0001437749-22-011618.txt : 20220510 0001437749-22-011618.hdr.sgml : 20220510 20220510090627 ACCESSION NUMBER: 0001437749-22-011618 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 87 CONFORMED PERIOD OF REPORT: 20220331 FILED AS OF DATE: 20220510 DATE AS OF CHANGE: 20220510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UroGen Pharma Ltd. CENTRAL INDEX KEY: 0001668243 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: L3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38079 FILM NUMBER: 22907591 BUSINESS ADDRESS: STREET 1: 9 HA'TA'ASIYA ST CITY: RA'ANANA STATE: L3 ZIP: 4365007 BUSINESS PHONE: 972 9 770 7601 MAIL ADDRESS: STREET 1: 9 HA'TA'ASIYA ST CITY: RA'ANANA STATE: L3 ZIP: 4365007 10-Q 1 urgn20220331_10q.htm FORM 10-Q urgn20220331_10q.htm
0001668243 UroGen Pharma Ltd. false --12-31 Q1 2022 0.01 0.01 100,000,000 100,000,000 22,682,221 22,682,221 22,462,995 22,462,995 28,392 25,935 28,392 25,935 475,698 467,321 25 8,413 1 1 44 44 28,392 28,392 62 478,646 495,713 69 17,074 60 452,525 356,501 96,355 1 3 4 128 128 25,935 25,935 61 458,723 382,436 143 76,491 28,392 25,935 0 75,000 5 75,000 4,169 316 1.28 2.13 841 1,257 1,207 182 243 251 49 725 373 1,335 1,708 1,001 1,411 2,412 3 100.0 3 2 2 $1.0 million of raw materials at December 31, 2021 are included within other non-current assets on the condensed consolidated balance sheets. $1.5M of the Amounts paid and payable are included as current portion of the prepaid forward obligation within other current liabilities on the balance sheet 00016682432022-01-012022-03-31 xbrli:shares 00016682432022-05-03 thunderdome:item iso4217:USD 00016682432022-03-31 00016682432021-12-31 iso4217:ILSxbrli:shares 00016682432021-01-012021-03-31 iso4217:USDxbrli:shares 0001668243us-gaap:CommonStockMember2021-12-31 0001668243us-gaap:AdditionalPaidInCapitalMember2021-12-31 0001668243us-gaap:RetainedEarningsAppropriatedMember2021-12-31 0001668243us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-31 0001668243us-gaap:CommonStockMember2022-01-012022-03-31 0001668243us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-31 0001668243us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-31 0001668243us-gaap:RetainedEarningsAppropriatedMember2022-01-012022-03-31 0001668243us-gaap:CommonStockMember2022-03-31 0001668243us-gaap:AdditionalPaidInCapitalMember2022-03-31 0001668243us-gaap:RetainedEarningsAppropriatedMember2022-03-31 0001668243us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-31 0001668243us-gaap:CommonStockMember2020-12-31 0001668243us-gaap:AdditionalPaidInCapitalMember2020-12-31 0001668243us-gaap:RetainedEarningsAppropriatedMember2020-12-31 0001668243us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-31 00016682432020-12-31 0001668243us-gaap:CommonStockMember2021-01-012021-03-31 0001668243us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-31 0001668243us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-31 0001668243us-gaap:RetainedEarningsAppropriatedMember2021-01-012021-03-31 0001668243us-gaap:CommonStockMember2021-03-31 0001668243us-gaap:AdditionalPaidInCapitalMember2021-03-31 0001668243us-gaap:RetainedEarningsAppropriatedMember2021-03-31 0001668243us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-31 00016682432021-03-31 utr:Y 0001668243urgn:ComputersAndSoftwareMember2022-01-012022-03-31 0001668243urgn:LaboratoryEquipmentMembersrt:MinimumMember2022-01-012022-03-31 0001668243urgn:LaboratoryEquipmentMembersrt:MaximumMember2022-01-012022-03-31 0001668243urgn:FurnitureMembersrt:MinimumMember2022-01-012022-03-31 0001668243urgn:FurnitureMembersrt:MaximumMember2022-01-012022-03-31 0001668243urgn:ManufacturingEquipmentMembersrt:MinimumMember2022-01-012022-03-31 0001668243urgn:ManufacturingEquipmentMembersrt:MaximumMember2022-01-012022-03-31 0001668243us-gaap:OtherNoncurrentAssetsMember2022-03-31 0001668243us-gaap:OtherNoncurrentAssetsMember2021-12-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2022-03-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2022-03-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2022-03-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-03-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-03-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-03-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2022-03-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2022-03-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2022-03-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2022-03-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2022-03-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2022-03-31 0001668243us-gaap:FairValueMeasurementsRecurringMember2022-03-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-31 0001668243us-gaap:MoneyMarketFundsMember2022-03-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2021-12-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2021-12-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2021-12-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-12-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-12-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-12-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-12-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-12-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-12-31 0001668243us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2021-12-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2021-12-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2021-12-31 0001668243us-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001668243us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001668243us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-31 0001668243us-gaap:MoneyMarketFundsMember2021-12-31 0001668243us-gaap:USTreasuryAndGovernmentMember2022-03-31 0001668243us-gaap:CorporateDebtSecuritiesMember2022-03-31 0001668243us-gaap:CommercialPaperMember2022-03-31 0001668243us-gaap:CertificatesOfDepositMember2022-03-31 0001668243urgn:LaboratoryEquipmentMember2022-03-31 0001668243urgn:LaboratoryEquipmentMember2021-12-31 0001668243urgn:ComputersAndSoftwareMember2022-03-31 0001668243urgn:ComputersAndSoftwareMember2021-12-31 0001668243urgn:FurnitureMember2022-03-31 0001668243urgn:FurnitureMember2021-12-31 0001668243us-gaap:LeaseholdImprovementsMember2022-03-31 0001668243us-gaap:LeaseholdImprovementsMember2021-12-31 0001668243urgn:ManufacturingEquipmentMember2022-03-31 0001668243urgn:ManufacturingEquipmentMember2021-12-31 0001668243urgn:RTWInvestmentsMember2021-03-012021-03-31 xbrli:pure 0001668243urgn:RTWInvestmentsMemberurgn:JelmytoMemberurgn:SalesOfUpTo200MillionMember2021-03-012021-03-31 0001668243urgn:RTWInvestmentsMemberurgn:JelmytoMemberurgn:SalesBetween200MillionAnd300MillionMember2021-03-012021-03-31 0001668243urgn:RTWInvestmentsMemberurgn:JelmytoMemberurgn:SalesOver300MillionMember2021-03-012021-03-31 0001668243urgn:RTWInvestmentsMember2021-03-31 utr:Rate 0001668243urgn:RTWInvestmentsMember2022-03-31 0001668243urgn:RTWInvestmentsMemberurgn:UGN102Memberurgn:SalesUpTo200MillionWithFDAApprovalMember2021-03-012021-03-31 0001668243urgn:RTWInvestmentsMemberurgn:SalesBetween200MillionAnd300MillionWithFDAApprovalMember2021-03-012021-03-31 0001668243urgn:RTWInvestmentsMemberurgn:SalesOver300MillionWithFDAApprovalMember2021-03-012021-03-31 0001668243urgn:RTWInvestmentsMemberurgn:SalesOver300MillionWithFDAApprovalMember2022-03-31 0001668243urgn:RTWInvestmentsMember2021-05-012021-05-31 00016682432021-01-012021-12-31 0001668243us-gaap:SecuredDebtMember2022-03-07 0001668243us-gaap:SecuredDebtMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-03-072022-03-07 00016682432020-10-012020-10-31 0001668243urgn:LeaseAgreementForOfficeInLosAngelesCaliforniaMemberurgn:UroGenPharmaIncMember2022-03-31 0001668243urgn:LeaseAgreementForOfficeInLosAngelesCaliforniaMemberurgn:UroGenPharmaIncMember2022-01-012022-03-31 utr:M 0001668243urgn:LeaseAgreementForOfficeInPrincetonNewJerseyMemberurgn:UroGenPharmaIncMember2019-11-29 0001668243urgn:LeaseAgreementForOfficeInPrincetonNewJerseyMemberurgn:UroGenPharmaIncMember2022-03-31 0001668243us-gaap:OtherCurrentLiabilitiesMember2022-03-31 0001668243us-gaap:OtherCurrentLiabilitiesMember2021-03-31 0001668243urgn:JelmytoMember2022-01-012022-03-31 0001668243urgn:JelmytoMember2021-01-012021-03-31 0001668243urgn:GovernmentSponsoredProgramsReservesMember2021-12-31 0001668243urgn:OtherReservesMember2021-12-31 0001668243urgn:GovernmentSponsoredProgramsReservesMember2022-01-012022-03-31 0001668243urgn:OtherReservesMember2022-01-012022-03-31 0001668243urgn:GovernmentSponsoredProgramsReservesMember2022-03-31 0001668243urgn:OtherReservesMember2022-03-31 0001668243urgn:AgenusIncMember2019-11-012019-11-30 0001668243urgn:AgenusIncMember2019-11-30 0001668243urgn:AgenusIncMembersrt:MinimumMember2019-11-012019-11-30 0001668243urgn:AgenusIncMembersrt:MaximumMember2019-11-012019-11-30 0001668243urgn:MDAndersonMember2021-01-012021-01-31 0001668243urgn:MDAndersonMember2022-01-012022-03-31 0001668243us-gaap:EmployeeStockOptionMemberurgn:ShareOptionPlanMembersrt:MaximumMember2022-01-012022-03-31 0001668243us-gaap:EmployeeStockOptionMemberurgn:ShareOptionPlanMembersrt:MinimumMember2022-01-012022-03-31 0001668243us-gaap:EmployeeStockOptionMemberurgn:ShareOptionPlanMember2022-01-012022-03-31 0001668243us-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2022-01-012022-03-31 0001668243us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-31 0001668243us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2022-01-012022-03-31 0001668243us-gaap:EmployeeStockOptionMember2022-01-012022-03-31 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2017-03-31 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2018-01-012018-01-01 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2018-01-01 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2018-10-122018-10-12 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2018-10-12 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2020-06-082020-06-08 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2020-06-08 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2021-06-072021-06-07 0001668243urgn:TwoThousandSeventeenEquityIncentivePlanMember2021-06-07 0001668243urgn:The2019InducementPlanMember2019-05-31 0001668243urgn:The2019InducementPlanMember2021-12-012021-12-31 0001668243us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-31 0001668243us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-03-31 0001668243us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-03-31 0001668243us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-03-31 0001668243us-gaap:RestrictedStockUnitsRSUMember2022-03-31
 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


FORM 10-Q


 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                     to                     

 

Commission file number: 001-38079

 


 

UROGEN PHARMA LTD.

(Exact Name of Registrant as Specified in its Charter)

 


 

Israel

98-1460746

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

400 Alexander Park Drive, Princeton, New Jersey

08540

(Address of principal executive offices)

(Zip Code)

 

(646) 768-9780

 

Registrants telephone number, including area code


N/A

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of exchange on which registered

Ordinary Shares, par value NIS 0.01 per share

URGN

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

    

Non-accelerated filer

Smaller reporting company

    

Emerging growth company

  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

As of May 3, 2022, the registrant had 22,693,170 ordinary shares, par value NIS 0.01 per share, outstanding.

 



 

 

 

UroGen Pharma Ltd.

Index

 

   

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Shareholders Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

69

Item 3.

Defaults Upon Senior Securities

69

Item 4.

Mine Safety Disclosures

69

Item 5.

Other Information

69

Item 6.

Exhibits

70

 

Signatures

71

 

 

Trademarks and Trade Names

 

Unless the context requires otherwise, references in this Quarterly Report to the “Company,” "UroGen," “we,” “us” and “our” refer to UroGen Pharma Ltd. and its subsidiary, UroGen Pharma, Inc.

 

UroGen, RTGel and Jelmyto are trademarks of ours that we use in this Quarterly Report. This Quarterly Report also includes trademarks, tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this Quarterly Report appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to our trademark and tradenames. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

i
 

 

Part IFinancial Information

 

Item 1. Financial Statements.

 

UroGen Pharma Ltd.

Condensed Consolidated Balance Sheets

(unaudited; in thousands, except share amounts and par value)

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $105,379  $44,360 

Marketable securities

  31,065   44,779 

Restricted cash

  550   1,226 

Accounts receivable

  9,499   11,717 

Inventories

  4,756   4,832 

Prepaid expense and other current assets

  9,275   7,476 

Total current assets

  160,524   114,390 

Non-current assets:

        

Property and equipment, net

  1,777   1,967 

Restricted deposit

  223   223 

Right of use asset

  945   1,180 

Marketable securities

  674   675 

Other non-current assets

  1,572   1,311 

Total Assets

 $165,715  $119,746 

Liabilities and Shareholders' Equity

        

Current liabilities:

        

Accounts payable and accrued expense

 $9,936  $12,102 

Employee related accrued expense

  5,146   6,948 

Other current liabilities

  4,009   3,330 

Total current liabilities:

  19,091   22,380 

Non-current liabilities:

        

Prepaid forward obligation

  89,782   85,713 

Long-term debt

  70,797    

Long-term lease liability

  277   398 

Uncertain tax positions liability

  2,842   2,842 

Total Liabilities

  182,789   111,333 

Commitments and contingencies (Note 18)

          

Shareholders' equity:

        

Ordinary shares, NIS 0.01 par value; 100,000,000 shares authorized at March 31, 2022 and December 31, 2021; 22,682,221 and 22,462,995 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

  62   61 

Additional paid-in capital

  478,646   475,698 

Accumulated deficit

  (495,713)  (467,321)

Accumulated other comprehensive income (loss)

  (69)  (25)

Total Shareholders' Equity (Deficit)

  (17,074)  8,413 

Total Liabilities and Shareholders' Equity (Deficit)

 $165,715  $119,746 

 

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

 

 

 

 

UroGen Pharma Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited; in thousands, except share and per share amounts)

 

   

For the Three Months Ended March 31,

 
   

2022

   

2021

 

Revenue

  $ 13,564     $ 7,485  

Cost of revenue

    1,525       897  

Gross profit

    12,039       6,588  

Operating expense:

               

Research and development expense

    12,696       10,513  

Selling, general and administrative expense

    21,300       22,189  

Operating loss

    (21,957 )     (26,114 )

Financing on prepaid forward obligation

    (5,826 )      

Interest expense on long-term debt

    (282 )        

Other income (expense)

    (2 )     179  

Loss before income taxes

    (28,067 )     (25,935 )

Income tax expense

    (325 )      

Net Loss

  $ (28,392 )   $ (25,935 )

Statements of Comprehensive Loss

               

Net loss

  $ (28,392 )   $ (25,935 )

Other comprehensive income

               

Unrealized (loss) gain on marketable securities

    (44 )     (128 )

Comprehensive Loss

  $ (28,436 )   $ (26,063 )

Net loss per ordinary share basic and diluted

  $ (1.25 )   $ (1.17 )

Weighted average number of shares outstanding used in computation of basic and diluted loss per ordinary share

    22,631,509       22,242,375  

 

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

 

 

 

UroGen Pharma Ltd.

Condensed Consolidated Statements of Shareholders Equity

(unaudited; in thousands, except share amounts)

 

 

   

Ordinary Shares

               
   

Number of

     

Additional paid-in

 

Accumulated

 

Other comprehensive

   
   

Shares

 

Amount

 

capital

 

Deficit

 

income (loss)

 

Total

Balance as of January 1, 2022

 

22,462,995

 

$ 61

 

$ 475,698

 

$ (467,321)

 

$ (25)

 

$ 8,413

Changes During the Three Months Ended March 31, 2022

                       

Exercise of options into ordinary shares

 

219,226

 

1

 

(1)

         

Share-based compensation

         

2,949

         

2,949

Other comprehensive income

                 

(44)

 

(44)

Net loss

             

(28,392)

     

(28,392)

Balance as of March 31, 2022

 

22,682,221

 

$ 62

 

$ 478,646

 

$ (495,713)

 

$ (69)

 

$ (17,074)

                         

Balance as of January 1, 2021

 

22,167,791

 

$ 60

 

$ 452,525

 

$ (356,501)

 

271

 

$ 96,355

Changes During the Three Months Ended March 31, 2021

                       

Exercise of options into ordinary shares

 

112,603

 

1

 

3

         

4

Share-based compensation

         

6,195

         

6,195

Other comprehensive income

                 

(128)

 

(128)

Net loss

             

(25,935)

     

(25,935)

Balance as of March 31, 2021

 

22,280,394

 

$ 61

 

$ 458,723

 

$ (382,436)

 

$ 143

 

$ 76,491

 

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

 

 

 

UroGen Pharma Ltd.

Condensed Consolidated Statements of Cash Flow

(unaudited; in thousands)

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

Cash Flows From Operating Activities

               

Net loss

  $ (28,392 )   $ (25,935 )

Adjustment to reconcile net loss to net cash from operating activities:

               

Depreciation and amortization

    215       191  

Accrued financing on prepaid forward obligation

    4,289        

Amortization on marketable securities

    50       191  

Share-based compensation

    2,949       6,195  

Interest expense on long-term debt

    282        

Amortization of right of use asset

    241       237  

Lease liability

    (286 )     (400 )

Changes in operating assets and liabilities:

               

Inventory

    76       (1,367 )

Accounts receivable

    2,218       746  

Prepaid expense and other current assets

    (1,800 )     (2,952 )

Other non-current assets

    (169 )      

Accounts payable and accrued expense

    (2,169 )     535  

Employee related accrued expense

    (1,801 )     (4,842 )

Other current liabilities

    301        

Net cash used in operating activities

    (23,996 )     (27,401 )

Cash Flows From Investing Activities

               

Maturities of marketable securities

    13,621       15,311  

Purchases of property and equipment

    (25 )     (287 )

Net cash (used in) provided by investing activities

    13,596       15,024  

Cash Flows From Financing Activities

               

Proceeds from exercise of options into ordinary shares

          4  

Proceeds from issuance of long-term debt

    70,831        

Issuance cost related to at-the-market issuances

    (89 )      

Net cash provided by financing activities

    70,742       4  

Increase (Decrease) in Cash and Cash Equivalents

    60,342       (12,373 )

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

    45,587       54,090  

Cash, Cash Equivalents and Restricted Cash at End of Period

  $ 105,929     $ 41,717  

Supplemental Disclosures of Non-Cash Activities

               

Non-cash new lease liabilities

  $ 6     $ (20 )

Non-cash issuance cost

  $ 3     $  

 

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

 

 

UroGen Pharma Ltd.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

 

Note 1 Business and Nature of Operations

 

Nature of Operations

 

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

 

UroGen Pharma Inc., a wholly owned 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 biotechnology company dedicated to developing and commercializing innovative solutions that treat urothelial and specialty cancers. Since commencing operations, the Company has devoted substantially all of its efforts to securing intellectual property rights, performing research and development activities, including conducting clinical trials and manufacturing activities, hiring personnel, launching the Company’s first commercial product, Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, clinical development of UGN-102, and raising capital to support and expand these activities.

 

On  April 15, 2020, the U.S. Food and Drug Administration (“FDA”) granted expedited approval for Jelmyto, a first-in-class treatment indicated for adults with low-grade upper tract urothelial cancer (“low-grade UTUC”). Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology. It has been designed to enable longer exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means.

 

 

Note 2 Basis of Presentation

 

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for fair statement of its financial position, results of operations and cash flows of the Company at the dates and for the periods indicated. Interim results are not necessarily indicative of results for the full fiscal year. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 21, 2022.

 

The Company has experienced net losses since its inception and has an accumulated deficit of $495.7 million and $467.3 million as of March 31, 2022 and December 31, 2021, respectively. The Company expects to incur losses and have negative net cash flows from operating activities as it executes on its strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials.

 

The success of the Company depends on the ability to successfully commercialize its technologies to support its operations and strategic plan. Based on management’s cash flow projections the Company believes that its cash and cash equivalents and marketable securities are sufficient to fund the Company’s planned operations for at least the next 12 months. The Company anticipates that it will need to raise additional capital in the future. There can be no assurances that the Company will be able to secure such additional financing if at all, or on terms that are satisfactory to the Company, and that it will be sufficient to meet its needs. In the event the Company is not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations.

 

 

 

Note 3 Significant Accounting Policies

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of UPL and its subsidiary, UPI. Intercompany balances and transactions have been eliminated during consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimates. As applicable to the unaudited condensed consolidated financial statements, the critical accounting estimates relate to the fair value of share-based compensation, measurement of revenue, estimate of uncertain tax positions, and measurement of liabilities accounted for under the interest method.

 

Functional Currency

 

The U.S. dollar (“Dollar”) is the currency of the primary economic environment in which the operations of the Company are conducted. Therefore, the functional currency of the Company is the Dollar.

 

Accordingly, transactions in currencies other than the Dollar are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the Dollar are measured using the official exchange rate at the balance sheet date. The effects of foreign currency re-measurements are recorded in the condensed consolidated statements of operations as “Interest and other income, net.”

 

Cash and Cash Equivalents; Marketable Securities

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist primarily of money market funds and bank money market accounts and are stated at cost, which approximates fair value. Restricted cash is related primarily to cash held to secure corporate credit cards; restricted deposits are related to cash held to secure leases.

 

Cash and cash equivalents and marketable securities totaled $137.1 million as of March 31, 2022. The Company classifies its marketable securities as available-for-sale in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments — Debt and Equity Securities”. Available-for-sale debt securities are carried at fair value with unrealized gains and losses reported in other comprehensive income/loss within shareholders’ equity. Realized gains and losses are recorded as a component of interest and other income (expense), net. The cost of securities sold is based on the specific-identification method.

 

Short-term investments are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. The majority of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. 

 

For individual debt securities classified as available-for-sale securities where there has been a decline in fair value below amortized cost, the Company determines whether the decline resulted from a credit loss or other factors. The Company records impairment relating to credit losses through an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.

 

6

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and cash equivalents and marketable securities. The primary objectives for the Company’s investment portfolio are the preservation of capital and the maintenance of liquidity. The Company does not enter into any investment transaction for trading or speculative purposes.

 

The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities, and places restrictions on maturities and concentration by type and issuer. The Company maintains cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation and concentrated within a limited number of financial institutions. The accounts are monitored by management to mitigate the risk.

 

The Company’s product sales are recognized through the Company's arrangement with a single customer, a third-party national specialty distributor. The Company assesses the need for an allowance for doubtful accounts primarily based on creditworthiness, historical payment experience and general economic conditions. The Company has not experienced any credit losses related to this customer and has not currently recognized any allowance for doubtful accounts.

 

Income Taxes

 

The Company provides for income taxes based on pretax income, if any, and applicable tax rates available in the various jurisdictions in which it operates, including Israel and the U.S. deferred taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future.

 

The Company follows a two-step approach in recognizing and measuring uncertain tax positions. After concluding that a particular filing position can be recognized (i.e., has a more-likely-than-not chance of being sustained), ASC 740-10-30-7 requires that the amount of benefit recognized be measured using a methodology based on the concept of cumulative probability. Under this methodology, the amount of benefit recorded represents the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority that has full knowledge of all relevant information. See Note 16 for further discussion related to income taxes.

 

Inventory

 

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. For Jelmyto, the Company commenced capitalization of inventory at the receipt of FDA approval.

 

The Company values its inventory at the lower of cost or net realizable value. The Company measures inventory approximating actual cost under a first-in, first-out basis. The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories.

 

Property and Equipment

 

Property and equipment are recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment charges. The Company reviews its property and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

Property and equipment are depreciated over the following useful lives (in years):

 

  

Useful Lives

 

Computers and software

 3 

Laboratory equipment

 3 - 6.5 

Furniture

 5 - 16.5 

Manufacturing equipment

 2 - 10 

 

7

 

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. See Note 8 for further discussion regarding property and equipment.

 

Prepaid Forward Obligation

 

The Company is party to a transaction with RTW Investments (the “RTW Transaction”) in which the Company received funds to support the continued launch of Jelmyto and the development of UGN-102 in return for tiered, future cash payments based on net sales of Jelmyto and UGN-102, if approved by the FDA. The net proceeds received under the RTW Transaction were recognized as a long-term liability. The subsequent measurement for the liability follows the accounting  principles defined in ASC Topic 835-30, “Imputation of Interest”. See Note 9 for further discussion related to the prepaid forward obligation.

 

Long-Term Debt

 

The Company is party to a loan agreement with funds managed by Pharmakon Advisors, L.P. (“Pharmakon”). The Company recognizes interest expense in current earnings, and accrued interest within other current liabilities on the condensed consolidated balance sheet. The Company recognizes capitalized financing expenses as a direct offset to the long-term debt on the Company's condensed consolidated balance sheet, and amortizes them over the term of the debt using the effective interest method. See Note 10 for further discussion related to long-term debt.

 

Leases

 

The Company is a lessee in several noncancelable operating leases, primarily for office space, office equipment and vehicles. The Company currently has no finance leases.

 

The Company accounts for leases in accordance with ASC Topic 842, “Leases”. The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term as of the commencement date. Operating lease ROU assets are presented as operating lease right of use assets on the condensed consolidated balance sheets. The current portion of operating lease liabilities is included in other current liabilities and the long-term portion is presented separately as operating lease liabilities on the condensed consolidated balance sheets.

 

Lease expense is recognized on a straight-line basis for operating leases. Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expense on the condensed consolidated statements of operations in the same line item as expense arising from fixed lease payments.

 

The Company’s lease terms may include options to extend the lease. The lease extensions are included in the measurement of the right of use asset and lease liability when it is reasonably certain that it will exercise that option.

 

Because most of the Company’s leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

 

ROU assets for operating leases are periodically reviewed for impairment losses under ASC 360-10, “Property, Plant, and Equipment”, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

 

Revenue

 

Product sales from Jelmyto are recognized as revenue under ASC 606 at the point in time that control of the product has been transferred to the customer, generally at the point the product has been delivered to the treating physician. All product sales of Jelmyto are recognized through the Company's arrangement with a single customer, a third-party national specialty distributor. Net revenue recognized include management’s estimate of returns, consideration paid to the customer, chargebacks relating to differences between the wholesale acquisition cost and the contracted price offered to the end consumer, chargebacks relating to 340b drug pricing programs, Medicaid drug rebate programs, and the Company’s copay assistance program, which are estimated based on industry benchmarking studies as well as the Company’s historical experience.

 

8

 

Research and Development Expense

 

Research and development costs are expensed as incurred and consist primarily of the cost of salaries, share-based compensation expense, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including nonclinical studies, clinical trials, manufacturing costs and professional services. The costs of services performed by others in connection with the research and development activities of the Company, including research and development conducted by others on behalf of the Company, shall be included in research and development costs and expensed as the contracted work is performed. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from its external service providers. The Company adjusts its accrual as actual costs become known. Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when such development milestone results are achieved.

 

Selling General and Administrative Expense

 

Selling, general and administrative expense consists primarily of personnel costs (including share-based compensation related to directors, employees and consultants). Other significant costs include commercial, medical affairs, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees. Selling, general and administrative costs are expensed as incurred, and the Company accrues for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from its service providers and adjusting its accruals as actual costs become known.

 

Share-Based Compensation

 

Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the required service period, which is equal to the vesting period. The fair value of options is determined using the Black-Scholes option-pricing model. The fair value of a restricted stock unit (“RSU”) equaled the closing price of the Company’s ordinary shares on the grant date. The Company accounts for forfeitures as they occur in accordance with ASC Topic 718, “Compensation—Stock Compensation”.

 

The Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule using the straight-line method and to value the awards based on the single-option award approach.

 

Net Loss per Ordinary Share

 

Basic net loss per share is computed by dividing the net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding. Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional ordinary shares that would have been outstanding if the potential ordinary shares had been issued and if the additional ordinary shares were dilutive.

 

For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted loss per share as their effect is anti-dilutive.

 

Recently Issued Accounting Pronouncements

 

The Company has reviewed the Accounting Standards Updates recently issued by the Financial Accounting Standards Board, and determined that they are not applicable to the Company.

 

 

 

Note 4 Other Financial Information

 

Accounts Payable and Accrued Expense

 

Accounts payable and accrued expense consists of the following as of March 31, 2022 and December 31, 2021 (in thousands):

 

   

March 31,

   

December 31,

 
   

2022

   

2021

 

Accounts payable

  $ 4,234     $ 5,786  

Accrued sales reserves

    361       497  

Accrued clinical expense

    1,129       1,377  

Accrued research and development expense

    1,186       1,748  

Accrued selling, general and administrative expense

    2,042       1,965  

Accrued other expense

    984       729  

Total accounts payable and accrued expense

  $ 9,936     $ 12,102  

 

Interest and Other Income (Expense), Net

 

Interest and other income (expense) consisted of the following as of March 31, 2022 and 2021 (in thousands):

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

Interest income

  $ 2     $ 167  

Other finance (expense), net

    (4 )     12  

Total other income (expense)

  $ (2 )   $ 179  

 

 

Note 5 Inventories

 

Inventories consist of the following as of  March 31, 2022 and December 31, 2021 (in thousands):

 

   

March 31,

   

December 31,

 
   

2022

   

2021

 

Raw materials (1)

  $ 3,663     $ 3,894  

Finished goods

    2,365       1,958  

Total inventories

  $ 6,028     $ 5,852  

 

 

(1) $1.3 million and $1.0 million of raw materials are included within other non-current assets on the condensed consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively .

 

 

Note 6 Fair Value Measurements

 

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

 

10

 

As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

 

 

Level 1:

Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

 

Level 2:

Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

 

Level 3:

Unobservable inputs that reflect the reporting entity’s own assumptions.

 

The carrying amounts of the Company’s cash and cash equivalents, restricted cash, other current assets, accounts payable and accrued liabilities are generally considered to be representative of their fair value because of the short-term nature of these instruments. The carrying value of the prepaid forward obligation (See Note 9 - Prepaid Forward Obligation) approximates its fair value as the effective interest rate approximates the market rate for loans with similar terms and risk characteristics. Likewise, the carrying value of long-term debt on the Company’s balance sheet (see Note 10 – Long-Term Debt), approximates its fair value as the interest rate approximates the market rate for loans with similar terms and risk characteristics. No transfers between levels have occurred during the periods presented.

 

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of March 31, 2022 are as follows (in thousands):

 

           

Fair Value Measurements Using

 
           

Quoted Prices

   

Significant

 
           

in Active

   

Other

 
   

Balance as of

   

Markets for

   

Observable

 
   

March 31,

   

Identical Assets

   

Inputs

 
   

2022

   

(Level 1)

   

(Level 2)

 

Marketable securities:

                       

US government

  $ 19,251     $ 19,251        

Corporate bonds

    5,296             5,296  

Commercial paper

    5,192             5,192  

Certificates of deposit

    2,000             2,000  

Total marketable securities

  $ 31,739     $ 19,251     $ 12,488  

 

Additionally, as of March 31, 2022 there were approximately $75.0 million of money market funds included within cash and cash equivalents on the condensed consolidated balance sheet that are measured at fair value based on Level 1 fair value measurement criteria.

 

 

 

 

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2021 are as follows (in thousands):

 

           

Fair Value Measurements Using

 
           

Quoted Prices

   

Significant

 
           

in Active

   

Other

 
   

Balance as of

   

Markets for

   

Observable

 
   

December 31,

   

Identical Assets

   

Inputs

 
   

2021

   

(Level 1)

   

(Level 2)

 

Marketable securities:

                       

US government

  $ 19,307     $ 19,307     $  

Corporate bonds

    8,652             8,652  

Commercial paper

    14,492             14,492  

Certificates of deposit

    3,003             3,003  

Total marketable securities

  $ 45,454     $ 19,307     $ 26,147  

 

Additionally, as of December 31, 2021 there were approximately $21.4 million of money market funds included within cash and cash equivalents on the condensed consolidated balance sheet that are measured at fair value based on Level 1 fair value measurement criteria.

 

 

 

Note 7 Marketable Securities

 

The following table summarizes the Company’s marketable securities (excluding cash and cash equivalents) as of March 31, 2022 (in thousands):

 

   

Amortized

   

Unrealized

   

Unrealized

         
   

Cost Basis

   

Gains

   

Losses

   

Fair Value

 

Marketable securities:

                               

US government

  $ 19,302             (51 )   $ 19,251  

Corporate bonds

    5,305             (9 )     5,296  

Commercial paper

    5,198             (6 )     5,192  

Certificates of deposit

    2,003             (3 )     2,000  

Total marketable securities

  $ 31,808     $     $ (69 )   $ 31,739  

 

 

 

 

 

The Company classifies its marketable securities as available-for-sale and they consist of all debt securities. The amortized cost basis as of March 31, 2022 includes $0.1 million of accrued interest receivable. As of March 31, 2022 marketable securities were in a net unrealized loss position. Unrealized gains and losses on available-for-sale debt securities are included as a component of comprehensive loss. 

 

As of  March 31, 2022, the aggregate fair value of marketable securities held by the Company in an unrealized loss position was $31.7 million which consisted of 17 securities. The unrealized loss was primarily driven by minor fluctuations in the fair value of corporate bonds driven by changes in market interest rates. The Company does not expect to settle the debentures at a price less than the amortized cost basis of the investment; the Company expects to recover the entire amortized cost basis of the security. In accordance with the Company’s general investment strategy, the Company does not intend to sell the investments before maturity. As of  March 31, 2022, the Company believes the cost basis for its marketable securities were recoverable in all material aspects and no credit losses were recognized in the period.

 

The Company’s marketable securities as of March 31, 2022 mature at various dates through July 2023. The fair values of marketable securities by contractual maturity consist of the following (in thousands):

 

   

March 31,

   

December 31,

 
   

2022

   

2021

 

Maturities within one year

  $ 31,065     $ 44,779  

Maturities after one year through three years

    674       675  

Total marketable securities

  $ 31,739     $ 45,454  

 

 

 

Note 8 Property and Equipment

 

Property and equipment, consists of the following as of March 31, 2022 and December 31, 2021 (in thousands):

 

   

March 31,

   

December 31,

 
   

2022

   

2021

 

Laboratory equipment

  $ 374     $ 360  

Computer equipment and software

    2,072       2,064  

Furniture

    597       597  

Leasehold improvements

    617       617  

Manufacturing equipment

    558       555  
      4,218       4,193  

Less: accumulated depreciation and amortization

    (2,441 )     (2,226 )

Property and equipment, net

  $ 1,777     $ 1,967  

 

Depreciation and amortization expense was $0.2 million for the three months ended March 31, 2022 and $0.2 million for the three months ended March 31, 2021.

 

 

 

Note 9 Prepaid Forward Obligation

 

In March 2021, the Company entered into a prepaid forward agreement with RTW Investments (“RTW”). Under the terms of the RTW Transaction, the Company received $75.0 million ($72.4 million net of transaction costs) to support the continued launch of Jelmyto and the development of UGN-102. In return for the transferred funds, RTW is entitled to receive tiered, future cash payments based on aggregate worldwide annual net product sales of Jelmyto in an amount equal to: (i) 9.5% of annual net sales up to $200 million, (ii) 3.0% of annual net sales for annual net sales between $200 million and $300 million, and (iii) 1.0% of annual net sales for annual net sales above $300 million. If certain revenue thresholds for Jelmyto aggregate worldwide annual net sales are not met, the future cash payments to RTW with respect to Jelmyto annual net sales up to $200 million will increase by 3.5%, and may decrease back to 9.5% dependent on the Company meeting certain subsequent Jelmyto aggregate worldwide annual net sales thresholds. The rate in effect for the three months ended March 31, 2022 for annual sales up to $200 million was 13.0%.

 

In addition, subject to FDA approval of UGN-102, RTW is entitled to receive tiered, future cash payments based on aggregate worldwide annual net product sales of UGN-102 in an amount equal to: (i) 2.5% of annual net sales up to $200 million, (ii) 1.0% of annual net sales for annual net sales between $200 million and $300 million, and (iii) 0.5% of annual net sales for annual net sales above $300 million. If the Company does not receive FDA approval for UGN-102 by a specified date, the future cash payments to RTW with respect to aggregate worldwide annual net sales of Jelmyto across all Jelmyto annual net sales tiers will increase by 1.5%. The rate in effect for 2022 for sales up to $200 million is 13%. 

 

In accordance with the prepaid forward agreement, the Company will be required to make payments of amounts owed to RTW each calendar quarter, through and until the quarter in which the aggregate cash payments received by RTW are equal to or greater than $300 million. As security for the payment and fulfilment of these amounts throughout the arrangement, the Company has granted RTW a first priority security interest in Jelmyto and UGN-102, including the regulatory approvals, intellectual property, material agreements, proceeds and accounts receivable related to these products.

 

In  May 2021, following the receipt of necessary regulatory approvals, the Company received the $75.0 million prepaid forward payment ($72.4 million net of transaction costs) from RTW and recognized an associated prepaid forward obligation liability. Each period the Company makes a payment to RTW, an expense is recognized related to financing on the prepaid forward obligation based on an imputed rate derived from the expected future payments. Management reassesses the effective rate each period based on the current carrying value of the obligation and the revised estimated future payments. Changes in future payments from previous estimates are included in current and future financing expense. The Company does not expect to make any principal payments in the next 12 months.

 

The following table shows the activity with respect to the carrying value of the prepaid forward liability, in thousands:

 

Prepaid forward obligation at closing of RTW Transaction

  $ 75,000  

Capitalized closing costs

    (2,599 )

Financing on prepaid forward obligation

    17,291  

Amounts paid and payable

    (3,979 )

Carrying value of prepaid forward obligation as of December 31, 2021

    85,713  

Financing on prepaid forward obligation

    5,826  

Amounts paid and payable

    (1,757 )

Carrying value of prepaid forward obligation as of March 31, 2022

  $ 89,782  

 

 

 

Note 10 – Long-Term Debt

 

On  March 7, 2022, the Company entered into a loan agreement with Pharmakon for a senior secured term loan of up to $100 million in two tranches. The first tranche of $75 million was funded in  March 2022. At its option, the Company  may draw up to an additional $25 million before  December 31, 2022, subject to customary bring down conditions and deliverables. The facility will mature five years from initial funding and can be prepaid in whole at the Company's discretion, at any time, subject to prepayment premiums and makewhole amounts. The loan will require interest-only payments for the first 48 months followed by principal and interest payments with interest accruing using 3-month London Inter-Bank Offered Rate (“LIBOR”) (with a 1.25% floor) plus 8.25%. In the event of the cessation of LIBOR, the benchmark governing the interest rate will be replaced with a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York. The Company is not required to maintain any financial covenants.

 

The Company incurred financing expenses of $4.2 million which are recognized as a direct offset to the long-term debt on the Company's condensed consolidated balance sheet. These debt issuance costs are  amortized over the term of the debt using the effective interest method, and are recorded in the condensed consolidated statements of operations as “Interest expense".

 

The following table shows the activity with respect to the carrying value of the long-term debt, in thousands:

 

 

Long-term debt at closing of Pharmakon loan

$ 75,000

Capitalized costs and discounts

(4,169)

Interest expense

282

Amounts paid and payable

(316)

Carrying value of Pharmakon loan as of March 31, 2022

70,797

 

 

Note 11  Leases

 

Operating Leases

 

The Company has the following office and laboratory facility leases:

 

 

In April 2016, UPL signed an addendum to its November 2014 lease agreement for the Company’s offices located in Israel, in order to increase the office space rented and to extend the rent period until 2019. In March 2019, UPL utilized the agreement extension option and extended the rent period for additional three years until August 2022.

 

 

In September 2017, UPI entered into a new lease agreement for its office space in New York, which the Company previously used as its headquarters. The lease agreement commenced in October 2017 and terminated in February 2021.  

 

 

In April 2018, UPI entered into a new lease agreement for an office in Los Angeles, California. The lease commencement date was July 10, 2018 and terminates in March 2024. The landlord provided a tenant allowance for leasehold improvements of $0.2 million that was accounted for as a lease incentive. The Company’s remaining contractual obligation under this lease is approximately $0.6 million as of March 31, 2022. In November 2019, UPI entered into a sublease for this office space, with a lease commencement date of  January 1, 2020 and continuing until the end of the lease term in March 2024. The subtenants exercised their early access clause and moved into the premises at the end of November 2019. The remaining rental payments to be received over the lease term is approximately $0.5 million as of March 31, 2022. The Company accounts for the sublease as on operating lease in accordance with ASC 842-10-25-2 and ASC 842-10-25-3. The main lease was considered for impairment and the amount was determined to be immaterial.

 

 

In November 2019, UPI entered into a new lease agreement for an office in Princeton, New Jersey, which the Company now uses as its headquarters. The lease commencement date was November 29, 2019 and the lease term is 38 months. The Company’s remaining contractual obligation under this lease is approximately $0.5 million as of March 31, 2022.

 

In addition, the Company has other operating office equipment and vehicle leases. The Company’s operating leases may require minimum rent payments, contingent rent payments adjusted periodically for inflation, or rent payments equal to the greater of a minimum rent or contingent rent. The Company’s leases do not contain any residual value guarantees or material restrictive covenants. The Company’s leases expire at various dates from 2022 through 2024, with varying renewal and termination options.

 

The components of lease cost for the three months ended March 31, 2022  and 2021 were as follows (in thousands):

 

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 

Operating lease cost

 $259  $267 

Sublease income

  (56)  (56)

Variable lease cost

  17   22 
  $220  $233 

 

The amounts recognized as of March 31, 2022 and  December 31, 2021 were as follows (in thousands):

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 

Right of use asset

 $945  $1,180 

Long-term lease liabilities

  277   398 

Other current liabilities

  930   1,089 

 

As of March 31, 2022, no impairment losses have been recognized to date.

 

14

 

Supplemental information related to leases for the three months ended March 31, 2022 and 2021 is as follows (in thousands):

 

 
  Three Months Ended 
  

March 31,

 
  

2022

  

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

        

Operating cash flows from operating leases

  3,322   2,157 

Right-of-use assets obtained in exchange for new operating lease liabilities

  144   135 

Weighted-average remaining lease term of operating leases (in years)

  1.28   2.13 

Weighted-average discount rate of operating leases

  5.78%  5.36%

 

As of March 31, 2022, maturities of lease liabilities were as follows (in thousands):

 

 

  

Operating

  

Leases

Years ending December 31,

  

Remainder of 2022

 

$ 841

2023

 

358

2024

 

58

2025

 

2026 and thereafter

 

Total future minimum lease payments

 

$ 1,257

Less: Interest

 

50

Present value of lease liabilities

 

$ 1,207

 

Subleases

 

As of March 31, 2022, undiscounted cash flows to be received under the Company’s operating sublease on an annual basis were as follows (in thousands):

 

  

Operating Leases

 

Years ending December 31,

    

Remainder of 2022

 $182 

2023

  243 

2024

  251 

2025

  49 

2026 and thereafter

   
  $725 

 

Sublease income is recognized net within operating expense. Sublease income for the three months ended March 31, 2022 and 2021 was as follows (in thousands):

 

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 
         

Sublease income from fixed lease payments

 $56  $56 

 

 

Note 12  Revenue From Product Sales

 

Net product sales consist of the following for the three months ended March 31, 2022 and 2021 (in thousands):

 

   

Three Months Ended

 
   

March 31,

 
   

2022

   

2021

 

Jelmyto

  $ 13,564     $ 7,485  

 

 

 

Net revenue recognized includes management’s estimate of returns, consideration paid to the customer, chargebacks relating to differences between the wholesale acquisition cost and the contracted price offered to the end consumer, chargebacks relating to 340b drug pricing programs, Medicaid drug rebate programs, and the Company’s copay assistance program, which are estimated based on industry benchmarking studies as well as the Company’s historical experience. Reserves related to items that are contractually able to be net settled are recognized as contra accounts receivables. The following table shows the activity with respect to sales reserves for period ended March 31, 2022 (in thousands):

 

   

Reserves related to government sponsored programs

 

Other reserves

 

Total accrued sales reserves

Balance as of December 31, 2021

 

373

 

1,335

 

1,708

Changes during Q1 22

           

Accruals

 

873

 

1,220

 

2,093

Utilizations

 

(1,001)

 

(1,411)

 

(2,412)

Balance as of March 31, 2022

 

245

 

1,144

 

1,389

 

 

Note 13  License and Collaboration Agreements

 

Agenus Agreement

 

In November 2019, the Company entered into a license agreement with Agenus Inc., pursuant to which Agenus granted to the Company an exclusive, worldwide (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus’s intellectual property rights to develop, make, use, sell, import, and otherwise commercialize products incorporating a proprietary antibody of Agenus known as AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery. AGEN1884 is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients and in combination with Agenus’ anti-PD-1 antibody in solid tumors. Initially, the Company plans to develop AGEN1884 in combination with UGN-201 for the treatment of high-grade NMIBC.

 

Pursuant to the license agreement, the Company paid Agenus an upfront fee of $10.0 million and has agreed to pay Agenus up to $115.0 million upon achieving certain clinical development and regulatory milestones, up to $85.0 million upon achieving certain commercial milestones, and royalties on net sales of licensed products in the 14%-20% range. The Company will be responsible for all development and commercialization activities. Under the terms of the license agreement, Agenus has agreed to use commercially reasonable efforts to supply AGEN1884 to the Company for use in preclinical studies or clinical trials.

 

Unless earlier terminated in accordance with the terms of the license agreement, the license agreement will expire on a product-by-product and country-by-country basis at the later of (a) the expiration of the last to expire valid claim of a licensed patent right that covers the licensed product in such country or (b) 15 years after the first commercial sale of the licensed product in such country. The Company may terminate the license agreement for convenience upon 180 days’ written notice to Agenus. Either party may terminate the license agreement upon 60 days’ notice to the other party if, prior to the first commercial sale of a licensed product, the Company substantially ceases to conduct development activities of the licensed products for nine consecutive months (and during such period, Agenus has complied with its obligations under the license agreement) other than in response to a requirement of an applicable regulatory authority or an event outside of the Company’s control. In addition, either party may terminate the license agreement in the event of an uncured material breach of the other party.

 

MD Anderson Agreement

 

In January 2021, the Company announced that it entered into a three-year strategic research collaboration agreement with MD Anderson focusing on the sequential use of UGN-201 and UGN-301 as an investigational treatment for high-grade NMIBC. Under the agreement, MD Anderson and the Company will collaborate on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee. The Company will provide funding, developmental candidates, and other support. Pursuant to the agreement, the Company makes bi-annual payments to MD Anderson to fund the collaboration. As of March 31, 2022, the Company has made payments to MD Anderson of $1,000,000 recognized evenly over the associated period through research and development expense.

 

 

Note 14  Shareholders Equity

 

The Company had 100.0 million ordinary shares authorized for issuance as of March 31, 2022 and December 31, 2021. The Company had 22.7 million and 22.5 million ordinary shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively. Each ordinary share is entitled to one vote. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available, when and if declared by the Board of Directors (the “Board”). Since its inception, the Board has not declared any dividends.

 

 

 

Note 15  Share-Based Compensation

 

In October 2010, the Board approved a share option plan (the “Plan”) for grants to Company employees, consultants, directors, and other service providers.

 

The grant of options to Israeli employees under the Plan is subject to the terms stipulated by Section 102 of the Israeli Income Tax Ordinance (“Section 102”). The option grants are subject to the track chosen by the Company, either the “regular income” track or the “capital gains” track, as set out in Section 102. The Company registered the Plan under the capital gains track, which offers more favorable tax rates to the employees. As a result, and pursuant to the terms of Section 102, the Company is not allowed to claim as an expense for tax purposes the amounts credited to the employees in respect of options granted to them under the Plan, including amounts recorded as salary benefits in the Company’s accounts, with the exception of the work-income benefit component, if any, determined on grant date. For non-employees and for non-Israeli employees, the Plan is subject to Section 3(i) of the Israeli Income Tax Ordinance.

 

Employees are typically granted stock options and/or restricted stock units ("RSUs"), upon commencement of employment. Also, eligible employees may receive an annual grant of options or RSUs. Non-employee members of the Board typically receive a grant of stock options and/or RSUs annually. The term of any option granted under the Plan cannot exceed 10 years. Options shall not have an exercise price less than 100% of the fair market value of the Company’s ordinary shares on the grant date, and generally vest over a period of three years. If the individual possesses more than 10% of the combined voting power of all classes of equity of the Company, the exercise price shall not be less than 110% of the fair market value of an ordinary share on the date of grant.

 

The Company’s RSU and option grants provide for accelerated or continued vesting in certain circumstances as defined in the plans and related grant agreements, including a termination in connection with a change in control. RSUs generally vest in a 33% increment upon the first anniversary of grant, and in either equal quarterly or annual amounts for the two years following the one-year anniversary of the grant date. Options generally vest in a 33% increment upon the first anniversary of the grant date, and in either equal quarterly or annual amounts for the two years following the one-year anniversary of the grant date.

 

The expected volatility is based on a mix of the Company’s historical volatility, and the historical volatility of comparable companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted. The expected term is the length of time until the expected dates of exercising the options and is estimated for employees using the simplified method due to insufficient specific historical information of employees’ exercise behavior, and for non-employees, and directors using the contractual term.

 

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

 

The maximum number of ordinary shares that was initially authorized for issuance under the 2017 Plan is 1,400,000. On January 1, 2018, the share reserve increased by 250,167 to 1,650,167. On October 12, 2018, the Company increased the amount of registered ordinary shares of the Company’s 2017 Plan by 1,900,000 to 3,550,167. On June 8, 2020 the Company’s shareholders approved an increase to the amount of registered ordinary shares of the Company’s 2017 Plan by 400,000 to 3,950,167. On June 7, 2021, the Company’s shareholders approved an increase of the amount of registered ordinary shares of the Company’s 2017 Plan by 400,000 to 4,350,167.

 

In May 2019, the Company adopted the UroGen Pharma Ltd. 2019 Inducement Plan (the “Inducement Plan”). Under the Inducement Plan, the Company is authorized to issue up to 900,000 ordinary shares pursuant to awards issued under the Inducement Plan. The only persons eligible to receive grants of Awards (as defined below) under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) or 5635(c)(3) and the related guidance under Nasdaq IM 5635-1, including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company. Under the Inducement Plan, an “Award” is a nonstatutory stock option, RSU or other right to receive ordinary shares pursuant to the Inducement Plan. In December 2021, the Board approved a 300,000 increase in the share reserve of the Inducement Plan.       

 

As of March 31, 2022, 3,949,544 ordinary shares are subject to outstanding awards under the Company's share-based compensation plans and 722,810 ordinary shares remain available for future awards.

 

16

 

The following table illustrates the effect of share-based compensation on the condensed consolidated statements of operations (in thousands):

 

   

Three Months Ended

 
   

March 31,

 
   

2022

   

2021

 

Research and development expense

  $ 726     $ 1,107  

Selling, general and administrative expense

    2,223       5,088  
    $ 2,949     $ 6,195  

 

The total unrecognized compensation cost of options and RSUs at March 31, 2022 is $17.5 million with a weighted average recognition period of 1.96 years.

 

 

Note 16  Income Taxes

 

UroGen Pharma Ltd. is taxed under Israeli tax laws. As of March 31, 2022, the Company continues to maintain a full valuation allowance against deferred tax assets for all jurisdictions. In evaluating the need for a valuation allowance, the Company considers all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, forecasts of future taxable income, and tax planning strategies. The Company has cumulative global pretax losses for the years ended 2021, 2020 and 2019, and for the three months ended March 31, 2022. The Company will continue to assess the extent to which its deferred tax assets may be realized in the future and will adjust the valuation allowance as needed.

 

The Company has a liability for uncertain tax positions of $2.8 million as of March 31, 2022, for tax positions relating to transfer pricing between affiliated entities. The Company recognizes interest accrued and penalties related to uncertain tax positions as a component of income tax expense. As of March 31, 2022, the Company’s liability for uncertain tax positions includes $0.9 million of accrued interest and penalties.

 

The Company operates on a global basis and is subject to tax laws and regulations in the U.S. and Israel. The estimate of the Company’s tax liabilities relating to uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex tax laws and regulations, expectations regarding the outcome of tax authority examinations, as well as the ultimate measurement of potential liabilities.

 

The uncertain tax positions are reviewed quarterly and adjusted as events occur that could affect potential liabilities for additional taxes, including lapsing of applicable statutes of limitations, correspondence with tax authorities, proposed assessments by tax authorities, identification of new issues, and issuance of new legislation or regulations. The Company believes that adequate amounts of tax have been provided in income tax expense for any adjustments that may result from its uncertain tax positions. Based upon the information currently available, the Company does not reasonably expect changes in its existing uncertain tax positions in the next 12 months and has recorded the gross uncertain tax positions as a long-term liability.

 

 

Note 17  Related Parties

 

There were no related party transactions for the three months ended March 31, 2022 or 2021.

 

 

Note 18  Commitments and Contingencies

 

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is unknown as of March 31, 2022 and December 31, 2021. The Company does not anticipate recognizing any significant losses relating to these arrangements.

 

Leases

 

See Note 11 for further discussion regarding lease commitments.

 

 

Note 19  Subsequent Events

 

The Company has evaluated and determined there were no subsequent events through May 10, 2022.

 

 

 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report and the audited financial statements and notes thereto as of and for the year ended December 31, 2021 and the related Managements Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2021(Annual Report), which was filed with the SEC on March 21, 2022. The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended, (Exchange Act), which are subject to the safe harbor created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words anticipates, believes, estimates, expects, intends, may, plans, projects, will, would and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, Risk Factors in this Quarterly Report. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

 

Overview

 

We are a biotechnology company dedicated to developing and commercializing innovative solutions that treat urothelial and specialty cancers. We have developed RTGel™ reverse-thermal hydrogel, a proprietary sustained release, hydrogel-based technology that has the potential to improve therapeutic profiles of existing drugs. Our technology is designed to enable longer exposure of the urinary tract tissue to medications, making local therapy a potentially more effective treatment option. Our approved product Jelmyto® (mitomycin) for pyelocalyceal solution, and our investigational candidate, UGN-102 (mitomycin) for intravesical solution, are designed to ablate tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade upper tract urothelial cancer (“low-grade UTUC”) and low-grade intermediate risk non-muscle invasive bladder cancer (“low-grade intermediate risk NMIBC”), respectively. In addition, our immuno-uro-oncology pipeline includes UGN-301 (zalifrelimab), an anti-CTLA-4 antibody, which we intend to study as a combination therapy with multiple potential agents.

 

We estimate that the annual treatable patient population of low-grade UTUC in the United States is approximately 6,000 to 7,000; the estimated annual treatable population of low-grade intermediate risk NMIBC is approximately 80,000.

 

RTGel is a novel proprietary polymeric biocompatible, reverse thermal gelation hydrogel, which, unlike the general characteristics of most forms of matter, is liquid at lower temperatures and converts into gel form when warmed to body temperature. We believe that these characteristics promote ease of delivery into and retention of drugs in body cavities, including the bladder and the upper urinary tract, forming a transient reservoir of drug that disintegrates over time while preventing rapid excretion, providing for increased dwell time. RTGel leverages the physiologic flow of urine to provide a natural exit from the body.

 

We believe that RTGel, when formulated with an active drug, may allow for the improved efficacy of treatment of various types of urothelial and specialty cancers and urologic diseases without compromising the safety of the patient or interfering with the natural flow of fluids in the urinary tract. RTGel achieves this by:

 

 

increasing the exposure of active drugs in the bladder and upper urinary tract by significantly extending the dwell time of the active drug while conforming to the anatomy of the bladder and the upper urinary tract, which allows for enhanced drug tissue coverage. For example, the average dwell time of the standard mitomycin water formulation, currently used as adjuvant treatment, in the upper urinary tract is approximately five minutes, compared to approximately six hours when mitomycin is formulated with RTGel;

 

 

administering higher doses of an active drug than would otherwise be possible using standard water-based formulations. For instance, it is only possible to dissolve 0.5 mg of mitomycin in 1 mL of water while it is possible to formulate up to 8 mg of mitomycin with 1 mL of RTGel; and

 

 

maintaining the active drug’s molecular structure and mode of action.

 

 

These characteristics of RTGel enable sustained release of mitomycin in the urinary tract for both Jelmyto and UGN-102. Further, RTGel may be particularly effective in the bladder and upper urinary tract where tumor visibility and access are challenging, and where there exists a significant amount of urine flow and voiding. We believe that these characteristics of RTGel may prove useful for the local delivery of active drugs to other bodily cavities in addition to the bladder and upper urinary tract.

 

Jelmyto

 

On April 15, 2020, the FDA approved our new drug application (“NDA”) for Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, for the treatment of adult patients with low-grade UTUC. Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology. It has been designed to prolong exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means. New product exclusivity for Jelmyto exists through April 15, 2023, Orphan Drug exclusivity through April 15, 2027, as well as a composition of matter patent through 2031. The main patents that protect Jelmyto in the United States are set to expire on January 20, 2031. These patents were listed in the FDA's Orange Book (Approved Drug Products with Therapeutic Equivalence Evaluations).

 

Low-grade UTUC is a rare cancer that develops in the lining of the upper urinary tract, ureters and kidneys. In the United States, there are approximately 6,000 - 7,000 new or recurrent low-grade UTUC patients annually. It is a challenging condition to treat due to the complex anatomy of the urinary tract system. Prior to Jelmyto, the current standard of care included endoscopic resection(s) and radical nephroureterectomy, which involves the removal of the renal pelvis, kidney, ureter and bladder cuff. Treatment is further complicated by the fact that low-grade UTUC is most commonly diagnosed in patients over 70 years of age, who may already have compromised kidney function and may suffer further complications as a result of a major surgery. We are focused on changing the way urothelial cancers are treated, an area in which there has been no significant advancements in recent years. Jelmyto is the first drug therapy of its kind, providing an alternative to endoscopic resection(s) and/or radical nephroureterectomy.

 

The FDA approval is based on results from our Phase 3 OLYMPUS trial showing Jelmyto achieved clinically significant disease eradication in adults with low-grade UTUC. Findings from the final study results include:

 

 

Complete response (“CR”) (primary endpoint) of 58% (41/71) in the intent-to-treat population and in the sub-population of patients who were deemed not capable of surgical removal at diagnosis.

 

 

At the 12-month time point for assessment of durability, 23 patients remained in CR of a total of 41 patients, eight had experienced recurrence of disease and ten patients were unable to be evaluated.

 

 

Durability of response was estimated to be 81.8% at 12 months by Kaplan-Meier analysis. The median duration of response was not reached.

 

 

The most commonly reported adverse events (≥ 20%) were ureteric obstruction, flank pain, urinary tract infection, hematuria, abdominal pain, fatigue, renal dysfunction, nausea, dysuria and vomiting. Most adverse events were mild to moderate and manageable using well established treatments. No treatment-related deaths occurred.

 

In June 2020, we initiated our commercial launch of Jelmyto in the United States. We have staffed, trained and prepared a customer-facing team comprising territory business managers with deep experience in both urology and oncology. These territory business managers are led by seven regional business managers. Each region is additionally supported by one to two clinical nurse educators to provide education and training around instillation, as well as a Field Reimbursement manager to help ensure access and reimbursement for appropriate patients. In addition, our organization includes seven medical science liaisons who appropriately engage with physicians interested in learning more about UroGen, Jelmyto and our technology, both in person and virtually. In total, our customer-facing team comprises approximately 80 representatives

.

We are committed to helping patients access Jelmyto. Our market access teams have laid the foundation for coverage and reimbursement, meeting multiple times with payors. The majority of large commercial plans have policies in place, covering over 150 million lives. In addition to reimbursement and access, we have also been focused on ensuring seamless integration into physician practices. We have implemented processes to help make Jelmyto preparation and administration safe and seamless for practitioners and patients, including entering into an agreement with a major national specialty pharmacy under which the pharmacy, following receipt of a patient prescription, prepares the Jelmyto admixture on our behalf. In October 2020, a Medicare C-Code was issued for Jelmyto. The Centers for Medicare & Medicaid Services established a permanent and product-specific J-code for Jelmyto that took effect on January 1, 2021, and replaced the C-Code. We are also launching a registry to capture data and evaluate real world outcomes in patients with UTUC that have been or will be treated with Jelmyto. The purpose of the registry is to study the use of Jelmyto in clinical practice in the United States and address specific clinical questions.

 

 

UGN-102

 

UGN-102 is our sustained-release formulation of mitomycin that we are developing for the treatment of low-grade intermediate risk NMIBC.

 

In October 2021, we reported final data from the Phase 2b OPTIMA II trial. The single-arm, open label trial completed enrollment of 63 patients at clinical sites across the United States and Israel in September 2019. Patients were treated with six weekly instillations of UGN-102 and underwent assessment of CR (the primary endpoint) four to six weeks following the last instillation. Consistent with our previous reports showing that 65%, or 41 out of 63 patients, treated with UGN-102 achieved a complete response three months after the start of therapy. In this subset of patients, 39 (95%), 30 (73%), and 25 (61%) remained disease-free at six, nine, and 12 months after treatment initiation, respectively. The probability of durable response nine months after CR (12 months after treatment initiation) was estimated to be 72.5% by Kaplan-Meier analysis. Thirteen patients had documented recurrences. Fifty-seven of 63 (90%) patients completed all six instillations of UGN-102 according to study protocol. Median duration of response was not reached. The most common adverse events, greater than 10%, were most often reported as mild to moderate in severity and include dysuria, hematuria, urinary frequency, fatigue, urgency and urinary tract infection. The final data was published online in The Journal of Urology in October 2021 and was included in the January 2022 print edition.

 

Urothelial cancer, which is comprised of bladder cancer and UTUC, affects a large, and what we believe to be, an underserved patient population. Annual expenditures for Medicare alone in the United States for the treatment of urothelial cancer were estimated to be at least $5.0 billion in 2020. The majority of the expenditures are spent on tumor resection surgeries such as transurethral resection of bladder tumor ("TURBT"). The prevalence of bladder cancer in the United States based on most recently published data was approximately 724,000 and estimated 2021 annual incidence of bladder cancer was approximately 85,000. We estimate based upon a review of peer-reviewed literature and publicly available data that there are approximately 80,000 low-grade intermediate risk NMIBC patients in the U.S. annually. We believe that UGN-102 has the potential to be a new therapeutic option for the treatment of low-grade intermediate risk NMIBC patients.

 

UGN-102 is administered locally using the standard practice of intravesical instillation directly into the bladder via a catheter. The instillation into the bladder is expected to take place in a physician’s office as a non-operative same-day treatment, in comparison with TURBT or similar surgical procedures, which are operations conducted under general anesthesia and may require an overnight stay. Surgical tumor removal often has limited success due to the inability to properly identify, reach and resect all tumors. We believe that an effective chemoablation agent can potentially provide better eradication of tumors irrespective of the detectability and location of the tumors. In addition, by removing the need for surgery, patients may avoid potential complications associated with surgery.

 

We initiated the Phase 3 ATLAS trial in December 2020 and until November 2021, were enrolling patients in this trial assessing UGN-102 with or without TURBT compared to standard of care. In parallel, we continued to engage in discussions with the FDA and, based on this dialogue, we designed a trial in order to demonstrate the efficacy and safety of UGN-102. This new Phase 3 ENVISION trial is a single-arm, multinational, multicenter study evaluating the efficacy and safety of UGN-102 as primary chemoablative therapy in patients with low-grade intermediate risk NMIBC. The design for the Phase 3 ENVISION trial is similar to our Phase 2 OPTIMA II trial in that the patient population will have similar clinical characteristics, receive the same treatment regimen and undergo the same efficacy and safety assessments and qualitative follow-up. Study participants will receive six once-weekly intravesical instillations of UGN-102. The planned primary endpoint will evaluate the complete response rate at three months after the first instillation, and the key secondary endpoint will evaluate durability over time in patients who achieve complete response at the three-month assessment.

 

In February 2022, we announced the initiation of the Phase 3 ENVISION trial, which is expected to enroll approximately 220 patients across 90 sites, with completion of enrollment expected by the end of 2022. Assuming positive findings, we anticipate submitting an NDA for UGN-102 in 2024. As a result of the FDA's acceptance of a single arm approach, we have stopped enrollment of the Phase 3 ATLAS study. However, at the time enrollment was stopped, any patients who had signed an informed consent were able to complete screening, and if eligible were randomized into the trial. Patients continue to be followed in the Phase 3 ATLAS study, and clinical results from these patients are expected to generate additional safety data and other insights in our evaluation of UGN-102 as a primary therapy in the treatment of low-grade intermediate risk NMIBC.

 

We have also initiated a Phase 3b study with the objective of demonstrating whether UGN-102 can be administered at home by a qualified home health professional, avoiding the need for repeated visits to a healthcare setting for instillation. Patients in the ongoing Phase 3b study will receive six once-weekly intravesical instillations of UGN-102. The Phase 3b study aims to enroll up to 10 patients across four centers. The initial treatment visit will occur at the investigative site and instillation will be performed by a qualified physician. Treatment visits two to six will take place at the patient's home and instillation will be performed by a properly trained and qualified home health professional. The primary endpoint of the study is the incidence of treatment-emergent adverse events ("TEAEs"), serious TEAEs, TEAEs of special interest, discontinuations from at home study treatment, and clinically significant abnormalities in laboratory tests (hematology, serum chemistry, and urinalysis). We believe the ease and convenience of home instillation has the potential to transform care and facilitate alternative access to treatment.

 

UGN-301

 

Our immuno-uro-oncology pipeline includes UGN-301, an anti-CTLA-4 antibody, which we intend to study as a combination therapy with multiple potential agents. The completion of non-human primate toxicity studies support the initiation of a multi-arm Phase 1 study of UGN-301 in combination with other agents. We believe that this approach leverages our unique drug delivery technology and provides an opportunity to evaluate intravesical delivery of UGN-301 in combination with other immuno-modulators, chemotherapies, gene therapy and innate immune stimulators.

 

High-grade NMIBC is a highly aggressive form of bladder cancer. TURBT followed by adjuvant intravesical immunotherapy with Bacillus of Calmette and Guerin ("BCG") is the current standard of care therapy for high-grade NMIBC. However, the high rates of recurrence and significant risk of progression to muscle-invasive tumors are particularly dangerous. Radical cystectomy, or bladder removal is strongly advocated in patients with BCG-unresponsive NMIBC (i.e. patients with BCG-refractory and BCG-relapsing tumors in whom further BCG therapy is not recommended) or for patients who cannot tolerate BCG. Drugs such as Keytruda have been recently approved for the BCG refractory population.

 

The first combination we are seeking to investigate clinically involves the sequential use of UGN-201 (imiquimod), a toll-like receptor-7 ("TLR 7") agonist, and UGN-301 in high-grade NMIBC ("high-grade NMIBC"). UGN-201 is a liquid formulation of imiquimod for intravesical administration that has been optimized for delivery in the urinary tract. We believe that UGN-201 may elicit an adaptive immune response in the presence of released bladder cancer antigens, which may translate into a long lasting acquired immune response. We believe the combination of UGN-301 and UGN-201 could further increase the adaptive immune response and potentially represent a valid post-TURBT adjuvant treatment of high-grade NMIBC. UGN-301 is delivered using our proprietary RTGel technology, which has been designed to significantly improve the effectiveness of certain intravesical therapy. In November 2019, we entered into a worldwide license agreement with Agenus Inc. to develop and commercialize zalifrelimab via intravesical delivery in combination with UGN-201 for the treatment of urinary tract cancers, initially in high-grade NMIBC. We believe that the combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and potential side effects.

 

In March 2022, we announced FDA clearance of our Investigational New Drug application ("IND") to begin a novel Phase 1 clinical study of UGN-301 in patients with recurrent NMIBC. The novel study design will utilize a Master Protocol that we believe is a more efficient and streamlined approach to development. It will provide more flexibility to add study arms as the trial progresses and is expected to increase efficiency and potentially reduce costs. We expect the Master Protocol will allow the Company to more quickly evaluate safety, tolerability and dosing of UGN-301 in combination with additional immunomodulators and chemotherapies, with the goal of developing optimized treatment regimens for patients. The multi-arm Phase 1 study was initiated in April 2022 and is expected support the development of UGN-301 in high-grade NMIBC.

.

 

 

Our Research and Development and License Agreements

 

Agenus Agreement

 

In November 2019, we entered into a license agreement with Agenus Inc. (“Agenus”). Pursuant to the agreement, Agenus granted us an exclusive, worldwide license (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus’s intellectual property rights to develop, make, use, sell, import and otherwise commercialize products incorporating a proprietary antibody of Agenus known as AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery. AGEN1884 is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients and in combination with Agenus’ anti-PD-1 antibody (AGEN2034) in solid tumors. UGN-301 is a formulation of RTGel and zalifrelimab that is in early-stage development for high-grade NMIBC.

 

MD Anderson Agreement

 

Based on nonclinical studies conducted by us, UGN-201 in combination with anti-CTLA-4 antagonists have shown encouraging results for the potential treatment of high-grade NMIBC. In January 2021, we announced that we entered into a three-year strategic research collaboration agreement with MD Anderson focusing on the sequential use of UGN-201 and UGN-301 as an investigational treatment for high-grade NMIBC. Under the agreement, we will collaborate with MD Anderson on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee. We will provide funding, developmental candidates, and other support.

 

For additional information regarding our research and development and license agreements, see Note 13 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

 

Impact of COVID-19 Pandemic

 

In the event of a prolonged disruption related to COVID-19, there could be detrimental impact to our ongoing and future clinical trials, our ongoing commercial launch and future commercialization activities for Jelmyto, and our ability to access capital markets.

 

According to the Centers for Disease Control and Prevention, as of April 2022, over 75% of the U.S. population has had at least one dose of the COVID-19 vaccine, and over 65% are fully vaccinated. However, as circumstances evolve, in particular related to the emergence of variants, it will be important to understand potential impacts to patients and the hospital system, and the ability for patients to access Jelmyto. While it is difficult to predict the impact of the ongoing COVID-19 pandemic, including associated variants, on our business and the healthcare industry, we continue to monitor the evolving COVID-19 situation, and the potential further impacts that the pandemic and related government response may have on our business.

 

 

Components of Operating Results

 

Revenue

 

During the three months ended March 31, 2022 and 2021 we recognized $13.6 million and $7.5 million of revenue, respectively from sales of our product, Jelmyto.

 

Cost of Revenue

 

Cost of revenue consists primarily of inventory and related costs associated with the manufacturing, distribution, warehousing and preparation of Jelmyto. In periods prior to receiving FDA approval for Jelmyto, we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expense.

 

Research and Development Expense

 

Research and development expense, net consists primarily of:

 

 

salaries and related costs, including share-based compensation expense, for our personnel in research and development functions;

 

 

expense incurred under agreements with third parties, including clinical research organizations (“CROs”), subcontractors, suppliers and consultants, nonclinical studies and clinical trials;

 

 

expense incurred to acquire, develop and manufacture nonclinical study and clinical trial materials;

 

 

expense incurred to purchase active pharmaceutical ingredient (“API”) in support of R&D activities and other related manufacturing costs; and

 

 

facility and equipment costs, including depreciation expense, maintenance and allocated direct and indirect overhead costs.

 

We expense all research and development costs as incurred. We estimate nonclinical study and clinical trial expense based on the services performed pursuant to contracts with research institutions and contract research organizations that conduct and manage nonclinical studies and clinical trials on our behalf based on actual time and expense incurred by them.

 

We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. Where at risk contingent milestone payments are due to third parties under research and development and collaboration agreements, the milestone payment obligations are expensed when such development milestone results are achieved.

 

We are currently focused on advancing our product candidates, and our future research and development expense will depend on their clinical success. Research and development expense will continue to be significant and will increase over at least the next several years as we continue to develop our product candidates and conduct nonclinical studies and clinical trials of our product candidates.

 

 

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We do not believe that it is possible at this time to accurately project total expense required for us to reach commercialization of our product candidates. Due to the inherently unpredictable nature of nonclinical and clinical development, we are unable to estimate with certainty the costs we will incur and the timelines that will be required in the continued development and approval of our product candidates. Clinical and nonclinical development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, if and when such arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expense to increase over the next several years as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates. We also expect to incur increased research and development expense as we selectively identify and develop additional product candidates.

 

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

 

 

per patient trial costs;

 

 

the number of patients that participate in the trials;

 

 

the number of sites included in the trials;

 

 

the countries in which the trials are conducted;

 

 

the length of time required to enroll eligible patients;

 

 

delays or operational challenges resulting from the ongoing COVID-19 pandemic;

 

 

the number of doses that patients receive;

 

 

the drop-out or discontinuation rates of patients;

 

 

potential additional safety monitoring or other studies requested by regulatory agencies;

 

 

the duration of patient follow-up; and

 

 

the efficacy and safety profile of the product candidates.

 

In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

 

Other than Jelmyto, which was approved by the FDA in April 2020, we have not received approval of any of our product candidates. UGN-102 is still in clinical development and our other product candidates are in nonclinical development, and the outcome of these efforts is uncertain. As such, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

 

License fees and development milestone payments related to in-licensed products and technology are expensed as incurred or when achieved, in the case of milestones, if it is determined at that point that they have no established alternative future use.

 

Selling and Marketing Expense

 

To date, selling and marketing expense consists primarily of commercial personnel costs (including share-based compensation) along with pre-commercialization and commercialization activities related to Jelmyto, formerly known as UGN-101. We anticipate that our selling and marketing expense remain relatively consistent for the remainder of 2022.

 

 

General and Administrative Expense

 

General and administrative expense consists primarily of personnel costs (including share-based compensation related to directors, executives, finance, medical affairs, business development, investor relations, and human resource functions). Other significant costs include medical affairs services, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees.

 

We anticipate that our general and administrative expense will remain relatively consistent for the remainder of 2022, and may increase in the future to support the potential approval and commercialization of our product candidates and our continued research and development programs. 

 

Financing on prepaid forward obligation

 

Financing on prepaid forward obligation is comprised of financing expense related to the RTW Transaction (as defined in Note 3 to our condensed consolidated financial statements included in this Quarterly Report).

 

Interest expense

 

Interest expense is comprised of interest related to our long-term debt with Pharmakon (see Note 10 to our condensed consolidated financial statements included in this Quarterly Report).

 

Interest and Other Income, Net

 

Interest and other income, net, consisted primarily of interest income.

 

Income Taxes

 

We have yet to generate taxable income in Israel. We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $335.8 million as of December 31, 2021. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. We have provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses. Income tax expense also consists of our estimate of uncertain tax positions, and related interest and penalties. See Note 16 to the condensed consolidated financial statements for further information.

 

Critical Accounting Policies and Estimates

 

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the revenue and expense incurred during the reported periods. In accordance with GAAP, we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ from these estimates under different assumptions or conditions. We discussed the critical accounting policies used in the preparation of our financial statements in Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report as well as in the Note 3 to the condensed consolidated financial statements included in this Quarterly Report.

 

 

Results of Operations

 

Comparison of the three months ended March 31, 2022 and 2021
 

 

The following table sets forth our results of operations for the three months ended March 31, 2022 and 2021.

 

   

Three Months Ended March 31,

 
   

2022

   

2021

   

Change

 
   

(in thousands)

 

Revenue

  $ 13,564     $ 7,485     $ 6,079  

Cost of revenue

    1,525       897       628  

Gross profit

    12,039       6,588       5,451  

Operating expense:

                       

Research and development

    12,696       10,513       2,183  

Selling and marketing

    13,351       11,435       1,916  

General and administrative

    7,949       10,754       (2,805 )

Total operating expense

    33,996       32,702       1,294  

Operating loss

    (21,957 )     (26,114 )     4,157  

Financing on prepaid forward obligation

    (5,826 )           (5,826 )

Interest expense

    (282 )           (282 )

Interest and other income, net

    (2 )     179       (181 )

Loss before income taxes

    (28,067 )     (25,935 )     (2,132 )

Income tax expense

    (325 )           (325 )

Net loss

  $ (28,392 )   $ (25,935 )   $ (2,457 )

 

Revenue

 

Revenue was $13.6 million and $7.5 million for the three months ended March 31, 2022 and 2021, respectively. The increase in revenue of $6.1 million reflects the increased volume of sales of our product Jelmyto.

 

Cost of Revenue

 

Cost of revenue was $1.5 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively. In periods prior to receiving FDA approval for Jelmyto, we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expense. We expect this to continue to impact cost of revenue through the first quarter of 2023 as we produce Jelmyto at costs reflecting the full cost of manufacturing and as we deplete inventories that we had expensed prior to receiving FDA approval. Gross margin would have been approximately 88.2% versus 88.7% for the three months ended March 31, 2022, if we had not sold Jelmyto units that were expensed prior to regulatory approval.

 

Research and Development Expense

 

Research and development (R&D) expense was $12.7 million and $10.5 million for the three months ended March 31, 2022 and 2021, respectively. The overall increase of $2.2 million is primarily attributable to the Phase 3 ENVISION study for UGN-102, and commencement of Phase 1 study for UGN-301.

 

Selling and Marketing Expense

 

Selling and marketing expense was $13.4 million and $11.4 million for the three months ended March 31, 2022 and 2021, respectively. The increase in selling and marketing expense of $2.0 million is primarily attributable to expenses related to our annual sales meeting held in March 2022 which did not occur during the first quarter of 2021.

 

General and Administrative Expense

 

General and administrative expense was $7.9 million and $10.8 million for the three months ended March 31, 2022 and 2021, respectively. The decrease in general and administrative expense of $2.9 million resulted primarily from a decrease in compensation expenses in 2022.

 

 

Financing on Prepaid Forward Obligation

 

Financing on prepaid forward obligation was $5.8 million and $0 for the three months ended March 31, 2022 and 2021, respectively. The cost in 2022 relates to the financing cost of the RTW Transaction which closed in May 2021.

 

Interest Expense

 

Interest expense was $0.3 million and $0.0 for the three months ended March 31, 2022 and 2021, respectively. The cost in 2022 relates to the Pharmakon loan which closed in March 2022.

 

Interest and Other Income, Net

 

Interest and other income, net was $0.0 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively. The decrease in interest and other income, net of $0.2 million was primarily due to lower interest earned on cash and marketable securities.

 

Liquidity and Capital Resources

 

As of March 31, 2022, we had $137.1 million in cash and cash equivalents and marketable securities. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation, and is held primarily in U.S. dollars. Based on our cash flow projections, we believe that our current cash and cash equivalents and marketable securities are sufficient to fund our planned operations beyond the next 12 months.

 

Through March 31, 2022, we funded our operations primarily through public equity offerings, private placements of equity securities and our funding arrangement with RTW Investments (“RTW”).

 

In December 2019, we entered into a sales agreement (the “ATM Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which we may from time to time offer and sell our ordinary shares having an aggregate offering price of up to $100.0 million. The shares are offered and will be sold pursuant to a shelf registration statement on Form S-3 which was declared effective by the SEC on January 2, 2020.

 

During the second quarter of 2020, we sold 700,000 ordinary shares under the ATM Sales Agreement, for gross proceeds of approximately $16.6 million. The net proceeds to us after deducting sales commissions to Cowen and other issuance expenses were approximately $15.8 million. The remaining capacity under the ATM Sales Agreement is approximately $83.4 million.

 

In March 2021, we entered into a prepaid forward agreement with RTW, pursuant to which RTW agreed to provide us with an upfront cash payment of $75.0 million to support the launch of Jelmyto and the development of UGN-102, and we agreed to provide RTW with tiered future payments based on global annual net product sales of Jelmyto and UGN-102, if approved. In May 2021, following the receipt of necessary regulatory approvals, we received the $75.0 million prepaid forward payment ($72.4 million net of transaction costs) from RTW.

 

On March 7, 2022, we entered into a loan agreement ("Loan Agreement") with Pharmakon for a senior secured term loan of up to $100 million in two tranches. The first tranche of $75 million ($72.6 million net of transaction costs) was funded in March 2022. At our option, we may draw up to an additional $25 million before December 31, 2022, subject to customary bring down conditions and deliverables. The Pharmakon loan will mature five years from initial funding and can be prepaid in whole at our discretion, at any time, subject to prepayment premiums and makewhole amounts. The Pharmakon loan will require interest-only payments for the first 48 months followed by principal and interest payments with interest accruing using 3-month LIBOR (with a 1.25% floor) plus 8.25%. In the event of the cessation of LIBOR, the benchmark governing the interest rate will be replaced with a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York.

 

We have incurred losses since our inception and negative cash flows from our operations, and as of March 31, 2022 we had an accumulated deficit of $495.7 million. We anticipate that we will continue to incur losses for the reasonably foreseeable future. Our primary uses of capital are, and we expect will continue to be, commercialization activities, research and development expense, including third-party clinical research and development services, laboratory and related supplies, clinical costs, including manufacturing costs, legal and other regulatory expense and general and administrative costs, partially offset by proceeds from sales of Jelmyto.

 

 

We cannot estimate the actual amounts necessary to successfully commercialize any approved products, including Jelmyto, or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. There can be no assurances that we will be able to secure such additional financing if at all, or on terms that are satisfactory to us, and that it will be sufficient to meet its needs. In the event we is not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations.

 

Funding and Material Cash Requirements

 

Our present and future funding and cash requirements will depend on many factors, including, among other things:

 

 

the progress, timing and completion of clinical trials for UGN-102;

 

 

nonclinical studies and clinical trials for UGN-301 or any of our other product candidates;

 

 

the costs related to obtaining regulatory approval UGN-102 and UGN-301 and any of our other product candidates, and any delays we may encounter as a result of regulatory requirements or adverse clinical trial results with respect to any of these product candidates;

 

 

selling, marketing and patent-related activities undertaken in connection with the commercialization of Jelmyto and UGN-102 and any of our other product candidates, and costs involved in the continued development of an effective sales and marketing organization;

 

 

the costs involved in filing and prosecuting patent applications and obtaining, maintaining and enforcing patents or defending against claims or infringements raised by third parties, and license royalties or other amounts we may be required to pay to obtain rights to third party intellectual property rights;

 

 

potential new product candidates we identify and attempt to develop;

 

 

revenues we may derive either directly or in the form of royalty payments from future sales of Jelmyto, UGN-102, UGN-301, RTGel reverse thermal hydrogel and any other product candidates; and

 

 

the repayment of outstanding debt.

 

Accordingly, we will need to obtain additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

 

We may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of any additional securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants that further limit or restrict our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, the terms of the Forward Contract and Loan Agreement limit our ability to take certain actions, including incurring additional indebtedness.

 

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

For more information as to the risks associated with our future funding needs, see Part II, Item 1A – Risk Factors. We will require additional financing to achieve our goals, and a failure to obtain this capital when needed and on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.

 

Contractual Obligations and Commitments

 

In April 2016, we signed an addendum to our November 2014 lease agreement for our executive offices located in Israel, in order to increase the office space rented and to extend the rent period until 2019. In March 2019, we utilized the agreement extension option and extended the rent period for an additional three years until August 2022.

 

In April 2018, we entered into a new lease agreement for an office in Los Angeles, CA. The lease commencement date was July 10, 2018 and terminates in March 2024. In November 2019, we subleased our offices in Los Angeles, CA. The lease commencement date was January 1, 2020 and terminates in March 2024. The subtenants exercised their early access clause and moved into the premises at the end of November 2019.

 

Also, in November 2019, we entered into a new lease agreement, dated effective October 31, 2019, for an office in Princeton, NJ. The lease commencement date was November 29, 2019 and the lease term is 38 months.

 

The total obligation for future minimum lease payments under our operating leases is $1.6 million as of December 31, 2021. See Note 11 to the Consolidated Financial Statements for further information.

 

In March 2022, UroGen Pharma Ltd., the Borrower and the Guarantors party thereto from time to time entered into the Loan Agreement with the Lenders and Collateral Agent pursuant to which the Lenders agreed to make the Term Loans to the Borrower in an aggregate principal amount of up to $100 million to be funded in two tranches: (i) the Tranche A Loan of $75 million was advanced in March, 2022 and (ii) the Tranche B Loan of $25 million will be advanced at Borrowers election, subject to certain conditions, subject to the customary bring down conditions and deliverables, and in no event later than December 31, 2022. The Term Loans will mature on the fifth-year anniversary of the Tranche A Closing Date (the “Maturity Date”). The Term Loans bear interest at 8.25% plus three-month LIBOR per annum with a LIBOR floor of 1.25%. In the event of the cessation of LIBOR, the benchmark governing the interest rate will be replaced with a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York as described in the Loan Agreement. Interest is payable quarterly in arrears. Repayment of outstanding principal of the Term Loans will be made in four equal quarterly payments of principal commencing after the 17th-quarter anniversary of the Tranche A Closing Date. The obligations of the Borrower under the Loan Agreement are guaranteed on a full and unconditional basis by UroGen Pharma Ltd. and the other Guarantor and are secured by substantially all of the respective Credit Parties’ tangible and intangible assets and property, including intellectual property, subject to certain exceptions.

 

Cash Flows

 

The following table sets forth the significant sources and uses of cash for the periods set forth below: 

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 
   

(in thousands)

 

Net cash (used in) provided by:

               

Operating activities

  $ (23,996 )   $ (27,401 )

Investing activities

    13,596       15,024  

Financing activities

    70,742       4  

Net change in cash and cash equivalents

  $ 60,342     $ (12,373 )

 

Operating Activities

 

Net cash used in operating activities was $24.0million during the three months ended March 31, 2022, compared to $27.4 million during the three months ended March 31, 2021. The $3.4 million decrease was attributable primarily to financing payments related to the prepaid forward obligation and timing of certain accruals, partially offset by increased collections of accounts receivables.

 

Investing Activities

 

Net cash used in investing activities was $13.6 million during the three months ended March 31, 2022, compared to $15.0 million provided by investing activities during the three months ended March 31, 2021. The net decrease of $1.4 million is primarily related to a decrease in maturities of marketable securities, as compared to the prior year.

 

Financing Activities

 

Net cash provided by financing activities was $70.7 million during the three months ended March 31, 2022, compared to $0.0 million during the three months ended March 31, 2021. The increase is related to the proceeds from the Pharmakon loan in the current year.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Interest Rate Fluctuation Risk

 

Some of the securities in which we invest have market risk in that a change in prevailing interest rates may cause the principal amount of the marketable securities to fluctuate. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents and marketable securities. As of March 31, 2022 we had $137.1 million of cash and cash equivalents and marketable securities. We invest our cash primarily in money market accounts, but also invest in commercial paper and debt instruments of financial institutions, corporations, U.S. government-sponsored agencies and the U.S. Treasury. The primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable securities without significantly increasing risk. We have established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity. If a 10% change in interest rates were to have occurred on March 31, 2022, this change would not have had a material effect on the fair value of our cash and cash equivalents and marketable securities as of that date.

 

 

Inflation Risk

 

Inflation generally may affect us by increasing our cost of labor and clinical trial costs. Inflation has not had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2022.

 

Foreign Currency Exchange Risk

 

The U.S. dollar is our functional and reporting currency. However, a significant portion of our operating expenses are incurred in the New Israeli Shekel ("NIS") . As a result, we are exposed to the risk that NIS may appreciate relative to the dollar, or, if the NIS instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation, if any, of the NIS against the dollar. For example, the dollar depreciated against the NIS during 2021 by a total of 3.2%. If the dollar cost of our operations in Israel increases, our dollar-measured results of operations will be adversely affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future. If a 10% change in NIS-to-Dollar exchange rates were to have occurred during the three months ended March 31, 2022, this change would not have had a material effect on our operating expenses.

 

We do not currently engage in currency hedging activities in order to reduce this currency exposure, but we may begin to do so in the future. Instruments that may be used to hedge future risks may include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive and financial officers (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosures controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

 

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

Changes in our internal control over financial reporting may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

.

 

 

Part IIOther Information

 

Item 1. Legal Proceedings.

 

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

 

Item 1A. Risk Factors.

 

Risk Factor Summary

 

Below is a summary of the principal factors that make an investment in our ordinary shares speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading Risk Factors and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our ordinary shares.

 

 

We are highly dependent on the successful commercialization of our only approved product, Jelmyto.

 

 

We have limited experience as an organization in marketing and distributing products and are therefore subject to certain risks in relation to the commercialization of Jelmyto and any of our product candidates that receive regulatory approval.

 

 

Our indebtedness resulting from our Loan Agreement could adversely affect our financial condition or restrict our future operations.

 

 

The market opportunities for Jelmyto and our product candidates may be smaller than we anticipate or limited to those patients who are ineligible for established therapies or for whom prior therapies have failed and may be small.

 

 

Jelmyto and any of our product candidates that receive regulatory approval may fail to achieve the broad degree of physician adoption and use and market acceptance necessary for commercial success.

 

 

Jelmyto and our product candidates, if approved, will face significant competition with competing technologies and our failure to compete effectively may prevent us from achieving significant market penetration.

 

 

In addition to Jelmyto, we are dependent on the success of our lead product candidate, UGN-102, and our other product candidates, including obtaining regulatory approval to market our product candidates in the United States.

 

 

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, results of earlier studies and trials may not be predictive of future trial results, and our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates.

 

 

We have entered into collaboration and licensing agreements and in the future may enter into collaboration and licensing arrangements with other third parties for the development or commercialization of our product candidates. If our collaboration and licensing arrangements are not successful, we may not be able to capitalize on the market potential of these product candidates.

 

 

We currently contract with third-party subcontractors and single-source suppliers for certain raw materials, compounds and components necessary to produce Jelmyto for commercial use, and to produce UGN-102, UGN-201 and UGN-301 for nonclinical studies and clinical trials, and expect to continue to do so to support commercial scale production of UGN-102 and UGN-201, if approved, as well as UGN-301 if approved as a monotherapy or for any approved product that includes UGN-301.

 

There are significant risks associated with the manufacture of pharmaceutical products and contracting with contract manufacturers, including single-source suppliers. Furthermore, our existing third-party subcontractors and single-source suppliers may not be able to meet the increased need for certain raw materials, compounds and components that may result from our commercialization efforts. This increases the risk that we will not have sufficient quantities of Jelmyto, UGN-102 , UGN-201 or UGN-301 or be able to obtain such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

 

 

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of any of our other products we develop.

 

 

If we fail to attract and keep senior management and key personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize any of the products we develop.

 

 

Our business could be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 pandemic.

 

 

We have a limited operating history and have incurred significant losses and negative cash flows since our inception, and we anticipate that we will continue to incur significant losses and negative cash flows for the foreseeable future, which makes it difficult to assess our future viability.

 

 

We will require additional financing to achieve our goals, and a failure to obtain this capital when needed and on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.

 

 

If our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our product candidates and technologies are not adequate, we may not be able to compete effectively, and we otherwise may be harmed.

 

 

If the FDA does not conclude that UGN-102 satisfies the requirements under 505(b)(2) or if the requirements for our product candidates are not as we expect, the approval pathway for these product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

 

 

Jelmyto and any of our product candidates that receive regulatory approval will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expenses, limit or withdraw regulatory approval and subject us to penalties if we fail to comply with applicable regulatory requirements.

 

 

It may be difficult for us to profitably sell our product candidates if coverage and reimbursement for these products is limited by government authorities and/or third-party payor policies.

 

 

Our research and development and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

 

 

 

Risk Factors

 

An investment in our ordinary shares involves a high degree of risk. You should carefully consider all of the information set forth in this Annual Report and in our other filings with the SEC, including the following risk factors which we face. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this Annual Report. See Special Note Regarding Forward-Looking Statementsabove.

 

Risks Related to Our Business and Strategy

 

We are highly dependent on the successful commercialization of our only approved product, Jelmyto.

 

Jelmyto is our first product, which we commercially launched in the United States in June 2020. We have not commercialized any other product candidates. We have invested significant efforts and financial resources in the research and development of Jelmyto, our first and only product approved for commercial sale. We are focusing a significant portion of our activities and resources on Jelmyto, and we believe our prospects are highly dependent on, and a significant portion of the value of our company relates to, our ability to successfully commercialize Jelmyto in the United States.

 

Successful commercialization of Jelmyto is subject to many risks. We initiated our commercial launch of Jelmyto in June 2020, and prior to that, we had never, as an organization, launched or commercialized any product. There is no guarantee that our ongoing commercial launch of Jelmyto or our future commercialization efforts will be successful, or that we will be able to successfully launch and commercialize any other product candidates that receive regulatory approval. There are numerous examples of unsuccessful product launches and failures to meet high expectations of market potential, including by pharmaceutical companies with more experience and resources than us. While we have established our commercial team and have hired our U.S. sales force, we will need to maintain, further train and develop our team in order to be prepared to successfully coordinate the ongoing launch and commercialization of Jelmyto. Even if we are successful in maintaining and further developing our commercial team, there are many factors that could cause the ongoing launch and commercialization of Jelmyto to be unsuccessful, including a number of factors that are outside our control. We must also properly educate physicians and nurses on the skillful preparation and administration of Jelmyto, and develop a broad experiential knowledge base of aggregated clinician feedback from which we can refine appropriate procedures for product administration, without which there could be a risk of adverse events.

 

Because no drug has previously been approved by the FDA for the treatment of low-grade UTUC, it is especially difficult to estimate Jelmyto’s market potential. The commercial success of Jelmyto depends on the extent to which patients and physicians accept and adopt Jelmyto as a treatment for low-grade UTUC, and we do not know whether our or others’ estimates in this regard will be accurate. For example, if the patient population suffering from low-grade UTUC is smaller than we estimate or if physicians are unwilling to prescribe or patients are unwilling to be treated with Jelmyto due to label warnings, adverse events associated with product administration or other reasons, the commercial potential of Jelmyto will be limited. At this time, we have only limited information regarding how physicians, patients and payors will respond to the pricing of Jelmyto. Physicians may not prescribe Jelmyto and patients may be unwilling to be treated with Jelmyto if coverage is not provided or reimbursement is inadequate to cover a significant portion of the cost. Additionally, any negative development for Jelmyto in our post-marketing commitments, or in regulatory processes in other jurisdictions, may adversely impact the commercial results and potential of Jelmyto. Thus, significant uncertainty remains regarding the commercial potential of Jelmyto.

 

In addition, our ongoing commercial launch of Jelmyto and subsequent commercialization efforts could be hindered by the COVID-19 pandemic, although we are currently not able to predict or quantify any such potential impact with any degree of certainty.

 

If the launch or commercialization of Jelmyto is unsuccessful or perceived as disappointing, our share price could decline significantly and the long-term success of the product and our company could be harmed.

 

Jelmyto has only been studied in a limited number of patients and in limited populations. Following the initiation of our commercial launch in June 2020, Jelmyto is now available to a much larger number of patients and in broader populations, and we do not know whether the results of Jelmyto use in such larger number of patients and broader populations will be consistent with the results from our clinical studies.

 

Jelmyto has been administered only to a limited number of patients and in limited populations in clinical studies, including our successful pivotal Phase 3 OLYMPUS clinical trial for the treatment of adult patients with low-grade UTUC. While the FDA granted approval of Jelmyto based on the data included in the NDA, including data from the Phase 3 OLYMPUS clinical trial, we do not know whether the results when a large number of patients and broader populations are exposed to Jelmyto, including results related to safety and efficacy, will be consistent with the results from earlier clinical studies of Jelmyto that served as the basis for the approval of Jelmyto. New data relating to Jelmyto, including from spontaneous adverse event reports and post-marketing studies in the United States, and from other ongoing clinical studies, may result in changes to the product label and may adversely affect sales, or result in withdrawal of Jelmyto from the market. The FDA and regulatory authorities in other jurisdictions may also consider the new data in reviewing potential marketing applications in other jurisdictions, or imposing post‑approval requirements. If any of these actions were to occur, it could result in significant expense and delay or limit our ability to generate sales revenues.

 

 

 

We have limited experience as an organization in marketing and distributing products and are therefore subject to certain risks in relation to the commercialization of Jelmyto and any of our product candidates that receive regulatory approval.

 

Our strategy is to build and maintain a fully integrated biotechnology company to successfully execute the commercialization of Jelmyto in the United States. Jelmyto is our only product that has been approved for sale by any regulatory body, and it became available in the United States in June 2020. While we have established a commercial management team and have also established a field-based organization comprised of approximately 80 individuals, including a sales team, reimbursement support team, clinical nurse educators, national account managers and medical science liaisons, we currently have very limited experience commercializing pharmaceutical products as an organization. In order to successfully commercialize Jelmyto, we must continue to develop our sales, marketing, managerial, compliance and related capabilities or make arrangements with third parties to perform these services. This involves many challenges, such as recruiting and retaining talented personnel, training employees, setting the appropriate system of incentives, managing additional headcount and integrating new business units into an existing corporate infrastructure. These efforts will continue to be expensive and time-consuming, and we cannot be certain that we will be able to successfully further develop these capabilities. Additionally, we will need to maintain and further develop our sales force, and we will be competing with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. In the event we are unable to effectively develop and maintain our commercial team, including our sales force, our ability to effectively commercialize Jelmyto would be limited, and we would not be able to generate product revenues successfully. If we fail to establish and maintain an effective sales and marketing infrastructure, we will be unable to successfully commercialize our product candidates, which in turn would have an adverse effect on our business, financial condition and results of operations.

 

If we are unable to effectively train and equip our sales force, our ability to successfully commercialize Jelmyto will be harmed.

 

None of the members of our sales force had ever promoted Jelmyto prior to its launch in June 2020. In addition, Jelmyto is the first drug approved by the FDA for the treatment of low-grade UTUC. As a result, we are and will continue to be required to expend significant time and resources to train our sales force to be credible, persuasive, and compliant with applicable laws in marketing Jelmyto for the treatment of low-grade UTUC to physicians and nurses. In addition, we must train our sales force to ensure that a consistent and appropriate message about Jelmyto is being delivered to our potential customers. If we are unable to effectively train our sales force and equip them with effective materials, including medical and sales literature to help them inform and educate potential customers about the benefits and risks of Jelmyto and its proper administration, our efforts to successfully commercialize Jelmyto could be put in jeopardy, which would negatively impact our ability to generate product revenues.

 

Additionally, in light of the COVID-19 pandemic, we have developed digital materials and programs for our sales force to use in order to engage virtually with their target physicians when in-person engagement is not safe or feasible. Beginning in the second quarter of 2021, our territory business managers have been able to engage in higher levels of in-person physician interaction than they were previously during the pandemic. However, there can be no assurance that our territory business managers will continue to have in-person access to physicians as a result of the ongoing evolution of the COVID-19 pandemic (including the emergence of variants), or that digital materials and virtual engagement will be effective at growing and sustaining prescription levels of Jelmyto. Disruptions in the prescription volume of Jelmyto could also occur:

 

 

if patients are physically quarantined or are unable or unwilling to visit healthcare providers;

     
 

if physicians restrict access to their facilities for a material period of time;

     
 

if healthcare providers prioritize treatment of acute or communicable illnesses over treatment of low-grade UTUC;

     
 

if pharmacies are closed or suffering supply chain disruptions;

     
 

if patients lose access to employer-sponsored health insurance due to periods of high unemployment; or

     
 

as a result of general disruptions in the operations of payors, distributors, logistics providers and other third parties that are necessary for Jelmyto to be prescribed, reconstituted, instilled and reimbursed.

 

 

The market opportunities for Jelmyto and our product candidates may be smaller than we anticipate or limited to those patients who are ineligible for established therapies or for whom prior therapies have failed and may be small.

 

Cancer therapies are sometimes characterized as first-line, second-line or third-line. When cancer is detected early enough, first-line therapy, often chemotherapy, hormone therapy, surgery, radiotherapy or a combination of these, is sometimes adequate to cure the cancer or prolong life. Second- and third-line therapies are administered to patients when prior therapy is not or is no longer effective. For urothelial cancers, the current first-line standard of care is surgery designed to remove one or more tumors. Chemotherapy is currently used in treating urothelial cancer only as an adjuvant, or supplemental therapy, after tumor resection. We are designing our lead product candidates with the goal of replacing surgery as the standard of care for certain urothelial cancers. However, there is no guarantee that our product candidates, if approved, would be approved for first-line or even later lines of therapy, and that prior to any such approvals, we will not have to conduct additional clinical trials.

 

Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers who have previously failed prior treatments, and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations or third-party market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers and the number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates. For instance, our pivotal Phase 3 OLYMPUS clinical trial for Jelmyto was designed to evaluate the use of Jelmyto for the treatment of tumors in the renal pelvis (the funnel-like dilated part of the ureter in the kidney) and was not designed to evaluate the use of Jelmyto for the treatment of tumors in the ureter (the tube that connects the kidneys to the bladder). Even though Jelmyto is approved for the treatment of low-grade UTUC, physicians may choose to only use it to treat tumors in the renal pelvis and not tumors in the ureter, which would limit the degree of physician adoption and market acceptance of Jelmyto. Even if we obtain significant market share, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including the use of the products as first- or second-line therapy. For example, low-grade UTUC is a rare malignant tumor of the cells lining the urinary tract and there is limited scientific literature or other research on the incidence and prevalence of low-grade UTUC. If our estimates of the incidence and prevalence of low-grade UTUC are incorrect, Jelmyto’s commercial viability may prove to be limited, which may negatively affect our financial results.

 

Jelmyto and any of our product candidates that receive regulatory approval may fail to achieve the broad degree of physician adoption and use and market acceptance necessary for commercial success.

 

The commercial success of Jelmyto and any other product candidates that receive regulatory approval will depend significantly on their broad adoption and use by physicians, for approved indications, including, in the case of Jelmyto, for the treatment of low-grade UTUC, and in the case of UGN-102, for the treatment of low-grade intermediate risk NMIBC, and for other therapeutic indications that we may seek to pursue with any of our product candidates. Physicians treating low-grade UTUC and low-grade intermediate risk NMIBC have never had to consider treatments other than surgery. The degree and rate of physician and patient adoption of Jelmyto, UGN-102 or any of our other product candidates, if approved, will depend on a number of factors, including:

 

 

the clinical indications for which the product is approved;

     
 

the safety and efficacy data from the clinical trial(s) supporting the approved clinical indications;

     
 

the approved labeling and packaging for our products, including the degree of product preparation and administration convenience and ease of use that is afforded to physicians by the approved labeling and product packaging; 

     
 

the prevalence and severity of adverse side effects and the level of benefit/risk observed in our clinical trials;

     
 

sufficient patient satisfaction with the results and administration of our products and overall treatment experience, including relative convenience, ease of use and avoidance of, or reduction in, adverse side effects;

     
 

the extent to which physicians recommend our products to patients;

     
 

physicians’ and patients’ willingness to adopt new therapies in lieu of other products or treatments, including willingness to adopt Jelmyto, and our lead product candidate UGN-102 as locally-administered drug replacements to current surgical standards of care;

     
 

the cost of treatment, safety and efficacy of our products in relation to alternative treatments, including the recurrence rate of our treatments;

     
 

the extent to which the costs of our products are covered and reimbursed by third-party payors, including the availability of a physician reimbursement code for our treatments, and patients’ willingness to pay for our products;

     
 

whether treatment with our products, including the treatment of low-grade UTUC with Jelmyto and the treatment of low-grade intermediate risk NMIBC with UGN-102, if approved, will be deemed to be an elective procedure by third- party payors; if so, the cost of treatment would be borne by the patient and would be less likely to be broadly adopted;

     
 

proper education of physicians or nurses for the skillful administration of our approved product, Jelmyto, and UGN-102, if approved, and development of a broad experiential knowledge base of aggregated clinician feedback from which we can refine appropriate procedures for product administration, without which there could be a risk of adverse events; and

     
 

the effectiveness of our sales and marketing efforts, especially the success of any targeted marketing efforts directed toward physicians and clinics and any direct-to-consumer marketing efforts we may initiate.

 

If Jelmyto, UGN-102 or any of our other product candidates are approved for use but fails to achieve the broad degree of physician adoption and market acceptance necessary for commercial success, our operating results and financial condition would be adversely affected.

 

Jelmyto and our product candidates, if approved, will face significant competition with competing technologies and our failure to compete effectively may prevent us from achieving significant market penetration.

 

The biotechnology industry is intensely competitive and subject to rapid and significant technological change. Our potential competitors include large and experienced companies that enjoy significant competitive advantages over us, such as greater financial, research and development, manufacturing, personnel and marketing resources, greater brand recognition and more experience and expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities. These companies may develop new drugs to treat the indications that we target or seek to have existing drugs approved for use for the treatment of the indications that we target.

 

 

The FDA has approved five immunotherapy drugs known as checkpoint inhibitors; Tecentriq (atezolizumab), Bavencio (avelumab), Imfinzi (durvalumab), Opdivo (nivolumab) and Keytruda (pembrolizumab) for the treatment of locally advanced or metastatic bladder cancer, a form of muscle invasive bladder cancer.

 

We are aware of several pharmaceutical companies that are developing drugs in the fields of urology and uro-oncology, such as Roche, Vyriad, GSK, Celgene, Samyang biopharma, Merck Sharp & Dohme Corp., Sesen Bio, Viralytics Limited, AADi, LLC, Biocancell Ltd., ImmunityBio, Seagen Inc., Steba Biotech Ltd., FKD Therapies Oy and Janssen. We are aware of a company called Steba Biotech with an IND granted in December 2020 who has initiated a Phase 3 study of padeliporfin ImPACT for the treatment of adult patients with low-grade and unifocal high-grade UTUC in the first quarter of 2021. We are also aware that other companies, such as Janssen and Lipac are conducting, or have recently conducted clinical trials for product candidates for the treatment of low-grade intermediate risk NMIBC. Outside of these indications where we are developing products, we are aware of other companies doing work in both bladder and upper tract cancers, but these are with agents or on targets in high-grade, metastatic, or muscle invasive cancers. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in this industry. Our competitors may succeed in developing, acquiring or licensing products that are more effective, easier to administer or less costly than our product candidates.

 

In addition, we face competition from existing standards of treatment, surgical tumor resection procedures. If we are not able to demonstrate that our product candidates are at least as safe and effective as such courses of treatment, medical professionals may not adopt our product candidates in replacement of the existing standard of care. Generic mitomycin injectable drug products, while approved by FDA for gastric and pancreatic cancers, are neither approved for low-grade UTUC nor reconstituted with hydrogel as Jelmyto is, although they may be used off-label by physicians for the treatment of low-grade UTUC, as they have been prior to the approval of Jelmyto.

 

Our ability to market Jelmyto and any of our product candidates that receive marketing approval is and will be limited to certain indications. If we want to expand the indications for which we may market our products, we will need to obtain additional regulatory approvals, which may not be granted.

 

Jelmyto is indicated for adult patients with low-grade UTUC. We are currently developing UGN-102, UGN-201 and UGN-301 for the treatment of various forms of bladder cancer. The FDA and other applicable regulatory agencies will restrict our ability to market or advertise our products to the scope of the approved label for the applicable product and for no other indications, which could limit physician and patient adoption. We may attempt to develop and, if approved, promote and commercialize new treatment indications for our products in the future, but we cannot predict when or if we will receive the regulatory approvals required to do so. Failure to receive such approvals will prevent us from promoting or commercializing new treatment indications. In addition, we would be required to conduct additional clinical trials or studies to support approvals for additional indications, which would be time consuming and expensive, and may produce results that do not support regulatory approvals. If we do not obtain additional regulatory approvals, our ability to expand our business will be limited.

 

If we are found to have improperly promoted off-label uses of Jelmyto or any of our product candidates that receive regulatory approval, or if physicians misuse our products, we may become subject to prohibitions on the sale or marketing of our products, significant sanctions, and product liability claims, and our image and reputation within the industry and marketplace could be harmed.

 

The FDA and other regulatory agencies strictly regulate the marketing and promotional claims that are made about drug products. In particular, a product may not be promoted for uses or indications that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling and may not be promoted based on overstated efficacy or omission of important safety information. For example, we cannot promote the use of our product Jelmyto in a manner that is inconsistent with the approved label, but we are permitted to share truthful and non-misleading information that is otherwise consistent with the product’s FDA approved labeling. However, physicians are able, in their independent medical judgment, to use Jelmyto on their patients in an off-label manner, such as for the treatment of other urology indications. If we are found to have promoted such off-label uses, we may receive warning letters and become subject to significant liability, which would harm our business. The federal government has levied large administrative, civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would harm our business. In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to prohibitions on the sale or marketing of our products or significant fines and penalties, and the imposition of these sanctions could also affect our reputation with physicians, patients and caregivers, and our position within the industry.

 

Physicians may also misuse our products or use improper techniques, potentially leading to adverse results, side effects or injury, which may lead to product liability claims. If our products are misused or used with improper technique, we may become subject to costly litigation. Product liability claims could divert management’s attention from our core business, be expensive to defend, and result in sizable damage awards against us that may not be covered by insurance. We currently carry product liability insurance covering our clinical trials with policy limits that we believe are customary for similarly situated companies and adequate to provide us with coverage for foreseeable risks. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. In addition, while we have established product liability insurance relating to our commercialization of Jelmyto, there can be no assurance that we will be able to maintain this insurance on commercially reasonable terms or that this insurance will be sufficient. Furthermore, the use of our products for conditions other than those approved by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

 

In addition to Jelmyto, we are dependent on the success of our lead product candidate, UGN-102, and our other product candidates, including obtaining regulatory approval to market our product candidates in the United States.*

 

The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping, marketing, distribution, post-approval monitoring and reporting, and export and import of drug products are subject to extensive regulation by the FDA and by foreign regulatory authorities. These regulations differ from country to country. To gain approval to market our product candidates, we must provide clinical data that adequately demonstrate the safety and efficacy of the product for the intended indication. Other than Jelmyto, all of our product candidates, including our lead product candidate, UGN-102, remain in clinical development and have not yet received regulatory approval from the FDA or any other regulatory agency in the United States or any other country. Our business depends upon obtaining these regulatory approvals. There are no drugs that have been approved by the FDA for the primary treatment of low-grade NMIBC, and only four drugs have been approved by the FDA as adjuvant treatment for high-grade NMIBC. The FDA can delay, limit or deny approval of our product candidates for many reasons.

 

The success of our product candidates is subject to significant risks, including risks associated with successfully completing current and future clinical trials, such as:

 

 

the FDA’s acceptance of our parameters for regulatory approval relating to UGN-102 and our other product candidates, including our proposed indications, primary and secondary endpoint assessments and measurements, safety evaluations and regulatory pathways, and proposed labeling and packaging;

     
 

our ability to successfully complete the FDA requirements related to chemistry, manufacturing and controls ("CMC"), for UGN-102 and our other product candidates, and if completed, their sufficiency to support an NDA;

     
 

the FDA’s timely acceptance of our INDs, for our product candidates. Without such IND acceptances, we will be unable to commence clinical trials in the United States;

     
 

the FDA’s acceptance of the number, design, size, conduct and implementation of our clinical trials, our trial protocols and the interpretation of data from nonclinical studies or clinical trials;

     
 

the FDA’s acceptance of the population studied in our clinical trials being sufficiently large, broad and representative to assess efficacy and safety in the patient population for which we seek approval;

     
 

our ability to successfully complete the clinical trials of our product candidates, including timely patient enrollment and acceptable safety and efficacy data and our ability to demonstrate the safety and efficacy of the product candidates undergoing such clinical trials;

     
 

our ability to demonstrate that clinical or other benefits of our product candidates outweigh any safety or other perceived risks;

     
 

the FDA’s need to schedule an advisory committee meeting, and to conduct such meeting, in a timely manner to evaluate and decide on the approval of our potential future NDA for UGN-102;

     
 

if applicable, the recommendation of the FDA’s advisory committee to approve our applications to market UGN-102 and our other product candidates in the United States, without limiting the approved labeling, specifications, distribution or use of the products, or imposing other restrictions;

     
 

the FDA’s determination of safety and efficacy of our product candidates;

     
 

the FDA’s determination that the 505(b)(2) regulatory pathway is available for our product candidates;

     
 

the prevalence and severity of adverse events associated with our product candidates, including UGN-102, as there are no drugs and related drug administration procedures approved for the primary treatment of low-grade NMIBC, that are based on RTGel technology;

     
 

the timely and satisfactory performance by third-party contractors of their obligations in relation to our clinical trials;

     
 

our success in educating physicians and patients about the benefits, risks, administration and use of our product candidates, if approved, particularly in light of the fact that there are no drugs that have been approved by the FDA for the primary treatment of low-grade NMIBC, and only a limited number of drugs have been approved by the FDA as adjuvant treatment for high-grade NMIBC;

     
 

the availability, perceived advantages, relative cost, safety and efficacy of alternative and competing treatments for the indications addressed by our product candidates;

     
 

the effectiveness of our marketing, sales and distribution strategy, and operations, as well as that of any current and future licensees;

     
 

the FDA’s acceptance of the quality of our drug substance or drug product, formulation, labeling, packaging, or the specifications of our product candidates is sufficient for approval;

     
 

our ability to develop, validate and maintain a commercially viable manufacturing process that is compliant with cGMP;

 

 

 

 

 

the FDA’s acceptance of the manufacturing processes or facilities of third-party manufacturers with which we contract;

     
 

our ability to secure supply of the raw materials from TAPI (Teva Active Pharmaceutical Ingredients) or other suppliers for our product candidates to support clinical trials and commercial use;

     
 

our ability to manufacture or secure finished product from third-party suppliers for product candidates, including UGN-102, if approved;

     
 

our ability to obtain, protect and enforce our intellectual property rights with respect to our product candidates;

he extent to which the costs of our products, once approved, are covered and reimbursed by third-party payors, including the availability of a physician reimbursement code for our treatments, and patients’ willingness to pay for our products;

     
  The extent to which the costs of our products, once approved, are covered and reimbursed by third-party payors, including the availability of a physician reimbursement code for our treatments, and patients’ willingness to pay for our products; and
     
 

our ability to properly train physicians or nurses for the skillful preparation and administration of any of our product candidates that receive approval, including UGN-102, and our ability to develop a broad experiential knowledge base of aggregated clinician feedback from which we can refine appropriate procedures for product administration, without which there could be a risk of adverse events.

 

Many of these clinical, regulatory and commercial risks are beyond our control. Further, these risks and uncertainties impact all of our clinical programs that we pursue and have been amplified by the ongoing COVID-19 pandemic, as described below. Accordingly, we cannot assure you that we will be able to advance any more of our product candidates through clinical development, or to obtain additional regulatory approval of any of our product candidates. To the extent we seek regulatory approval in foreign countries, we may face challenges similar to those described above with regulatory authorities in applicable jurisdictions. Any delay in obtaining, or inability to obtain, applicable regulatory approval for any of our product candidates would delay or prevent commercialization of our product candidates and would thus negatively impact our business, results of operations and prospects. Even if we receive approval of any of the product candidates in our pipeline or future product candidates, there is no assurance that we will be able to successfully commercialize any of them.

 

To date we have only generated limited clinical data for our investigational product candidates.

 

Positive results in nonclinical testing and early clinical trials do not ensure that later clinical trials will be successful. A number of pharmaceutical companies have suffered significant setbacks in clinical trials, including in Phase 3 clinical trials, after promising results in nonclinical testing and early clinical trials. These setbacks have included negative safety and efficacy observations in later clinical trials, including previously unreported adverse effects. To date, our clinical trials and other programs have involved small patient populations and because of the small sample size, the results of these clinical trials may be subject to substantial variability and may not be indicative of future results. We initiated the Phase 3 ATLAS trial in December 2020 and until recently were enrolling patients in this trial assessing UGN-102 with or without TURBT compared to standard of care, TURBT. Following discussions with the FDA, we initiated our Phase 3 ENVISION trial, a new single-arm Phase 3 trial of UGN-102 in low-grade, intermediate-risk, NMIBC in the first quarter of 2022. The design for the Phase 3 ENVISION trial is similar to our Phase 2 OPTIMA II trial in that the patient population will have similar clinical characteristics, receive the same treatment regimen and undergo the same efficacy and safety assessments and qualitative follow-up. However, there can be no assurance that the Phase 3 ENVISION trial will have a higher probability of clinical or regulatory success notwithstanding similarities in its design to our Phase 2 OPTIMA II trial. If our clinical trials do not ultimately indicate that our product candidates are safe and effective for their intended use, the FDA may not approve any NDA that we may submit to market such product candidates, and our business would not be able to generate revenue from the sale of any such product candidates.

 

Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

 

From time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials. These interim updates are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change as patient data become available and following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. In particular, interim data may reflect small sample sizes, be subject to substantial variability and may not be indicative of either future interim results or final results. Publications based on interim data may differ from FDA approved product labeling. Adverse changes between interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our ordinary shares. See the description of risks under the heading “Risks Related to Ownership of our Ordinary Shares” for additional disclosures related to the risk of volatility in the price of our ordinary shares.

 

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information. Furthermore, we may report interim analyses of only certain endpoints rather than all endpoints. You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, product candidate or our business. If the preliminary or topline data that we report differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, UGN-102 or any other investigational product candidate may be harmed, which could harm our business, financial condition, results of operations and prospects.

 

We have limited experience in conducting clinical trials and obtaining approval for product candidates and may be unable to do so successfully.

 

As a company, we have limited experience in conducting clinical trials and have progressed only one product candidate through to regulatory approval. In part because of this lack of experience, our clinical trials may require more time and incur greater costs than we anticipate. We cannot be certain that the planned clinical trials will begin or conclude on time, if at all. Large-scale trials will require significant additional financial and management resources. Third-party clinical investigators do not operate under our control. Any performance failure on the part of such third parties could delay the clinical development of our product candidates or delay or prevent us from obtaining regulatory approval or commercializing our current or future product candidates, depriving us of potential product revenue and resulting in additional losses.

 

 

 

We have not yet applied for regulatory approvals to market UGN-102 or the other product candidates in our pipeline, and we may be delayed in obtaining or failing to obtain such regulatory approvals and to commercialize our product candidates.

 

The process of developing, obtaining regulatory approval for and commercializing our product candidates is long, complex, costly and uncertain, and delays or failure can occur at any stage. The research, testing, manufacturing, labeling, marketing, sale and distribution of drugs are subject to extensive and rigorous regulation by the FDA and foreign regulatory agencies, as applicable. These regulations are agency-specific and differ by jurisdiction. We are not permitted to market any product candidate in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from the respective regulatory agencies in such countries. To gain approval of an NDA or other equivalent regulatory approval, we must provide the FDA or relevant foreign regulatory authority with nonclinical and clinical data that demonstrates the safety and efficacy of the product for the intended indication.

 

Before we can submit an NDA to the FDA or comparable similar applications to foreign regulatory authorities, we must conduct Phase 3 clinical trials, or a pivotal/registration trial equivalent, for each product candidate. After submission of an NDA, the FDA may raise additional questions on any data contained in the application. These questions may come in the form of information requests or in the NDA 74-day letter as review issues. We must address these questions during the review, but we do not know whether our responses will be acceptable to the FDA. We cannot assure you that the FDA will not decide to require us to perform additional clinical trials, including potentially requiring us to perform an additional pivotal study with a control arm, before approving, or as a condition of approving, NDAs for our product candidates.

 

Phase 3 clinical trials often produce unsatisfactory results even though prior clinical trials were successful. Moreover, the results of clinical trials may be unsatisfactory to the FDA or foreign regulatory authorities even if we believe those clinical trials to be successful. The FDA or applicable foreign regulatory agencies may suspend one or all of our clinical trials or require that we conduct additional clinical, nonclinical, manufacturing, validation or drug product quality studies and submit that data before considering or reconsidering any NDA or comparable foreign regulatory application that we may submit. Depending on the extent of these additional studies, approval of any applications that we submit may be significantly delayed or may cause the termination of such programs or may require us to expend more resources than we have available.

 

If any of these outcomes occur, we may not receive regulatory approval for the corresponding product candidates, and our business would not be able to generate revenue from the sale of any such product candidates.

 

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

 

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

 

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

 

We may not be able to advance our nonclinical product candidates into clinical development and through regulatory approval and commercialization.

 

Certain of our product candidates are currently in nonclinical development and are therefore currently subject to the risks associated with nonclinical development, including the risks associated with:

 

generating adequate and sufficient nonclinical safety and efficacy data in a timely fashion to support the initiation of clinical trials;

     
 

obtaining regulatory approval to commence clinical trials in any jurisdiction, including the submission and acceptance of INDs;

     
 

contracting with the necessary parties to conduct a clinical trial;

     
 

enrolling sufficient numbers of patients in clinical trials in timely fashion, if at all; and

     
 

timely manufacture of sufficient quantities of the product candidate for use in clinical trials.

 

 

 

These risks and uncertainties impact all of our nonclinical programs that we pursue and have been amplified by the recent COVID-19 pandemic, as described below. If we are unsuccessful in advancing our nonclinical product candidates into clinical trials in a timely fashion, our business may be harmed. Even if we are successful in advancing our nonclinical product candidates into clinical development, their success will be subject to all of the clinical, regulatory and commercial risks described elsewhere in this report and our other filings with the SEC. Accordingly, we cannot assure you that we will be able to develop, obtain regulatory approval for, commercialize or generate significant revenue from our product candidates.

 

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, results of earlier studies and trials may not be predictive of future trial results, and our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates.

 

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. We do not know whether our ongoing and future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed, suspended or terminated for a variety of reasons, including failure to:

 

 

generate sufficient nonclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;

     
 

obtain regulatory approval or feedback on trial design, in order to commence a trial;

     
 

identify, recruit and train suitable clinical investigators;

     
 

reach agreement on acceptable terms with prospective contract research organizations ("CROs") and clinical trial sites, and have such CROs and sites effect the proper and timely conduct of our clinical trials;

     
 

obtain and maintain institutional review board ("IRB") approval at each clinical trial site;

     
 

identify, recruit, enroll and retain suitable patients to participate in a trial;

     
 

have a sufficient number of patients enrolled, complete a trial or return for post-treatment follow-up;

     
 

ensure clinical investigators and clinical trial sites observe trial protocol or continue to participate in a trial;

     
 

address any patient safety concerns that arise during the course of a trial;

     
 

address any conflicts with new or existing laws or regulations;

     
 

add a sufficient number of clinical trial sites;

     
 

manufacture sufficient quantities at the required quality of product candidate for use in clinical trials; or

     
 

raise sufficient capital to fund a trial.

 

Patient enrollment is a significant factor in the timing and success of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ or caregivers’ perceptions as to the potential advantages of the drug candidate being studied in relation to other available therapies, including any new drugs or treatments that may be developed or approved for the indications we are investigating.

 

We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, by the FDA or by the applicable foreign regulatory authorities. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA or foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

 

If we experience delays in carrying out or completing any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed.

 

 

In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

 

Jelmyto or any of our product candidates may produce undesirable side effects that we may not have detected in our previous nonclinical studies and clinical trials or that are not expected with mitomycin treatment or inconsistent with catheter administration procedures. This could prevent us from gaining marketing approval or market acceptance for these product candidates, or from maintaining such approval and acceptance, and could substantially increase commercialization costs and even force us to cease operations.

 

As with most pharmaceutical products, Jelmyto and our product candidates may be associated with side effects or adverse events that can vary in severity and frequency. Side effects or adverse events associated with the use of Jelmyto or any of our product candidates, including UGN-102, may be observed at any time, including in clinical trials or once a product is commercialized, and any such side effects or adverse events may negatively affect our ability to obtain regulatory approval or market our product candidates. To date, in our nonclinical testing, Compassionate Use Program for Jelmyto, clinical trials and post-marketing experience, we have observed several adverse events and SAEs, including ureteric obstruction, ureteral stenosis, inhibition of urine flow, rash, flank pain, kidney swelling, kidney infection, renal dysfunction, hematuria, fatigue, nausea, abdominal pain, dysuria, vomiting, urinary tract infection, urgency in urination and pain during urination. In addition, we have observed transient perturbation of laboratory measures of renal and hematopoietic function. These adverse events are known mitomycin or procedure-related adverse events and many are indicated as potential side effects of mitomycin usage on the mitomycin label. However, we cannot assure you that we will not observe additional drug or procedure-related SAEs in the future or that the FDA will not determine them as such. Side effects such as toxicity or other safety issues associated with the use of Jelmyto or our product candidates could require us to perform additional studies or halt development or sale of Jelmyto or our product candidates or expose us to product liability lawsuits, which will harm our business.

 

Furthermore, our Phase 2b clinical trial for UGN-102 involved larger patient bases than in our prior studies of these candidates, and the commercial marketing of Jelmyto and, if approved, UGN-102, will further expand the clinical exposure of the drugs to a wider and more diverse group of patients than those participating in the clinical trials, which may identify undesirable side effects caused by these products that were not previously observed or reported.

 

The FDA and foreign regulatory agency regulations require that we report certain information about adverse medical events if our products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date upon which we become aware of the adverse event as well as the nature and severity of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA or a foreign regulatory agency could take action including enforcing a hold on or cessation of clinical trials, withdrawal of approved drugs from the market, criminal prosecution, the imposition of civil monetary penalties or seizure of our products.

 

Additionally, in the event we discover the existence of adverse medical events or side effects caused by one of our products or product candidates, a number of other potentially significant negative consequences could result, including:

 

 

our inability to submit an NDA or similar application for our product candidates because of insufficient risk-reward, or the denial of such application by the FDA or foreign regulatory authorities;

     
 

the FDA or foreign regulatory authorities suspending or terminating our clinical trials or suspending or withdrawing their approval of the product;

     
 

the FDA or foreign regulatory authorities requiring the addition of labeling statements, such as boxed or other warnings or contraindications or distribution and use restrictions;

     
 

the FDA or foreign regulatory authorities requiring us to issue specific communications to healthcare professionals, such as letters alerting them to new safety information about our product, changes in dosage or other important information;

     
 

the FDA or foreign regulatory authorities issuing negative publicity regarding the affected product, including safety communications;

     
 

our being limited with respect to the safety-related claims that we can make in our marketing or promotional materials;

     
 

our being required to change the way the product is administered, conduct additional nonclinical studies or clinical trials or restrict or cease the distribution or use of the product; and

     
 

our being sued and held liable for harm caused to patients.

 

 

Any of these events could prevent us from achieving market acceptance or approval of the affected product or product candidate and could substantially increase development or commercialization costs, force us to withdraw from the market any approved product, or even force us to cease operations. We cannot assure you that we will resolve any issues related to any product-related adverse events to the satisfaction of the FDA or any regulatory agency in a timely manner or ever, which could harm our business, prospects and financial condition.

 

We may continue to face future developmental and regulatory difficulties related to Jelmyto and any of our product candidates that receive marketing approval. In addition, we are subject to government regulations and we may experience delays in obtaining required regulatory approvals to market our proposed product candidates.

 

We are subject to certain post-marketing commitments related to Jelmyto, including a requirement for a period of five years to provide annual updates for the duration of response for all patients with ongoing complete responses enrolled in the Phase 3 OLYMPUS trial. With respect to our current and future candidates, even if we complete clinical testing and receive approval of any regulatory filing for our product candidates, the FDA or applicable foreign regulatory agency may grant approval contingent on the performance of additional costly post-approval clinical trials, risk mitigation requirements and surveillance requirements to monitor the safety or efficacy of the product, which could negatively impact us by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. Absence of long-term safety data may further limit the approved uses of our products, if any.

 

The FDA or applicable foreign regulatory agency also may approve our product candidates for a more limited indication or a narrower patient population than we originally requested or may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates. Furthermore, any such approved product will remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping.

 

If we fail to comply with the regulatory requirements of the FDA or other applic