UroGen Pharma Ltd. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Unaudited consolidated results; amounts below are in U.S. dollars.
Business context
UroGen is a biopharmaceutical company developing and commercializing therapies for urological cancers using its RTGel sustained-release technology. The FDA approved Jelmyto for adults with low-grade upper tract urothelial cancer in April 2020, and the U.S. commercial launch began in June. UGN-102, for low-grade non-muscle invasive bladder cancer, remained in development.
Key financial metrics
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $3.5 million | $0 | $3.8 million | $18,000 |
| Gross profit | $3.2 million | $0 | $3.5 million | $18,000 |
| Operating expenses | $32.3 million | $23.5 million | $103.0 million | $69.7 million |
| Operating loss | $29.1 million | $23.5 million | $99.5 million | $69.6 million |
| Net loss | $28.8 million | $22.3 million | $98.0 million | $66.2 million |
| Basic and diluted loss per share | $1.31 | $1.06 | $4.52 | $3.25 |
For the nine months, net cash used in operating activities was $84.6 million, compared with $45.0 million in 2019. Investing activities provided $43.8 million, mainly from marketable-security maturities; financing activities provided $16.4 million, including net ATM proceeds of approximately $15.8 million.
At September 30, cash and cash equivalents plus marketable securities totaled $125.5 million; total current assets were $129.3 million and current liabilities were $17.6 million. Total liabilities were $19.4 million, including lease obligations; the filing reports no borrowings. Accumulated deficit was $326.0 million. Management said available cash and marketable securities were expected to fund planned operations for at least 12 months from the reporting date, while noting that future additional capital may be needed.
Changes and notable items
- Jelmyto generated $3.5 million of Q3 sales. Reported gross margin was approximately 91.1%; management said it would have been approximately 86.7% absent sales of units whose costs had been expensed before approval. Pre-approval inventory costs are expected to affect cost of revenues through Q1 2022.
- Q3 selling and marketing expense rose to $11.0 million from $3.9 million, primarily reflecting Jelmyto launch costs. Nine-month research and development expense rose to $34.9 million, including a one-time $6.6 million payment to unwind obligations to the Israel Innovation Authority.
- The Q3 net loss widened by $6.6 million year over year; the nine-month net loss widened by $31.8 million. Higher operating expenses were partly offset by new Jelmyto revenue; interest income also declined.
- In August, UroGen reported that the Phase 2 APOLLO trial of RTGel with BOTOX did not meet its primary endpoint. The company and AbbVie said they would continue exploring RTGel with AbbVie’s toxin portfolio.
- Interim Phase 2b OPTIMA II data for UGN-102 showed complete response in 41 of 63 patients (65%) at three months after therapy began. The company expected to start its pivotal Phase 3 study by the end of 2020; these were interim results, not final pivotal-trial evidence.
- The CFO’s separation was effective October 15, 2020; $0.7 million was recognized in Q3 in connection with the arrangement. A new CFO and General Counsel were appointed in October.
Outlook, risks and contingencies
- Management expected continued losses and negative operating cash flows as it commercialized Jelmyto and advanced clinical programs. The company stated that its future capital needs could require equity or debt financing or collaborations; the ATM program had approximately $83.4 million of remaining capacity.
- COVID-19 could disrupt clinical trials, patient access and Jelmyto launch activity, as well as suppliers, healthcare services and access to capital. The company said the potential impact could not be reliably quantified.
- Key risks include dependence on successful Jelmyto commercialization, physician adoption and reimbursement; uncertain clinical and regulatory outcomes for UGN-102 and other candidates; reliance on single-source suppliers and contract manufacturers; and competition, intellectual-property, product-safety and Israeli operating risks.
- Jelmyto carries post-marketing commitments, including annual updates for five years on duration of response for OLYMPUS patients with ongoing complete responses. The filing reports no legal proceedings expected by management to have a material adverse effect.
- Management concluded disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2020; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether Jelmyto prescriptions, net sales, reimbursement coverage and gross margins develop as launch spending and pre-approval inventory effects change.
- Whether UGN-102’s interim results are confirmed in the pivotal Phase 3 study, including enrollment, timing, safety and regulatory pathway.
- Whether COVID-19 or supply constraints affect commercial supply, clinical timelines, physician access or patient starts.
- Whether the stated 12-month cash runway remains adequate given operating cash use, planned commercialization and development spending, and any additional financing.
- The final outcomes of Jelmyto post-marketing commitments and the next steps for the AbbVie collaboration following APOLLO’s missed endpoint.