Quoted from Goronic:That looks like one built early on.
The Smuag 'mouth' motor will need to be replaced to have it work again. JJP may be able to repair it but you would need to ask - and probably at least pay shipping and also the motor cost. However, I am not sure they will do that. Your other option would be to buy a whole new Smaug assembly (a bit pricey)
http://store.jerseyjackpinball.com/Parts/The-Hobbit-Parts/Smaug-Assembly-HOBBIT-LE-SE-Edition-RED.html
Not necessarily, take him out and manually move the mouth, it could just be stuck and needs to be recalibrated. Could also be a loose connector.