I’ll be honest. Until one of InvestorPlace’s editors asked me to write about Jaguar Health (NASDAQ:JAGX), I had never heard of the San Francisco-based biotechnology company or covered JAGX stock.
Now, I’ve found out from InvestorPlace web content specialist Sarah Smith that Jaguar is merging its Napo Pharmaceutical business with the Post Pandemic Recovery SPAC, a European special purpose acquisition company being brought to market by Andreea Porcelli, CEO and founder of the Swiss Growth Forum, an invitation-only conference for growth companies seeking capital.
According to Porcelli’s LinkedIn profile, the SPAC focuses on the treatment of Covid-19 long-hauler symptoms such as inflammatory diarrhea. Porcelli believes that the U.S. and the European Union will be living with these long-hauler symptoms for years to come.
JAGX Stock’s Role in Potential Merger
Jaguar Health and Porcelli hosted a conference call on Jan. 27 to discuss the potential merger in more detail.
Perhaps I’m cynical, but after the Reddit-induced GameStop (NYSE:GME) melee, combined with the fact that more SPACs went public in 2020 than traditional IPOs, am I the only one who thinks there’s not a lot of meat on this bone?
A first-year public relations student could do a better job informing investors of the facts surrounding this so-called merger.
Having just gotten itself back in compliance with Nasdaq, you would think Jaguar would have its ducks in a row before coming out with details — or lack thereof — of a potential SPAC merger.
Here’s what I can tell about Jaguar from a quick look at its regulatory filings, along with recent comments from InvestorPlace’s Louis Navellier.
The Company Has Revenues
As of Sept. 30, 2020, Jaguar Health’s sales for the first nine months of the fiscal year were $6.8 million, 59.5% higher than a year earlier. On an annualized basis, that’s $9.1 million in revenue. That’s 38 times sales based on a $346 million market capitalization.
As for earnings, it lost $21.5 million from its operations through Q3 2020 and $23.1 million in the same period a year ago. Excluding impairments in 2019, 2020’s operating loss was greater than 2019.
If you add back to the net product sales rebates, discounts, returns, and fees, you get gross product sales of $13.96 million, 127.4% higher than a year earlier. Except for $61,000 in sales from its Neonorm animal health products, all of its gross product sales were from Mytesi, Napo Pharmaceuticals’ plant-based prescription medicine approved by the U.S. Food and Drug Administration (FDA).
As my colleague wrote on Jan. 12, it is “for the symptomatic relief of noninfectious diarrhea in adults with HIV/AIDS or who are on anti-retro-viral therapy.” However, it also could work as an anti-diarrheal for those suffering from Covid-19 long-hauler symptoms.
So, now the question is: If the SPAC is merging with the newly created Napo EU, is Mytesi going with Napo EU, or is the merger only for the rights to market Mytesi in a defined geographical area such as the EU?
That matters in the sense that if 100% of Mytesi is being transferred to the SPAC merger, Jaguar Health is nothing but a shell with an ownership stake in that merged entity.
Should You Buy JAGX Stock?
In mid-January, Navellier suggested that investors shouldn’t fight the trend. JAGX stock was moving higher. A stock in motion tends to stay in motion and all that jazz.
In late November, Jaguar issued a press release announcing preliminary discussions with the SPAC. Details of the press release include a potential upfront cash license fee between $2 million and $10 million, $20 million in funding for Napo EU, and Napo Pharmaceuticals’ ownership of 30-49.9% of Napo EU.
That clears up some of the issues I raised earlier in the article.
However, I find it strange that no information is readily available surrounding the SPAC, such as IPO funds raised, etc.
Another InvestorPlace colleague, Ian Bezek, suggested to readers in mid-January that the $6 million royalty deal it signed for Mytesi in December — the royalty deal entitles the lender to $12 million in future royalty payments as well as 10% interest on outstanding royalty payments until repaid — is indicative of the product’s effectiveness.
At the very least, it’s reassuring to shareholders. Bezek concluded his article, however, by stating JAGX stock “isn’t appropriate for most investors.”
I would second that emotion. Until I know more details about the SPAC in question, I couldn’t possibly recommend this stock.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.