UroGen Pharma Ltd. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2019. Amounts are in U.S. dollars; financial statement amounts are in thousands unless stated otherwise.
Business context and reporting period
UroGen is a clinical-stage biopharmaceutical company developing treatments for urological conditions. 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). The company has not generated product-sales revenue. Reported revenue primarily reflects RTGel supplied under its Allergan collaboration.
Financial performance and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $18,000 | $364,000 | $18,000 | $845,000 |
| Research and development expense | $10.0 million | $8.3 million | $19.7 million | $15.9 million |
| General and administrative expense | $13.8 million | $10.2 million | $26.5 million | $16.3 million |
| Operating loss | $23.8 million | $18.4 million | $46.2 million | $32.1 million |
| Net loss | $22.5 million | $18.0 million | $43.9 million | $31.4 million |
| Basic and diluted loss per share | $1.08 | $1.14 | $2.19 | $2.02 |
| Operating cash used | Not stated for quarter | Not stated for quarter | $32.5 million | $17.8 million |
Gross profit was $18,000 in both the three- and six-month 2019 periods, versus $46,000 and $97,000, respectively, in 2018; gross margins are not meaningful given the minimal revenue base. Net interest and other income was $1.3 million for Q2 and $2.3 million for the first half, compared with $0.4 million and $0.8 million, respectively, in 2018.
At June 30, 2019, cash and cash equivalents were $90.4 million and marketable securities totaled approximately $142.6 million; management reported combined cash, cash equivalents and marketable securities of $233.3 million. Current assets were $191.2 million and current liabilities $11.8 million. Total liabilities were $13.8 million, including $3.0 million of current and long-term lease liabilities; the filing reports no borrowing debt. Accumulated deficit was $166.8 million.
For the first half, operating activities used $32.5 million; investing activities used $142.2 million, primarily reflecting purchases of marketable securities; financing activities provided $163.9 million, primarily from the January 2019 share offering. Cash and cash equivalents decreased by $10.8 million. The January offering generated approximately $161.4 million net proceeds from 4.2 million shares sold at $41 per share.
Material changes versus prior comparable periods
- First-half net loss increased by $12.5 million year over year, while operating cash use increased by $14.7 million.
- R&D expense rose with UGN-101 Phase 3 and UGN-102 Phase 2b activity. For the first half, management cited increases of $2.5 million for UGN-101 and pharmacovigilance, $1.5 million for UGN-102, and $0.7 million in headcount-related costs, partly offset by lower share-based compensation.
- First-half G&A expense increased $10.2 million, reflecting $3.3 million higher share-based compensation, $4.0 million higher payroll and recruitment costs, and $2.9 million in pre-commercialization activity.
- Revenue fell sharply because less RTGel was supplied to Allergan. No product revenue was generated.
- Marketable securities increased from none reported at year-end 2018 to approximately $142.6 million at June 30, 2019, as the company invested proceeds from its January financing. Shares outstanding increased to 20.85 million from 16.21 million at year-end.
Outlook, pipeline, risks and unusual items
- Liquidity outlook: Management believes available cash, cash equivalents and marketable securities will fund planned operations for at least the next 12 months. The company expects continuing losses and negative operating cash flows, and anticipates needing additional capital to complete development and pursue commercialization.
- UGN-101: In interim OLYMPUS Phase 3 data reported at the May 2019 AUA meeting, 42 of 71 patients (59%) achieved complete response at primary disease evaluation. Of 27 evaluated complete responders, 24 (89%) remained disease-free at six months. These are interim results and may change as follow-up and data review continue. The filing reports serious adverse events including ureteric stenosis and hydronephrosis. UGN-101 has Orphan Drug, Fast Track and Breakthrough Therapy designations. A rolling NDA submission began in December 2018; the company expected to complete it in 2019 and planned a retreatment protocol.
- UGN-102 and other programs: The Phase 2b UGN-102 trial was enrolling. On April 22, 2019, UroGen entered an early-stage feasibility evaluation with Janssen, with each party bearing the costs of its own activities.
- Allergan collaboration: UroGen may receive up to $200 million in additional development, regulatory and commercial milestones and low-single-digit royalties on licensed-product sales. Allergan may terminate the agreement for any reason on advance notice. Revenue under the agreement remains limited and can vary with supply and milestone timing.
- Key risks: Clinical efficacy, safety and durability remain uncertain; FDA review, the 505(b)(2) pathway, manufacturing validation and approval timelines may differ from expectations. Commercial success depends on physician adoption, reimbursement and market acceptance. The company also identifies reliance on single-source suppliers, foreign-exchange exposure to the Israeli shekel, IIA grant restrictions and potential future financing needs. IIA-funded technology transfer or manufacture outside Israel requires approval and may trigger increased royalties or penalties.
- Unusual and accounting items: First-half share-based compensation was $14.7 million, including $10.3 million in G&A. The company adopted lease accounting in 2019, recognizing right-of-use assets and lease liabilities; management said this materially affected the balance sheet but not the statement of operations. No material litigation or subsequent events were reported. Management concluded disclosure controls were effective as of June 30, 2019.
Important facts for investors to verify
- Final UGN-101 clinical results, durability follow-up, safety profile, and the status and timing of the NDA submission and FDA review.
- UGN-102 enrollment, trial progress and eventual efficacy and safety data.
- Cash burn and investment liquidity, and whether the stated 12-month funding runway remains adequate as development and pre-commercialization costs evolve.
- Allergan’s development progress and any milestone, royalty or termination developments; progress of the Janssen feasibility evaluation.
- Manufacturing readiness, supplier continuity, and approvals or obligations related to IIA-funded technology.
- Potential share dilution and ongoing equity-compensation costs, as well as the company’s need and ability to obtain additional financing.