UroGen Pharma Ltd. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. UroGen is a biopharmaceutical company commercializing Jelmyto for low-grade upper tract urothelial cancer (UTUC) and developing additional urologic cancer therapies. Financial amounts below are in U.S. dollars; figures are rounded to millions unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue, all Jelmyto | $11.4M | $3.5M | $31.9M | $3.8M |
| Gross profit | $10.1M | $3.2M | $28.3M | $3.5M |
| Operating expenses | $33.5M | $32.3M | $100.7M | $103.0M |
| Operating loss | $(23.4)M | $(29.1)M | $(72.4)M | $(99.5)M |
| Net loss | $(30.2)M | $(28.8)M | $(82.4)M | $(98.0)M |
| Basic and diluted loss per share | $(1.35) | $(1.31) | $(3.69) | $(4.52) |
- Reported gross margin was approximately 89% for Q3 2021 and 89% for the nine-month period. The company says margins would have been approximately 88.3% and 87.4%, respectively, absent sales of Jelmyto inventory whose costs were expensed before FDA approval; this inventory accounting effect is expected to continue through Q2 2023.
- Cash and cash equivalents were $55.3M; marketable securities totaled $54.9M. Together they were $110.3M at September 30, 2021. Current assets were $125.1M and current liabilities $19.8M.
- Nine-month operating cash use was $64.8M, compared with $84.6M in 2020. Investing activities used $5.1M; financing provided $72.4M, primarily net proceeds from the RTW transaction. Cash, cash equivalents and restricted cash increased $2.5M to $56.6M.
- Total liabilities were $103.1M, including a $79.9M non-current prepaid forward obligation to RTW. This is a sales-linked financing arrangement, not conventional bank debt. The company reported no expected principal payments within 12 months.
Changes and notable developments
- Jelmyto revenue rose sharply as commercial sales expanded following its April 2020 FDA approval. The increase in nine-month revenue was $28.0M.
- For Q3, operating loss narrowed by $5.7M year over year, but net loss increased by $1.4M, principally reflecting $6.8M of RTW financing expense and lower interest income. For nine months, net loss improved by $15.6M, despite $9.9M of RTW financing expense.
- Management stopped enrollment in the Phase 3 ATLAS trial of UGN-102 after FDA discussions and plans a redesigned, single-arm Phase 3 trial, with enrollment expected to begin in Q1 2022. Randomized ATLAS participants were to remain in follow-up.
- October 2021 topline Phase 2b OPTIMA II results for UGN-102 reported complete response in 65% of patients at three months after therapy began; 61% of that group remained disease-free at 12 months after treatment initiation. These are company-reported trial results, not FDA approval.
- The Allergan/AbbVie collaboration was terminated in November 2021 after the Phase 2 APOLLO trial failed its primary endpoint, freeing UroGen to pursue RTGel opportunities independently.
Outlook, risks and contingencies
- Management believes available cash and marketable securities will fund planned operations for at least 12 months from the filing’s reporting date, but expects to need additional capital. No assurance is given that financing will be available on acceptable terms; a shortfall could force delays or reductions in development or commercialization.
- The company expects continued losses and negative operating cash flow. It anticipated R&D spending would increase over the next several years as programs advance; selling and marketing expense was expected to remain relatively consistent for the rest of 2021 and rise thereafter, while G&A was expected to increase in the remainder of 2021.
- RTW is entitled to tiered payments based on worldwide Jelmyto sales and, if approved, UGN-102 sales, until aggregate payments reach $300M. RTW holds a first-priority security interest in specified product-related assets, intellectual property and receivables. The arrangement may constrain additional secured borrowing and future cash flows.
- COVID-19 had limited access to clinics and surgery centers in some U.S. regions and could affect product uptake, clinical enrollment, operations and supply. The company also relies on single-source suppliers for key inputs, including mitomycin API, and identified shipping and supply-chain disruption risks.
- Key business risks include reliance on Jelmyto as its only approved product, uncertain physician adoption and reimbursement, clinical and regulatory uncertainty for UGN-102 and other candidates, competition, product safety, intellectual-property protection, and exposure to NIS exchange-rate movements. The company said it did not hedge currency exposure.
- The company reported an accumulated deficit of $438.9M and a $2.7M long-term liability for uncertain tax positions. Management said disclosure controls were effective at a reasonable assurance level; ERP implementation was ongoing and required testing. No material legal proceedings were reported.
Most important facts for investors to verify
- Whether Jelmyto sales growth, reimbursement access and physician adoption continue, and how sales compare with commercial expectations.
- The final protocol, FDA alignment, start and enrollment progress for the redesigned UGN-102 Phase 3 trial, plus the reliability and durability of OPTIMA II results.
- Cash burn and runway relative to management’s 12-month estimate; available ATM capacity was reported at approximately $83.4M, while future financing remained uncommitted.
- The actual economic cost and payment terms of the RTW obligation, including sales-based escalators, security interests and any effect on financing flexibility.
- Whether COVID-19, single-source suppliers or transportation disruptions affect clinical programs or Jelmyto supply; also monitor post-marketing safety and the required OLYMPUS response-duration updates.