EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT
22nd DECEMBER 2020

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

NapoEU
NAPOEU ENTERS EU MARKET NapoEU
FOR POST COVID TREATMENT Description

NapoEU is the proposed European arm

of Napo Pharmaceuticals, a wholly-ow-
ned subsidiary of San Francisco-based
Jaguar Health, Inc. It focuses on the
development and commercialization
of proprietary pharmaceuticals for the
global marketplace — every country,
every population, every channel —
regardless of social or economic status.
Napo’s mission is to provide novel
NapoEU’s ambitions to expand marketing and medicines to high-margin western
distribution of crofelemer into Europe appear markets, while leveraging economies
justified in our view. Population size, an establi- of scale in emerging and developing
shed approved drug and an in-place strong markets.
management team should generate signifi-
cant, profitable revenue for the business - and
on a relatively lower risk basis than might
normally be associated an early stage pharma-
ceuticals venture. The implications for valua-
tion thus look positive in our view.

This SGF Evergreen Research Brief includes our

revenue and profit projections for NapoEU
during the course of a specific 10-year forecasting
period. Our central conclusions are that the com-
pany may well achieve around US$1,100m of sales
revenue in that period with operating profits of
the order of US$500m to US$520m. Moreover,
the discovery of a more contagious variant of
corona virus in the UK should intensify interest in
drugs associated with Covid19, including those
for long haulers.

While a new drug launch inevitably involves

substantial costs, we note the risk reward benefi-
ts of having Napo Pharmaceuticals Inc already in
place withcrofelemer under the Mytesi® brand
name in the US. Mytesi® is a well invested drug
which entered development phase in 1989 and
began selling in 2014. In the first 30 years of its
development around US$720m was invested in
the drug. A further US$468m has been earmar-
ked for Mytesi® between 2019 and 2023. www.swissgrowthforum.org
EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

The volume and revenue growth projections which appear in this report are based on a number
of assumptions which in turn drive expected NapoEU’s sales of crofelemer in Europe. As yet, we
assume no firm start year for the drug in Europe. However, we do note the potential for drugs to
receive conditional approval, which accelerates availability and eases any potential cash demands.
Approved US drugs have an observable approval rate in Western Europe in excess of 80%.
Our model is driven by assumptions made for overall Covid19 sufferers, the portion affected by
gastrointestinal complaints. We apply a market penetration rate for NapoEU of 35% and assume
a US$400 per bottle selling price. Gross margins are assumed to be in excess of 75% and opera-
ting margins to be close to 50%.

Once established on a pan-European basis, crofelemer will potentially serve a 540million popula-
tion of which Covid incidents may be expected to number 16m. Out of these around 5million
might have post Covid syndrome and be referred to as long haulers with a diarrhea prevalence
affecting about 30%, which rounds to about 2m. Assuming a 35% market penetration rate, crofe-
lemer’s European customer base could be of the order half a million patients.

The assumed prescription duration of these ½m sufferers varies by symptom persistence. If our
assessment is correct, prescribed volume will peak at around 2.8m which at US$400/bottle refe-
rence selling price implies US$1.1bn sales.Our profit model applies a gross margin and selling and
general administrative expenses. These are assumed to be 77% and 28% of sales revenue respecti-
vely. The implied peak operating profit at these levels is around US$541m.

Our revenue and profit assumptions have important implications for how the Post Pandemic
Recovery Equity SPAC might be valued. The base assumption is a US$25m pre-money valuation
at which level the SPAC would own 51% were it to raise US$25m. At US$50m the SPAC would own
67%. Importantly in our view a post-money valuation of around US$75m represents a fraction of
the net operating profit potential of the group (based on our assumptions) of US$400m to
US$450m.

Given the risk reduction to NapoEU’s roll-out of crofelemer associated with an established
management team and an already FDA approved drug – i.e. Mytesi in the US – this kind of
valuation arithmetic is arguably attractive to potential investors in the SPAC.

Please refer to the important Swiss Growth

Forum disclosures shown on the back page.
The information contained in this report is
categorised as marketing material www.swissgrowthforum.org
EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

OVERVIEW
The purpose of this SGF Evergreen Research Brief is to evaluate the potential for NapoEU, as the
target of a proposed Post Pandemic Recovery Equity SPAC. We look at potential revenue drivers,
the implications for profitability and assess key benchmarks for valuation.

The overall framework is based on a 10-year specific forecasting period with Year 1 being the first
full year of commercial operation once approval, or conditional approval, has been granted in key
European countries and relevant marketing activities are in place.

As www.livescience.com highlighted, symptoms may include recurrent fevers, persistent consti-

pation or diarrhea, intense bouts of fatigue, debilitating brain fog, and vivid hallucinations. Some
people who catch COVID-19 experience symptoms like these for months on end.
The volume and revenue growth forecasts which appear in this report are based on a number of
assumptions which in turn drive expected NapoEU’s sales of crofelemer in Europe. As yet we
assume no firm start year for the drug in Europe. However, we do note the potential for drugs to
receive conditional approval, which accelerates availability and eases any potential cash demands.
Approved US drugs have an observable approval rate in Europe in excess of 80%.

Once established on a pan-European basis, the drug will serve a 540million population of which
Covid incidents may be expected to number 16m. Out of these around 5million might have post
Covid syndrome and be referred to as long haulers with a diarrhea prevalence affecting about
30%, which rounds to about 2m. Assuming a 35% market penetration rate, crofelemer’s European
customer base could be of the order ½m.

The assumed prescription duration of these ½m sufferers varies by symptom persistence. Our
volume model assumes that 30% of those affected will have acute inflammatory symptoms, 60%
will be long haulers and 10% will have chronic inflammatory diarrhea. We envisage bottles of
crofelemer prescribed to each category to be half a bottle 6 and 12 respectively. If our assessment
is correct, prescribed volume will peak at around 2.8m which at US$400/bottle reference selling
price implies US$1.1bn sales.

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

Our profit model applies a gross margin and selling and general administrative expenses. These
are assumed to be 77% and 28% of sales revenue respectively. The implied peak operating profit
at these levels is around US$541m. What the profit model does not expense is any start-up costs
associated with bringing the drug to the European market.

However, these start-up costs, largely regulatory approval and marketing, should significantly be
covered by the US$25m to US$50m which the company plans to raise via a Special Purpose Acqui-
sition Company. The SPAC referred to for NapoEUis called the “Post Pandemic Recovery Equity
SPAC.” The SPAC looks to raise the US$25mtoUS$50m ahead of a potential AIM Milan listing and
will become majority owner of NapoEU.

Our revenue and profit assumptions have important implications for how the Post Pandemic
Recovery Equity SPAC might be valued. The base assumption is a US$25m pre-money valuation
at which level the SPAC would own 51% were it to rase US$25m. At US$50m the SPAC would own
67%. Importantly in our view a post-money valuation of around US$75m represents a fraction of
the net operating profit potential of the group based on our assumptions which would be
US$400m to US$450m.

Given the risk reduction to NapoEU’s roll-out of crofelemer associated with an established mana-
gement team and an already FDA approved drug – i.e.Mytesi in the US – this kind of valuation
arithmetic is arguably attractive to potential investors in the SPAC.

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

VOLUME AND REVENUE ASSUMPTIONS

EUROPEAN POPULATION AND COVERAGE

Adding Europe to Napo Pharmaceuticals massively increases its scope. Both the overall 748
million population and size of economy at US$22tn are larger than the USA where comparable
figures are 328 million US$21tn respectively. NapoEU will focus initially on the EU and other
Western Europe nations, which boast not only the largest economies but also have the most evol-
ved of the state funded healthcare systems – both medically and financially. Western Europe’s
combined population (EEA + UK) amounts to 529m (Source: Statista).

Figure 1 – European population coverage for crofelemer

Source: WorldStats and SGF Evergreen Research

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

VOLUME PROJECTIONS

Aside from market penetration, the main drivers for patients are Covidincidence, those affected
with post Covid syndrome, and the portion of the latter category with a diarrhea prevalence. We
assume that Covidincident number around 3% of the European population in the middle of the
forecasting period. Of these, around33% are assumed to have post Covid syndrome – i.e., be the
long haulers.
The peak number of incidents is assumed to occur during the middle of the forecasting period.
Thereafter, the patient numbers and prescription take-up are expected to reduce.

Figure 2 – Post covid - potential patient numbers - overall

Source: SGF Evergreen Research

We separate patient numbers by type in Figure 3. We assume that those with acute symptoms
account for 30% in total. The largest category is assumed to be long haulers with acute symp-
toms, who represent 60%. Those patients with chronic inflammatory diarrhea are expected to be
the smallest group being 10% of the total.

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

Figure 3 – Post covid – potential patient numbers by category

Source: SGF Evergreen Research

NapoEU itself seems unlikely to have a monopoly prescribed diarrhea medication for post Covid19
pandemic recovery patients. However, given the success of Mytesi® and its novel mechanism of
action and safety profile as the only anti-diarrhea approved for chroic use in the US we assume that
crofelemer will be a market leader with the potential to enjoy a substantial market share. As a result,
we include 35% market penetration in our projections. These are summarised in Figure 4.

Figure 4 – NapoEU – patient numbers by category

Source: SGF Evergreen Research

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

Where patient numbers by type and assumed penetration are important is in the total amount of
pills prescribed. Those with acute symptoms are likely to be prescribed the smallest quantities.
Half a 60 tablet bottle should be enough to complete a course of treatment. Long hauler patients
might be expected to require as many as 6 bottles to complete a course, while chronic inflamma-
tory diarrhea sufferers could need one bottle per month – i.e. 12 bottles annually.
The impact is summarised in Figure 5.

Figure 5 – NapoEU – crofelemer sales volume projections

Source: SGF Evergreen Research

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

SALES REVENUE PROJECTIONS

The sales revenue outcome, which is driven by Figures 1 to 5 is summarised in Figure 6. The
projections use a constant selling price of US$400 per bottle. This may fluctuate at some stage
due to changes in the US$/€ exchange rate. However, it does not assume any price inflation in the
relevant period. If our projections are met, NapoEU should reach US$1bn in sales revenue by the
middle of the specific forecasting period.

Figure 6 – NapoEU – crofelemer sales revenue projections

Source: SGF Evergreen Research

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

SALES REVENUE PROJECTIONS

We split our profitability assumptions between gross profit and operating income. The gross
profit is struck on the basis of cost of goods sold being 25.0% of sales at the beginning of the fore-
casting period and dropping to 20.5% by the end – i.e. gross margins are expected to improve over
time. This assumption is summarised in Figure 7.

Figure 7–NapoEU – gross profit projections

Source: SGF Evergreen Research

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EVERGREEN RESEARCH BRIEF

NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

A salient feature of NapoEU is relatively low Research & Development costs associated with crofe-
lemer. The main use of R&D funds – assumed to be US$20m annually - will be for continued
investment in COGS reduction and regulatory approvals in the full European licensed territory
These kinds of costs should be constrained to the US and the legacy Mytesi® business. As a result,
the bulk of costs comprise Selling & General Administrative expenses which we assume to be
around 28% of sales revenue.

Figure 8 – NapoEU – operating profit projections

Source: SGF Evergreen Research

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NapoEU
ENTERS EU MARKET FOR
EVERGREEN RESEARCH BRIEF
POST COVID TREATMENT
NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

RELATIVE VALUATION
Some idea of the valuation parameters for NapoEU is available from the relative valuation sum-
mary which is shown in Figure 9. It is a similar exercise to the one which we included in our 30th
November 2020 report “NapoEU – Sustainable Expansion in Europe.”

This exercise serves two purposes. First it shows the kinds of multiples that small to mid-cap phar-
maceuticals companies can generate as a portion of sales. The average is a market cap to half-ye-
ar sales ratio of 12.4x which implies around 6.2x full year sales.

As a result, Jaguar Inc which closed on Friday 18th December 2020 with a US$31m market cap
could be argued to be worth US$49m were it to match its peer group average. Both values are
highlighted in the boxed area of Figure 9.

The read across for a potential valuation of NapoEU is positive in our opinion given a pre-money
valuation of US$25m for the Post Pandemic Recovery Equity SPAC. Were it to match our fair
value for Jaguar Inc right now based on relative valuation it would be worth twice the proposed
pre-money valuation.

Furthermore, our forecasts assume that NapoEU will achieve US$1.1bn in annual sales revenue.
Based on the current average for market cap to first half sales revenue the business could be
worth a significant multiple of sales revenue – e.g. somewhere of the order of 6x times the annual
total.

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NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

Figure 9 – Jaguar Health Inc – relative valuation

Jan-Jun 2020
Small Cap Pharmas Market Cap Net Revenue Market cap/H1
(US$m) (US$m) revenue
Enanta Pharmaceuticals, Inc. (NasdaqGS: ENTA) 865,0 46,3 18,7
Ironwood Pharmaceuticals, Inc. (NasdaqGS: IRWD) 1.890,0 169,4 11,2
Avadel Pharmaceuticals plc (NasdaqGS: AVDL) 430,0 22,3 19,3
Innoviva, Inc. (NasdaqGM: INVA) 1.220,0 157,6 7,7
Amphastar Pharmaceuticals, Inc. (NasdaqGS: AMPH) 882,0 170,5 5,2
Supernus Pharmaceuticals, Inc. (NasdaqGM: SUPN) 1.110,0 221,7 5,0
Exelixis, Inc. (NasdaqGS: EXEL) 6.300,0 486,4 13,0
Horizon Therapeutics (NasdaqGS: HZNP) 15.460,0 818,7 18,9

Average 12,4

Jaguar Health Inc. actual 31,0 4,0 7,8

at average 49,4

Source: Marketscreener, Jaguar Health Inc. company data and SGF Evergreen Research

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NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

SPAC – KEY POINTS

NapoEU is the proposed target for a Special Purpose Acquisition Company (SPAC), which will be
referred to as the Post Pandemic Revovery Equity SPAC. The SPAC will be a listed company on
AIM Italy which will usefunds raised to purchase a controlling stake in NapoEU. The larger the
funds raised, the greater the portion of NapoEUwhich will be owned by the SPAC.

The advantage of a SPAC relative to a spin-off is that existing shareholders of Jaguar Inc, which
owns Napo Pharmaceuticals, will not be diluted as a result of the capital raise process to finance
NapoEU. Moreover, NapoEU will effectively be listed once acquired by the SPAC. Jaguar Inc
shareholders will participate in the European growth opportunity as a result of their equity stake
in NapoEU.

In addition, we note that AIM Italy is the largest SPAC market globally for new listings outside of
the US. Furthermore, Italy is a strategic choice for Napo EU as it has seen the highest number of
deaths in the EU due to having one of the oldest populations in the world many of whomdwell in
mutli-generational households.As a result, awareness in the Italian media is at a fever pitch regar-
ding the pandemic and its lasting effects on their population's health.

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NapoEU
ENTERS EU MARKET FOR
POST COVID TREATMENT

22nd DECEMBER 2020

CONTACTS
Andreea Porcelli
andreea@swissgrowthforum.io

Research Consultant – Chris Wickham

research@swissgrowthforum.io

DISCLAIMER
DO NOT BASE ANY INVESTMENT DECISION UPON ANY INFORMATION OR OPINIONS FOUND IN THIS REPORT. We are not registered as a
securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state or
overseas securities regulatory authority. We are neither licensed nor qualified to provide investment advice. We have been paid US$2,124 by
Jaguar Health Inc to release this report. This report has been prepared for informational purposes only and is not intended to be used as a
complete source of information on any particular company or industry. Information, opinions and analysis contained herein are based on
sources believed to be reliable, but no representation, expressed or implied, has been made to us as to the accuracy, completeness or
correctness of such information. You alone will need to evaluate the merits and risks associated with an investment with the company
mentioned herein. Decisions based on information obtained from this report are your sole responsibility, and before making any decision
on the basis of this information, you should consider (with the assistance of a financial and/or securities adviser) whether the investment is
appropriate in light of your particular investment needs, objectives and financial circumstances. The opinions contained in this report
reflect our current judgment and are subject to change without notice. We accept no liability for any losses arising from an investor's
reliance on or use of this report. We have no obligation to update such report. Certain information included herein is forward-looking,
including, but not limited to, statements concerning the growth and expansion of the Company and its industry. Such forward-looking
information involves important risks and uncertainties that could affect actual results and cause them to differ materially from expectations
expressed herein. We have no ownership in the Company mentioned herein.

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