim results are expected to be read out in the first half of 2019. The second study,
which is funded by Puma, is evaluating the use of crofelemer in subjects receiving neratinib, which has extremely high rates of 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 Transparency Market Research, sales of therapeutics for the prevention of CINV approximated $620 million in 2013, and sales of
such therapeutics are expected to reach $1 billion in 2020.
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 anti-diarrheal
like Mytesi may hold promise for treating secretory diarrheaand therefore also support long-term cancer treatment adherencein this population.
As
we announced on January 22, 2018, Napo has accepted a request for support submitted by Dr. Mohamad Miqdady, Chief of Pediatric Gastroenterology, Hepatology and Nutrition
at Sheikh Khalifa Medical City (SKMC) in Abu Dhabi, for an investigator-initiated trial of crofelemer, the active pharmaceutical ingredient in Mytesi, for congenital diarrheal disorders (CDDs) in
children.
CDDs
are 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. CDDs are related to specific genetic defects inherited as autosomal recessive traits. The incidence of CDDs is prevalent in regions where consanguineous
marriages (related by blood) is part of the culture. CDDs are directly associated with serious secondary conditions including
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dehydration,
metabolic acidosis, and failure to thrive, prompting the need for immediate therapy to prevent death and limit lifelong disability.
SKMC
is the Abu Dhabi public health system's flagship institution and the largest hospital in the United Arab Emirates (UAE), consisting of a 586-bed tertiary hospital, 14 outpatient
specialty clinics, and the Abu Dhabi Blood Bank, all of which are accredited by Joint Commission International, the oldest and largest healthcare standards-setting and accrediting body in the United
States. Dr. Miqdady is American Board certified in Pediatric Gastroenterology, Hepatology and Nutrition, and he is a member of Napo's Scientific Advisory Board.
Napo
intends to submit documentation in the first half of 2019 to the U.S. FDA for the planned formulation of crofelemer appropriate for feeding tube administration to support this
investigation.
As
announced on June 5, 2017, Napo has received orphan-drug designation from the FDA for pediatric short bowel syndrome (SBS). The Orphan Drug Act provides for granting special
status to a drug or biological product to treat a rare disease or condition upon request of a sponsor. Orphan-drug designation qualifies the sponsor of the drug for various development incentives,
including extended exclusivity, tax credits for qualified clinical testing, and relief of filing fees.
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, as well as identifying possible opportunities for a Special Protocol Assessment (SPA) from the FDA. When
granted, SPA provides that, upon request, FDA will evaluate within 45 days certain protocols to assess whether they are adequate to meet scientific and regulatory requirements identified by the
sponsor. In 2007, under the SPA process, Napo obtained agreement with the FDA for the design of the pivotal study protocol for the currently approved indication of crofelemer (Mytesi) for the
symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. The 2007 SPA agreement was an important milestone for Napo, allowing Napo to address and mitigate
regulatory uncertainty prior to the completion of its final Phase 3 trial of crofelemer for its currently approved indication.
In
October 2017, Napo established a scientific advisory board for each potential follow-on indication currently planned for Mytesi. Napo has developed relationships with physicians and
patient advocates around the world who are recognized specialists and key opinion leaders (KOLs) in the planned Mytesi follow-on indications. The two charts below provide the names, credentials and
affiliations of current Napo scientific advisory board members and KOL advisors to Napo.
As
we announced on May 10, 2017, Dr. Pravin Chaturvedi, a highly experienced drug development veteran who has spent more than 25 years in the pharmaceutical/biotech
industry, has been appointed chair of Napo's scientific advisory boards. From 2006 to 2013, Dr. Chaturvedi served as Napo's Chief Scientific Officer and has remained a scientific adviser to the
company since 2014. His track record of successful development includes participating in and/or leading successful development efforts for seven drugs, including crofelemer (Mytesi).
We
are confident that our scientific advisory boards will provide expert, actionable input regarding all aspects of development, including trial design, for Mytesi for our follow-on
indicationseach of which addresses a significant, global, unmet medical need. We also expect that our scientific advisory board members will serve as speakers for our medical education
programs, authors on Napo abstracts and publications, and as a resource for media inquiries.
Napo's
HIV Scientific Advisory Board has focused primarily on physician education, and community and global awareness regarding the importance and availability of solutions for neglected
comorbidities, such as the first-in-class anti-secretory mechanism of action of Mytesi for its currently approved indication.
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Napo Scientific Advisory Board (SAB) Members
HIV Physicians Scientific Advisory Board
|
|
|
David Asmuth, MD
|
|
Infectious diseases specialist and Professor of Medicine, UC Davis Health
|
Gary Blick, MD, AAHIVS
|
|
Founder of Health Care Advocates International and BEAT AIDS Project Zimbabwe
|
Christine Wanke, MD
|
|
Director of the Nutrition and Infection Unit; Associate Chair and Professor, Department of Public Health and Community
Medicine; Professor, Department of Medicine, Tufts University School of Medicine; Professor, Sackler School of Biomedical Science; Professor, Friedman School of Nutrition Science and Policy
|
Pravin Chaturvedi, PhD
|
|
Chair of Napo's Scientific Advisory Boards; 25+ years drug development experience in pharmaceutical/biotech field;
Successfully developed crofelemer (Mytesi) (first pivotal adaptive design)
|
Cancer Therapy-Related Diarrhea Scientific Advisory Board
|
|
|
Lee Schwartzberg, MD, FACP
|
|
Executive Director of the West Cancer Center, a multispecialty oncology practice affiliated with the University of Tennessee; Chief, Division of Hematology/Oncology, the University of Tennessee Health
Science Center
|
Eric Roeland, M.D
.
|
|
Attending Physician, Center for Palliative Care, Harvard Medical School
|
Hope Rugo, MD
|
|
Clinical Professor of Medicine, Director Breast Oncology and Clinical Trials Education, Division of Hematology and Oncology,
University of California San Francisco
|
Pravin Chaturvedi, PhD
|
|
Chair of Napo's Scientific Advisory Boards; 25+ years drug development experience in pharmaceutical/biotech field;
Successfully developed crofelemer (Mytesi) (first pivotal adaptive design)
|
IBD Scientific Advisory Board
|
|
|
Corey Siegel, MD, MS
|
|
Associate Professor of Medicine; Associate Professor of The Dartmouth Institute; Director of the Inflammatory Bowel Disease Center at the Dartmouth-Hitchcock Medical Center
|
Pravin Chaturvedi, PhD
|
|
Chair of Napo's Scientific Advisory Boards; 25+ years drug development experience in pharmaceutical/biotech field;
Successfully developed crofelemer (Mytesi) (first pivotal adaptive design)
|
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Pediatric Indications (SBS and CDD) Scientific Advisory Board
|
|
|
Mohammed Miqdady, MD
|
|
Chief of Pediatric Gastroenterology, Hepatology & Nutrition at Sheikh Khalifa Medical City in Abu Dhabi
|
Martin Martin, MD
|
|
Professor, Department of Pediatrics, David Geffen School of Medicine at UCLA
|
Sue Rhee, MD
|
|
Division Chief, Pediatric Gastroenterology, Hepatology and Nutrition Pediatric gastroenterologist and liver specialist, UCSF
Benioff Children's Hospital
|
Pravin Chaturvedi, PhD
|
|
Chair of Napo's Scientific Advisory Boards; 25+ years drug development experience in pharmaceutical/biotech field;
Successfully developed crofelemer (Mytesi) (first pivotal adaptive design)
|
Key Opinion Leader (KOL) Advisors to Napo (on an as-needed basis)
KOL Advisors: Cancer Therapy-Related Diarrhea
|
|
|
Herbert DuPont, MD
|
|
Professor and Director, Center for Infectious Diseases, University of Texas Houston School of Public Health
|
Pablo C. Okhuysen, M.D
.
|
|
Department of Infectious Diseases, Infection Control, and Employee Health, Division of Internal Medicine,
MD Anderson
|
KOL Advisors: Diarrhea Related to IBD
|
|
|
David Rubin, MD
|
|
Joseph B. Kirsner Professor of Medicine Section Chief, Gastroenterology, Hepatology and Nutrition Co-Director, Digestive Diseases Center, University of Chicago Medicine
|
Charles Bernstein, MD
|
|
Distinguished Professor of Medicine and Bingham Chair in Gastroenterology Research, University of Manitoba
|
William Sandborn, MD
|
|
Director, Inflammatory Bowel Disease Center Chief, Division of Gastroenterology Professor of Medicine, US San Diego
Health
|
Scott Lee, MD
|
|
Associate Professor of Medicine, Digestive Health Center, University of Washington Medical Center
|
Edward Loftus, Jr., MD
|
|
Consultant, Division of Gastroenterology and Hepatology, Department of Internal Medicine, Mayo Clinic
|
Douglas Wolf, MD
|
|
Medical Director of IBD Research at Atlanta Gastroenterology Associates. Clinical Assistant Professor of Medicine, Emory
University School of Medicine
|
Brooks D. Cash, MD, AGAF, FACG, FACP, FASGE
|
|
Division Director, Gastroenterology, Hepatology, and Nutrition Visiting Professor of Medicine, The University of Texas
McGovern Medical School
|
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KOL Advisors: Pediatric Indications (SBS and CDD)
|
|
|
Jay Thiagarajah, MD, PhD
|
|
Attending Physician, Division of Gastroenterology, Hepatology and Nutrition, Boston Children's Hospital. Instructor of Pediatrics, Harvard Medical School
|
James Goldenring, M.D., Ph.D
.
|
|
Professor of Surgery, Vanderbilt University School of Medicine. Paul W. Sanger Chair in Experimental Surgery. Professor of
Cell and Developmental Biology
|
KOL Advisors: Diarrhea Related to HIV and other Infectious Diseases
|
|
|
Herbert DuPont, MD
|
|
Professor and Director, Center for Infectious Diseases, University of Texas Houston School of Public Health
|
Pradip Bardhan, MBBS, MD
|
|
Chief Physician at ICDDR,B, Bangladesh
|
Patrick Clay, Pharm D
|
|
Consultant
|
Paulo Pacheco, MD
|
|
Clinical Assistant Professor, Department of Medicine, New York University Langone Health
|
Elie Schochet, MD, FACS
|
|
Colorectal surgeon, Holy Cross Medical Group
|
KOL Advisors: Diarrhea Related to IBS
|
|
|
Anthony Lembo, MD
|
|
Director of the GI Motility and Functional Bowel Disorders Program at Beth Israel Deaconess Medical Center and Associate Professor of Medicine at Harvard Medical School
|
Doug Drossman, MD
|
|
Co-Director Emeritus, UNC Center for Functional GI and Motility Disorders Adjunct Professor of Medicine and Psychiatry,
University of North Carolina School of Medicine
|
William Chey, MD
|
|
Professor of Internal Medicine and Professor of Nutritional Sciences, University of Michigan School of Public
Health
|
According
to a 2017 report from Research and Markets, the combined global market for prescription and OTC gastrointestinal agents is expected to reach $21 billion by 2025. Jaguar
estimates that a first-in-class anti-secretory agent should be able to achieve a significant portion of the market share.
Our
management team has significant experience in gastrointestinal product development for both humans and animals. Napo was founded 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 executive vice president of sustainable supply, ethnobotanical research and intellectual property, and Lisa Conte, our founder, president and CEO, have worked together for more than
30 years. Together, these dedicated personnel successfully transformed crofelemer, which is extracted from trees growing in the rainforest, to Mytesi, which is a natural, sustainably harvested,
FDA-approved drug.
There
are significant barriers to entry for Mytesi (crofelemer). Through Napo, we hold an extensive global patent portfolio. At the present time we hold approximately 142 issued
worldwide patents, with coverage in many cases that extends until 2031. These issued patents cover multiple indications including HIV-AIDS diarrhea, IBS, IBD, manufacturing, enteric protection from
gastric juices, among others. We also have approximately 24 pending patent applications worldwide in the human health areas that are being prosecuted.
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Mytesi
is the first oral drug approved by the FDA under 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 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 not systemically absorbed, 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 is continuing limited
initiatives related to Canalevia, its drug product candidate for treatment of chemotherapy-induced diarrhea ("CID") in dogs, and Equilevia, its non-prescription, personalized, premium product for
total gut health in equine athletes. 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.
As
previously announced, Jaguar has received MUMS (Minor Use and Minor Species) designation status from the FDA for Canalevia for the indication of chemotherapy-induced diarrhea (CID) in
dogs. Jaguar has completed clinical and manufacturing activity for Canalevia for this indication. MUMS designation is modeled on the orphan-drug designation 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. Additionally, as announced on March 8,
2018, the FDA's Center for Veterinary Medicine (CVM) has indicated that Jaguar's Reasonable Expectation of Effectiveness (RxE) technical section is complete towards conditional approval of Canalevia
(crofelemer delayed-release tablets) for treatment of CID in dogs, based on CVM's review of the results of Jaguar's completed pilot study (CANA-001) of Canalevia for this indication. Jaguar has now
completed two of the four required technical sections of the Company's application for conditional approval of Canalevia for CID in dogs.
Crofelemer
is extracted from the
Croton lechleri
tree, which we sustainably harvest and manage through programs that we have been
developing over the past 2 years. This process has involved working with communities to plant trees, obtaining permits for export, and creating a supply network that is robust and reliable.
We
continue to have working relationships with partners that began in the 1990s. Additionally, through the establishment of a nonprofit called the Healing Forest Conservancy (HFC), 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 29 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 agent which has a basic normalizing effect locally on the gut, 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 four follow-on indications, several of which are backed by Phase 2 evidence from completed
Phase 2 trials. In addition, a second-generation proprietary anti-secretory agent is in development for cholera.
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Napo Prescription Drug Product Candidates
|
|
|
|
|
|
|
|
|
Product Candidates
|
|
Indication
|
|
Completed Milestones
|
|
Current
Phase of
Development
|
|
Anticipated Near-Term
Milestones*
|
Mytesi
|
|
Targeted cancer therapy-related diarrhea (TCT-D)
|
|
Two investigator-initiated
(IIT) clinical trials funded by Genentech-Roche & Puma
Scheduled meeting with FDA in March 2019 to discuss the anticipated protocol for a planned pivotal trial
|
|
Phase 2
|
|
Availability of interim
data IIT for Genentech-Roche-funded trial in Q2 2019
|
|
|
|
|
|
|
|
|
|
Mytesi
|
|
Supportive care for IBD
|
|
Safety
Multiple Phase 2 studies completed
in various secretory diarrhea (not IBD)
|
|
Phase 2
|
|
Protocol development with
KOLs for discussions with FDA
|
|
|
|
|
|
|
|
|
|
Formulation of crofelemer
|
|
Rare disease indications (SBS & CDD)
|
|
Phase 1 study
Orphan-drug designation
for SBS
|
|
Phase 2
|
|
Formulation/IIT, Abu Dhabi,
Protocol design
|
|
|
|
|
|
|
|
|
|
Mytesi
|
|
Irritable bowel syndromediarrhea predominant (IBS-D)
|
|
Phase 1 study
Two Phase 2 studies
completed
|
|
Phase 2
|
|
Publication of supplemental
analysis of Phase 2 data
|
|
|
|
|
|
|
|
|
|
Mytesi
|
|
Idiopathic/functional diarrhea
|
|
Safety
Multiple Phase 2 studies completed
in various secretory diarrhea
IIT request accepted
|
|
Phase 2
|
|
Initiation of
IIT
|
|
|
|
|
|
|
|
|
|
SB-300 (lechlemer)
|
|
Second-generation anti-secretory agent for multiple indications including cholera
|
|
Animal and human studies in
secretory diarrhea; successful cholera trial design for anti-secretory mechanism of action with API
|
|
Pre IND
|
|
Formulation /
POC
|
-
*
Clinical
trials are funding dependent
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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, by 2020 more than 70% of Americans with HIV are expected to be 50 and
older.(1)
|
|
|
|
|
Market
|
|
Number of
Competitors for
Mytesi's Approved/
Anticipated Labelled
Indication
|
|
Market Size/Potential
|
HIV-D
|
|
0
|
|
We estimate the U.S. market revenue potential for Mytesi to be approximately $100 million in gross annual sales
|
TCT-D
|
|
0
|
|
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, which is projected to reach $1.0 billion by 2020(3)
|
IBD
|
|
0
|
|
Estimated 1,171,000 Americans have IBD(4)
|
IBS-D
|
|
3
|
|
Most IBS products have estimated revenue potential of greater than $1.0 billion(5)
|
CDD/SBS
|
|
0
|
|
Financial benefits of Orphan-drug Designation
|
Cholera (hydration maintenance) PRV (SB-300)
|
|
0
|
|
In recent transactions by other companies, priority review vouchers have sold for $67 million to $350 million(6)
|
-
(1)
-
HIV
Among People Aged 50 and Older (https://www.cdc.gov/hiv/group/age/olderamericans/index.html)
-
(2)
-
Centers
for Disease Control and Prevention. Preventing Infections in Cancer Patients: Information for Health Care Providers
(cdc.gov/cancer/preventinfections/providers.htm)
-
(3)
-
Heron
Therapeutics, Inc. Form 10-K for the fiscal year ended December 31, 2016
-
(4)
-
Kappelman,
M. et al. Recent Trends in the Prevalence of Crohn's Disease and Ulcerative Colitis in a Commercially Insured US Population. Dig Dis Sci.
2013 Feb; 58(2): 519-525
-
(5)
-
Merrill
Lynch forecasts peak US sales of roughly $1.5 bn for Ironwood's Linzess
(http://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 (Source: https://www.benzinga.com/analyst-ratings/analyst-color/17/03/9224181/analyst-synergy-pharma-could-achieve-sustainable-profita)
-
(6)
-
In
Aug. 2015, AbbVie Inc. bought a priority review voucher from United Therapeutics Corp for $350 million
(http://www.reuters.com/article/us-abbvie-priorityreview/abbvie-buys-special-review-voucher-for-350-million-idUSKCN0QO1LQ20150819). 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 our human and animal gastrointestinal drug products and drug product candidates, which normalize chloride and water flow and
transit time of fluids within the intestinal lumen.
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 knowledge, experience and intellectual
property portfolio
Mytesi is a novel, first-in-class anti-secretory agent which has a basic normalizing effect locally on 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 extensive global rights for Mytesi. Mytesi is in development for multiple possible follow-on indications, including diarrhea related to targeted
cancer therapy; orphan-drug indications for infants and children with congenital diarrheal disorders and short bowel syndrome (SBS); supportive care for inflammatory bowel disease (IBD); irritable
bowel syndrome (IBS); and for idiopathic/functional diarrhea. In addition, a second-generation proprietary anti-secretory agent is in development for cholera.
Our
management team collectively has more than 100 years of experience in the development of gastrointestinal prescription drug and non-prescription products. This experience
covers all aspects of product development, including discovery, preclinical and clinical development, GMP manufacturing, and regulatory strategy. Key members of this team successfully developed
Mytesi.
Establish and expand commercial capabilities in Mytesi sales and marketing efforts
As announced on August 7, 2017, we appointed Pete Riojas, a 29-year pharmaceutical industry veteran, to lead Napo's direct sales
organization, which is comprised of Mytesi field sales representatives strategically positioned to cover U.S. geographies with the highest potential. Additionally, in June 2018, we hired Robert J.
Griffing, a seasoned industry veteran with a broad range of experience that includes commercializing supportive care and HIV treatments, as chief commercial officer for Napo. 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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In
June 2018, as stated above, Napo entered into an agreement with RedHill Biopharma, a specialty biopharmaceutical company primarily focused on late clinical-stage development and
commercialization of proprietary drugs for gastrointestinal diseases and cancer, to establish a U.S. co-promotion program for Mytesi. RedHill's specialized, GI-focused field sales force promotes
Mytesi to health care practitioners in 36 U.S. territories that contain significant numbers of HIV patients and health care practitioners that are not currently covered by Napo's field sales force. In
these regions, RedHill sales representatives target gastroenterologists who see large populations of people living with HIV, along with nurse practitioners and physician assistants. RedHill field
representatives also target lower-level ART prescribing infectious disease specialists in regions currently covered by Napo's sales force. Four RedHill inside sales representatives actively target
health care practitioners in other regions not covered by the Napo or RedHill field representatives. We believe this co-promotion program will play a significant role in extending the reach of our
commercial efforts into the GI medical community in support of the treatment of people living with HIV (PLWH) with Mytesi. Under the terms of the Agreement, RedHill is compensated based on
performance, and the program can be extended by agreement between the two companies.
Leverage our relationships with key opinion leaders regarding development of follow-on indications
To date, more than 30 key opinion leaders (KOLs) who are recognized specialists in HIV patient care, TCT, IBD, IBS, cholera, SBS, CDD and equine
gut health, are participating in our scientific advisory board or KOL advisory program in some manner.
Establish partnerships to support moving pipeline indications to pivotal clinical trials
Jaguar is actively pursuing development of a robust pipeline of potential follow-on indications for crofelemer, and the Company's goal is to
establish partnerships to support moving pipeline indications to pivotal clinical trials.
Strategically sequence the development of follow-on indications of Mytesi and seek
geographically-focused licensing opportunities
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 and a right of first negotiation to commercialize Mytesi and related products in
specified Latin American countries.
Although
it is possible that we may enter into additional corporate partnering relationships related to Mytesi, our intention would be to retain all 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 US exclusive commercial rights) in the field of gastrointestinal care and cancer in the long term.
As
announced December 6, 2018, Jaguar has engaged T.R. Winston & Company, LLC to provide strategic advice with respect to collaboration, licensing and development
activities in support of Mytesi and crofelemer.
Reduce risks relating to product development
Risk reduction is a key focus of our product development planning. Mytesi is approved for chronic indication, providing us the ability to
leverage this corresponding safety data when seeking approval for planned follow-on indications that are also chronic or chronic episodic indications. Crofelemer manufacturing is being conducted at a
new, multimillion-dollar commercial manufacturing facility that
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has
been FDA-inspected and approved. In an effort to reduce risk further, we have implemented the following approach: First, we meet with key opinion leaders, typically at medical
conferencesas we did in 2017 at Digestive Disease Week for IBS and IBD, the American Society of Clinical Oncology annual meeting, and the Multinational Association of Supportive Care and
Congress. Next, we confirm unmet medical needs with these key opinion leaders 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, by the time we start devoting significant funds to a clinical trial, is to have de-risked the program as much as we believe we
possibly can, in particular the regulatory pathway. We believe this approach will lead to better long-term outcomes for our products in development.
We
believe that Jaguar is poised to realize a number of synergistic, value adding benefitsand an expanded pipeline of important human follow-on indications and a
second-generation anti secretory agent, upon which to build global partnerships.
In
May 2016, the New Drug Application ("NDA") and commercial rights for human applications of crofelemer (Mytesi) previously licensed to Salix Pharmaceuticals, Inc. ("Salix") were
transferred to Napo. The active pharmaceutical ingredient ("API") in Mytesi is crofelemer, our proprietary, patented gastrointestinal anti-secretory agent sustainably harvested from the rainforest.
Diarrhea
is a common adverse event seen with chemotherapy agents typically used in breast and colon cancers, and in particular in the more recently introduced therapeutic classes of
epidermal growth factor receptor ("EGFR") monoclonal antibodies and tyrosine kinase inhibitors ("TKI") often used for chronic adjuvant care management of cancer. The increased need for and use of
these agents has made diarrhea one of the most disabling issues for cancer patients.
We
will 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 SB-300 (lechlemer) for various gastrointestinal indications. Lechlemer is a proprietary Jaguar pharmaceutical product, a standardized botanical extract distinct from crofelemer, also
sustainably derived from the
Croton lechleri
tree.
We
believe lechlemer, which has the same 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 a cholera indication. Priority review vouchers are granted by the FDA to drug developers as an incentive to develop treatments for neglected diseases and rare pediatric diseases.
Additionally, we believe lechlemer represents a long-term pipeline opportunity as a second-generation anti-secretory agent, on a global basis, for multiple gastrointestinal
diseasesespecially in resource-constrained countries where cost of goods is a factor, in part, because requirements often exist in such regions for drug prices to decrease annually.
The
Company has presented Phase 2 data on crofelemer for the treatment of devastating dehydration in cholera patients from the renowned International Centre for Diarrhoeal Disease
Research (icddr,b) in Bangladesh, and Napo plans to follow the same study design for a trial conducted in association with icddr,b in support of development of lechlemer for the potential
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 veterinary and human indications. Crofelemer is also the API in Canalevia,
our lead prescription drug product candidate, intended for the treatment of chemotherapy-induced diarrhea in dogs. We expect our first veterinary prescription product launch will be Canalevia for
chemotherapy-induced diarrhea, an interesting commercial synergy with the pursuit of follow-on indications for Mytesi.
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Mytesi Clinical Data
Mytesi has been clinically demonstrated to have:
-
-
Minimal absorption, with plasma concentrations below the level of detection
-
-
No clinically relevant drug-drug interactions
-
-
No effect on viral load or CD4 counts
-
-
Adverse events comparable to those with placebo
The
efficacy of Mytesi 125-mg delayed-release tablets twice daily was evaluated in a randomized, double-blind, 24-week, multicenter study (the ADVENT trial) comprised of a
placebo-controlled (1 month) treatment period and a placebo-free (5 month) treatment period. The study enrolled HIV-positive patients on stable ART with a history of diarrhea for
1 month or more. In the Mytesi 125mg bid group, more than twice as many patients (18% vs. 8% on placebo, p<0.01) achieved the highly rigorous endpoint defined as reduction to
£
2 watery stools per week for 2 out of the 4 weeks in the placebo-controlled period (the average baseline in the ADVENT population was 20 watery
stools per week).
In
a supplemental analysis of the ADVENT study population, 78% of patients in the Mytesi 125mg BID group experienced a decrease in watery stools at week 4. Among these patients that
experienced a decrease, 61% had at least a 50% decrease in watery stools. At week 20, 89% of patients in the Mytesi BID group experienced a decrease in watery stools. Among these patients that
experienced a decrease, 83% had at least a 50% decrease in watery stools, and over half of patients had no watery stools at all (100% decrease).
Products in Development
Targeted Cancer Therapy-Related Diarrhea (TCT)
Diarrhea related to TCT is a common problem with a relevant mechanism for crofelemer
|
|
|
|
|
|
|
|
|
National Cancer Institute Criteria for Grading Severity of Diarrhea
|
|
|
Grade 1
|
|
Grade 2
|
|
Grade 3
|
|
Grade 4
|
Patients without a colostomy
|
|
Increase of <4 stools per day over pretreatment
|
|
Increase of 4 to 6 stools per day or nocturnal stools
|
|
Increase of
³
7 stools per day or incontinence; need for parenteral support for hydration
|
|
Physiologic consequences requiring intensive care; hemodynamic collapse
|
Diarrhea
is a common adverse event seen with chemotherapy agents in the therapeutic classes of epidermal growth factor receptor ("EGFR") tyrosine kinase inhibitors ("TKI's") and EGFR
monoclonal antibodies (for breast, lung, and other malignancies). The increased need for and use of these agents has made diarrhea one of the most disabling issues for cancer patients. Crofelemer
offers the potential for an appropriate mechanism of action against this likely secretory diarrhea and has prompted interest among physicians concerned about this diarrheal symptom, stimulating the
aforementioned investigator-initiated trials. Diarrhea is also a common adverse event seen with chemotherapy agents used in colorectal and gastric cancers, and chronic maintenance chemotherapy. There
are currently no anti-diarrhea agents approved generally for chemotherapy-induced diarrhea.
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A
study titled
HALT-D: DiarrHeA Prevention and ProphyLaxis with Crofelemer in HER2 Positive Breast Cancer Patients Receiving Trastuzumab,
Pertuzumab, and Docetaxel or Paclitaxel with or without Carboplatin
is currently underway in conjunction with Georgetown University. The primary objective of the study is to
characterize the incidence and severity of diarrhea in patients receiving investigational therapy in the setting of prophylactic anti-diarrheal management.
A
second study, titled
An open label study to characterize the incidence and severity of diarrhea in patients with early stage HER2+ breast cancer treated with
adjuvant trastuzumab and neratinib followed by neratinib monotherapy, and intensive anti-diarrhea prophylaxis
, is currently underway in conjunction with the University of
California at San Francisco. The study is designed to evaluate crofelemer as a salvage anti-diarrheal therapy used with the investigational breast cancer agent neratinib. The primary objective is to
characterize the incidence and severity of diarrhea in patients with early stage breast cancer receiving adjuvant trastuzumab and neratinib followed by 1 year of neratinib monotherapy in the
setting of prophylactic anti-diarrheal management. The secondary objectives are to evaluate the activity of crofelemer as a rescue anti-diarrheal medication; to assess neratinib adherence, holds,
delays, and early discontinuation throughout the course of study therapy, which includes patients receiving neratinib for >1 year; and to assess overall toxicity including constipation and
cardiac toxicity with concomitant neratinib and trastuzumab.
Irritable Bowel SyndromeDiarrhea Predominant (IBS-D)
Diarrhea is a common symptom of irritable bowel syndrome (IBS), a frustrating, underdiagnosed and undertreated condition. IBS-D is a subtype
characterized mainly by loose or watery stools at least 25 percent of the time. According to the U.S. FDA, studies estimate that IBS affects 10 to 15 percent of adults in the United
States.
Abdominal
pain is the key symptom of IBS, and the pain, which is associated with a change in stool frequency or consistency, can be severe. To improve the diagnosis and outcomes for IBS
patients and to update clinicians on the latest research, Dr. William Chey, a gastroenterologist and professor of medicine and nutrition sciences at the University of Michigan, along with an
international team of collaborators, compiled
Rome IV
, an updated compendium of diagnostic criteria on functional GI disorders such IBS.
Rome IV
contains a
chapter titled Centrally Mediated Disorders of Gastrointestinal Pain.
Although
new agents for IBS-D have come on the market, there is an unmet medical need for long-term, safe management of the abdominal pain associated with IBS-D. We recognize that
patients suffering from IBS-D may require a poly-pharmacy approach to lifetime management of their disease. Mytesi, which represents a novel mechanistic approach with the benefit of a long-term safety
profile, could possibly be an important addition to the treatment of IBS-D, if approved for this indication.
Mytesi
has been demonstrated to be safe for chronic use, and two studies provide statistically significant results of crofelemer use for abdominal pain in women.
The
largest group of IBS sufferers are those with the subtype referred to as IBS-M (mixed diarrhea and constipation). IBS-M is also referred to as IBS-A, because the condition often
involves frequent alternating between IBS-D and IBS-C (constipation predominant). IBS-M is distressing for patients as well as difficult to diagnose and manage, and is often associated with pain and
urgency as well as significant abdominal distension and bloating. No approved drugs currently exist for IBS-M. Leading gastroenterologists have stated that IBS-C drugs may cause diarrhea in an IBS-M
patient, and an IBS-D drug may cause significant constipation. Since Mytesi has not caused constipation in clinical trials or real-world experience, we therefore believe an opportunity exists for an
IBS-M indication for Mytesi. Resultingly, and due to the demonstrated safety of Mytesi for chronic use and its demonstrated
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benefit
for abdominal pain in women, Napo is considering expanding development efforts to evaluate the IBS-M indication.
Crofelemer
has been tested in safety studies and two significant Phase 2 studies for IBS-D as detailed below.
Phase 2aa randomized double-blind placebo-controlled, dose-ranging (placebo, 125 mg, 250 mg, and 500
mg bid) study over a 12-week treatment period in 246 patients with d-IBS (Rome II criteria), including both males and females, whose average age was 50 years old.
n=245
subjects
61 placebo
62 125 mg crofelemer BID
59 250 mg crofelemer BID
62 500 mg crofelemer BID
IBS
symptoms (pain, urgency, stool frequency and consistency, and adequate relief) were self-reported by the patients via an interactive voice response system. Patients needed to exhibit
active disease during the two-week baseline period as defined by a mean daily stool frequency greater than or equal to 2/day, pain score greater than or equal to 1 and stool consistency greater than
or equal to 3 (5-point Lickert scale for pain and consistency) to be enrolled. Patients received treatment for 12 weeks followed by a two-week treatment free period.
The
protocol-specified primary efficacy measure was daily stool consistency. Statistical analysis of the primary endpoint found no significant differences between placebo and any of the
crofelemer dose groups (p
³
0.1434) and no significant dose relationship was seen with regard to change from Baseline to Month 3 in stool consistency scores
(p = 0.1165) in the ITT population.
A
supplementary analysis of Rome Foundation-defined stool consistency and abdominal pain showed positive results. Responders were subjects who had stool consistency score of
³
4 for < 25% of days in a given week and
³
30% improvement in abdominal pain scores a given week
(i.e., Rome Foundation-defined stool consistency and abdominal pain responders).
When
we look at a supplemental analysis at a reduction in a composite abdominal pain/stool consistency endpoint, the regulatory endpoint in accordance with FDA guidance, we see at the
125 mg dose bid a significant 15% difference with just women patients compared to placebo; and a significant 11% when we include both men and women. The current D-IBS products on the market have a
7-8% reduction (Viberzi and Xifaxan).
In
this analysis, Rome Foundation-defined stool consistency and abdominal pain responders were significantly more likely during the entire 3 months in the 125 mg BID group
when compared with placebo (24.2% versus 13.1%, p = 0.0399) and there was a statistical trend in favor of crofelemer 125 mg BID during Months 1 through 2 (27.4% versus 16.4%, p =
0.0640). Similar positive effects of crofelemer 125 mg BID were observed in female subjects (n = 183). When the supplementary analysis was applied to the female patients, crofelemer at a dose
of 125 mg BID was superior to placebo at Month 3 (26.1% vs 10.9%, p=0.0337).
-
-
Results: The 125mg bid of crofelemer exhibited a consistent response during each month among most efficacy endpoints in women with d-IBS
reaching statistical significance (p<0.05) for pain.
-
-
Crofelemer had little effect on the stool consistency score, though there was a trend toward reduced stool frequency.
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-
-
Treatment benefits were not apparent in men, although relatively few men enrolled in the trial (13-16/group).
-
-
As with previous trials of crofelemer, no drug-related serious adverse events were reported. Adverse event rates were similar across all dose
groups, although in the two highest doses (250 and 500 mg bid) there were a higher percentage of dropouts. There were no drug-related or dose-related differences in constipation. During the two-week
treatment-free follow-up period symptoms approached baseline levels.
Safety:
Crofelemer at doses of 125, 250 and 500 mg had a safety profile that was generally similar to placebo among men and women with
d-IBS.
Phase 2A Randomized, double-blind, placebo-controlled study to assess the safety and efficacy of crofelemer for the symptomatic treatment of
diarrhea predominant irritable bowel syndrome (d-IBS) in 240 female subjects 18 years or older with active d-IBS according to the Rome II criteria for the diagnosis of
d-IBS.
The
study consisted of a 2-week screening period and a 12-week blinded treatment period followed by a 4-week treatment-free follow-up period. During the 12-week treatment period 240
subjects were given 125 mg of crofelemer BID or placebo BID and recorded daily assessments of their IBS symptoms in the interactive voice response system.
The
primary endpoint was the change from baseline for overall percentage of abdominal pain/discomfort free days (PFDs). On a daily basis, respondents recorded the intensity of their
abdominal pain/discomfort for that day using the 5-pint Likert scale: 0=none, 1=mild, 2=moderate, 3=intense, 4=severe. Any day that a score of zero (0) was recorded was considered a PFD.
Stool
consistency and abdominal pain endpoints were analyzed using definitions of symptom improvement from a recent FDA guidance on IBS endpoints (March 2010) and recommendations of the
Rome Foundation (letter dated 28 June 2010) concerning the IBS endpoints described in this guidance.
Results:
The overall increase in pain-free days (protocol-specified primary endpoint) for subjects in the crofelemer group was not
statistically
significant when compared with subjects in the placebo group (p = 0.5107)
A
supplementary analysis of abdominal pain showed positive results. Responders were subjects who had
³
30% improvement in abdominal pain scores
a given week (i.e., FDA-defined abdominal pain responders; this definition of abdominal pain responders was presented in the March 2010 guidance on IBS endpoints).
In
this analysis, abdominal pain responders were significantly more likely during Months 1 through 2 (58.3% versus 45.0%, p = 0.0303) and during the entire 3 months (54.2%
versus 42.5%, p = 0.0371) in the crofelemer group when compared to placebo.
Safety:
The overall safety profile for crofelemer 125 mg BID for 12 weeks was comparable to that observed with placebo and was
consistent with
the IBS population under study.
Rare Pediatric Disease Indications: Congenital Diarrheal Disorders and Short Bowel Syndrome (SBS)
Congenital diarrheal disorders (CDD) are a group of rare, chronic intestinal channel diseases, occurring in early infancy, that are
characterized by severe, lifelong diarrhea and a lifelong need for nutritional intake either parenterally or with a feeding tube. CDDs are related to specific genetic defects inherited as autosomal
recessive traits, and the incidence of CDDs is much
more prevalent in regions where consanguineous marriage is part of the culture. CDDs are directly associated with serious
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secondary
conditions including dehydration, metabolic acidosis, and failure to thrive, prompting the need for immediate therapy to prevent death and limit lifelong disability.
Potential Orphan-Drug: Congenital Diarrheal Disorders (CDD) & Short Bowel Syndrome (SBS)
Clinical StudyCDD
We
have completed safety studies of crofelemer in children as young as 3 months of age, and Napo has accepted a request for support submitted by Dr. Mohamad Miqdady, Chief
of Pediatric Gastroenterology, Hepatology and Nutrition at Sheikh Khalifa Medical City (SKMC) in Abu Dhabi, for an investigator-initiated trial of crofelemer, the active pharmaceutical ingredient in
Mytesi, for CDD in children.
A
pre-clinical study in mice, conducted by an independent third-party investigator, is underway to support possible orphan-drug designation for crofelemer for Congenital Diarrheal
Disorders (CDD). This animal model study is examining the effects of crofelemer on diarrhea caused by microvillous inclusion disease (MVID), a very rare autosomal recessive disorder which belongs to
the CDD category.
SBS
is a complex condition characterized by malabsorption of fluids and nutrients due to congenital deficiencies or surgical resection of small bowel segments. Consequently, patients
suffer from symptoms such as debilitating diarrhea, malnutrition, dehydration and imbalances of fluids and salts. This could be due to either a genetic disorder or premature birth. In countries such
as the United Arab Emirates and Saudi Arabia, SBS occurs with much higher incidence. Napo recently visited with medical centers in this region.
We
have received orphan-drug status for Mytesi (crofelemer) for the SBS pediatric indication and are pursuing orphan-drug status for CDD. The mission of the FDA Office of Orphan Products
Development is to advance the evaluation and development of products (drugs, biologics, devices, or medical foods) that demonstrate promise for the diagnosis and/or treatment of rare diseases or
conditions.
IBDSupportive Care:
Key opinion leaders ("KOLs") identified an unmet need to treat diarrhea in IBD patients, particularly in specific subsets of patients. KOLs felt
all IBD patients who undergo ileal pouch-anal anastomosis (IPAA) surgery suffer severe, chronic diarrhea following the procedure. Because this is a highly-motivated patient population with a low
placebo-responder risk, we believe a relatively small proof-of-concept trial is the appropriate next step from a development standpoint.
KOLs
felt crofelemer's novel mechanism of action may also prove to be an effective treatment for diarrhea that results from bile acid malabsorption, which has been shown to occur in
approximately 30% of patients with IBD.
Additionally,
KOLs felt crofelemer's novel mechanism of action may prove to be an effective treatment for diarrhea experienced by patients receiving IV infusions of Entyvio, a Takeda
Pharmaceuticals prescription medicine used in adults with moderate to severe ulcerative colitis or Crohn's disease. Secretory diarrhea occurs when the intestine does not complete absorption of
electrolytes and water from luminal contents. This can happen when a nonabsorbable, osmotically active substance is ingested ("osmotic diarrhea") or when electrolyte absorption is impaired ("secretory
diarrhea").
Secretory
diarrhea can result from bacterial toxins, luminal secretagogues (such as bile acids or laxatives), reduced absorptive surface area caused by disease or resection, circulating
secretagogues (such as various hormones, drugs, and poisons), and medical problems that compromise regulation of
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intestinal
function. These studies in acute diarrhea support the normalizing aspect of the mechanism of action, regardless of the cause of the diarrhea, and are supportive of the supportive care
indication under development in IBD patients.
Mytesi
has safety studies that support chronic use for the current approved indication, and has demonstrated statistically significant results in multiple supportive
care settings, though not specifically in IBD patients. Next steps would include a Phase 2 proof of concept study for supportive care in patients with IBD.
Phase 2A study of crofelemer in 184 persons in a double-blind, placebo-controlled study for the
symptomatic treatment of acute diarrhea among travelers to Jamaica and Mexico.
The
study was designed to evaluate the effectiveness of crofelemer in the treatment of travelers' diarrhea.
A
total of 184 persons from the United States who acquired diarrhea in Jamaica or Mexico were enrolled in a double-blind, placebo-controlled study examining the effectiveness of three
doses of crofelemer in reducing illness. Subjects were treated with 125 mg, 250 mg, or 500 mg crofelemer or a matching placebo four times a day for 2 days. Subjects kept daily diaries of
symptoms and were seen each day for 3 days. Of the subjects, 169 (92%) were included in the efficacy analysis.
The
most common etiological agent identified was enterotoxigenic Escherichia coli, found in 19% of subjects. The mean time interval from taking the first dose of medication until passage
of the last unformed stool during 48-hour therapy (TLUS48) was 38.7 hours for the placebo group.
TLUS48
was shortened by crofelemer:
-
30.6
-
h
for the 125-mg dose group (p = 0.005);
-
30.3
-
h
for the 250-mg group; and
-
32.6
-
h
for the 500-mg group (p = 0.01).
Treatment
failures were seen in 29.3% in the placebo group compared with 7.3% (p = 0.01), 4.3 (p = 0.002), and 9.8 (p = 0.026) in the three treatment groups.
Crofelemer was well tolerated at all doses.
The
study provided statistically significant results of crofelemer use for shortening the duration of travelers' diarrhea. This antisecretory approach works directly against the
pathophysiology of travelers' diarrhea and is not likely to potentiate invasive forms of diarrhea or to produce posttreatment constipation.
Cholera/General Watery Diarrhea
According to the Centers for Disease Control and Prevention of the U.S. Department of Health & Human Services, Cholera is an acute,
diarrheal illness caused by infection of the intestine with the bacterium
Vibrio cholerae
. An estimated 3-5 million cases and over 100,000 deaths
occur each year around the world. The infection is often mild or without symptoms, but can sometimes be severe. Approximately one in 10 (5-10%) 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. At this
time, for example, the largest cholera outbreak in recorded history is occurring in Yemen.
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We
are investigating lechlemer for the indication of cholera/general watery diarrhea. Lechlemer is a distinct and proprietary Napo pharmaceutical formulation of a standardized botanical
extract, also sustainably derived from the
Croton lechleri
tree. We believe lechlemer represents a long-term pipeline opportunity as a second-generation
anti-secretory agent, on a global basis, for multiple gastrointestinal diseases. Additionally, we believe lechlemer, which has the same 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 a cholera indication. Priority review vouchers are granted by the FDA to
drug developers as an incentive to develop treatments for neglected diseases and rare pediatric diseases. If approved for this indication, lechlemer could serve as long-term pipeline anti-secretory
agent for cholera/general watery diarrhea in geographies where cost of goods is a critical factor, for example, in resource-constrained regions and countries in which a requirement exists for drug
prices to decrease annually.
We
have initiated CMC and have multiple animal and human studies in secretory diarrheas. We have also completed a successful trial design for cholera with an
anti-secretory mechanism of action, published studies with crofelemer in patients with cholera and other acute severe watery diarrhea disease.
Phase 2 study of crofelemer in the treatment acute, severely dehydrating watery diarrhea with confirmed cholera
with the use of an antibiotic (azithromycin) and oral rehydration therapy in 100 adult patients between 18 and 55 in Bangladesh.
A
total of 100 adult patients, from Bangladesh, between the ages of 18 and 55, with acute, severely dehydrating watery diarrhea with confirmed cholera were treated with crofelemer on a
background of an antibiotic (azithromycin) and oral rehydration therapy. After a four-hour period of rapid rehydration therapy, patients were randomized 1:2:2 to placebo or 125 mg or 250 mg oral dose
of crofelemer. Crofelemer or placebo doses were administered about one hour after the oral administration of azithromycin (1 gm dose). The primary objective was to evaluate the safety and effects of
crofelemer on reducing the watery stool output normalized to body weight (mL/kg) in the first 24 hours on the background of azithromycin and rehydration therapy. Crofelemer was well tolerated
and there were no drug related adverse events in this study. Both doses of crofelemer produced approximately 25-30% reduction in median watery stool volumes in the 0-6 and 0-12 hour period
following initiation of therapy. Crofelemer showed a strong trend in the reduction of watery stool output in the 0-6 hour and 0-12 hour intervals (p=0.07). Upon exclusion of three
outlier patients, the crofelemer dose of 125 mg produced a statistically significant reduction in the normalized stool output (p=0.028) and the dose of 250 mg crofelemer showed a strong trend for
reduction of watery stool output (p=0.07).
In
another study, the effects of crofelemer were evaluated in patients with acute dehydrating watery diarrhea caused by various bacterial pathogens, such as enterotoxic strains of
Escherichia coli (ETEC) and Vibrio cholerae infection. Crofelemer was evaluated in adult Indian patients with acute watery diarrhea of less than 24-hour duration with suspected bacterial infections,
without the use of antibiotics. In this study, patients received oral doses of placebo or crofelemer at a dose of 250 mg every 6 hours for 2 days on the background of oral rehydration
therapy only. The use of antibiotics was prohibited in this study. A total of 98 patients were randomized into this study (47 in placebo group and 51 in the crofelemer group). Primary endpoints for
this study were changes in stool weight, frequency, consistency, duration of diarrhea. Secondary endpoints included the assessment of clinical symptoms scored as total of 7-item GI index.
Clinical success was defined as no diarrhea within 48 hours from study start date and treatment failure was defined as no improvement/worsening of symptoms after 24 hours, fever, bloody
stools or dehydration.
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Results:
98 patients (51 crofelemer, 47 placebo) were enrolled in the study. 16 patients (4 in the crofelemer group and 12 in the
placebo group) used
antibiotics and were considered as treatment failures and were excluded from the "per protocol efficacy analysis". Groups were similar in age, weight, vital signs, stool frequency, consistency,
dehydration and GI index.
The
crofelemer group had improvement over baseline and compared to placebo at day 3. More specifically, crofelemer showed superior effects in reducing stool weight (61% vs 11%), stool
frequency (65% vs 21%), reversion to soft stool (92% vs 49%) and improved the 7-item GI index (70% C vs 33% P), (all p<0.05).
Crofelemer
was well tolerated with no related serious adverse events or concerning changes in lab values. Progression to dehydration and report of fecal incontinence was more common in
placebo group (p<0.05).
Conclusions:
Clinical success (cessation of diarrhea within 48 hours of 1st dose) was achieved in 79% of crofelemer patients
compared
to 28% placebo patients (p<0.05).
Other Product Potential Future Indications
Institutional Diarrhea
Patients in medical institutions such as hospitals often experience diarrhea following infection with
Clostridium
difficile
, an anaerobic bacillus shed in feces. According to the Centers for Disease Control and Prevention of the U.S. Department of Health & Human Services, any
surface, device, or material (e.g., commodes, bathing tubs, and electronic rectal thermometers) that becomes contaminated with feces may serve as a reservoir for the
C.
difficile
spores, which are transferred to patients mainly via the hands of healthcare personnel who have touched a contaminated surface or item. We believe development of an
approved formulation of crofelemer for use in
C. difficile
has the potential to help patients infected with
C.
difficile
leave the hospital sooner, help keep patients infected with
C. difficile
out of the hospital, and aid in controlling
C. difficile
contagion in institutional settings, which would also represent a significant economic benefit.
Competition
There are several significantly larger pharmaceutical companies competing with us in the gastrointestinal segment. These companies include
Valeant Pharmaceuticals International, Merck & Co., Inc., and Allergan plc as well as smaller pharmaceutical companies.
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 patients also use loperamide and over the counter anti-diarrheal remedies such as Mylanta or Kaopectate to treat their diarrhea, but these medicines affect motility and can result
in rebound diarrhea.
Diarrhea predominant irritable bowel syndrome.
Two drugs were approved in 2015 for the treatment of
diarrhea predominant irritable bowel syndrome, Allergan plc's Virbezi 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 Verbezi and Xifaxan employ extensive media and print
promotion for the commercialization of these products. We are seeking a partner to further the clinical development and commercialization of crofelemer for d-IBS. There are currently numerous trials
on going for d-IBS.
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Pediatric diarrhea.
Acute diarrhea in children is commonly treated by a change in diet, oral rehydration therapy and/or antibiotics,
assuming the
cause of the diarrhea is bacterial in nature. Children aged 12 and younger are advised not to use anti-motility drugs (loperamide for example) unless directed to do so by a physician. There are recent
clinical trials for probiotics and zinc sulfate. Other recent anti-diarrheal studies in children include a safety and tolerability study of Fidaxomicin for C difficile associated diarrhea.
Chemotherapy-induced diarrhea.
We are not aware of any FDA-approved drugs specifically indicated for chemotherapy-induced diarrhea. A
recent
Phase IIb trial of elsiglutide for the treatment of chemotherapy induced diarrhea in colorectal cancer patients did not meet statistical significance. 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.
Congenital Diarrheal Disorders and Short Bowel Syndrome.
We are not aware of any FDA-approved drugs specifically indicated for
Congenital Diarrheal
Disorders and Short Bowel Syndrome.
Cholera.
We are not aware of any FDA-approved drugs specifically indicated as an anti-secretory agent for use to address the devastating
dehydration
in cholera patients.
Irritable Bowel Syndrome (IBS).
If we receive regulatory approval for Mytesi for IBS, we expect to compete with major pharmaceutical
and
biotechnology companies that operate in the gastrointestinal space, such as Sucampo AG, Takeda Pharmaceuticals, Allergan, Inc., Ironwood Pharmaceuticals, Inc., Synergy
Pharmaceuticals Inc., Sebela Pharmaceuticals, Inc. and Salix Pharmaceuticals. Because Mytesi is approved with chronic safety and several of the other agents have safety concerns, there
is likely to be an opportunity for a polypharmacetuical approach to long-term management of these patients, removing a direct competitive scenario from Mytesi's potential entry to the marketplace and
disease indication.
To
our knowledge, there are currently no FDA-approved anti-secretory products, in particular which act locally in the gut with the chronic safety profile of crofelemer, in development or
on the market. Crofelemer represents a new tool in gastrointestinal disease management.
Distribution and Marketing Agreements
Napo has agreements in place with BexR, a distributor in Texas, for the distribution, marketing and sale of Mytesi. The agreement compensates
BexR with a percentage of net sales, as defined. Payments by Napo to BexR will be a specified percentage of net sales, ranging in the low double digits but in no instance exceeding 20% of net sales,
depending on the period in which the sales occur and the amount of such sales.
On
December 4, 2018, Napo entered into the Suspension, Settlement and Termination Agreement (the "Termination Agreement") with SmartPharma, LLC ("SmartPharma") and the
Company, as guarantor, pursuant to which the parties mutually agreed to suspend and then terminate the Strategic Marketing Alliance Agreement, dated April 4, 2016, between Napo and SmartPharma
(the "Alliance Agreement"). Under the Alliance Agreement, SmartPharma performed certain marketing and commercialization
activities (collectively, the "SP Services") with respect to Mytesi in consideration for the receipt of a specified percentage of net sales ranging in the low double digits but in no instance
exceeding 20% of net sales, depending on the amount of such sales. In the event of termination, Napo would be required to pay SmartPharma a termination fee equal to a certain percentage of net sales
generated within a specified period after the termination date.
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As
a result of our previously announced appointment of Robert J. Griffing as chief commercialization officer of Napo, the parties mutually agreed to enter into the Termination Agreement.
Pursuant to the terms of the Termination Agreement, upon SmartPharma's receipt of the payment due to SmartPharma for October 2018 sales as set forth in Article IV of the Alliance Agreement (the
"October Payment"), (i) the Alliance Agreement will be suspended by the parties retroactive as of October 31, 2018 (the "Effective Date"), (ii) the Alliance Agreement will remain
in suspension from the Effective Date until the earlier of (A) January 8, 2019 or (B) the date SmartPharma receives a one-time lump sum payment in the amount of $250,000 (the
"Buyout Fee"), (iii) after the Effective Date, SmartPharma will not be obligated to perform any of the SP Services and (iv) after Napo makes the October Payment and the Buyout Fee, all
payment obligations under Article IV of the Alliance Agreement will be deemed satisfied and the Alliance Agreement will automatically terminate.
All
payment obligations under the Termination Agreement are guaranteed by Jaguar. To the extent that the Buyout Fee is not made on or before January 8, 2019, the Alliance
Agreement will be reinstated and will remain in full force and effect, subject to certain amendments, including (i) the deletion of SmartPharma's obligation to perform SP Services and Napo's
right to terminate the Alliance Agreement and (ii) the extension of Napo's obligation to pay remuneration to SmartPharma in accordance with the terms of the Article IV of the Alliance
Agreement until the end of the renewal term of the Alliance Agreement in October 2021.
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 Pharmaceuticals Ltd. (Glenmark), a research-driven, global, integrated pharmaceutical company, is Napo's primary
manufacturer of crofelemer, the active pharmaceutical ingredient in Mytesi. Glenmark processes CPL into crofelemer utilizing a proprietary manufacturing process. The processing occurs at two
FDA-approved Glenmark facilities. Additionally, Napo plans to establish a third processing site, which will be operated by Indena S.p.A., 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 technology transfer and pilot manufacturing and has the equipment in place for the initiation of commercial scale manufacturing.
Canalevia
will be manufactured by the same process used to manufacture the API that was used in the animal safety studies and the human studies in support of the approval of Mytesi. Napo
has also licensed this intellectual property to third parties in connection with its agreements related to the manufacture of crofelemer.
In
May 2014 and June 2014, and as amended in February 2015, we entered into binding memorandums of understanding with Indena S.p.A. to negotiate a definitive commercial supply
agreement for the manufacture of crofelemer and the botanical extract, SB-300.
We
have contracts in place with all the manufacturers and third party testing labs required to manufacture Mytesi and lechlemer. We are finalizing a master service agreement with
Glenmark for the manufacture of crofelemer which addresses cost of goods reductions at increasing scale. We are in the
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of evaluating alternative and secondary third parties to reduce costs associated with finished product manufacture and the assays necessary to the release specifications of Mytesi.
Proprietary Library of Medicinal Plants
We possess a proprietary library of more than 2,300 medicinal plants.
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.
License Agreements
Termination, Asset Transfer and Transition Agreement
On September 19, 2017 (the "Transfer Date"), Napo entered into the Termination, Asset Transfer and Transition Agreement (the "Glenmark
Transition Agreement") with Glenmark. The Glenmark Transition Agreement supersedes the Glenmark Collaboration Agreement and returns to Napo certain rights which Napo licensed to Glenmark pursuant to
the Glenmark Collaboration Agreement related to the development and commercialization of crofelemer for certain specified human indications in India and 140 other countries largely in developing
regions (the "Transferred Assets").
As
a result of the execution of the Glenmark Transition Agreement, we, through Napo, now hold extensive global rights for Mytesi, and also hold commercial rights to the existing
regulatory approvals for crofelemer in Brazil, Ecuador, Zimbabwe and Botswana.
In
consideration for Glenmark's assignment and transfer of the Transferred Assets to Napo, Napo agreed to pay Glenmark in cash, within 45 days after receipt by Napo, 25% of any
payment that Napo 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 the certain specified human
indications in India and 140 other countries largely in developing regions any of the Transferred Assets, subject to certain limitations, until Glenmark has received a total of $7 million. As
additional consideration for the assignment and transfer of the Transferred Assets, Napo agreed (i) to enter into, within 90 days after the Transfer Date, a manufacturing and supply
agreement with Glenmark for crofelemer, which will be manufactured at either or both of Glenmark's facilities in India (this master service agreement is in final draft form, though not yet fully
executed) and (ii) to transfer and assign to Glenmark all right, title and interest in and to certain required dedicated equipment used to manufacture crofelemer located at Glenmark's
Ankleshwar facility, subject to certain limitations.
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). The patent family associated with International Patent publication WO1998/16111 relates to enteric protected formulations
of proanthocyanidin polymers isolated from Croton spp. or Calophyllum spp., including crofelemer, and methods of treating watery diarrhea using these enteric protected formulations. There is one U.S.
patent in force in this family, US 7,341,744, which has a term until at least June 23, 2019, which term has been extended under 35 U.S.C. 156 by 1,075 days. Based
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upon
the June 23, 2019 expiration date, the expiration date for crofelemer is June 2, 2022, to account for the regulatory delay in obtaining human marketing approval for crofelemer.
Napo
additionally 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, Canada, China, and Malaysia. 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, and Taiwan and pending applications in Bangladesh, Bolivia, Chile, Mexico, Panama, Peru, Paraguay, Thailand, 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
an allowed application in Canada, which have estimated expiration dates of April 30, 2027. Napo has a pending U.S. non provisional application for the treatment of chemotherapy induced diarrhea
(CID) with crofelemer filed on March 9, 2018 and two International Patent Applications on other human indications including for the treatments of short bowel syndrome and congenital diarrhea
disorder filed on May 31, 2018.
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 India, Russia, and South Africa and pending applications in Argentina, Brazil, and 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. Napo holds a patent in South Africa
covering non enteric formulations of crofelemer estimated to expire August 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.
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 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 is establishing processes and resources to provide
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oversight
of the development, approval processes and launch of its products and to position those products in order to gain market share.
In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act ("FDCA"), and its 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 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 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
GLP, regulations;
-
-
submission to the FDA of an investigational new drug application, or IND, which must become approved before human clinical trials may begin;
-
-
approval by an institutional review board, or IRB, of the study protocol and informed consent forms for the clinical site before each trial may
be initiated. Multiple sites may necessitate the involvement of multiple IRBs and submissions;
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performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, requirements to establish
the safety and efficacy of the proposed drug product for each indication;
-
-
submission to the FDA of an NDA which would include the study reports of the clinical trials, chemistry and manufacturing of the active
pharmaceutical ingredient and the final dosage form as well as other required sections to be included in the NDA;
-
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satisfactory completion of an FDA advisory committee review, if applicable;
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-
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance
with current good manufacturing practice, or cGMP, 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 efficacy. 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
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clinical
trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Trials
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 GCP 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.govwebsite.
Human
clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
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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.
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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.
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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.
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
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
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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:
-
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public health concerns emerge that were unrecognized at the time of the protocol assessment;
-
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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;
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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
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 FDA because the FDA has approximately two months to make a "filing" decision.
In
addition, under the Pediatric Research Equity Act of 2003 ("PREA"), 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.
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.
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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 cGMP 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 GCP 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 of the 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
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, 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
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to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP 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 cGMP 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 cGMP compliance.
Once
an 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;
-
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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;
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product seizure or detention, or refusal to permit the import or export of products; or
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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.
To the extent that any of Napo's product candidates, once approved, are sold in a foreign country, Napo may be subject to similar foreign laws
and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs
and reporting of payments or other transfers of value to healthcare professionals.
In
order to market Napo's future products in the EEA (which is comprised of the 28 Member States of the EU plus Norway, Iceland and Liechtenstein) and many other foreign jurisdictions, a
sponsor must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of
marketing authorizations:
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-
the Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for
Medicinal Products for Human Use of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of
products, such as biotechnology medicinal products, orphan medicinal products and medicinal products indicated
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for
the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet
authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU; and
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National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are
available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can
be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved
simultaneously in various Member States through the Decentralized Procedure.
Under
the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the
product on the basis of scientific criteria concerning its quality, safety and efficacy.
In
the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing
authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when
applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market
exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial authorization of the reference
product in the EU. The 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 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.
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.
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.
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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 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 payor, 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 payor.
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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, or 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 payors, 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.
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 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, or 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.
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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 payors 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 payors. Third-party payors include government authorities, managed care plans, private health insurers and other organizations. In the United
States, the process for determining whether a third-party payor 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 payor will pay for the product once coverage is approved. Third-party payors 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 payor 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 payor'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
payor to payor. One third-party payor's decision to cover a particular medical product or service does not ensure that other payors 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 payor 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 new products. In addition, in some countries, cross border imports from low-priced markets exert a 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 payors 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 payors 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.
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A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors 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 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 coverage 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 implementation of certain provisions
of the ACA. In addition, there have been judicial and Congressional challenges to certain aspects of the ACA, and Napo expects there will be additional challenges and amendments to the ACA in the
future. For example, in January 2017, the U.S. House of Representatives and Senate passed legislation, which, if signed into law, would repeal certain aspects of the ACA. In addition, Congress could
consider subsequent legislation to replace those elements of the ACA if so repealed.
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 payors. 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.
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 drug and non-drug products. To comply with these regulatory requirements, we are establishing 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 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. 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.
The
approval of prescription drugs intended for animal use is regulated by the FDA's Center for Veterinary Medicine ("CVM"). The CVM consists of six offices that work together to, in
part, approve new drugs for commercialization and thereafter monitor those commercialized drugs once in the market. The Office of New Animal Drug Evaluation ("ONADE"), is the lead office for reviewing
novel drug candidates. We, as the sponsor of a novel drug candidate, commence the development and approval process by initiating communication with the ONADE and opening an INAD file. As part of this
process, we will also schedule a discussion of the novel drug's development plan in order to obtain agreement from the CVM for the number, type and design of studies needed to obtain FDA
approval of the novel drug.
As
required by the FDA, new animal drug products must obtain marketing approval through the NADA process. Under the Administrative New Animal Drug Application, or Administrative NADA,
process, a sponsor can engage in a phased submission of the required technical sections of an NADA, known as a rolling NADA, as opposed to submitting the entire application at once with a standard
NADA. The requirements for all NADAs are the same regardless of whether a sponsor chooses the rolling NADA or the standard NADA submission. Under the phased review, once all technical sections have
been submitted and reviewed, the sponsor submits an Administrative NADA to reflect that all technical sections of the NADA have been submitted and reviewed, each such technical section meets the
requirements for approval and the CVM has issued technical section complete letters for each technical section. The phased review and Administrative NADA allow a drug sponsor to engage with the FDA as
to each technical section to ensure that each section meets all requirements prior to submission of the application for approval. Phasing of NADA submissions is a voluntary process.
Once
the tasks set forth in the development plan have been completed, including the clinical work as well as the chemistry and manufacturing work (feasibility, validation and stability
of the drug inclusive), We, as the novel drug sponsor will need to provide to the FDA through the application process, information as to the safety and efficacy of the drug candidate, and, if needed,
human food safety studies. These food safety studies are only required for drugs intended for use in production animals, and we currently have no plans to develop drugs for production animals.
Additionally, the application will contain a module on CMC, which describes the plan for manufacturing the drug including the API, the final formulation, where it will be made, how it will be made,
how the drug will be packaged, how it can be stored, the conditions required for storage and how long it can be stored
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before
expiry. A major part of the CMC section is the analysis we employ to ensure that the manufactured drug is of a high quality, is consistently manufactured under cGMP and is stable. Other
significant components to the application we have to complete before receiving drug approval includes a draft label that will list specific information such as dosing information, intended use,
warnings, directions for use, and other information as required by the regulations. The package insert that will contain information on studies, warnings, drug interactions, intended use and dosing is
considered part of the label in addition to that which is adhering to the container itself. The CVM ensures that the labeling provides all the necessary information to use the drug safely and
effectively, and that it clearly discloses the risks associated with the drug.
The Minor Use and Minor Species Animal Health Act ("MUMS Act"), became effective in August 2004. The purpose of the MUMS Act was twofold: first,
to encourage the development and availability of more animal drugs that are intended to be used in a major species defined as dogs, cats, cattle, horses, chickens, turkeys and pigs to treat diseases
which occur infrequently or in limited geographic areas, therefore having an impact on a smaller number of animals on a yearly basis; and second, to encourage the development and availability of
animal drugs for use in minor species (defined as all animals other than humans that are not one of the major species). The drug sponsor may seek conditional approval of the drug product provided the
Office of Minor Use Minor Species ("OMUMS") acknowledges that the intended use fits within a small number of animals treated per annum. A drug does not have to be designated to be eligible for
conditional approval, however if OMUMS designates a MUMS drug, certain incentives and exclusivities are available to the sponsor. The MUMS designation is modeled on the orphan-drug designation for
human drug development and has certain financial incentives available to encourage MUMS drug development such as the availability of grants to help with the cost of the MUMS drug development. Also,
drug developers of MUMS drugs are eligible to apply for a waiver of the user fees once the MUMS designation has been given by OMUMS. We believe that we qualify for MUMS designation for Canalevia as a
minor use in a major species because the estimated total number of dogs in the United States affected by CID is less than 70,000. We also believe that Canalevia will qualify for MUMS designation for
EID because, in our estimate, the total number of dogs in the United States affected by EID on an annual basis is less than 70,000. To obtain conditional approval of a MUMS drug, the company must
submit CMC and safety data similar to that required for an NADA, as well as data suggesting a reasonable expectation of effectiveness. After the submission and the review of the application, the FDA
through the CVM can then grant a conditional approval (CA-1). This approval allows for a commercialization of the product, while the sponsor continues to collect the substantial evidence of
effectiveness required for a full NADA approval. The sponsor has up to five years to demonstrate substantial evidence of effectiveness for a previously conditionally approved drug. Ideally, MUMS
designation helps move the product forward in development; however, it may not shorten the
time to full commercialization. A sponsor that gains approval or conditional approval for a MUMS designated drug receives seven years of marketing exclusivity.
As we announced in April 2016, we obtained protocol concurrence from the FDA for our pivotal trial of Canalevia that we initiated in December
2015 for acute diarrhea in dogs. Under this process, a protocol is submitted to the FDA voluntarily by a drug sponsor. The FDA review of the protocol for a pivotal study makes it more likely that the
study will generate information the sponsor needs to demonstrate whether the drug is safe and effective for its intended use. It creates an expectation by the sponsor that the FDA will not later alter
its perspectives on these issues unless public or animal health concerns appear that were not recognized at the time of protocol assessment. Even if FDA issues a protocol concurrence, ultimate
approval of an NADA by the FDA is not guaranteed because a final
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determination
that the agreed-upon protocol satisfies a specific objective, such as the demonstration of efficacy, or supports an approval decision, will be based on a complete review of all the data
submitted to the FDA. Even if we were to obtain protocol concurrence, such concurrence does not guarantee that the results of the study will support a particular finding or approval of the new drug.
We are currently planning on seeking MUMS designation for some of our prescription drug products and if we receive such a designation, we will
be entitled to a seven-year marketing exclusivity, which means that we will face no competition from another sponsor marketing the same drug in the same dosage form for the same intended use. If we
were to lose such designation or not receive such designation but our application as a new animal drug is found to be a new chemical entity that meets the criteria described by the FDA, we would be
entitled to a five-year marketing exclusivity. In order to receive this five-year exclusivity, the FDA would have to find in its approval of our application that our NADA contains an API not
previously approved in another application, that the application itself is an original application, not a supplemental application, and that our application included the following studies: one or more
investigations to demonstrate substantial evidence of
effectiveness of the drug for which we are seeking approval; animal safety studies and human food safety studies (where applicable). If the NADA is seeking approval of a drug for which we have
received conditional approval, we, upon approval would still be entitled to a five-year marketing exclusivity provided we meet the criteria as set forth above. If, however, our NADA is for a drug for
which the FDA has determined that the drug contains an API that has previously been approved, regardless of whether the original approval was for use in humans or not, we may only be entitled to a
three-year marketing exclusivity provided that the NADA is an original, not supplemental, application and contains both safety and efficacy studies demonstrating the safety and efficacy of the drug
which is the subject of the application. We have received MUMS designation for Canalevia for the indication of chemotherapy-induced diarrhea, or CID, in dogs. Additionally, the FDA has indicated that
the use of Canalevia for the treatment of EID in dogs qualifies as a "minor use", which means that Canalevia is eligible for conditional approval for the indication of EID in dogs.
As
we announced on March 8, 2018, the U.S. Food & Drug Administration's Center for Veterinary Medicine (CVM) has indicated that the Company's Reasonable Expectation of
Effectiveness (RxE) Technical Section is complete towards conditional approval of Canalevia (crofelemer delayed-release tablets) for treatment of CID in dogs, based on CVM's review of the results of
Jaguar's completed pilot study (CANA-001) of Canalevia for this indication. If Canalevia is approved for CID in dogs, we expect to conduct the commercial launch of Canalevia for these indications in
2020.
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 it eventually may sell its product candidates.
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 non-prescription products are not regulated by section 201(g) of the Federal Food, Drug, and Cosmetic Act, which the FDA is authorized to administer.
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Our animal prescription drug product candidates currently in development, if approved, may eventually face generic competition in the United States and in the EU
after the period of exclusivity has expired. In the United States, a generic animal drug may be approved pursuant to an abbreviated new animal drug application ("ANADA"). With an ANADA, a generic
applicant is not subject to the submission of new clinical and safety data but instead must only show that the proposed generic product is a copy of the novel drug product, and bioequivalent to the
approved novel product. However, if our product candidates are the first approved by the FDA or the EMA as applicable for use in animals, they will be eligible for a five-year marketing exclusivity in
the United States and 10 years in the EU thereby prohibiting generic entry into the market. If the product has MUMS designation it has a seven-year marketing exclusivity.
We
do not believe that our animal non-prescription 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 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. 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 ("GRAS"), and therefore, not subject to a feed Additive Petition approval prior to use. However, the 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 products are not intended to diagnose, cure, mitigate, treat
or prevent disease and therefore, do not fit within the definition of an animal drug. Our non-prescription products are intended to support a healthy gut, support fluid retention, and normalize stool
formation in animals suffering from scours. Additionally, because a previously marketed human formulation of the botanical extract in our non-prescription products was considered a dietary supplement
subject to the Dietary Supplement Health and Education Act of 1994 (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.
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
below, there are currently no claims or actions
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pending
against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.
March 2018 Demand Letter relating to 2018 Special Meeting of Stockholders
On March 27, 2018, we received a demand letter from a law firm representing a purported stockholder, relating to certain approvals
obtained at a special meeting of stockholders on March 12, 2018 (the "2018 Special Meeting"). The demand letter alleges that we miscalculated the votes with respect to (i) the proposal
to amend our Third Amended and Restated Certificate of Incorporation as filed with Secretary of State of the State of Delaware on March 15, 2018 (the "COI"), which increased the authorized
shares of Common Stock from 250,000,000 to 500,000,000 (the "Share Increase Proposal") and (ii) the proposal to amend the COI to effect a reverse stock split at a ratio of not less than
1-for-1.2 and not greater than 1-for-10 (the "Former Reverse Stock Split Proposal").We did not implement the Former Reverse Stock Split Proposal. In addition, at the 2018 annual meeting of
stockholders held on May 18, 2018, stockholders approved amendments to the COI to (i) effect a reverse stock split at a ratio of not less than 1-for-11 and not greater than 1-for-15 and
(ii) decrease the number of authorized shares of Common Stock to 150,000,000.
On
September 5, 2018, we responded to the law firm, indicating that the Board unanimously rejected the demands set forth in the demand letter. While no proceedings with respect to
the demand letter have been initiated by the purported stockholder to date, we believe that the allegations set forth in the demand letter are without merit and would intend to vigorously defend
against any such proceeding.
July 2017 Complaint Relating to the Merger
On July 20, 2017, a putative class action complaint was filed in the United States District Court, Northern District of California, Civil
Action No. 3:17-cv-04102, by Tony Plant (the "Plaintiff") on behalf of shareholders of the Company who held shares on September 30, 2017 and were entitled to vote at the 2017 Special
Shareholders Meeting, against the Company and certain individuals who were directors as of the date of the vote (collectively, the "Defendants"), in a matter captioned Tony Plant v. Jaguar Animal
Health, Inc., et al., making claims arising under Section 14(a) and Section 20(a) of the Exchange Act and Rule 14a-9, 17 C.F.R. § 240.14a-9, promulgated
thereunder by the SEC. The claims alleged false and misleading information provided to investors in the Joint Proxy Statement/Prospectus on Form S-4 (File No. 333-217364) declared
effective by the SEC on July 6, 2017 related to the solicitation of votes from shareholders to approve the merger and certain transactions related thereto. We accepted service of the complaint
and summons on behalf of itself and the United States-based director Defendants on November 1, 2017. We have not accepted service on behalf of, and Plaintiff has not yet served, the
non-U.S.-based director Defendants.
On
October 3, 2017, Plaintiff filed a motion seeking appointment as lead plaintiff and appointment of Monteverde & Associates PC as lead counsel. That motion was granted.
Plaintiff filed an amended complaint against the Company and the United States-based director Defendants on January 10, 2018. The Defendants filed a motion to dismiss on March 12, 2018,
for which oral arguments were held on June 14, 2018. The court dismissed the complaint on September 20, 2018. Plaintiff was entitled to amend the complaint within 20 days from the
date of dismissal. On October 10, 2018, Plaintiff amended the complaint to focus on our commercial strategy in support of Equilevia and the related disclosure statements in the Form S-4
described above. On November 6, 2018, the Defendants moved to dismiss the second amended complaint. The Defendants argue in their motion that the complaint fails to state a claim upon which
relief can be granted because the omissions and misrepresentations alleged in the complaint are immaterial as a matter of law. Plaintiff's memorandum of law in opposition to the Defendants' motion to
dismiss was due on December 21, 2018. If the Plaintiff were able to prove its allegations in this matter and to establish the damages it asserts, then an adverse
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ruling
could have a material impact on us. We believe that it is not probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount
of any potential loss is not reasonably estimable.
Corporate Information
We were incorporated in the State of Delaware on June 6, 2013. Our principal executive offices are located at 201 Mission Street,
Suite 2375, San Francisco, CA 94015 and our telephone number is (415) 371-8300. Our website address is www.jaguar.health. The information contained on, or that can be accessed through,
our website is not part of this prospectus. 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.
Employees
As of December 31, 2018, we had 40 employees. Six employees hold D.V.M. or Ph.D. degrees. 13 of our employees are engaged in
research and development activities and 20
employees are engaged in sales and marketing. None of our employees are represented by labor unions or covered by collective bargaining agreements.
Description of Properties
Our corporate headquarters are located in San Francisco, California, where we lease 6,311 rentable square feet of office space from CA-Mission
Street Limited Partnership. Our lease agreement expires on September 30, 2020. We believe that our existing facilities are adequate for our near term needs.
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PLAN OF DISTRIBUTION
On January 7, 2019, we entered into the CSPA with Oasis Capital, the terms of which provided for what is sometimes termed an equity line
of credit arrangement. Upon the terms and subject to the conditions set forth therein, Oasis Capital is committed to purchase up to 5,333,333 shares of Common Stock (the "Original Purchase Shares") at
a fixed price of $0.75 per share, or such price as mutually agreed upon between the Company and Oasis Capital from time to time. As an inducement to Oasis Capital to enter into the CSPA, we issued
Oasis Capital an additional 300,000 shares of Common Stock (the "Commitment Shares") on the date of execution of the CSPA. We have the option to increase the equity line of credit by an additional
8,000,000 shares of Common Stock (the "Additional Purchase Shares" and, together with the Original Purchase Shares, the "Purchase Shares") by notifying Oasis Capital any time after the effective date
of the CSPA, which option we exercised on March 18, 2019.
From
time to time over the term of CSPA, and at our sole discretion, we may present Oasis Capital with purchase notices ("Purchase Notices") specifying a number of Purchase Shares to be
purchased by Oasis Capital pursuant to the terms of the CSPA. Each Purchase Notice shall require Oasis Capital to buy Purchase Shares equal to the lesser of (a) 500,000 shares or
(b) 200% of the average trading volume of the Common Stock in the 5 business days immediately preceding the applicable Purchase Date (each such purchase, a "Regular Purchase"). The "Purchase
Date" means with respect to any Regular Purchase, the business day that the respective portion of the Purchase Shares are reflected in Oasis Capital's account. Each such purchase of Purchase Shares
will have an individual closing within one business day following the receipt of the Purchase Shares for the applicable Purchase Notice.
With
respect to the Purchase Shares that are the subject of any Purchase Notice, Oasis Capital will deliver to us an amount equal to the product of (x) the Purchase Price and
(y) the number of Purchase Shares set forth on such Purchase Notice, minus deposit and clearing costs associated with such purchase.
We
may issue Purchase Shares at any time on or after the date of the CSPA until the date on which Oasis Capital has purchased 13,333,333 Purchase Shares, unless the CSPA is terminated
earlier in accordance with its terms; provided, that, we are not permitted to submit more than one Purchase Notice to Oasis Capital in any 3 business day period without Oasis Capital's consent.
Further, the number of Purchase Shares to be purchased by Oasis Capital may not exceed the number of shares that, when added to the number of shares of the Common Stock then beneficially owned by
Oasis Capital, would exceed 4.99% of the shares of Common Stock outstanding. Additionally, we are not required to deliver Purchase Shares, and Oasis Capital is not entitled to receive such Purchase
Shares, if the issuance of such Purchase Shares would exceed the aggregate number of shares of the Common Stock that we may issue without breaching our obligations under the rules or regulations of
the Nasdaq Capital Market.
We
have agreed to indemnify Oasis Capital, along with its affiliates, members, officers, directors, employees, and authorized agents or other representatives (collectively, the
"Indemnitees"), from and against all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith, and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by us in the CSPA or related transaction documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in CSPA or related transaction documents or any other certificate, instrument or document contemplated thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of the CSPA or related transaction documents or
any other certificate, instrument or document contemplated hereby or
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thereby,
other than with respect to Indemnified Liabilities which directly and primarily result from (A) a breach of any of Oasis Capital's representations and warranties, covenants or
agreements contained in the CSPA, or (B) the gross negligence, bad faith or willful misconduct of CSPA or any other Indemnitee.
Oasis
Capital may resell the Purchase Shares to the public from time to time. With respect to the resale of the Purchase Shares only (but not the Commitment Shares), Oasis Capital and
any broker-dealer participating in the distribution of the shares is considered an "underwriter" within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the
"Securities Act").
Oasis
Capital and any unaffiliated broker-dealer may, from time to time, sell any or all of the Purchase Shares, directly or through one or more underwriters, broker-dealers or agents,
in any manner permitted by but will be subject to liability under applicable state and federal securities laws and the requirements of the Securities Act and the Exchange Act, including without
limitation, Rule 10b-5 and Regulation M under the Exchange Act, as well as the rules and regulations of FINRA and the NASDAQ Capital Market. These rules and regulations may limit the
timing of purchases and sales of shares of Common Stock by Oasis Capital or any unaffiliated broker-dealer. Under these rules and regulations, Oasis Capital and any unaffiliated
broker-dealer:
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may not engage in any stabilization activity in connection with our securities;
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must furnish each broker which offers shares of our Common Stock covered by the prospectus supplement with the number of copies of such
prospectus supplement which are required by each broker; and
-
-
may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted
under the Exchange Act.
These
restrictions may affect the marketability of the shares of Common Stock by Oasis Capital and any unaffiliated broker-dealer. Notwithstanding the foregoing, short sales (as defined
in Rule 200 of Regulation SHO under the Exchange Act), whether by Oasis Capital or on its behalf, are prohibited under the CSPA during the term of the CSPA. The sale after delivery of a
Purchase Notice of such number of shares of Common Stock reasonably expected to be purchased under a Purchase Notice shall not be deemed a "short sale".
If
the shares of Common Stock are sold through underwriters or broker-dealers, Oasis Capital will be responsible for underwriting discounts or commissions or agent's commissions. The
Purchase Shares may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in one or more of the following methods:
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-
in transactions involving crosses or block trades;
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in transactions on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
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in transaction on the over-the-counter market;
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-
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
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-
through the writing of options, whether such options are listed on an options exchange or otherwise;
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-
in ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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-
in block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
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-
through purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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in an exchange distribution in accordance with the rules of the applicable exchange;
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in privately negotiated transactions;
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by sales pursuant to Rule 144;
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-
through broker-dealers which may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
-
-
through a combination of any such methods of sale; and
-
-
through any other method permitted pursuant to applicable law.
If
Oasis Capital effects such transactions by selling Purchase Shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive
commissions in the form of discounts, concessions or commissions from Oasis Capital or commissions from purchasers of the Purchase Shares for whom they may act as agent or to whom they may sell as
principal.
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LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by our counsel, Reed Smith LLP, Palo Alto, California.
EXPERTS
The financial statements of the Company as of December 31, 2017 and 2016 and for each of the two years in the period ended
December 31, 2017 incorporated by reference in this prospectus supplement have been so incorporated in reliance on the reports of BDO USA, LLP, an independent registered public
accounting firm (the reports on the financial statements contains an explanatory paragraph regarding the Company's ability to continue as a going concern), incorporated herein by reference, given on
the authority of said firm as experts in auditing and accounting.
The
consolidated financial statements of Napo as of December 31, 2016 and for the year ended December 31, 2016 incorporated by reference in this prospectus supplement have
been audited by Macias Gini & O'Connell LLP, as stated in their report incorporated by reference in this prospectus supplement (which report contains an explanatory paragraph regarding
Napo's ability to continue as a going concern), and are incorporated by reference in reliance upon such report and upon the authority of such firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC's public reference facilities at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the public reference facilities. SEC filings are also available at the SEC's web site at http://www.sec.gov.
This
prospectus supplement is only part of a registration statement on Form S-3 that we have filed with the SEC under the Securities Act and therefore omits certain information
contained in the registration statement. We have also filed exhibits and schedules with the registration statement that are excluded from this prospectus supplement, and you should refer to the
applicable exhibit or schedule for a complete description of any statement referring to any contract or other document. You may inspect a copy of the registration statement, including the exhibits and
schedules, without charge, at the public reference room or obtain a copy from the SEC upon payment of the fees prescribed by the SEC.
We
also maintain a website at www.jaguar.health, through which you can access our SEC filings. The information set forth on, or accessible from, our website is not part of this
prospectus supplement or the accompanying prospectus.
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file with them. Incorporation by reference allows us to disclose important
information to you by referring you to those other documents. The information incorporated by reference is an important part of this prospectus supplement, and information that we file later with the
SEC will automatically update and supersede this information. This prospectus supplement omits certain information contained in the
registration statement, as permitted by the SEC. You should refer to the registration statement, including the exhibits, for further information about us and the securities we may offer pursuant to
this prospectus supplement. Statements in this prospectus supplement or the accompanying prospectus regarding the
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provisions
of certain documents filed with, or incorporated by reference in, the registration statement are not necessarily complete and each statement is qualified in all respects by that reference.
Copies of all or any part of the registration statement, including the documents incorporated by reference or the exhibits, may be obtained upon payment of the prescribed rates at the offices of the
SEC listed above in "Where You Can Find More Information." The documents we are incorporating by reference are:
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our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed on April 9, 2018;
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our definitive proxy statement and definitive additional materials, on Schedule 14A, relating to our Annual Meeting of Stockholders held
on May 18, 2018, filed on April 24, 2018;
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our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018 filed on May 15, 2018, our Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 2018 filed on August 13, 2018, and our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2018 filed on November 19, 2018;
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our Current Reports on Form 8-K filed on January 2, 2018, February 16, 2018, February 28, 2018, March 2,
2018, March 12, 2018, March 27, 2018, April 2, 2018, April 18, 2018, May 18, 2018, May 29, 2018, June 1, 2018, June 11, 2018, June 18,
2018, June 20, 2018, July 5, 2018, August 29, 2018, September 4, 2018, September 12, 2018, September 25, 2018, October 5, 2018, November 14,
2018, December 10, 2018, January 8, 2019, February 26, 2019, March 5, 2019, and March 15, 2019;
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-
the description of our common stock contained in our registration statement on Form 8-A filed on October 30, 2014 (Registration
No. 001-36714) with the SEC, including any amendment or report filed for the purpose of updating such description; and
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all reports and other documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date of this prospectus supplement and prior to the termination or completion of the offering of securities under this prospectus supplement shall be deemed to be incorporated by reference in this
prospectus supplement and to be a part hereof from the date of filing such reports and other documents.
Unless
otherwise noted, the SEC file number for each of the documents listed above is 001-36714.
In
addition, all reports and other documents filed by us pursuant to the Exchange Act after the date of this prospectus supplement shall be deemed to be incorporated by reference into
this prospectus supplement.
Any
statement contained in this prospectus supplement, the accompanying prospectus, or in a document incorporated or deemed to be incorporated by reference into this prospectus
supplement or the accompanying prospectus will be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement,
the accompanying prospectus, or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus supplement modifies or supersedes the statement. Any statement
so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement or accompanying prospectus.
You
may request, orally or in writing, a copy of any or all of the documents incorporated herein by reference. These documents will be provided to you at no cost, by contacting: Investor
Relations, Jaguar Health, Inc., 201 Mission Street, Suite 2375, San Francisco, CA, 94105 or call (415) 371-8300.
You
should rely only on information contained in, or incorporated by reference into, this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide
you with information different from that contained in this prospectus supplement and the accompanying prospectus. We are not making offers to sell the securities in any jurisdiction in which such an
offer or
solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.
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JAGUAR HEALTH, INC.
$60,000,000
Common Stock
Warrants
Subscription Rights
Units
456,866 Shares of Common Stock
Offered by the Selling Shareholders
This prospectus relates to (i) common stock, warrants and subscription rights that we may sell from time to time in one or more offerings
up to a total public offering price of $60,000,000 on terms to be determined at the time of sale, which securities may be sold either individually or in units, and (ii) the proposed resale or
other disposition from time to time of up to 456,866 shares of Jaguar Health, Inc. common stock, $0.0001 par value per share, by the selling shareholders identified in this prospectus. We will
not receive any of the proceeds from the sale or other disposition of common stock by the selling shareholders. We and the selling shareholders may offer securities at the same time or in separate
transactions.
Each
time we sell securities hereunder, we will provide specific terms of these securities in supplements to this prospectus. You should read this prospectus and any supplement
carefully before you invest. This prospectus may not be used to offer and sell securities unless accompanied by a prospectus supplement for those securities.
These
securities may be offered and sold in the same offering or in separate offerings, directly to purchasers, through dealers or agents designated from time to time, to or through
underwriters or through a combination of these methods. See "Plan of Distribution" in this prospectus. We may also describe the plan of distribution for any particular offering of these securities in
any applicable prospectus supplement. If any agents, underwriters or dealers are involved in the sale of any securities in respect of which this prospectus is being delivered, we will disclose their
names and the nature of our or the selling shareholders' arrangements with them in a prospectus supplement. The net proceeds we expect to receive from any sale of securities offered by us will also be
included in a prospectus supplement.
The
selling shareholders or their pledgees, assignees or successors-in-interest may offer and sell or otherwise dispose of the shares of common stock described in this prospectus from
time to time through public or private transactions at prevailing
market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling shareholders will bear all commissions and discounts, if any, attributable to the sales of
shares. We will bear all other costs, expenses and fees in connection with the registration of the shares. See "Plan of Distribution" beginning on page 21 for more information about how the
selling shareholders may sell or dispose of their shares of common stock.
Our
voting common stock is listed on the NASDAQ Capital Market, under the symbol "JAGX." On September 11, 2017, the last reported sale price of our voting common stock on the
NASDAQ Capital Market was $6.60 per share.
As
of July 31, 2017, the aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the price at which the common equity
was last sold or the average bid and asked price of such common equity on that date, was approximately $37,422,042.56, based on 4,495,372 shares of outstanding common stock, of which 4,455,005 were
held by non-affiliates. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell securities in a public primary offering with a value exceeding more than one-third of
our public float in any 12-month period so long as our public float remains below $75.0 million. We have not offered any securities pursuant to General Instruction I.B.6 of
Form S-3 during the 12 calendar months prior to and including the date of this prospectus.
Investing in our common stock involves a high degree of risk. Before deciding whether to invest in our securities, you
should consider carefully the risks that we have described on page 5 of this prospectus under the caption "Risk Factors" and in the documents incorporated by reference into this
prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is September 14, 2017.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the "SEC") using a "shelf"
registration process. Under this shelf process, we may sell any combination of the securities described in this prospectus in one or more offerings up to a total public offering price of $60,000,000.
This
prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific
information about the securities being offered and the terms of that offering. The prospectus supplement may also add to, update or change information contained in this prospectus.
The
selling shareholders may also use the registration statement to offer and sell or otherwise dispose of up to an aggregate of 456,866 shares of our common stock from time to time in
the public market. Neither we nor the selling shareholders have authorized any dealer, salesman or other person to give any information or to make any representation other than those contained or
incorporated by reference in this prospectus. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus. This prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any of our securities other than the securities covered hereby, nor does this prospectus constitute an offer to sell or the
solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus
applicable to those jurisdictions.
We
further note that the representations, warranties and covenants made in any agreement that is filed as an exhibit to any document that is incorporated by reference in the accompanying
prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be
deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations,
warranties and covenants should not be relied on as accurately representing the current state of our affairs.
You
should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front cover of this prospectus or that any
information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or securities are sold
or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus, including the Information Incorporated by Reference herein, and any
prospectus supplement in making your investment decision. You should also read and consider the information in the documents to which we have referred you under the captions "Where You Can Find More
Information" and "Incorporation of Information by Reference" in this prospectus.
Unless
the context otherwise requires, references in this prospectus to "Jaguar," the "Company," "we," "us," and "our" refer to Jaguar Health, Inc.
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PROSPECTUS SUMMARY
The following is a summary of what we believe to be the most important aspects of our business and the offering of our
securities under this prospectus. We urge you to read this entire prospectus, including the more detailed financial statements, notes to the financial statements and other information incorporated by
reference from our other filings with the SEC. Each of the risk factors could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an
investment in our securities.
Overview
We are a natural-products pharmaceuticals company focused on the development and commercialization of novel, sustainably derived
gastrointestinal products for both human prescription use and animals on a global basis. Our wholly-owned subsidiary, Napo Pharmaceuticals, Inc. ("Napo"), focuses on the development and
commercialization of proprietary human gastrointestinal pharmaceuticals for the global marketplace from plants used traditionally in rainforest areas. 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. In the animal health space, we focus on developing and commercializing
first-in-class gastrointestinal products for companion and production animals, foals, and high value horses.
We
are pursuing a follow-on indication for Mytesi in chemotherapy-induced diarrhea, an important supportive care indication for patients undergoing primary or adjuvant chemotherapy for
cancer treatment. Mytesi is in development for orphan-drug indications for infants and children with congenital diarrheal disorders and short bowel syndrome; as a second-generation anti-secretory
agent for use in cholera patients; and for supportive care for irritable bowel syndrome (IBS) and inflammatory bowel disease (IBD). Mytesi® has demonstrated benefit to D-IBS patients in
published Phase 2 studies.
Canalevia
is our lead veterinary prescription drug product candidate, intended for treatment of various forms of diarrhea in dogs. We achieved statistically significant results in a
multicenter canine proof-of-concept study completed in February 2015, supporting the conclusion that Canalevia treatment is superior to placebo. As we announced in December 2015, the pivotal clinical
field study to evaluate the safety and effectiveness of Canalevia for acute diarrhea in dogs is underway. Two-hundred dogs were enrolled in the Canalevia pivotal study, which completed enrollment in
January 2017. We have received Minor Use in a Minor Species (MUMS) designation for Canalevia for Chemotherapy-Induced Diarrhea (CID) in dogs, and we are pursuing MUMS designation for Canalevia for the
indication of exercise-induced diarrhea (EID) in dogs. If Canalevia is approved for CID in dogs, we expect to conduct the commercial launch of Canalevia for this indication in 2018.
Canalevia
is a canine-specific formulation of crofelemer, an active pharmaceutical ingredient isolated and purified from the
Croton
lechleri
tree, which is sustainably harvested. Members of our management team developed crofelemer while at Napo, which was our parent company until May 13, 2015.
Canalevia utilizes the same mechanism of action as Mytesi, as do Neonorm Foal and Neonorm Calfour lead non-prescription products. Each of these products normalizes ion and water flow into
the intestinal lumen. Because this is a physiological pathway generally present in mammals, we have validated its low risk strategy of extending the clinical success in humans to preweaned dairy
calves, foals, piglets, and dogs; and we believe these clinical benefits will continue to be confirmed in other mammalian species.
Neonorm
is a standardized botanical extract derived from the
Croton lechleri
tree. The reception among users of Neonorm Calf and Neonorm
Foal, an anti-diarrheal product we launched for newborn horses in early 2016has been positive. We launched Neonorm Calf in the United States at the end of 2014 for preweaned dairy calves.
In June 2017 we launched neonorm.com, a commercial website for
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both
Neonorm products. As we announced on June 14, 2017, the Organic Materials Review Institute (OMRI) has reviewed Neonorm Calf and determined that it is allowed for use in compliance with the
U.S. Department of Agriculture National Organic Program. OMRI is an international nonprofit organization that determines which input products are allowed for use in organic production and processing.
The
clinically-proven performance of Neonorm Foal, in combination with our heightened understanding of market needs within the global equine space, is driving our increased focus on
equine product development. Equilevia is our non-prescription product for total gut health in equine athletes. Gut health is important in horses, as colic can cause an otherwise healthy horse to die
in a matter of hours. Although we are still assessing the size of this opportunity, we expect to launch sales of Equilevia in the fall of 2017. Equilevia is a pharmaceutical formulation of a
standardized botanical extract.
Canalevia,
Equilevia and Neonorm are distinct products formulated to address specific species and market channels. We have filed nine investigational new animal drug applications, or
INADs, with the FDA and intend to develop species-specific formulations of Neonorm in six additional target species, and Canalevia for both cats and dogs.
We,
through Napo, own the intellectual property rights and technology related to our products and product candidates, including rights to a library of over 2,300 medicinal plants, for
all veterinary treatment uses and indications for all species of animals. This includes rights to Neonorm, Canalevia, and other distinct prescription drug product candidates in our pipeline along with
the corresponding existing preclinical and clinical data packages. We also recently expanded this intellectual property portfolio to include combinations of our proprietary anti-secretory product
lines, Canalevia and Neonorm, with the non-absorbed antibiotic, rifaximin, for gastrointestinal indications in all animals.
Our
management team has significant experience in gastrointestinal and animal health product development. This experience includes the development of crofelemer for human use, from
discovery and preclinical and clinical toxicity studies, including the existing animal studies to be used for Canalevia regulatory approvals, through human clinical development. Our team also includes
individuals who have prior animal health experience at major pharmaceutical companies.
About Mytesi
Mytesi (crofelemer) is an antidiarrheal indicated for the symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on
antiretroviral therapy (ART). Mytesi is not indicated for the treatment of infectious diarrhea. Rule out infectious etiologies of diarrhea before starting Mytesi. If infectious etiologies are not
considered, there is a risk that patients with infectious etiologies will not receive the appropriate therapy and their disease may worsen. In clinical studies, the most common adverse reactions
occurring at a rate greater than placebo were upper respiratory tract infection (5.7%), bronchitis (3.9%), cough (3.5%), flatulence (3.1%), and increased bilirubin (3.1%).
Crofelemer,
the active ingredient in Mytesi, is a botanical (plant-based) drug extracted and purified from the red bark sap of the medicinal
Croton
lechleri
tree in the Amazon rainforest. Napo has established a sustainable harvesting program for crofelemer to ensure a high degree of quality and ecological integrity.
Corporate Information
We were incorporated in the State of Delaware on June 6, 2013. Our principal executive offices are located at 201 Mission Street,
Suite 2375, San Francisco, CA 94015 and our telephone number is (415) 371-8300. Our website address is www.jaguaranimalhealth.com. The information contained on, or that can be accessed
through, our website is not part of this prospectus. Our voting common stock is
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listed
on the NASDAQ Capital Market and trades under the symbol "JAGX." On July 31, 2017, we completed the acquisition of Napo (the "Merger") 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 Agreement").
Jaguar
Health, our logo, Canalevia, Neonorm and Mytesi are our trademarks that are used in this prospectus. This prospectus also includes trademarks, tradenames and service marks that
are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus 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.
The Offering
This prospectus relates to the offer by us of up to $60,000,000 of common stock, warrants, subscription rights or units in one or more offerings
and in any combination.
This
prospectus also relates to the resale of up to 456,866 shares of our common stock held by the selling shareholders identified in this prospectus, including its transferees,
pledgees, donees or successors. See "Selling Shareholders." The selling shareholders may offer to sell these shares at fixed prices, at prevailing market prices at the time of sale, at varying prices
or at negotiated prices. We have agreed to register the offer and sale of the common stock to satisfy registration rights we have granted to the selling shareholders. We will not receive any proceeds
from the sale of the securities by the selling shareholders.
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RISK FACTORS
Please carefully consider the risk factors described in our periodic reports filed with the SEC, which are incorporated by reference in this
prospectus. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus. Additional risks and
uncertainties not presently known to us or that we deem currently immaterial may also impair our business operations or adversely affect our results of operations or financial condition.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into it contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have made these statements in
reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in or incorporated by reference into
this prospectus, 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 prospectus 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 prospectus and are subject to a number of risks, uncertainties and assumptions
including those listed in the "Risk Factors" incorporated by reference into this prospectus from our Annual Report on Form 10-K, as updated by subsequent reports. 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.
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Incorporated by reference herein is the unaudited pro forma consolidated financial information reflecting the consummation of the Merger and
related transactions. This financial information is included in Exhibit 99.2 to our Current Report on Form 8-K, filed with the SEC on August 29, 2017 and consists of
(i) the unaudited pro forma combined condensed statement of operations for the six months ended June 30, 2017, (ii) the unaudited pro forma consolidated balance sheet, as of
June 30, 2017 and (iii) the unaudited pro forma combined condensed statement of operations, for the year ended December 31, 2016. The unaudited pro forma consolidated financial
information should be read in conjunction with the historical consolidated financial statements and the related notes of the Company, included in the Company's periodic reports filed with the SEC, and
of Napo, included in Exhibit 99.2 to our Current Report on Form 8-K/A, filed with the SEC on August 4, 2017, and Exhibit 99.1 to our Current Report on Form 8-K,
filed with the SEC on August 29, 2017, each of which are incorporated by reference herein. See "Incorporation of Information by Reference."
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USE OF PROCEEDS
We currently intend to use the estimated net proceeds from the sale of the securities offered by us for working capital and other general
corporate purposes, and possibly acquisitions of other companies, products or technologies. Working capital and other general corporate purposes may include research and development expenditures,
capital expenditures, operating and administrative expenditures, and any other purpose that we may specify in any prospectus supplement. While we have no current plans for any specific acquisitions at
this time, we believe opportunities may exist from time to time to expand our current business through strategic alliances or acquisitions with other companies, products or technologies. We have not
yet determined the amount of net proceeds to be used specifically for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net
proceeds from the sale of the securities offered
by us. Pending any use, as described above, we intend to invest the net proceeds in high-quality, short-term, interest-bearing securities. Our plans to use the estimated net proceeds from the sale of
the securities offered by us may change, and if they do, we will update this information in a prospectus supplement.
We
will not receive any of the proceeds from the sale of shares of our common stock by the selling shareholders. The selling shareholders will receive all of the proceeds from such sale.
The selling shareholders will pay any underwriting discounts and commissions and expenses incurred by the selling shareholders for brokerage, accounting, tax or legal services or any other expenses
incurred by the selling shareholders in disposing of the shares held by them. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this
prospectus, including, without limitation, all registration and filing fees, fees and expenses of our counsel and our independent registered public accountants.
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DESCRIPTION OF CAPITAL STOCK
General
The following is a summary of the rights of our common stock and preferred stock and of certain provisions of our third amended and restated
certificate of incorporation and amended and restated bylaws. This summary is not complete. For more detailed information, please see the third amended and restated certificate of incorporation and
amended and restated bylaws, each of which is incorporated by reference into the registration statement of which this prospectus is a part.
We
will describe in a prospectus supplement the specific terms of any common stock we may offer pursuant to this prospectus. If indicated in a prospectus supplement, the terms of such
common stock or preferred stock may differ from the terms described below.
Our
authorized capital stock consists of 210,000,000 shares, all with a par value of $0.0001 per share, of which 150,000,000 shares are designated as voting common stock, 50,000,000
shares are designated as non-voting common stock, and 10,000,000 shares are designated as preferred stock.
Voting Common Stock and Non-Voting Common Stock
As of August 11, 2017, we had 1,653,175 shares of voting common stock outstanding held by 24 stockholders of record, 42,903,218
shares of non-voting common stock outstanding held by 6 stockholders of record, and zero shares of preferred stock outstanding.
As
of August 11, 2017, there were outstanding options to purchase 196,802 shares of our voting common stock with a weighted-average exercise price of $37.20 per share and
outstanding RSUs for 392,923 shares of our voting common stock.
As
of August 11, 2017, there were outstanding warrants exercisable for 443,755 shares of our voting common stock with a weighted-average exercise price of $17.25 per share.
Voting Rights
The holders of our voting common stock are entitled to one vote per share on all matters to be voted on by our stockholders. The holders of our
non-voting common stock are not entitled to vote on matters submitted to our stockholders, other than in connection with a change of control of the Company.
Dividends
Subject to preferences that may be applicable to any outstanding our preferred stock, holders of our common stock are entitled to receive
dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. We are required to obtain the prior written consent of Nantucket Investments Limited
("Nantucket") before the issuance of dividends to holders of our voting common stock and/or non-voting common stock for so long as Nantucket or its affiliates own any shares of our non-voting common
stock.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our voting common stock and non-voting common stock will be entitled to
share ratably in the net assets legally available for distribution to our stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference
granted to the holders of any then outstanding shares of our preferred stock.
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Rights and Preferences
Holders of our common stock have no preemptive, conversion or subscription rights. There are no redemption or sinking fund provisions applicable
to our common stock.
Shares
of our non-voting common stock are convertible into shares of our voting common stock on a one-for-one basis (i) at the option of the respective holders thereof, at any
time and from time to time on or after April 1, 2018 or (ii) automatically, without any payment of additional consideration by the holder thereof, (x) upon a transfer of such
shares to any person or entity that is neither an affiliate of Nantucket nor an investment fund, investment vehicle or other account, that is, directly or indirectly, managed or advised by Nantucket
or any of its affiliates pursuant to a sale of such stock to a
third-party for cash in accordance with the terms and condition set forth in the Investor Rights Agreement, dated March 31, 2017, between the Company and Nantucket, or (y) upon the
release or transfer of such shares to the registered holders of Napo's outstanding shares of common stock immediately prior to the consummation of the Merger (the "Napo Legacy Stockholders").
The
rights, preferences and privileges of the holders of our voting common stock and non-voting common stock are subject to and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock that we may designate in the future.
Fully Paid and Nonassessable
All of our outstanding shares of common stock are fully paid and nonassessable.
Preferred Stock
Our board of directors has the authority, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one
or more series and to fix the number, rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than
the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders will receive dividend
payments and payments upon liquidation. In addition, the issuance of our preferred stock could have the effect of delaying, deferring or preventing a change of control or other corporate action. We
have no current plan to issue any shares of preferred stock.
Warrants
As of August 11, 2017, we had outstanding warrants to purchase an aggregate of 443,755 shares of our voting common stock, 13,844 of which
are exercisable at a price of $37.95 per share and expire on February 5, 2019; 1,111 of which are exercisable at a price of $10.35 per share and expire on June 26, 2020; 11,904 of which
are exercisable at a price of $84.00 per share and expire on
June 3, 2020; 3,869 of which are exercisable at a price of $84.00 per share and expire December 31, 2017; 7,440 of which are exercisable at a price of $84.00 per share and expire
December 31, 2017; 9,533 of which are exercisable at a price of $131.25 per share and expire on May 13, 2020; 8,000 of which are exercisable at a price of $0.15 per share and expire on
or before July 28, 2022; 120,000 of which are exercisable at a price of $11.25 per share and expire on May 29, 2022; 111,111 of which are exercisable at a price of $13.50 per share and
expire on November 29, 2017; 50,555 of which are exercisable at a price of $15.00 per share and expire on May 29, 2018; 24,727 of which are exercisable at a price of $7.65 per share and
expire on January 31, 2019; 9,697 of which are exercisable at a price of $1.20 per share and expire on December 31, 2018; and 71,961 of which are exercisable at a price of $1.20 per
share and expire on December 31, 2025.
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Registration Rights
Pursuant to the Registration Rights Agreement, dated November 22, 2016, we are required to file one or more registration statements as
permissible and necessary to register under the Securities Act, the resale of the shares of our voting common stock and shares of our voting common stock underlying warrants sold to the investors
pursuant to the securities purchase agreement, dated November 22, 2016, between us and certain institutional investors.
Pursuant
to the Registration Rights Agreement, dated June 8, 2016, we are required to file one or more registration statements as permissible and necessary to register under the
Securities Act, the resale of the shares of our voting common stock sold to Aspire Capital Fund LLC ("Aspire Capital") under the common stock purchase agreement, dated June 8, 2016,
between us and Aspire Capital.
Pursuant
to the Commitment Letter, dated February 21, 2017, signed by Invesco Asset Management Limited ("Invesco"), and the Share Purchase Agreement, dated July 31, 2017,
between us and Invesco, we are required to register the resale of the shares of our voting common stock sold to Invesco thereunder. We are registering the resale of such shares pursuant to the
registration statement of which this prospectus forms a part.
Pursuant
to the Note Purchase Agreement, dated March 1, 2017, by and among Napo, MEF I, LP and Riverside Merchant Partners, Napo is required to include in the Merger
Agreement provisions, consistent with the terms set forth in Annex II of the Note Purchase Agreement, that we register the
shares of our voting common stock issuable upon exchange of the Exchangeable Promissory Notes issuable thereunder.
Pursuant
to the Amended and Restated Note Purchase Agreement, dated March 31, 2017, by and among Napo, Kingdon Associates, M. Kingdon Offshore Master Fund L.P. and Kingdon
Family Partnership, L.P., we are required to register the shares of our voting common stock issuable upon conversion of the Conversion Stock (as defined therein), together with any shares of
our voting common stock issuable in connection with interest payments under the Convertible Promissory Notes issuable thereunder.
Pursuant
to the settlement agreements with Nantucket, Dorsar Investment Company, Alco Investment Company, Two Daughters LLC, Boies Schiller Flexner LLP and Dan Becka on or
about March 31, 2017, Napo agreed to cause us to register the shares of our voting common stock, the shares of our voting common stock issuable upon conversion of the shares of our non-voting
common stock, and the shares of our voting common stock underlying the warrants, in each case as issuable under the settlement agreements. We are registering the resale of shares of voting stock
issuable upon conversion of shares of non-voting common stock held by Dan Becka pursuant to the registration statement of which this prospectus forms a part.
Pursuant
to the share purchase agreements, each entered on or about June 23, 2017, between us and the investors named therein, relating to the issuance of $100,000 of our voting
common stock, we are required to file one or more registration statements as permissible and necessary to register under the Securities Act the resale of the shares of our voting common stock sold to
the investors thereto.
Pursuant
to the Securities Purchase Agreement, dated June 29, 2017, between us and Chicago Venture Partners L.P., we are required to register the shares of our voting
common stock issuable upon conversion of the Convertible Promissory Note, due August 2, 2018, issued thereunder.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Delaware Law
Certain provisions of Delaware law and our third amended and restated certificate of incorporation and amended and restated bylaws contain
provisions that could have the effect of
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delaying,
deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices
and inadequate takeover bids. These provisions are also designed in part to encourage anyone seeking to acquire control of us to negotiate with our board of directors. We believe that the advantages
gained by protecting our ability to negotiate with any unsolicited and potentially unfriendly acquirer outweigh the disadvantages of discouraging such proposals, including those priced above the
then-current market value of our common stock, because, among other reasons, the negotiation of such proposals could improve their terms.
Third Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Our third amended and restated certificate of incorporation and amended and restated bylaws include provisions
that:
-
-
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
-
-
specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors, the
chief executive officer or the president;
-
-
establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board of directors;
-
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provide that directors may be removed only for cause;
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-
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
-
-
establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class
serving staggered terms;
-
-
specify that no stockholder is permitted to cumulate votes at any election of our board of directors; and
-
-
require approval of the stockholders of at least 75% of the shares and a majority of the board of directors to amend certain of the
above-mentioned provisions.
Exclusive Jurisdiction
Under the provisions of our third amended and restated certificate of incorporation, unless we consent in writing to the selection of 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 behalf of us; (ii) any
action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or agents to us or our stockholders; (iii) any action asserting a claim against
us arising pursuant to any provision of the Delaware General Corporation Law or our third amended and restated certificate of incorporation or amended and restated bylaws; or (iv) any action
asserting a claim against us governed by the internal affairs doctrine. The enforceability of similar choice of forum provisions in other companies' certificates of incorporation has been challenged
in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our third amended and restated certificate of incorporation
to be inapplicable or unenforceable in such action.
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Delaware Anti-Takeover Statute
We are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general,
Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years
following the date the person became an interested stockholder unless:
-
-
prior to the date of the transaction, our board of directors of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder;
-
-
upon the closing of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not for determining the
outstanding voting stock owned by the interested stockholder, (1) shares owned by persons who are directors and also officers, and (2) shares owned by employee stock plans in which
employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
-
-
at or subsequent to the date of the transaction, the business combination is approved by our board of directors of the corporation and
authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66
2
/
3
% of the outstanding voting stock which is not owned by
the interested stockholder.
Generally,
a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder
is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation's outstanding
voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that
Section 203 may discourage business combinations or other attempts that might result in the payment of a premium over the market price for the shares of common stock held by our stockholders.
The
provisions of Delaware law and our third amended and restated certificate of incorporation and amended and restated bylaws could have the effect of discouraging others from
attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored takeover attempts.
These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may
otherwise deem to be in their best interests.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company N.A. The transfer agent and registrar's address is 250
Royall St., Canton, MA 02021. The transfer agent's telephone number is (800) 962-4284.
Listing
Our voting common stock is listed on The NASDAQ Capital Market under the symbol "JAGX." On August 22, 2016, we received notice from
NASDAQ, which indicated that under NASDAQ Listing Rule 5550(b)(1), we are required to maintain a minimum of $2,500,000 in stockholders' equity for continued listing. For the year ended
December 31, 2016, we reported stockholders' deficit of
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$2,454,185.
Based on the plan that we submitted to regain compliance, the SEC granted us an extension until February 21, 2017 to regain compliance.
On
February 22, 2017, we received a letter from NASDAQ stating that NASDAQ determined that we did not meet the terms of the extension and that our securities are subject to
delisting from NASDAQ unless we timely request a hearing before the NASDAQ Hearings Panel. We timely requested a hearing before the Panel, and at the hearing on April 20, 2017, we presented our
plan to evidence compliance with the $2,500,000 stockholders' equity requirement (or the alternatives of market value of listed securities of $35 million or net income from continuing
operations) concurrent with the Merger and requested the continued listing of our common stock on NASDAQ pending our return to compliance. On April 27, 2017, we were notified that the Panel
determined to grant our request for continued listing on NASDAQ. On July 31, 2017, we notified NASDAQ that we successfully completed our acquisition of Napo and, as a result, believe we have
stockholders' equity in excess of $2.5 million as of the date thereof.
On
May 16, 2017, we received notice from NASDAQ, which indicated that our closing bid price was less than $1.00 per share for 30 consecutive business days. We have a 180 calendar
day grace period, or until November 13, 2017, to regain compliance with the minimum bid price requirement. The minimum bid price requirement will be met if our common stock has a minimum
closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days during the 180 calendar day grace period.
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DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of common stock. Warrants may be issued independently or together with common stock and may be attached
to or separate from any offered securities. Each series of warrants will be issued under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agent will act
solely as our agent in connection with the warrants and will not assume any obligation or relationship of agency or trust for or with any registered holders of warrants or beneficial owners of
warrants. This summary of some provisions of the warrants is not complete. You should refer to the warrant agreement, including the forms of warrant certificate representing the warrants, relating to
the specific warrants being offered for the complete terms of the warrant agreement and the warrants. That warrant agreement, together with the terms of the warrant certificate and warrants, will be
filed with the SEC in connection with the offering of the specific warrants.
The
particular terms of any issue of warrants will be described in the prospectus supplement relating to the issue. Those terms may include:
-
-
the title of such warrants;
-
-
the aggregate number of such warrants;
-
-
the price or prices at which such warrants will be issued;
-
-
the terms of the securities purchasable upon exercise of such warrants and the procedures and conditions relating to the exercise of such
warrants;
-
-
the price at which the securities purchasable upon exercise of such warrants may be purchased;
-
-
the date on which the right to exercise such warrants will commence and the date on which such right shall expire;
-
-
any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the
warrants;
-
-
if applicable, the minimum or maximum amount of such warrants that may be exercised at any one time;
-
-
if applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants issued with each
such security;
-
-
if applicable, the date on and after which such warrants and the related securities will be separately transferable;
-
-
information with respect to book-entry procedures, if any; and
-
-
any other terms of such warrants, including terms, procedures and limitations relating to the exchange or exercise of such warrants.
The
prospectus supplement relating to any warrants to purchase equity securities may also include, if applicable, a discussion of certain U.S. federal income tax considerations.
Warrants
for the purchase of common stock will be offered and exercisable for U.S. dollars only. Securities warrants will be issued in registered form only.
Each
warrant will entitle its holder to purchase the number of shares of common stock at the exercise price set forth in, or calculable as set forth in, the applicable prospectus
supplement.
After
the close of business on the expiration date, unexercised warrants will become void. We will specify the place or places where, and the manner in which, warrants may be exercised
in the applicable prospectus supplement.
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Upon
receipt of payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement, we will, as soon as practicable, forward the purchased securities. If less than all of the warrants represented by the warrant certificate are exercised, a new
warrant certificate will be issued for the remaining warrants.
Prior
to the exercise of any warrants to purchase common stock, holders of the warrants will not have any of the rights of holders of common stock purchasable upon exercise, including
the right to vote or to receive any payments of dividends on the common stock purchasable upon exercise.
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DESCRIPTION OF SUBSCRIPTION RIGHTS
The following is a general description of the terms of the subscription rights we may issue from time to time. Particular terms of any
subscription rights we offer will be described in the prospectus supplement or free writing prospectus relating to such subscription rights, and may differ from the terms described herein.
We
may issue subscription rights to purchase our securities. These subscription rights may be issued independently or together with any other security offered hereby and may or may not
be transferable by the stockholder receiving the subscription rights in such offering. In connection with any offering of subscription rights, we may enter into a standby arrangement with one or more
underwriters or other purchasers pursuant to which the underwriters or other purchasers may be required to purchase any
securities remaining unsubscribed for after such offering. The applicable prospectus supplement will describe the specific terms of any offering of subscription rights for which this prospectus is
being delivered, including the following:
-
-
whether common stock or warrants for those securities will be offered under the stockholder subscription rights;
-
-
the price, if any, for the subscription rights;
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the exercise price payable for each security upon the exercise of the subscription rights;
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-
the number of subscription rights issued to each stockholder;
-
-
the number and terms of the securities which may be purchased per each subscription right;
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-
the extent to which the subscription rights are transferable;
-
-
any other terms of the subscription rights, including the terms, procedures and limitations relating to the exchange and exercise of the
subscription rights;
-
-
the date on which the right to exercise the subscription rights shall commence, and the date on which the subscription rights shall expire;
-
-
the extent to which the subscription rights may include an over-subscription privilege with respect to unsubscribed securities;
-
-
if appropriate, a discussion of material U.S. federal income tax considerations; and
-
-
if applicable, the material terms of any standby underwriting or purchase arrangement entered into by us in connection with the offering of
subscription rights.
The
description in the applicable prospectus supplement of any subscription rights we offer will not necessarily be complete and will be qualified in its entirety by reference to the
applicable subscription rights certificate or subscription rights agreement, which will be filed with the SEC if we offer subscription rights.
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DESCRIPTION OF UNITS
The following description, together with the additional information that we include in any applicable prospectus supplements, summarizes the
material terms and provisions of the
units that we may offer under this prospectus. While the terms we have summarized below will apply generally to any units that we may offer under this prospectus, we will describe the particular terms
of any series of units in more detail in the applicable prospectus supplement. The terms of any units offered under a prospectus supplement may differ from the terms described below.
We
will incorporate by reference from reports that we file with the SEC, the form of unit agreement that describes the terms of the series of units we are offering, and any supplemental
agreements, before the issuance of the related series of units. The following summaries of material terms and provisions of the units are subject to, and qualified in their entirety by reference to,
all the provisions of the unit agreement and any supplemental agreements applicable to a particular series of units. We urge you to read the applicable prospectus supplements related to the particular
series of units that we may offer under this prospectus, as well as any related free writing prospectuses and the complete unit agreement and any supplemental agreements that contain the terms of the
units.
General
We may issue units consisting of common stock, warrants, or subscription rights in one or more series, in any combination. Each unit will be
issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each security included in
the unit. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified
date.
We
will describe in the applicable prospectus supplement the terms of the series of units being offered, including:
-
-
the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those
securities may be held or transferred separately;
-
-
any provisions of the governing unit agreement that differ from those described below; and
-
-
any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.
The
provisions described in this section, as well as those set forth in any prospectus supplement or as described under "Description of Capital Stock," "Description of Warrants," and
"Description of Subscription Rights" will apply to each unit, as applicable, and to any common stock, warrant, or subscription right included in each unit, as applicable.
Unit Agent
The name and address of the unit agent for any units we offer will be set forth in the applicable prospectus supplement.
Issuance in Series
We may issue units in such amounts and in such numerous distinct series as we determine.
Enforceability of Rights by Holders of Units
Each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of agency or
trust with any holder of any unit. A single bank or
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trust
company may act as unit agent for more than one series of units. A unit agent will have no duty or responsibility in case of any default by us under the applicable unit agreement or unit,
including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit may, without the consent of the related unit agent or the
holder of any other unit, enforce by appropriate legal action its rights as holder under any security included in the unit.
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SELLING SHAREHOLDERS
The shares of common stock being offered by the selling shareholders are those previously issued to the selling shareholders. We are registering
the shares of common stock in order to permit the selling shareholders to offer the shares for resale from time to time.
The
following table sets forth:
-
-
the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by the selling shareholders;
-
-
the number of shares of common stock beneficially owned by the selling shareholders as of August 24, 2017, without regard to any
limitations on exercises prior to the sale of the shares covered by this prospectus;
-
-
the number of shares that may be offered by the selling shareholders pursuant to this prospectus;
-
-
the number of shares to be beneficially owned by the selling shareholders and their respective affiliates following the sale of any shares
covered by this prospectus; and
-
-
the percentage of our issued and outstanding common stock to be beneficially owned by the selling shareholders and their respective affiliates
following the sale of all shares covered by this prospectus.
The
selling shareholders may sell all, some or none of their shares in this offering. See "Plan of Distribution."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
of Common Stock
Owned After
Offering(1)
|
|
|
|
Number of
shares of
Common Stock
Owned Prior
to Offering
|
|
Maximum Number
of shares of
Common Stock to
be Sold Pursuant
to this Prospectus
|
|
Name of Selling Shareholder
|
|
Number
|
|
Percent
|
|
Invesco Ltd.(2)
|
|
|
419,840
|
|
|
419,840
|
|
|
0
|
|
|
|
|
Daniel Becka(3)
|
|
|
41,219
|
|
|
37,026
|
|
|
4,193
|
|
|
*
|
|
-
*
-
Less
than 1%.
-
(1)
-
Assumes
that each selling shareholder sells all shares of common stock registered under this prospectus held by such selling shareholder.
-
(2)
-
As
it previously reported on Amendment No. 1 to its Schedule 13G, Invesco Ltd, in its capacity as an investment adviser, may have been deemed to
beneficially own 131,624 shares. On June 27, 2017, Invesco Ltd., in its capacity as an investment adviser, acquired beneficial ownership of 72,000 shares for $7.50 per share on the open
market. Invesco Ltd. in its capacity as an investment adviser, beneficially acquired 216,216 shares for $13.88 in a private purchase from the Company on July 31, 2017. In addition, prior
to the Merger, Invesco Asset Management Limited held 2,591,877 shares of common stock of Napo, representing approximately 35.9% of the outstanding shares of Napo common stock. Pursuant to the terms of
the Merger Agreement, upon consummation of the Merger, such shares of Napo common stock were exchanged for contingent rights to receive shares of our voting common stock, which contingent rights are
excluded from the shares listed in the table above. Invesco Asset Management Limited is a subsidiary of Invesco Ltd.
-
(3)
-
Consists
of (i) 4,193 shares of voting common stock and (ii) 37,026 shares of voting common stock issuable upon conversion of the shares of non-voting
common stock held by Daniel Becka.
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PLAN OF DISTRIBUTION
We or the selling shareholders may offer and sell the securities from time to time in one or more of the following
transactions:
-
-
to or through underwriters, brokers or dealers (acting as agent or principal);
-
-
on the NASDAQ Capital Market, in the over-the-counter market or on any other national securities exchange on which our shares are then listed
or traded;
-
-
directly to one or more other purchasers;
-
-
upon the exercise of rights distributed or issued to our security holders;
-
-
through a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the securities as agent, but may
position and resell a portion of the block as principal to facilitate the transaction;
-
-
in "at the market" offerings within the meanings of Rule 415(a)(4) under the Securities Act of 1933 or through a market maker or into an
existing market, on an exchange, or otherwise;
-
-
directly to purchasers, through a specific bidding or auction process, on a negotiated basis or otherwise;
-
-
in ordinary brokerage transactions and transactions in which the broker solicits purchasers;
-
-
through the writing or settlement of options (including put or call options), whether the options are listed on an options exchange or
otherwise;
-
-
through the distribution of the common stock by the selling stockholders to their partners, members or stockholders;
-
-
through agents on a best-efforts basis;
-
-
through any other method permitted pursuant to applicable law; or
-
-
otherwise through a combination of any of the above methods of sale.
In
addition, we or the selling shareholders may enter into option, share lending or other types of transactions that require us or the selling shareholders, as applicable, to deliver
shares of common stock to an underwriter, broker or dealer, who will then resell or transfer the shares of common stock under this prospectus. We or the selling shareholders may also enter into
hedging transactions with respect to our securities or the securities of such selling shareholders, as applicable. For example, we or the selling shareholders
may:
-
-
enter into transactions involving short sales of the shares of common stock by underwriters, brokers or dealers;
-
-
sell shares of common stock short and deliver the shares to close out short positions;
-
-
enter into option or other types of transactions that require us or the selling shareholders, as applicable, to deliver shares of common stock
to an underwriter, broker or dealer, who will then resell or transfer the shares of common stock under this prospectus; or
-
-
loan or pledge the shares of common stock to an underwriter, broker or dealer, who may sell the loaned shares or, in the event of default, sell
the pledged shares.
The
selling shareholders will act independently of us in making decisions with respect to the timing, manner and size of each sale of shares of common stock covered by this prospectus.
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We
or the selling shareholders may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus
supplement, including in short sale transactions. If so, the third party may use securities pledged by us or the selling shareholders, as applicable, or borrowed from us, the selling shareholders or
others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us or the selling shareholders in settlement of those derivatives to close out
any related open borrowings of stock. The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified in the applicable prospectus
supplement (or a post-effective amendment). In addition, we or the selling shareholders may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell
the securities short using this prospectus. Such financial institution or other third party may transfer its economic short position to investors in our securities or the securities of the selling
shareholders, as applicable, or in connection with a concurrent offering of other securities.
Shares
of common stock may also be exchanged for satisfaction of the selling shareholders' obligations or other liabilities to its creditors. Such transactions may or may not involve
brokers or dealers.
If
we or the selling shareholders use any underwriter, we will provide a prospectus supplement that will name any underwriter involved in the offer and sale of the securities. The
prospectus supplement will also set forth the terms of the offering, including:
-
-
the purchase price of the securities and the proceeds we or the selling shareholders, as applicable, will receive from the sale of the
securities;
-
-
any underwriting discounts and other items constituting underwriters' compensation;
-
-
any public offering or purchase price and any discounts or commissions allowed or re-allowed or paid to dealers;
-
-
any commissions allowed or paid to agents;
-
-
any securities exchanges on which the securities may be listed;
-
-
the method of distribution of the securities;
-
-
the terms of any agreement, arrangement or understanding entered into with the underwriters, brokers or dealers; and
-
-
any other information we think is important.
If
underwriters or dealers are used in the sale, the securities will be acquired by the underwriters or dealers for their own account. The securities may be sold from time to time by us
or the selling shareholders in one or more transactions:
-
-
at a fixed price or prices, which may be changed;
-
-
at market prices prevailing at the time of sale;
-
-
at prices related to such prevailing market prices;
-
-
at varying prices determined at the time of sale; or
-
-
at negotiated prices.
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Such
sales may be effected:
-
-
in transactions on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
-
-
in transactions in the over-the-counter market;
-
-
in block transactions in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a
portion of the block as principal to facilitate the transaction, or in crosses, in which the same broker acts as an agent on both sides of the trade;
-
-
through the writing of options; or
-
-
through other types of transactions.
The
securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more of such firms. Unless
otherwise set forth in the prospectus supplement, the obligations of underwriters or dealers to purchase the securities offered will be subject to certain conditions precedent and the underwriters or
dealers will be obligated to purchase all the offered securities if any are purchased. Any public offering price and any discount or concession allowed or reallowed or paid by underwriters or dealers
to other dealers may be changed from time to time.
We
may also make direct sales through subscription rights distributed to our existing stockholders on a pro rata basis, which may or may not be transferable. In any distribution of
subscription rights to our stockholders, if all of the underlying securities are not subscribed for, we may then sell the
unsubscribed securities directly to third parties or may engage the services of one or more underwriters, dealers or agents, including standby underwriters, to sell the unsubscribed securities to
third parties. In addition, whether or not all of the underlying securities are subscribed for, we may concurrently offer additional securities to third parties directly or through underwriters,
dealers or agents.
The
selling shareholders might not sell any shares of common stock under this prospectus. In addition, any shares of common stock covered by this prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather than pursuant to this prospectus.
The
securities may be sold directly by us or the selling shareholders or through agents designated by us or the selling shareholders, as applicable, from time to time. Any agent involved
in the offer or sale of the securities in respect of which this prospectus is delivered will be named, and any commissions payable by us or the selling shareholders, as applicable, to such agent will
be set forth in, the prospectus supplement. Unless otherwise indicated in the prospectus supplement, any such agent will be acting on a best efforts basis for the period of its appointment.
Offers
to purchase the securities offered by this prospectus may be solicited, and sales of the securities may be made by us or by the selling shareholders directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of the Securities Act of 1933 with respect to any resale of the securities. The terms of any offer made in this manner will
be included in the prospectus supplement relating to the offer.
If
indicated in the applicable prospectus supplement, underwriters, dealers or agents will be authorized to solicit offers by certain institutional investors to purchase securities from
us pursuant to contracts providing for payment and delivery at a future date. Institutional investors with which these contracts may be made include, among
others:
-
-
commercial and savings banks;
-
-
insurance companies;
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-
-
pension funds;
-
-
investment companies; and
-
-
educational and charitable institutions.
In
all cases, these purchasers must be approved by us or the selling shareholders, as applicable. Unless otherwise set forth in the applicable prospectus supplement, the obligations of
any purchaser under any of these contracts will not be subject to any conditions except that (a) the purchase of the securities must not at the time of delivery be prohibited under the laws of
any jurisdiction to which that purchaser is subject, and (b) if the securities are also being sold to underwriters, we or the selling shareholders, as applicable, must have sold to these
underwriters the securities not subject to delayed delivery. Underwriters and other agents will not have any responsibility in respect of the validity or performance of these contracts.
Some
of the underwriters, dealers or agents used by us or the selling shareholders in any offering of securities under this prospectus may be customers of, engage in transactions with,
and perform services for us or the selling shareholders, as applicable, or affiliates of ours or theirs, as applicable, in the ordinary course of business. Underwriters, dealers, agents and other
persons may be entitled under agreements which may be entered into with us or the selling shareholders to indemnification against and contribution toward certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended, and to be reimbursed by us or the selling shareholders for certain expenses.
Any
securities initially sold outside the U.S. may be resold in the U.S. through underwriters, dealers or otherwise.
Any
underwriters to which offered securities are sold by us or the selling shareholders for public offering and sale may make a market in such securities, but those underwriters will not
be obligated to do so and may discontinue any market making at any time.
The
anticipated date of delivery of the securities offered by this prospectus will be described in the applicable prospectus supplement relating to the offering.
In
compliance with the guidelines of the Financial Industry Regulatory Authority ("FINRA"), the aggregate maximum discount, commission, agency fees or other items constituting
underwriting compensation to be received by any FINRA member or independent broker-dealer will not exceed 8% of the offering proceeds from any offering pursuant to this prospectus and any applicable
prospectus supplement.
No
FINRA member may participate in any offering of securities made under this prospectus if such member has a conflict of interest under FINRA Rule 5121, including if 5% or more
of the net proceeds, not including underwriting compensation, of any offering of securities made under this prospectus will be received by a FINRA member participating in the offering or affiliates or
associated persons of such FINRA members, unless a qualified independent underwriter has participated in the offering or the offering otherwise complies with FINRA Rule 5121.
To
comply with the securities laws of some states, if applicable, the securities may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition,
in some states the securities may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
The
Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities.
We
agreed to keep this prospectus effective until the earlier of (i) the date on which all registrable securities covered by this prospectus have been sold hereunder or
(ii) the date on which all of the remaining registrable securities are eligible to be sold without compliance with the volume limitations
24
Table of Contents
or
public information requirements of Rule 144 under the Securities Act. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable
state securities
laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities
with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling shareholders will be
subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by
the selling shareholders or any other person. We will make copies of this prospectus available to the selling shareholders and have informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
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Table of Contents
LEGAL MATTERS
The validity of the securities offered by this prospectus will be based upon by Reed Smith LLP, Palo Alto, California.
EXPERTS
The financial statements of the Company as of December 31, 2016 and 2015 and for each of the two years in the period ended
December 31, 2016 incorporated by reference in this prospectus and the registration statement have been so incorporated in reliance on the reports of BDO USA, LLP, an independent
registered public accounting firm (the reports on the financial statements contains an explanatory paragraph regarding the Company's ability to continue as a going concern), incorporated herein by
reference, given on the authority of said firm as experts in auditing and accounting.
The
consolidated financial statements of Napo as of December 31, 2016 and 2015 and for each of the two years in the period ended December 31, 2016 incorporated by reference
in this prospectus and the registration statement have been audited by Macias Gini & O'Connell LLP, as stated in their report incorporated by reference in this registration statement
(which report contains an explanatory paragraph regarding Napo's ability to continue as a going concern), and are incorporated by reference in reliance upon such report and upon the authority of such
firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC's public reference facilities at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the public reference facilities. SEC filings are also available at the SEC's web site at http://www.sec.gov.
This
prospectus is only part of a registration statement on Form S-3 that we have filed with the SEC under the Securities Act and therefore omits certain information contained in
the registration statement. We have also filed exhibits and schedules with the registration statement that are excluded from this prospectus, and you should refer to the applicable exhibit or schedule
for a complete description of any statement referring to any contract or other document. You may inspect a copy of the registration statement, including the exhibits and schedules, without charge, at
the public reference room or obtain a copy from the SEC upon payment of the fees prescribed by the SEC.
We
also maintain a website at
www.jaguaranimalhealth.com
, through which you can access our SEC filings. The information set forth on, or
accessible from, our website is not part of this prospectus.
26
Table of Contents
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file with them. Incorporation by reference allows us to disclose important
information to you by referring you to those other documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will
automatically update and supersede this information. This prospectus omits certain information contained in the registration statement, as permitted by the SEC. You should refer to the registration
statement and any prospectus supplement filed hereafter, including the exhibits, for further information about us and the securities we may offer pursuant to this prospectus. Statements in this
prospectus regarding the provisions of certain documents filed with, or incorporated by reference in, the registration statement are not necessarily complete and each statement is qualified in all
respects by that reference. Copies of all or any part of the registration statement, including the documents incorporated by reference or the exhibits, may be obtained upon payment of the prescribed
rates at the offices of the SEC listed above in "Where You Can Find More Information." The documents we are incorporating by reference are:
-
-
our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2016 filed on May 26, 2017;
-
-
our definitive proxy statement and definitive additional materials, on Schedule 14A, relating to our Annual Meeting of Stockholders held
on May 8, 2017, filed on April 17, 2017;
-
-
our Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 2017 filed on June 23, 2017 and our Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2017 filed on August 9, 2017;
-
-
our Current Reports on Form 8-K filed on January 31, 2017, February 9, 2017, February 24, 2017, March 31,
2017, April 6, 2017, May 2, 2017, May 8, 2017, May 19, 2017, July 3, 2017, July 7, 2017, July 28, 2017, July 31, 2017, August 1, 2017,
August 4, 2017, August 16, 2017 and August 29, 2017;
-
-
the description of our common stock contained in our registration statement on Form 8-A filed on October 30, 2014 (Registration
No. 001-36714) with the SEC, including any amendment or report filed for the purpose of updating such description; and
-
-
all reports and other documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date of this prospectus and prior to the termination or completion of the offering of securities under this prospectus shall be deemed to be incorporated by reference in this prospectus and to be a
part hereof from the date of filing such reports and other documents.
Unless
otherwise noted, the SEC file number for each of the documents listed above is 001-36714.
In
addition, all reports and other documents filed by us pursuant to the Exchange Act after the date of the initial registration statement and prior to effectiveness of the registration
statement shall be deemed to be incorporated by reference into this prospectus.
Any
statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this prospectus or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus
modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
27
Table of Contents
You
may request, orally or in writing, a copy of any or all of the documents incorporated herein by reference. These documents will be provided to you at no cost, by contacting: Investor
Relations, Jaguar Health, Inc., 201 Mission Street, Suite 2375, San Francisco, CA, 94105 or call (415) 371-8300.
You
should rely only on information contained in, or incorporated by reference into, this prospectus and any prospectus supplement. We have not authorized anyone to provide you with
information
different from that contained in this prospectus or incorporated by reference in this prospectus. We are not making offers to sell the securities in any jurisdiction in which such an offer or
solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.
28
Table of Contents
Up to 8,000,000 Shares of Common Stock
PROSPECTUS SUPPLEMENT
March 19, 2019
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