Business context and reporting period
UroGen Pharma Ltd. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2021. The biopharmaceutical company is commercializing Jelmyto, its FDA-approved treatment for low-grade upper tract urothelial cancer (UTUC), and developing UGN-102 for low-grade intermediate-risk non-muscle invasive bladder cancer (NMIBC), alongside earlier-stage programs. Jelmyto was approved in April 2020 and launched in the United States in June 2020.
Unless otherwise noted, financial amounts below are in millions of U.S. dollars. Figures may not sum due to rounding.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 |
|---|---|---|---|---|
| Revenue | $13.0 | $0.4 | $20.5 | $0.4 |
| Gross profit | $11.6 | $0.3 | $18.2 | $0.3 |
| Gross margin | 89.1% | 87.1% | 88.7% | 87.1% |
| Operating loss | $(22.8) | $(31.8) | $(48.9) | $(70.4) |
| Net loss | $(26.2) | $(31.3) | $(52.2) | $(69.1) |
| Basic and diluted loss per share | $(1.17) | $(1.44) | $(2.34) | $(3.22) |
| Cash used in operating activities | Not separately stated | Not separately stated | $(46.3) | $(59.6) |
Revenue was from Jelmyto sales. The company remained unprofitable, with an accumulated deficit of $408.7 million at June 30, 2021. Q2 operating expenses were $34.4 million: R&D $12.1 million, selling and marketing $11.8 million, and G&A $10.5 million.
At June 30, cash and cash equivalents were $63.3 million and marketable securities totaled $66.0 million, or $129.3 million combined. Current assets were $140.5 million and current liabilities $19.1 million, implying working capital of approximately $121.4 million. Total liabilities were $97.5 million, including a $74.8 million prepaid forward obligation to RTW; the filing reports no conventional debt balance. Management said available cash and marketable securities were expected to fund planned operations for at least 12 months, while noting that additional capital may be needed in the future.
Six-month financing cash flow was $72.5 million, principally the net proceeds from the RTW transaction. Investing activities used $15.7 million. Cash, cash equivalents and restricted cash ended the period at $64.5 million.
Material changes versus the prior comparable period
- Revenue rose to $13.0 million in Q2 and $20.5 million in H1, compared with $0.4 million in each 2020 period, reflecting the commercial launch of Jelmyto.
- H1 operating loss improved by $21.4 million and net loss by $17.0 million year over year. Higher Jelmyto revenue and lower operating expenses contributed; the prior-year period included a $6.6 million one-time payment to unwind obligations to the Israel Innovation Authority.
- Q2 R&D expense increased $4.0 million year over year, mainly due to the UGN-102 Phase 3 ATLAS study and UGN-301 development. H1 R&D expense decreased $2.1 million, in part because of the prior-year IIA payment.
- Cash and marketable securities increased from $104.0 million at December 31, 2020 to $129.3 million, substantially reflecting RTW proceeds. The RTW financing also added a $74.8 million liability and $3.1 million of financing expense in H1.
Outlook, management commentary, risks and unusual items
- Management expects R&D and commercialization spending to remain significant and anticipates R&D expense to increase as clinical programs advance. Selling and marketing expense was also expected to increase during 2021 as Jelmyto commercialization continued. The filing provides no quantified revenue or earnings guidance.
- Jelmyto gross margin is temporarily affected by inventory manufactured before FDA approval whose costs were expensed as R&D. Management expected this to affect cost of revenue through Q2 2022; it estimated Q2 and H1 2021 gross margins would have been approximately 87.7% and 87.0%, respectively, absent sales of those previously expensed units.
- In May 2021, UroGen received $75.0 million from RTW ($72.5 million net of transaction costs). RTW receives tiered future payments based on worldwide annual net sales of Jelmyto and, if approved, UGN-102, until aggregate payments reach at least $300 million. The arrangement is secured by product-related assets and rights, including intellectual property and accounts receivable. The filing says no principal payments are expected in the next 12 months.
- UGN-102’s Phase 3 ATLAS trial was enrolling; nearly 100 global centers were active by the end of July 2021. The company also reported a three-year MD Anderson research collaboration focused on UGN-302 for high-grade NMIBC.
- Key risks include dependence on Jelmyto’s commercial adoption and reimbursement, clinical and regulatory uncertainty for UGN-102 and other candidates, reliance on single-source suppliers and a single specialty distributor for Jelmyto sales, and the possibility that COVID-19 or variants could disrupt trials, physician access, sales or supply.
- The company reported no material pending legal proceedings and no subsequent events through August 4, 2021. A $2.7 million long-term liability relates to uncertain tax positions, primarily transfer pricing. Management concluded disclosure controls were effective; implementation of a new ERP system was ongoing.
Important facts for investors to verify
- Whether Jelmyto prescriptions, sales, reimbursement and gross margins continue to develop as expected, including the effect of pre-approval inventory costs through Q2 2022.
- ATLAS enrollment, timelines and eventual results for UGN-102, and the regulatory pathway and funding needs for the broader pipeline.
- The practical cost and restrictions of the RTW arrangement, including sales-based payment rates, collateral, and its effect on future borrowing or cash flows.
- Whether the $129.3 million of cash and marketable securities supports operations beyond management’s stated 12-month estimate given operating cash use of $46.3 million in H1 and anticipated additional financing needs.
- Supply continuity and commercial concentration risks, particularly the disclosed single-source suppliers and single specialty distributor.