Urogen Pharma Ltd. annual report, FY2019

Business context and reporting period

UroGen Pharma Ltd. is a clinical-stage biopharmaceutical company developing local treatments for urothelial cancers using its RTGel sustained-release platform. This Form 10-K covers the fiscal year ended December 31, 2019; fourth-quarter figures are unaudited. The company had no product approved for sale and generated no product-sales revenue.

Key programs: UGN-101 (mitomycin gel) for low-grade upper tract urothelial carcinoma (LG UTUC); UGN-102 (mitomycin gel) for low-grade intermediate-risk non-muscle-invasive bladder cancer (NMIBC); and UGN-201, including a planned combination with Agenus’s anti-CTLA-4 antibody as UGN-302.

Financial results and liquidity

Revenue was principally from RTGel supplied under the Allergan agreement; no UGN product revenue was recorded. Operating expenses rose by $32.991 million. The increase included a $10 million Agenus-related R&D expense, higher clinical and manufacturing activity, and commercial and staffing costs ahead of a potential UGN-101 launch. Stock-based compensation totaled $29.967 million in 2019.

Fourth-quarter 2019 revenue was zero, operating expenses were $39.839 million, and net loss was $38.973 million, versus fourth-quarter 2018 revenue of zero, operating expenses of $24.017 million, and net loss of $23.716 million. Fourth-quarter 2019 loss per share was $1.86, compared with $1.46.

Net cash used in operations was $71.017 million in 2019, versus $37.334 million in 2018. Investing activities used $145.593 million, primarily reflecting purchases of marketable securities; financing provided $165.250 million, principally from the January 2019 share offering. Year-end cash and cash equivalents were $49.688 million; marketable securities totaled approximately $145.944 million. Working capital was $129.152 million. Total liabilities were $22.086 million, including lease liabilities; the filing reports no borrowings or debt balance.

Management said available cash, cash equivalents and short-term investments were expected to fund planned operations for at least 12 months from the filing. The company nevertheless expects continuing losses and says it will need additional funding to complete development and pursue commercialization. No product gross margin is meaningful as commercial product sales had not begun.

Material changes versus the prior comparable period

• Annual net loss increased by $29.489 million, while revenue declined by $1.110 million, largely because 2018 included greater RTGel supply revenue under Allergan.
• R&D expense increased by $12.363 million, including the $10 million Agenus-related charge. Excluding that charge, the company reported a $2.4 million increase, reflecting clinical activity, staffing, nonclinical work and manufacturing preparation, partly offset by lower share-based compensation.
• G&A expense increased by $20.628 million, driven by commercialization-related hiring and services, and higher share-based compensation.
• Cash and marketable securities increased to $195.632 million from $101.318 million, principally following the January 2019 equity offering, which generated approximately $161.4 million net.

Outlook, commentary, risks and unusual items

• UGN-101: The FDA accepted the NDA and granted Priority Review in December 2019. The stated PDUFA action date was April 18, 2020; management said it was on track for potential approval and launch by mid-2020. In the single-arm Phase 3 OLYMPUS trial, 42 of 71 treated patients (59%) achieved complete response; estimated response durability was 89% at six months and 84% at 12 months, with median time to recurrence estimated at 13 months. These findings do not assure approval or commercial success.
• Safety: In OLYMPUS, ureteric stenosis occurred in 43.7% of patients, urinary tract infection in 32.4%, and renal impairment in 19.7%; 8.5% had severe ureteric stenosis. Serious adverse events included ureteric stenosis, hydronephrosis and urosepsis.
• UGN-102: Enrollment in the 63-patient Phase 2b OPTIMA II study was complete. Interim results for 32 patients showed a 63% complete-response rate; durability data were pending. The company intended to pursue a 505(b)(2) pathway.
• Funding and commitments: A December 2019 Cowen sales agreement permits up to $100 million of at-the-market share sales; none had occurred as of the filing. In January 2020, the Israeli Innovation Authority approved an unwind of grant-related obligations in exchange for a $6.6 million payment plus accrued interest, intended for the first quarter of 2020, and a commitment to retain at least 75% of Israel-based base R&D jobs for three years. The arrangement would remove other IIA restrictions after payment.
• Partner programs: The Agenus agreement involved a $10 million upfront payment, up to $200 million in development, regulatory and commercial milestones, and royalties of 14%–20%. Allergan’s RTGel/BOTOX program remained in Phase 2; potential future milestones and low-single-digit royalties are contingent and not assured.
• Principal risks: Regulatory review and possible additional study requirements; limited clinical sample sizes and single-arm trial design; adverse events; manufacturing validation and reliance on single-source suppliers; uncertain reimbursement, uptake and market size; continuing cash burn and potential dilution; and foreign-exchange exposure to the Israeli shekel. Management expects R&D and G&A costs to rise as programs advance and commercialization preparations continue.
• The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls and internal control over financial reporting. The auditor gave unqualified opinions on the financial statements and internal controls.

Important facts for investors to verify

• FDA’s decision on UGN-101, any changes to the review timeline, and the final approved indication, label and safety requirements.
• Final and longer-term UGN-101 efficacy and durability results, including recurrence and ureteric stenosis outcomes.
• Completion, full results and next development steps for UGN-102, plus the planned clinical development of UGN-302 and UGN-201.
• Commercial supply readiness, manufacturing validation, availability of backup suppliers, and the cost and timing of launch preparations.
• Cash use and financing needs relative to the stated 12-month runway; any use of the $100 million ATM facility and resulting dilution.
• Payment of the IIA settlement, accrued interest and compliance with the three-year Israeli R&D employment commitment.