Business context and reporting period
UroGen Pharma Ltd. filed this Form 10-K for the fiscal year ended December 31, 2018. It is a clinical-stage biopharmaceutical company developing local therapies for urological cancers. Its lead candidates are UGN-101 for low-grade upper tract urothelial carcinoma (LG UTUC) and UGN-102 for low-grade non-muscle invasive bladder cancer (LG NMIBC); neither was approved or generating product-sales revenue in 2018.
The filing also presents unaudited quarterly results. In Q4 2018, revenue was zero, versus $327,000 in Q4 2017.
Financial results and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $1.1 million | $8.2 million |
| Gross profit (loss) | ($675,000) | $7.6 million |
| Research and development expense | $36.9 million | $18.7 million |
| General and administrative expense | $39.6 million | $8.8 million |
| Operating loss | ($77.2 million) | ($20.0 million) |
| Net loss | ($75.7 million) | ($20.0 million) |
| Basic and diluted loss per share | ($4.80) | ($2.14) |
Revenue was primarily from the Allergan license and supply agreement; the 2017 comparison included a $7.5 million development milestone, while 2018 revenue was mainly RTGel supply. 2018 cost of revenue exceeded revenue, resulting in a gross loss. The company recorded $30.6 million of non-cash share-based compensation, including costs associated with senior-management changes.
Q4 2018 operating expenses were $24.0 million, operating loss was $24.0 million, and net loss was $23.7 million. Q4 2017 operating loss was $10.2 million and net loss was $10.1 million.
At year-end, cash and cash equivalents were $101.3 million, short-term investments were zero, working capital was $88.8 million, total assets were $103.6 million, and total liabilities were $13.5 million. The balance sheet reports no borrowings or other debt. Operating cash use was $37.3 million; investing activities provided $35.3 million, primarily reflecting investment movements; financing provided $66.4 million, principally from the January 2018 equity offering. Management said year-end cash and investments were expected to fund operations and capital needs for at least 12 months.
Material changes and developments
- Annual net loss increased by $55.7 million from 2017. R&D expense rose with clinical activity and staffing; G&A increased substantially, including share-based compensation, recruitment, commercial services, and public-company costs.
- Operating cash use increased from $9.6 million in 2017 to $37.3 million in 2018.
- In January 2019, the company raised approximately $161.8 million net through an offering of 4.2 million ordinary shares at $41 per share. This was subsequent to the 2018 balance-sheet date.
- Elizabeth Barrett became President and CEO on January 3, 2019, replacing Ron Bentsur, who also left the board.
- The company reported effective disclosure controls and internal control over financial reporting; the independent auditor gave an unqualified opinion on the financial statements and internal controls.
Outlook, commentary, risks, and unusual items
- UGN-101: The Phase 3 OLYMPUS trial completed enrollment at 71 patients in December 2018. In January 2019 interim results, 57% of the 61 patients evaluated had a complete response at primary disease evaluation; the remaining 10 had not yet been evaluated. Available six-month follow-up showed evaluated complete responders remained disease-free, but follow-up was available for only about half of responders at the time. These were interim findings, not final results. The company expected to complete its rolling NDA submission in the second half of 2019 and anticipated priority review if the FDA accepted the filing.
- UGN-102: The company commenced a U.S.-based Phase 2b trial. In the earlier Phase 2a study, 19 of 22 evaluable patients in the 80 mg group achieved a complete response; the filing notes study limitations and differences in baseline tumor characteristics.
- Funding and profitability: The company has incurred losses since inception and expected significant losses and negative operating cash flows to continue. It anticipated needing additional capital to complete development and pursue commercialization, despite the January 2019 offering.
- Key risks: Product candidates remain investigational; trial outcomes, FDA acceptance of the 505(b)(2) pathway, NDA filing and approval, safety, adoption, pricing, and reimbursement are uncertain. The company also relies on third parties for manufacturing and single-source supplies, including mitomycin API, and has no established commercial sales infrastructure.
- Other exposures: Allergan may terminate its agreement on advance notice; future milestone and royalty receipts depend on development and commercial progress. Israeli grants impose royalty and technology-transfer restrictions. The company also cited foreign-exchange exposure, regulatory and reimbursement changes, intellectual-property risks, and operational exposure to conditions in Israel.
- The filing reports no material legal proceedings. It identifies approximately $3.5 million of additional operating lease liabilities expected on adoption of the new lease standard in 2019, with no expected material effect on operations or cash flows.
Important facts for investors to verify
- Final OLYMPUS efficacy, safety, and durability results, and whether the FDA accepts the NDA and proposed single-arm evidence.
- UGN-102 Phase 2b enrollment, results, and the requirements for later-stage development and approval.
- Cash use and operating runway after the January 2019 financing, including the pace of R&D and commercial-readiness spending.
- Manufacturing validation, commercial supply agreements, and continuity of mitomycin and RTGel supplies.
- Allergan program progress and the conditions attached to potential milestones, royalties, and termination rights.
- The scale and recurrence of stock-based compensation and management-related charges, and their effects on reported losses and dilution.