Jaguar Health Inc

Jaguar Health Inc (NASDAQ: JAGX) is a California, United States-based commercial stage pharmaceuticals Company. It focusses on developing novel, non-opioid, plant-based, and sustainably derived prescription medicines for both human prescription use and animals on a global basis.

Rationale for Valuation – Avoid at USD 2.78

• The Company’s profitability margins and Return on equity remained in the negative zone from the last three periods.
• The Company’s EV/EBITDA, Price/Earnings and Price/Cash Flow multiples are in the negative zone.
• The Company has lower liquidity with a current ratio of 0.42x, reflecting insufficient current assets to pay its short-term obligations.
• In September 2020, the Company has a Debt/Equity ratio of 4.49x, which is higher than the industry median, reflecting that the Company is more leveraged as compared to the industry.
• From the technical standpoint, 90-day RSI stood at ~63, which means the stock price could decline in the short term.

Key Risks

• The business's growth trajectory could be impacted due to existing and emerging risks and uncertainties.
• Also, the increased competition can lead to the market share decline and income short fall.
• Adjacently, there are some operational risks arising from changing regulatory policies, loss of sensitive data through cyberattacks, and increased supply cost due to Covid-19 outbreak.
• Also, foreign exchange fluctuations can lead to a shortfall in profits and loss of income.

Recent News

On 22 January 2021, the Company stated that it had regained compliance with Nasdaq bid price requirement.

On 20 January 2021, the Company has signed a definitive agreement, which was related to the issuance and sale of a secured promissory note.

On 13 January 2021, the Company had entered into a securities purchase agreement with two institutional investors for gross proceeds of around USD 15.0 million.

Q3 FY20 Trading Update (as on 16 November 2020)

(Source: Company Website)

• The net product revenue increased by 185% year-on-year during the quarter, with an increase of USD 1.8 million quarter-on-quarter in Mytesi net sales and USD 4.4 million quarter-on-quarter in Mytesi gross sales.
• The research and development expense increased to USD 1.5 million in Q3 FY20 as compared with the corresponding period of the last year, due to an increase in clinical trial costs.
• In the third quarter, the Company has decreased its loss from the previous year.
• For the third quarter of 2020, the non-GAAP EBITDA was a net loss of USD 6.2 million.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

In Q3 FY20, the Company delivered a decent performance, with good net product revenue in Mytesi. It has established a solid commercial team integrated with enhancements to the Mytesi patient access program. Looking forward, it expects to ramp up the investment and will be expanding the worldwide sales and marketing activities. JAGX’s operations were not materially impacted by the covid-19 pandemic, while the market remained highly uncertain. Moreover, the Company works in a challenging environment that requires continuous investment, sometimes at the profitability cost, to stay ahead of competitors. Overall, the Company is still in the development stage. The stock made a 52-week low and high of USD 0.185 and USD 4.47, respectively.

Based on the headwinds faced by the Company, we have given an “Avoid” recommendation on Jaguar Health Inc at the closing price of USD 2.78 (as on 27 January 2021), and we will watch for results of new investments.

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