UroGen Pharma Ltd. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. UroGen is a biotechnology company focused on urothelial and specialty cancers. Its only marketed product is Jelmyto, for adults with low-grade upper tract urothelial cancer (UTUC); its lead investigational product is UGN-102 for low-grade intermediate-risk non-muscle-invasive bladder cancer (NMIBC). Unless stated otherwise, amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $18.8 million | $17.2 million |
| Gross profit / gross margin | $17.1 million / 90.8% | $14.9 million / 86.8% |
| Operating expenses | $42.8 million | $37.0 million |
| Operating loss | $(25.7) million | $(22.0) million |
| Net loss | $(32.3) million | $(30.2) million |
| Basic and diluted loss per share | $(0.97) | $(1.30) |
| Net cash used in operating activities | $(31.7) million | $(25.8) million |
- All Q1 revenue was from Jelmyto. Revenue increased 9% year over year, primarily on higher sales volume. Cost of revenue fell to $1.7 million from $2.3 million, supporting higher gross margin.
- R&D rose $3.0 million to $15.5 million, mainly due to UGN-102 manufacturing and regulatory work and initiation of a Phase 3 UGN-103 study, partly offset by lower UGN-102 trial costs. Selling and marketing rose $3.0 million to $17.1 million, primarily on UGN-102 pre-commercial marketing and higher commercial operating costs. G&A was broadly flat at $10.2 million.
- Interest expense on long-term debt declined to $2.4 million from $3.6 million; financing expense on the RTW prepaid forward increased to $5.7 million from $5.2 million. Higher interest income helped, but net loss increased by $2.1 million. Per-share loss narrowed, while weighted-average shares increased to 33.4 million from 23.3 million.
- Cash, cash equivalents and marketable securities totaled $164.5 million at March 31, 2024, versus $137.0 million at year-end 2023. Cash and cash equivalents were $131.4 million; marketable securities were $33.1 million, including $0.5 million classified as non-current. Current assets were $196.8 million and current liabilities $26.3 million.
- Cash and restricted cash increased by $36.4 million during the quarter: operating cash use of $31.7 million and investing inflows of $13.5 million were more than offset by $54.7 million of financing proceeds, mainly ATM share sales.
- Long-term debt carrying value was $97.6 million. The separate RTW prepaid forward obligation was $112.9 million; it is repaid through sales-based payments and is not conventional term debt. Total liabilities were $240.7 million, and shareholders’ deficit was $40.1 million.
Material changes and financing
- UroGen sold 3.4 million shares under its at-the-market (ATM) program in Q1, receiving approximately $54.7 million net. Remaining ATM capacity was approximately $27.3 million at March 31. Shares issued and outstanding rose from 32.5 million at year-end to 36.1 million at quarter-end.
- A March 2024 amended Pharmakon loan agreement added a $25 million tranche required to be drawn by September 30, 2024, subject to conditions, and a potential $75 million tranche available at UroGen’s option by August 29, 2025. The latter depends on drawing the $25 million tranche, FDA approval of UGN-102 by June 30, 2025, and other conditions. Interest is 3-month SOFR plus 7.25% plus 0.26161%; principal repayment is scheduled in four quarterly installments beginning Q2 2026, with a possible one-year extension upon UGN-102 approval. The loan is secured and includes restrictive covenants, but no financial covenants are required.
- RTW payments are based on product sales. The rate on Jelmyto sales up to $200 million annually was 13.0% during Q1, subject to contractual thresholds and potential adjustments. Payments continue until RTW receives at least $300 million in aggregate.
Outlook, commentary and key risks
- Management expects continued operating losses and negative operating cash flow as it funds commercialization and development. It believes available cash and investments, together with projections, are sufficient to fund operations beyond one year from issuance of the financial statements, but says additional capital will be needed and may not be available on acceptable terms or at all. No revenue or profitability guidance is provided.
- For UGN-102, the FDA agreed that the clinical plan, including 12-month duration-of-complete-response assessment from ENVISION, can support an NDA submission and permitted rolling review. CMC materials were submitted in January 2024; UroGen expected to complete the rolling NDA submission in Q3 2024. Additional ENVISION duration-of-response data were anticipated in Q2 2024. The FDA may seek an advisory committee review.
- UroGen reported that UGN-102 met the primary endpoints in the Phase 3 ATLAS and ENVISION trials in 2023: ENVISION’s three-month complete-response rate was 79.2%; ATLAS reported a 55% reduction in risk of recurrence, progression or death. The company cautions that ENVISION secondary outcomes remain important to regulatory approval.
- In January 2024, UroGen entered a medac licensing and supply agreement for next-generation UGN-103 and UGN-104 formulations. The FDA accepted UGN-103’s IND in April 2024; UroGen expected to dose patients in its planned Phase 3 study by year-end and start a UGN-104 Phase 3 study shortly thereafter. UGN-301 Phase 1 safety and tolerability data were expected in mid-2024.
- Jelmyto sales may fluctuate quarter to quarter. Management noted a possible third-quarter seasonal decline associated with the nature of low-grade disease, but said it was too early to conclude that the pattern will continue.
- Teva notified UroGen in February 2024 that it had filed an ANDA seeking approval for a generic Jelmyto. Teva challenged two Orange Book patents expiring in January 2031. UroGen filed an infringement lawsuit on April 2, 2024 seeking to prevent market entry before patent expiry. Failure to obtain relief could expose Jelmyto to generic competition after orphan exclusivity ends in April 2027.
- Principal risks include dependence on Jelmyto commercialization and a single specialty-distributor customer; UGN-102 clinical, regulatory and commercial execution; continuing losses and future financing needs; share dilution; secured debt and RTW sales-based obligations; patent litigation and generic competition; reliance on single-source suppliers; reimbursement and market-acceptance uncertainty; and Israel-related geopolitical, staffing and supply-chain disruption. The company also disclosed exposure to foreign-exchange, interest-rate, cybersecurity, privacy and regulatory risks.
Important facts for investors to verify
- Jelmyto sales growth, demand trends, customer concentration, reimbursement and gross-margin sustainability.
- Completion and FDA acceptance of the UGN-102 rolling NDA, and whether ENVISION duration-of-response data support approval and the expected timeline.
- Availability and conditions for the Pharmakon tranches, debt service, covenants and the effect of RTW sales-based payments on future cash generation.
- Cash burn and financing runway relative to management’s “beyond one year” estimate, including potential dilution from further ATM sales.
- Progress and outcome of the Teva patent litigation, including implications for Jelmyto’s exclusivity and generic-entry risk.
- Execution of UGN-103 and UGN-104 development plans, supply arrangements and the expected UGN-301 data readout.