UroGen Pharma Ltd. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts are in U.S. dollars; financial statement amounts below are in millions unless stated otherwise. UroGen is a biotechnology company whose only approved product is Jelmyto, for low-grade upper tract urothelial cancer (UTUC). The company is developing UGN-102 for bladder cancer and advancing an immuno-oncology pipeline.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $13.6 | $7.5 | Up $6.1, or 81% |
| Gross profit / reported gross margin | $12.0 / 88.8% | $6.6 / 88.0% | Gross profit up $5.5 |
| Research and development expense | $12.7 | $10.5 | Up $2.2 |
| Selling and marketing expense | $13.4 | $11.4 | Up $1.9 |
| General and administrative expense | $7.9 | $10.8 | Down $2.8 |
| Operating loss | $(22.0) | $(26.1) | Loss narrowed $4.2 |
| Net loss | $(28.4) | $(25.9) | Loss widened $2.5 |
| Basic and diluted loss per share | $(1.25) | $(1.17) | |
| Net cash used in operating activities | $(24.0) | $(27.4) | Cash use declined $3.4 |
Revenue was entirely from Jelmyto. Management attributed growth to higher sales volume. Reported gross margin was affected by sales of inventory whose costs had been expensed as R&D before FDA approval; excluding those units, management estimated gross margin at 88.2% in Q1 2022 versus 88.7% in Q1 2021.
Financial position, liquidity and financing
- At March 31, 2022, cash and cash equivalents were $105.4 million and marketable securities were $31.7 million, totaling $137.1 million. Total current assets were $160.5 million and current liabilities were $19.1 million.
- Total liabilities were $182.8 million, including an $89.8 million RTW prepaid forward obligation and $70.8 million carrying value of long-term debt. Shareholders’ equity was a deficit of $17.1 million; accumulated deficit was $495.7 million.
- Cash, cash equivalents and restricted cash increased $60.3 million during the quarter. Financing activities provided $70.7 million, primarily from the Pharmakon loan; investing activities provided $13.6 million, primarily from maturities of marketable securities.
- In March 2022, UroGen drew $75 million under a senior secured Pharmakon facility of up to $100 million; a further $25 million may be drawn by December 31, 2022, subject to conditions. The loan matures five years after initial funding, has interest-only payments for the first 48 months, and bears interest at three-month LIBOR (1.25% floor) plus 8.25%. The facility is secured by substantially all credit-party assets, subject to exceptions, and has restrictive covenants.
- The RTW arrangement provides upfront funding in exchange for tiered future payments tied to Jelmyto sales and, if approved, UGN-102 sales. RTW payments are subject to a $300 million aggregate cap; the products and related assets are collateral. The liability increased to $89.8 million, including $5.8 million of Q1 financing expense.
- Management said available cash and marketable securities are expected to fund planned operations for at least the next 12 months and, in the MD&A, beyond the next 12 months. The company expects to need additional capital in the future and cautioned that financing may not be available on acceptable terms.
Material changes and operating developments
- Operating loss improved despite higher R&D and commercial spending, largely reflecting higher Jelmyto gross profit and lower G&A. Net loss nevertheless increased, principally because of $5.8 million of RTW financing expense and $0.3 million of Pharmakon interest expense, neither of which was reported in Q1 2021.
- R&D spending increased primarily due to the Phase 3 ENVISION trial for UGN-102 and initiation of the UGN-301 Phase 1 program. Selling and marketing costs rose mainly because of the annual sales meeting held in March 2022.
- The company stopped enrollment in the Phase 3 ATLAS study after FDA discussions and began the single-arm Phase 3 ENVISION trial for UGN-102. UroGen expected ENVISION to enroll approximately 220 patients at 90 sites, with enrollment completion by year-end 2022; assuming positive results, it anticipated filing an NDA in 2024.
- The FDA cleared the IND for UGN-301 in March 2022; the multi-arm Phase 1 study began in April 2022. A separate Phase 3b study is evaluating home administration of UGN-102 in up to 10 patients.
Outlook, risks and contingencies
- Management expects R&D expense to rise over the next several years as clinical programs advance. Selling and marketing and G&A expense were expected to remain relatively consistent for the remainder of 2022, with possible future G&A growth to support development and commercialization.
- UroGen remains loss-making and expects continued operating losses and negative operating cash flows. Profitability depends on successful development, regulatory approval and commercialization of additional products, as well as Jelmyto’s commercial performance.
- Key risks include dependence on Jelmyto as the sole approved product; uncertain clinical and regulatory outcomes for UGN-102 and other candidates; market adoption, coverage and reimbursement; competition; and dependence on third-party manufacturers and single-source suppliers. COVID-19 and geopolitical disruption, including the conflict affecting Russia and Ukraine and operations in Israel, could affect trials, supply, commercialization or financing.
- Substantial future cash needs may require additional debt, equity or collaborations, potentially diluting shareholders or requiring rights to products or technology to be relinquished. Debt and RTW obligations restrict some financing and operating flexibility.
- The filing reports no legal proceedings considered likely to have a material adverse effect and no subsequent events through May 10, 2022. Management concluded disclosure controls and procedures were effective at a reasonable assurance level.
Important facts for investors to verify
- Jelmyto sales growth, prescribing trends, net pricing, reimbursement, customer concentration and the durability of demand.
- ENVISION enrollment progress, completion timing, safety and efficacy results, and whether the FDA continues to support the single-arm design and anticipated NDA pathway.
- UGN-301 Phase 1 progress and the clinical and financial implications of the broader pipeline.
- Cash burn and runway against management’s stated outlook, including the timing and availability of the optional $25 million Pharmakon tranche and any future capital raises.
- Debt interest costs, covenant compliance and collateral terms; RTW’s sales-based payment rates and growth in the obligation.
- Manufacturing capacity and continuity of supply, particularly given reliance on single-source suppliers; any impact from COVID-19 or geopolitical events on clinical trials and operations.