UroGen Pharma Ltd. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial amounts below are in U.S. dollars; statement amounts are in millions unless otherwise noted. UroGen is a biotechnology company commercializing Jelmyto and developing urothelial cancer candidates, including UGN-102 and UGN-301.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $16.1M | $11.4M | $46.3M | $31.9M |
| Gross profit | $14.1M | $10.1M | $40.9M | $28.3M |
| Operating loss | $18.1M | $23.4M | $58.8M | $72.4M |
| Net loss | $25.8M | $30.2M | $80.9M | $82.4M |
| Basic and diluted loss per share | $1.13 | $1.35 | $3.56 | $3.69 |
- All reported revenue was from Jelmyto. Revenue increased approximately 42% for Q3 and 45% for the nine-month period, primarily due to higher sales volume.
- Reported gross margin was approximately 87.5% for Q3 and 88.3% for the nine months. UroGen said margin was affected by sales of Jelmyto inventory whose costs had been expensed before FDA approval; excluding those units, it estimated margins of 86.9% and 87.8%, respectively.
- At September 30, cash and cash equivalents were $28.7M and marketable securities were $67.2M, totaling $95.9M. Current assets were $121.6M and current liabilities $19.0M. Management said these resources were expected to fund planned operations for at least the next 12 months, while also anticipating a need for additional capital in the future.
- Net cash used in operating activities was $65.8M for the nine months, versus $64.8M a year earlier. Investing activities used $22.0M, largely reflecting net purchases of securities; financing activities provided $71.8M. Cash, cash equivalents and restricted cash declined by $16.1M to $29.5M.
- Long-term debt had a carrying value of $71.9M, net of financing costs. Total liabilities were $191.8M, including a $96.2M prepaid forward obligation to RTW; shareholders’ equity was a deficit of $63.3M. Accumulated deficit was $548.2M.
Material changes and notable items
- Operating loss narrowed year over year, reflecting higher gross profit and lower total operating expenses. R&D expense increased, mainly due to the UGN-102 ENVISION trial and Jelmyto manufacturing work; lower share-based compensation contributed to lower SG&A.
- Net loss improved less than operating loss: the company recorded $5.2M of debt interest expense for the nine months and $16.5M of financing expense on the RTW obligation, compared with $9.9M of RTW financing expense in the prior-year period.
- In March 2022, UroGen received the $75M first tranche of a senior secured Pharmakon loan. It bears interest at three-month LIBOR, subject to a 1.25% floor, plus 8.25%, has 48 months of interest-only payments, and matures five years after initial funding. The loan is secured by substantially all credit-party assets, subject to exceptions, and includes restrictive covenants.
- After quarter-end, UroGen requested the loan’s additional $25M tranche; funding was expected December 16, 2022, subject to customary conditions. The filing does not establish that the funding subsequently occurred.
- Under the RTW arrangement, future payments are tied to product sales and the obligation is secured by rights and assets related to Jelmyto and UGN-102. The reported carrying value increased from $85.7M at year-end 2021 to $96.2M at September 30, 2022.
Outlook, risks and contingencies
- UroGen expected the Phase 3 ENVISION trial of UGN-102 to enroll approximately 220 patients, with enrollment completion anticipated by year-end 2022; assuming positive results, it anticipated submitting an NDA in 2024. These are forward-looking expectations, not reported outcomes.
- The company also described an ongoing small Phase 3b study assessing home administration of UGN-102, and an actively enrolling Phase 1 study of UGN-301 combinations. The ATLAS Phase 3 trial stopped enrollment in November 2021; enrolled participants continue to be followed.
- Management expects continued losses and negative operating cash flows, with R&D spending expected to increase as clinical programs advance. Jelmyto revenue may fluctuate quarter to quarter; management cited possible summer seasonality but said it was too early to confirm a continuing pattern.
- Key risks include dependence on Jelmyto as the only approved product, uncertain clinical and regulatory outcomes, reimbursement and adoption, competition, reliance on single-source suppliers, additional financing needs, debt and RTW restrictions, and potential COVID-19, geopolitical and Israeli operating disruptions. The company also noted that the Medicare discarded-drug refund program begins in 2023 and that Jelmyto received a higher threshold classification.
- The FDA extended Jelmyto’s post-reconstitution in-use period from eight hours to 96 hours in September 2022. The filing reports no legal proceedings that management believed likely to have a material adverse effect, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent Jelmyto sales, gross margin, payer coverage and any persistence of the reported quarterly sales pattern.
- Whether the $25M Pharmakon tranche was funded, and the resulting debt balance, interest burden and covenant position.
- ENVISION enrollment and trial progress, and whether the stated NDA timing remains achievable.
- Operating cash burn and management’s liquidity runway relative to clinical, commercial and debt-related cash needs.
- RTW payment terms, including the sales-based rates, secured collateral and changes in the obligation’s carrying value.
- Product supply resilience and progress toward qualifying alternative suppliers for key materials and components.