urgn-6k_20180630.htm

EX-99.1 2 UroGen-urgn-ex991_20180630.htm EX-99.1 urgn-6k_20180630.htm

Exhibit 99.1

UROGEN PHARMA LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

	June 30,			December 31,
	2018			2017
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	119,109		$	36,999
Short-term investments		—			36,001
Restricted deposit		197			198
Accounts receivable		232			—
Inventory		142			316
Prepaid expenses and other current assets		1,024			958
TOTAL CURRENT ASSETS		120,704			74,472
NON-CURRENT ASSETS
Property and equipment, net		718			805
Restricted deposit		80			29
Other non-current assets		—			244
TOTAL ASSETS	$	121,502		$	75,550
Liabilities and Shareholders' equity
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	5,655		$	4,435
Employee related accrued expenses		2,211			1,950
Deferred revenues		86			650
TOTAL CURRENT LIABILITIES		7,952			7,035

TOTAL LIABILITIES		7,952			7,035
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS’ EQUITY:
Ordinary shares, NIS 0.01 par value; 100,000,000 shares authorized at June 30, 2018 and December 31, 2017; 15,853,286 and 13,751,390 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively		43			37
Additional paid-in capital		192,129			115,692
Accumulated deficit		(78,622	)		(47,214	)
TOTAL SHAREHOLDERS’ EQUITY		113,550			68,515
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	121,502		$	75,550

The accompanying notes are an integral part of these condensed consolidated financial statements.

UROGEN PHARMA LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

	Six Months Ended June 30,					Three Months Ended June 30,
	2018			2017		2018			2017
REVENUES	$	845		$	19	$	364		$	—
COST OF REVENUES		748			18		318			—
GROSS PROFIT		97			1		46			—
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT EXPENSES		15,895			6,315		8,273			3,651
GENERAL AND ADMINISTRATIVE EXPENSES		16,276			3,175		10,207			2,300
OPERATING LOSS		32,074			9,489		18,434			5,951
INTEREST AND OTHER (INCOME) EXPENSES, NET		(766	)		127		(408	)		248
REALIZED LOSS ON SALE OF SHORT-TERM INVESTMENT		100			—		—			—
NET LOSS	$	31,408		$	9,616	$	18,026		$	6,199
NET LOSS PER ORDINARY SHARE BASIC AND DILUTED	$	2.02		$	1.81	$	1.14		$	0.70
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER ORDINARY SHARE		15,528,826			5,755,714		15,784,393			9,204,405

The accompanying notes are an integral part of these condensed consolidated financial statements.

UROGEN PHARMA LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(U.S. dollars in thousands, except share data)

(Unaudited)

	Ordinary Shares				Preferred Shares						Additional paid-in capital			Accumulated Deficit			Total
	Number of Shares		Amount		Number of Shares			Amount			Amounts
BALANCE AS OF JANUARY 1, 2018		13,751,390	$	37		—		$	—		$	115,692		$	(47,214	)	$	68,515
CHANGES DURING THE SIX MONTHS ENDED JUNE 30, 2018:
Exercise of options into ordinary shares		418,970		1								(1	)					—
Share-based compensation												12,250						12,250
Issuance of ordinary shares in public offering, net of issuance expenses		1,682,926		5								64,188						64,193
Net loss															(31,408	)		(31,408	)
BALANCE AS OF JUNE 30, 2018		15,853,286	$	43		—		$	—		$	192,129		$	(78,622	)	$	113,550

BALANCE AS OF JANUARY 1, 2017		2,305,743	$	6		5,193,427		$	13		$	43,502		$	(27,214	)	$	16,307
CHANGES DURING THE SIX MONTHS ENDED JUNE 30, 2017:
Exercise of options into ordinary shares		1,920	*									4						4
Share-based compensation												1,873						1,873
Exercise of warrants into preferred shares						364,036			1			4,731						4,732
Conversion of preferred shares into ordinary shares		5,557,463		14		(5,557,463	)		(14	)
Issuance of ordinary shares, net of issuance expenses		5,144,378		15								60,757						60,772
Net loss															(9,616	)		(9,616	)
BALANCE AS OF JUNE 30, 2017		13,009,504	$	35		—		$	—		$	110,867		$	(36,830	)	$	74,072

(*) Represents less than one thousand

The accompanying notes are an integral part of these condensed consolidated financial statements.

UROGEN PHARMA LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(31,408	)	$	(9,616	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation and disposals		291			132
Share-based compensation		12,250			1,873
Realized loss on sale of short-term investment		100			—
Exchange rates differences		1			(2	)
Fair value adjustment of warrants for preferred shares		—			168
Changes in operating assets and liabilities:
Decrease (increase) in inventory		174			(293	)
(Increase) decrease in accounts receivable		(232	)		73
Increase in prepaid expenses and other current assets		(66	)		(308	)
Increase in accounts payable and accrued expenses		1,422			1,031
(Decrease) increase in deferred revenues		(564	)		311
Increase in employee related accrued expenses		261			425
Net cash used in operating activities		(17,771	)		(6,206	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted deposit		(51	)		(5	)
Sale of short-term investment		35,901			—
Purchase of property and equipment		(204	)		(98	)
Net cash provided by (used in) investing activities		35,646			(103	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options into ordinary shares		—			4
Issuance of ordinary shares in public offering, net of issuance expenses		64,235			61,654
Proceeds from exercise of warrants to preferred shares		—			382
Net cash provided by financing activities		64,235			62,040
INCREASE IN CASH AND CASH EQUIVALENTS		82,110			55,731
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR		36,999			21,362
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR	$	119,109		$	77,093
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash issuance cost	$	—		$	728
Exercise of warrants into preferred shares	$	—		$	4,732

The accompanying notes are an integral part of these condensed consolidated financial statements.

UROGEN PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands, except share data)

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS

UroGen Pharma Ltd. is an Israeli company incorporated in April 2004 ("UPL").

UroGen Pharma, Inc. a subsidiary of UPL, was incorporated in Delaware in October 2015 and began operating in February 2016 ("UPI").

UPL and UPI (together the “Company”) is a clinical stage biopharmaceutical company focused on developing novel therapies designed to change the standard of care for urological pathologies.

In May 2017, the Company raised $60.8 million, net of issuance costs and underwriting discounts, in an Initial Public Offering ("IPO") on the Nasdaq stock market.

As described in Note 7a1, in April 2017, the Company’s board of directors and shareholders approved a 3.2-for-1 split of the Company’s ordinary, Preferred A and Preferred A-1 shares. All share and per share amounts reflected in these financial statements and the notes thereto have been adjusted, on a retroactive basis, to reflect this share split.

In January 2018, the Company completed a follow-on public offering on Nasdaq of 1,682,926 ordinary shares, a t a public offering price of $41.00 per share, in consideration for approximately $64.2 million net of underwriting discounts and commissions and issuance costs, including exercise of the underwriters’ option to purchase an additional 219,512 ordinary shares at the public offering price.

As of the date of issuance of the consolidated financial statements, the Company has the ability to fund its planned operations for at least the next 12 months. However, the Company’s product candidates may never achieve commercialization and it will continue to incur losses for the foreseeable future. Therefore, the Company may need to raise additional funds to fund its research and development expenses, general and administrative expenses and capital expenditures until such time that it can generate substantial revenues.

NOTE 2 - BASIS OF PRESENTATION

The Company’s unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of June 30, 2018, the results of operations for the six and three months ended June 30, 2018 and 2017, and cash flows for the six months ended June 30, 2018 and 2017.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2017 and notes thereto included in the Company’s annual financial statements for the year ended December 31, 2017. The condensed balance sheet data as of December 31, 2017 included in these unaudited condensed consolidated financial statements was derived from the audited financial statements for the year ended December 31, 2017 but does not include all disclosures required by U.S. GAAP.

The results for the six and three month periods ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018.

UROGEN PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands, except share data)

(Unaudited)

NOTE 3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“Topic 606”, “ASU 2014-09”, or “the New Revenue Standard”). ASU 2014-09 requires entities to recognize revenue that represents the transfer of promised goods or services to customers in an amount equivalent to the consideration to which the entity expects to be entitled to in exchange for those goods or services. The following steps should be applied to determine this amount: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in ASU 605, “Revenue Recognition,” and most industry-specific guidance in the Accounting Standards Codification. The New Revenue Standard is effective for the Company for annual reporting periods, including interim periods therein, beginning January 1, 2018. The New Revenue Standard may be applied retrospectively with the cumulative effect recognized as of the date of adoption (modified retrospective method). The Company has adopted the New Revenue Standard using modified retrospective method. The Company has completed its assessment of the New Revenue Standard and identified two revenue streams; (1) licensing revenue and (2) revenue from clinical supply of RTGel per the license agreement with Allergan. The implementation of the New Revenue Standard did not have a material impact on the amount or timing of the Company’s current revenue recognition related to these revenue streams.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842 or “ASU 2016-02”). ASU 2016-02 supersedes existing guidance in Leases (Topic 840). The revised standard requires lessees to recognize the assets and liabilities arising from leases with lease terms greater than twelve months on the balance sheet, including those currently classified as operating leases, and to disclose key information about leasing arrangements. Lessees will be required to recognize a lease liability and a right-of-use asset on their balance sheets, while lessor accounting will remain largely unchanged. The guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

NOTE 4 – SHORT-TERM INVESTMENTS

The Company sold its short-term investments during March 2018 and recorded a realized loss on sale of short-term investment of $100 for the six months ended June 30, 2018. The Company also recorded increased interest income for the same period related to the short-term investment. At June 30, 2018, all the Company’s funds were in cash and cash equivalents.

NOTE 5 - FAIR VALUE MEASUREMENT

Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

UROGEN PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands, except share data)

(Unaudited)

NOTE 5 - FAIR VALUE MEASUREMENT (continued)

The Company’s assets and liabilities that are measured at fair value as of June 30, 2018 and December 31, 2017 are classified in the tables below in one of the three categories described above:

	June 30,		December 31,
	2018		2017
Money market and mutual funds⁽¹⁾ - Level 1	$	108,638	$	26,127
Short-term investments - Level 2		—		36,001
Other - Level 3		—		—

⁽¹⁾

Included in cash and cash equivalents on the consolidated balance sheets. The carrying amount approximates fair value.

The table below sets forth a summary of the changes in the fair value of the warrants for preferred shares classified as Level 3:

	Six Months Ended June 30,					Three Months Ended June 30,
	2018		2017			2018		2017
Balance at the beginning of the period	$	—	$	3,612		$	—	$	3,503
Changes in fair value during the period		—		168			—		277
Exercise of warrants to preferred shares		—		(3,780	)		—		(3,780	)
Balance at end of the period	$	—	$	—		$	—	$	—

NOTE 6 - COMMITMENTS AND CONTINGENCIES

In September 2017, UPI entered into a new lease agreement for its New York headquarters. The lease agreement commenced in October 2017 and shall terminate in February 2021. The total contractual obligation for the duration of the lease is approximately $2,130.

In April 2018, UPI entered into a new lease agreement for an office in Los Angeles, CA. The lease commencement date is estimated to be in the third quarter of 2018 and terminate in 2023. The total contractual obligation for the duration of the lease is approximately $1,400.

NOTE 7 - SHARE CAPITAL

Share capital

On April 19, 2017, the Company’s board of directors and shareholders approved an aggregate 3.2‑for-1 share split of the Company’s ordinary, Preferred A and Preferred A-1 shares. The share split was effected on April 19, 2017 by the issuance of 2.2 ordinary shares for each outstanding ordinary, Preferred A and Preferred A-1 share held immediately prior to the share split.

In May 2017, the Company completed an IPO on the Nasdaq stock market, in which it issued 5,144,378 ordinary shares at a public offering price of $13.00 per share in consideration for $60.8 million, net of issuance costs and underwriting discounts.

In January 2018, the Company completed a follow-on public offering on Nasdaq of 1,682,926 ordinary shares, at a public offering price of $41.00 per share, in consideration for approximately $64.2 million net of underwriting discounts and commissions and issuance costs, including exercise of the underwriters’ option to purchase an additional 219,512 ordinary shares at the public offering price.

During the six months ended June 30, 2018, the Company issued 418,970 ordinary shares with respect to the net exercise of options.

UROGEN PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands, except share data)

(Unaudited)

NOTE 7 - SHARE CAPITAL (continued)

Share-based compensation

The following table illustrates the effect of share-based compensation on the statements of operations:

	Six Months Ended June 30,				Three Months Ended June 30,
	2018		2017		2018		2017
Research and development expenses	$	5,261	$	1,013	$	2,788	$	853
General and administrative expenses		6,989		860		4,921		723
	$	12,250	$	1,873	$	7,709	$	1,576

2017 Equity Incentive Plan

In March 2017, the Company’s board of directors adopted the 2017 Equity Incentive Plan ("2017 Plan"), which was approved by the shareholders in April 2017. The 2017 Plan provides for the grant of incentive stock options to the Company's employees and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of stock awards to the Company's employees, directors and consultants.

The maximum number of ordinary shares that may initially be issued under the 2017 Plan is 1,400,000. In addition, the number of ordinary shares reserved for issuance under the 2017 Plan will automatically increase on January 1st of each calendar year, from January 1, 2018 through January 1, 2027, so that the number of such shares reserved for issuance will equal 12% of the total number of ordinary shares outstanding on the last day of the calendar month prior to the date of each automatic increase, or a lesser number of shares determined by our board of directors. The maximum number of ordinary shares that may be issued upon the exercise of incentive stock options under the 2017 Plan is 5,600,000.

On January 1, 2018, the share reserve increased by 250,167 to 1,650,167.

The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2017 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of the Company’s ordinary shares on the date of grant. Options granted under the 2017 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.

During the six months ended June 30, 2018, the Company's board of directors approved grants of 702,000 options to executive management and employees of the Company. Each option is exercisable into one ordinary share of the Company at an exercise price between $38.64 to $59.23. The options vest in several installments over a three-year period. As of the grant date, the fair value of these options was $23,195. The options expire ten years after their grant date.

During the six months ended June 30, 2018, the Company's board of directors approved grants of 78,527 restricted stock units, or RSUs, to executive management and employees of the Company. The RSUs vest in several installments over a three-year period. As of the grant date, the fair value of these RSUs was $4,481. The RSUs expire ten years after their grant date.

In January 2018, the Company's board of directors approved a grant of 40,000 options to the Chairman of the board of directors of the Company. Each option is exercisable into one ordinary share of the Company at an exercise price of $43.67. The options vest quarterly over a one-year period. As of the grant date, the fair value of these options was $1,392. The options expire ten years after their grant date.

In January 2018, the Company's board of directors approved grants of 30,000 options to consultants of the Company. Each option is exercisable into one ordinary share of the Company at an exercise price of $43.67. The options vest monthly over a one-year period. As of June 30, 2018, the fair value of these options was estimated at $701. The options expire ten years after their grant date.

In June 2018, the Company's board of directors approved a grant of 60,000 options to the board of directors of the Company. Each then current director, including the Chairman of the board, received 10,000 options. Each option is exercisable into one ordinary share of the Company at an exercise price of $59.23. The options vest quarterly over a one-year period. As of the grant date, the fair value of these options was $2,882. The options expire ten years after their grant date.

UROGEN PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands, except share data)

(Unaudited)

NOTE 7 - SHARE CAPITAL (continued)

In June 2018, the Company's board of directors approved grants of 10,000 options to consultants of the Company. Each option is exercisable into one ordinary share of the Company at an exercise price of $59.23. The options vest 50% six months from grant date and 50% nine months from grant date. As of June 30, 2018, the fair value of these options was estimated at $392. The options expire ten years after their grant date.

In June 2018, the Company announced the resignation of its CFO, and in June 2018, the Company's board of directors approved a severance package including modifications to grants of his related option awards. The fair value of the modifications to these option awards was estimated at $2,324 and was recorded in general and administrative expenses in the Company’s Statements of Operations for the six and three months ended June 30, 2018.

NOTE 8 - RELATED PARTIES

UPI entered into a lease agreement, dated as of November 2015 and commencing as of May 2016, for office space located at 689 Fifth Avenue in New York. UPI shared the office space equitably with Kite Pharma, Inc., a Delaware corporation, which is a cosignatory to such lease agreement. Arie Belldegrun, M.D., UPL’s chairman, served as the Chairman and Chief Executive Officer of Kite Pharma, Inc. until his resignation effective as of October 3, 2017, in connection with the acquisition of Kite Pharma, Inc. by Gilead Sciences, Inc.

In April 2018, the Company terminated its lease for offices at 689 Fifth Avenue in New York. The Company expects the office to be assumed by other tenants in the near future. However, until the assumption takes place, the Company has recorded an estimate of approximately $291 in early termination expense on the lease for the six months ended June 30, 2018. The Company also recorded a loss on disposal of fixed assets of $183 for the six months ended June 30, 2018, regarding the accelerated depreciation on the leasehold improvements associated with the lease.

NOTE 9 - LOSS PER SHARE:

The following table sets forth the calculation of basic and diluted loss per share for the periods indicated:

	Six Months Ended June 30,				Three Months Ended June 30,
	2018		2017		2018		2017
Basic and diluted:
Net Loss attributable to equity holders of the Company	$	31,408	$	9,616	$	18,026	$	6,199
Dividend accumulated on preferred shares during the period	$	—	$	824	$	—	$	216
Net Loss attributable to equity holders of the Company, after reducing dividend accumulated on preferred shares	$	31,408	$	10,440	$	18,026	$	6,415
Weighted average number of ordinary shares outstanding used in computing basic and diluted net loss per ordinary share		15,528,826		5,755,714		15,784,393		9,204,405
Basic and diluted net loss per ordinary share	$	2.02	$	1.81	$	1.14	$	0.70

For the six and three months ended June 30, 2018 and 2017, all ordinary shares underlying outstanding options, A-1 warrants and convertible preferred shares have been excluded from the calculation of the diluted loss per share since their effect was anti-dilutive.

NOTE 10 - SUBSEQUENT EVENTS:

The Company has evaluated and determined there were no subsequent events through August 14, 2018.