Urogen Pharma Ltd. annual report, FY2022

UroGen Pharma Ltd. — FY2022 Form 10-K

Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter report; quarterly financial results are not provided in the filing text summarized here. UroGen is a biotechnology company with one approved product, Jelmyto, and clinical-stage candidates including UGN-102 and UGN-301.

Financial performance and liquidity

Metric	2022	2021
Revenue, all from Jelmyto	$64.4 million	$48.0 million
Cost of revenue	$7.7 million	$5.2 million
Gross profit / gross margin	$56.7 million / approximately 88.1%	$42.9 million / approximately 89.3%
Research and development expense	$52.9 million	$47.6 million
Selling and marketing expense	$51.9 million	$47.6 million
General and administrative expense	$30.9 million	$39.9 million
Operating loss	$(79.0) million	$(92.3) million
Net loss	$(109.8) million	$(110.8) million
Net loss per share, basic and diluted	$(4.81)	$(4.96)
Cash used in operating activities	$(87.6) million	$(84.9) million

• Revenue increased by $16.3 million, primarily due to higher Jelmyto sales. Gross margin was approximately 87.5% excluding sales of inventory whose costs had been expensed before approval.
• R&D and selling and marketing expenses rose, principally reflecting ENVISION trial and commercial-marketing costs. G&A declined mainly due to lower compensation-related costs. Operating loss narrowed, but financing costs increased: $21.6 million on the RTW prepaid forward obligation and $8.4 million in interest expense on the Pharmakon debt.
• At year-end, cash and cash equivalents were $55.4 million and marketable securities were $44.6 million; together, approximately $100.0 million. Current assets were $128.9 million and current liabilities $23.9 million. Cash, cash equivalents and restricted cash totaled $56.2 million.
• Pharmakon provided $100 million in two loan tranches during 2022. The debt’s carrying value was $97.5 million at year-end. Interest is 3-month LIBOR, subject to a 1.25% floor, plus 8.25%; interest-only payments apply for the first 48 months, followed by principal payments. The loan is secured by substantially all relevant credit-party assets, including intellectual property.
• The RTW prepaid forward obligation was $98.9 million at year-end. RTW receives tiered payments linked to Jelmyto sales and, if approved, UGN-102 sales, subject to an aggregate payment cap of $300 million.
• Shareholders’ equity was a deficit of $89.4 million, versus equity of $8.4 million at the end of 2021; accumulated deficit was $577.1 million.

Material changes and operating developments

• UroGen completed target enrollment of 220 patients in the Phase 3 ENVISION trial of UGN-102 in December 2022. After FDA discussions, it stopped enrollment in the comparative ATLAS trial and proceeded with ENVISION’s single-arm design.
• Management anticipated submitting an NDA for UGN-102 in 2024, conditional on positive trial findings and regulatory progress.
• Long-term OLYMPUS follow-up reported a median Jelmyto response duration of 28.9 months based on available data for 16 of 23 patients in complete response at the end of the original study. Two had low-grade recurrence; one underwent kidney and upper urinary tract removal for ureteral stricture without UTUC evidence at surgery. No high-grade progression was reported in that group.
• Long-term OPTIMA II follow-up reported a median UGN-102 response duration of 24.4 months based on available data for 15 of 25 patients. Reported outcomes included seven remaining in complete response, six low-grade recurrences and one progression to high-grade disease.
• In February 2023, UroGen reported preliminary results from an eight-patient at-home UGN-102 study: 75% achieved complete response at three months, and all eight preferred at-home to in-office treatment. These are small-study, preliminary results reported after the fiscal year-end.
• The UGN-301 multi-arm Phase 1 study began in April 2022 and was actively enrolling. UroGen concluded its fixed-funding MD Anderson collaboration in 2022 after determining it had achieved its objectives; costs for existing joint projects may continue.
• Jelmyto’s in-use period after reconstitution was extended by the FDA in September 2022 from eight hours to 96 hours. The company reported coverage across Medicare and most large commercial plans, while noting Jelmyto’s Medicare pass-through status was due to expire in 2023.

Outlook, risks and unusual items

• Going concern: The company and its auditor disclosed substantial doubt about UroGen’s ability to continue as a going concern. Management estimated existing resources and projected revenue would fund planned operations only until midway through the first quarter of 2024, absent additional financing. The auditor issued an unqualified opinion on the financial statements but highlighted the going-concern uncertainty.
• UroGen expects continued operating losses and negative operating cash flow, with substantial R&D and commercialization spending. It expects to need significant additional financing within 12 months; there is no assurance financing will be available on acceptable terms. Funding shortfalls could delay, reduce or end development or commercialization activities.
• The Pharmakon loan includes restrictive covenants and prepayment premiums or make-whole amounts. The RTW arrangement also encumbers product-related collateral and restricts certain additional borrowing. Both arrangements may constrain financial flexibility.
• Jelmyto is the company’s only approved product and all reported revenue came from its sales. Commercial adoption, patient population size, reimbursement, physician training and product safety remain important uncertainties. Revenue may fluctuate quarter to quarter; management said observed summer declines could reflect the nature of low-grade disease but that it was too early to establish seasonality.
• Revenue is recognized through a single national specialty distributor. Estimates for returns, discounts, chargebacks, rebates and copay assistance affect net revenue; the auditor identified gross product revenue recognition as a critical audit matter.
• Key operating risks include reliance on single-source suppliers and contract manufacturers, clinical-trial and regulatory uncertainty, competition, product-adoption and reimbursement risk, and potential safety events. The company reported known Jelmyto adverse events including ureteric obstruction and renal dysfunction.
• Other risks include the impact of geopolitical and military instability in Israel, difficulty following ATLAS patients in Ukraine and Russia because of the war, foreign-exchange exposure to the Israeli shekel, cybersecurity threats, and evolving drug-pricing and healthcare regulations.
• The filing reports no material pending legal proceedings and no subsequent events identified in its financial-statement note. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022.

Important facts for investors to verify

• Jelmyto sales trajectory, gross-to-net adjustments and distributor concentration, including the effect of reimbursement and the 2023 expiration of pass-through status.
• ENVISION’s final efficacy, durability and safety results, and whether the FDA accepts the single-arm evidence and supports the anticipated 2024 NDA timing.
• Cash runway and financing plans relative to ongoing cash burn, debt service, RTW sales-linked payments and covenant restrictions.
• Clinical follow-up and safety findings for Jelmyto and UGN-102, particularly ureteral complications and the reported high-grade progression in OPTIMA II follow-up.
• Supply continuity and diversification plans for mitomycin, hydrogel and delivery components, as well as the company’s ability to meet commercial and clinical needs.