Jaguar Animal Health (JAGX) Enters Agreement for Potential Merger with Napo Pharma
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Jaguar Animal Health, Inc. (Nasdaq: JAGX) announced that it has signed a non-binding letter of intent (“LOI”) with Napo Pharmaceuticals, Inc. (“Napo”) potentially to merge the two companies. Napo focuses on human product development and commercialization from plants used traditionally in rainforest areas, and has provided Jaguar with exclusive worldwide rights for veterinary applications to crofelemer and corresponding rights to all related Napo technology.
The LOI contemplates a 3-to-1 Napo-to-Jaguar value ratio (inclusive only of in-the-money convertible securities of Jaguar at the time a definitive agreement is entered into) to calculate the relative ownership of the merged entity. As of October 1, 2016, Napo owned 22.6% of Jaguar’s outstanding shares of common stock. The LOI also outlines capitalization requirements that Napo would be required to satisfy to proceed with a potential merger.
A merger of the two companies, should it occur, would allow Jaguar to recognize revenue from sales of crofelemer, under the brand name Mytesi™ (formerly known as Fulyzaq®), an important Napo revenue stream. Crofelemer was approved by the Food and Drug Administration (“FDA”) in 2012 for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS on antiretroviral therapy. In May 2016, Napo regained ownership of the New Drug Application (NDA) and commercial rights for human applications of crofelemer (Mytesi™) from Valeant Pharmaceuticals International, which acquired those rights from Salix Pharmaceuticals in April 2015. Napo is now recognizing the sales of Mytesi™, and will begin promotion of Mytesi™ to HIV prescribers in October 2016.
Napo is continuing development of Mytesi™ for other antidiarrheal indications, with investigational studies completed in irritable bowel syndrome, cholera, traveler’s diarrhea, and in pediatric patients, and two planned investigator-initiated trials of the product in breast cancer patients suffering from chemotherapy-induced diarrhea. Diarrhea is a common adverse event seen with chemotherapy agents in the therapeutic classes of epidermal growth factor receptor (EGFR) monoclonal antibodies and tyrosine kinase inhibitors (TKI). 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.
Crofelemer is also the active pharmaceutical ingredient (API) in Canalevia™, Jaguar’s lead prescription drug product candidate, intended for the treatment of various forms of diarrhea in dogs. Jaguar is planning a multi-site pilot study of Canalevia™ in dogs with malignancies treated with toceranib phosphate, another TKI, with diarrhea as a frequent adverse effect. Dr. Roger Waltzman, a human medical oncologist and experienced drug-development executive who serves as Jaguar’s Chief Scientific Officer and a medical consultant to Napo, added, “I expect that a merger of Napo and Jaguar would play a significant and positive role in supporting the development of crofelemer to address the problem of chemotherapy-induced diarrhea in both humans and companion animals.”
Canalevia™ is under license for exclusive global veterinary rights to Jaguar from Napo. Twelve members of Jaguar’s team contributed to the successful development of crofelemer for human indication while at Napo.
As previously announced, Napo and Jaguar have been engaged in exploratory discussions since February 2016 regarding a potential merger and/or other ways to cooperate with their respective business endeavors.
“We are confident that a merger will enable both companies, through a joint management team, to maximize the potential value creation for stockholders,” stated Lisa Conte, Jaguar’s president and CEO, as well as the CEO and founder of Napo. “We believe both Jaguar and Napo will benefit from the synergies and economies of scale that a merger should create in manufacturing and commercialization of crofelemer for various human and animal indications. In addition, we are confident that the commercial readiness that Napo’s team would bring to a combined entity would prove beneficial for Jaguar as it prepares for the launch of its first prescription products—Canalevia™ for canine diarrhea, and Equilevia™ for equine gastric ulcers—if approved.”
The final pivotal field trial for Canalevia™ is ongoing for acute diarrhea in dogs, the first planned indication for this Jaguar drug product candidate. Jaguar expects to enroll approximately 200 dogs in the study. Jaguar has completed enrollment for the dose determination study for Equilevia™ and expects top line results to be available next month. More than 100 horses have been enrolled in the Equilevia™ study.
Karen Wright, Jaguar’s CFO and Treasurer, commented, “A merger will allow Jaguar to benefit from Napo’s existing Mytesi™ revenue stream and we believe aligns with Jaguar’s strategic plans, including planning for the anticipated launch of our prescription product candidates currently in clinical development.”
Jaguar is also announcing that Aspire Capital Fund, LLC (“Aspire”) purchased 348,601 shares of Jaguar common stock, at a price per share of $2.28, under the existing $15 million Common Stock Purchase Agreement between Aspire and Jaguar.
The LOI is non-binding and any agreement is subject to the negotiation and execution of a definitive transaction agreement, which may vary from the terms set forth in the LOI. A final transaction also is anticipated to be subject to material conditions, including, but not limited to, the approval of: (i) the respective boards of directors of Jaguar and Napo, (ii) the shareholders of each company, (iii) the Nasdaq Stock Market, and (iv) other customary conditions for a transaction of this nature. Accordingly, there can be no assurance that a definitive agreement will be reached by the companies, or that any agreement will result in the completion of a merger transaction.
Napo’s proprietary, patented gastrointestinal compound, crofelemer, is a first-in-class anti-secretory agent isolated and purified from Croton lechleri, a medicinal plant sustainably harvested under fair-trade working conditions in several South American countries. Crofelemer (trade name Mytesi™) was approved in 2012 and is indicated for the symptomatic relief of noninfectious diarrhea in adult patients with HIV/AIDS on antiretroviral therapy. Crofelemer is in various stages of clinical development by Napo for the following indications:
- Crofelemer for diarrhea predominant irritable bowel syndrome (IBS-D), Phase 2,
- Crofelemer for acute infectious diarrhea, including cholera, Phase 2,
- Crofelemer for pediatric diarrhea, Phase 1, and
- Crofelemer for chemotherapy-induced diarrhea, Phase 2.
Mytesi™ (crofelemer 125mg delayed-release tablets) 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%).
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