Jaguar Animal Health, Napo propose merger

Merger would allow Jaguar to recognize important revenue stream from novel mechanism of action of anti-diarrheal Mytesi.

Jaguar Animal Health Inc., an animal health company focused on developing and commercializing first-in-class gastrointestinal products for companion and production animals, foals and high-value horses, announced Oct. 6 that it has signed a non-binding letter of intent with Napo Pharmaceuticals Inc. to potentially merge the two companies.

Napo focuses on development and commercialization of human products from plants used traditionally in rainforest areas. It has provided Jaguar with exclusive worldwide rights for veterinary applications to crofelemer and corresponding rights to all related Napo technology.

The letter of intent contemplates a three-to-one 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 Oct. 1, Napo owned 22.6% of Jaguar's outstanding shares of common stock. The letter also outlines capitalization requirements Napo would be required to satisfy in order 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 revenue stream for Napo.

Crofelemer was approved by the Food & Drug Administration in 2012 for the symptomatic relief of non-infectious diarrhea in adults with HIV/AIDS on anti-retroviral therapy. In May 2016, Napo regained ownership of the new drug application 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 promoting Mytesi to HIV prescribers in October 2016.

Crofelemer is also the active pharmaceutical ingredient 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 that have malignancies treated with toceranib phosphate, another tyrosine kinase inhibitor for which 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, said, "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 from Napo to Jaguar for exclusive global veterinary rights.

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," said Lisa Conte, Jaguar president and chief executive officer who also is 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."

Jaguar also announced that Aspire Capital Fund LLC 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.

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