Investor Alert

May 7, 2020, 7:07 a.m. EDT


Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report and the audited financial statements and notes thereto as of and for the year ended December 31, 2019 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2019 ("Annual Report"), which was filed with the U.S. Securities and Exchange Commission ("SEC") on March 2, 2020. The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, ("Exchange Act"), which are subject to the "safe harbor" created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, "Risk Factors" in this Quarterly Report. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.


We are a biopharmaceutical company dedicated to building and commercializing novel solutions that treat specialty cancers and urologic diseases. We have developed RTGel reverse-thermal hydrogel, a proprietary sustained release, hydrogel-based technology that has the potential to improve therapeutic profiles of existing drugs. Our technology is designed to enable longer exposure of the urinary tract tissue to medications, making local therapy a potentially more effective treatment option. UroGen's approved product Jelmyto (mitomycin) for pyelocalyceal solution, and our investigational candidate, UGN-102 (mitomycin) for intravesical solution are designed to ablate tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade upper tract urothelial cancer ("LG-UTUC") and low-grade non-muscle invasive bladder cancer ("LG-NMIBC"), respectively.

We estimate that the annual treatable population of LG-UTUC in the United States is approximately 6,000 to 7,000; the annual treatable population of LG-NMIBC is approximately 80,000.

We believe that RTGel-based drug formulations, which provide for the sustained release of an active drug, may improve the efficacy of treatment of various types of urothelial cancer with an acceptable safety profile that permits the natural flow of fluids from the kidney via the urinary tract to the bladder. Our formulations are designed to achieve this by increasing the dwell time in the kidney and bladder to maximize tissue exposure of the active drug. Consequently, we believe that RTGel-based drug formulations may enable us to overcome the anatomical and physiological challenges that have historically contributed to the lack of drug development for the treatment of urothelial cancer and other urological pathologies.

On April 15, 2020, the FDA approved our new drug application ("NDA") for Jelmyto, formerly known as UGN-101, for pyelocalyceal solution, for the treatment of adult patients with LG-UTUC. Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology. It has been designed to enable longer exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means.

LG-UTUC is a rare cancer that develops in the lining of the upper urinary tract, ureters and kidneys. In the United States, there are approximately 6,000 - 7,000 new or recurrent LG-UTUC patients annually. It is a challenging condition to treat due to the complex anatomy of the urinary tract system. The current standard of care includes multiple surgeries and most require a radical nephroureterectomy, which includes the removal of the renal pelvis, kidney, ureter and bladder cuff. Treatment is further complicated by the fact that LG-UTUC is most commonly diagnosed in patients over 70 years of age, who may already have compromised kidney function and may suffer further complications as a result of major surgery.

The FDA approval is based on results from our Phase 3 OLYMPUS trial showing Jelmyto achieved clinically significant disease eradication in adults with LG-UTUC. Findings include:

Complete response ("CR") (primary endpoint) of 58% in the intent-to-treat population and in the sub-population of patients who were deemed not capable of surgical removal at diagnosis.

At the 12-month time point for assessment of durability, 19 patients remained in CR of a total of 41 patients, seven had experienced recurrence of disease and nine patients continued to be followed for the 12-month duration of response.

The most commonly reported adverse events (? 20%) were ureteric obstruction, flank pain, urinary tract infection, hematuria, renal dysfunction, fatigue, nausea, abdominal pain, dysuria, and vomiting. Most adverse events were mild to moderate and manageable using well established treatments. No treatment-related deaths occurred.

The FDA evaluated Jelmyto under Priority Review, which is reserved for medicines that may represent significant improvements in safety or efficacy in treating serious conditions. Jelmyto was also granted Breakthrough Therapy designation by the FDA, which was created to expedite the development and review of drugs developed for serious or life-threatening conditions with high unmet need.

We expect to commercially launch Jelmyto by mid-2020. We have staffed, trained and prepared a commercial team comprising a field force of 48 representatives with deep experience in both urology and oncology. The sales representatives will be led by seven regional business managers. Each region is supported with a Clinical Nurse Educator to provide training and support around instillation, as well as a Field Reimbursement manager to ensure access and reimbursement. In the last year, we hired a team of seven medical science liaisons who have appropriately engaged with physicians interested in learning more about UroGen and our technology, including through virtual meetings.

We are committed to helping patients access Jelmyto. Our market access teams have been laying the foundation for coverage and reimbursement, meeting multiple times with payers. In addition to reimbursement and access, we have also been focused on ensuring seamless integration into physician practices. We have implemented processes to help make Jelmyto preparation and administration safe and seamless for practitioners and patients, including entering into an agreement with a major national pharmacy under which the pharmacy, following receipt of a patient prescription, will be able to prepare and dispense the Jelmyto admixture on our behalf.

In addition, we are evaluating the safety and efficacy of UGN-102, our novel sustained-release high dose formulation of mitomycin, for the treatment of LG-NMIBC.

In September 2019, we reported the interim data of our Phase 2b OPTIMA II trial of investigational UGN-102 for patients with Intermediate Risk NMIBC, defined as those with one or two of the following criteria: multifocal disease, large tumors and rapid rates of recurrence. The single-arm, open label study trial recently completed enrollment of 63 patients at clinical sites across the U.S. and Israel. Patients are treated with six weekly instillations of UGN-102 and undergo assessment of complete response, or CR (the primary endpoint) four to six weeks following the last instillation. In an interim cohort of 32 patients, 63% (20/32) achieved a CR. We also intend to pursue a 505(b)(2) regulatory pathway for UGN-102. We believe that UGN-102 has the potential to be a new therapeutic option for the treatment of LG Intermediate Risk NMIBC patients.

In April 2020, we reported additional interim data analysis of our Phase 2b OPTIMA analysis of UGN-102 in patients with LG Intermediate Risk NMIBC. The Phase 2b OPTIMA II trial demonstrated a CR rate at three months following onset of treatment of 65% (41/63 patients). Of those who achieved a complete response and underwent evaluation at six- and nine-months, 97% and 85% respectively, of patients remained free of disease at six- and nine-months follow-up, respectively remained disease free. The Company is actively engaged in discussions with the FDA to finalize the design for our pivotal Phase 3 protocol and expect to begin the study in the second half of 2020.

We believe that urothelial cancer, which is comprised of bladder cancer and UTUC, affects a large and underserved patient population. Annual expenditures for Medicare alone in the United States for the treatment of urothelial cancer were estimated to have been at least $4.0 billion in 2010 and are projected to be at least $5.0 billion in 2020. The majority of the expenditures are spent on tumor resection surgeries such as transurethral resection of bladder tumor, or TURBT. In 2015, the estimated prevalence of urothelial cancer in the United States was 700,000 with an annual incidence of approximately 80,000. The prevalence of each of LG-NMIBC and LG-UTUC in the United States was approximately 343,000 and 14,500, respectively.

Our clinical stage pipeline also includes UGN-201 (imiquimod), our proprietary formulation of an immunotherapy product candidate, a toll-like receptor 7/8, or TLR 7/8, agonist which have been evaluated for the treatment of high-grade NMIBC, which may include carcinoma in situ, or CIS. UGN-201 is a novel, liquid formulation of imiquimod, a generic TLR7/8, agonist. Toll-like receptor agonists play a key role in initiating the innate immune response system. We believe that the combination of UGN-201 with additional immunotherapy drugs, such as immune checkpoint inhibitors could represent a valid alternative to the current standard of care for the post-TURBT adjuvant treatment of high-grade NMIBC. In the fourth quarter of 2019, we entered into a worldwide license agreement with Agenus Inc. to develop and commercialize zalifrelimab (UGN-301, anti-CTLA-4 antibody) via intravesical delivery in combination with UGN-201 (together UGN-302) for the treatment of urinary tract cancers, initially in high-grade non-muscle invasive bladder cancer (HG NMIBC). The combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and potential side effects

In October 2016, we granted an exclusive worldwide license to Allergan Pharmaceuticals International Limited, or Allergan, a wholly owned subsidiary of Allergan plc, to research, develop, manufacture, and commercialize pharmaceutical products formulated with our RTGel technology and clostridial toxins, including BOTOX(R), a branded drug, that we believe can potentially serve as an effective treatment option for patients suffering from overactive bladder, or OAB. In August 2017, we announced that Allergan had submitted an IND to the FDA in order to be able to commence clinical trials in the United States using RTGel in combination with BOTOX. In October 2017, Allergan commenced a Phase 2 clinical trial of BOTOX/RTGel for the treatment of OAB, with the potential to evolve from multiple injections of BOTOX into the bladder to a single instillation of the novel formulation.

Our Research and Development and License Agreements

In October 2016, the Company entered into the Allergan Agreement and granted Allergan an exclusive worldwide license to research, develop, manufacture and commercialize pharmaceutical products that contain RTGel and clostridial toxins (including BOTOX), alone or in combination with certain other active ingredients, referred to as the Licensed Products, which are approved for the treatment of adults with overactive bladder who cannot use or do not adequately respond to anticholinergics. Additionally, the Company granted Allergan a non-exclusive, worldwide license to use certain of the Company's trademarks as required for Allergan to practice its exclusive license with respect to the Licensed Products.

Under the Allergan Agreement, Allergan is solely responsible, at its expense, for developing, obtaining regulatory approvals for and commercializing, on a worldwide basis, pharmaceutical products that contain RTGel and clostridial toxins (including BOTOX), alone or in combination with certain other active ingredients (collectively, the "Licensed Products"). Allergan is obligated to pay us a tiered royalty in the low single digits based on worldwide annual net sales of Licensed Products, subject to certain reductions for the market entry of competing products and/or loss of our patent coverage of Licensed Products. We are responsible for payments to any third party for certain RTGel-related third-party intellectual properties.

In November 2019, we entered into a license agreement with the Agenus Inc. ("Agenus"). Pursuant to the agreement, Agenus granted us an exclusive, worldwide license (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus's intellectual property rights to develop, make, use, sell, import, and otherwise commercialize products incorporating a proprietary antibody of Agenus known as AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery. AGEN1884 is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients, and in combination with Agenus' anti-PD-1 antibody (AGEN2034) in solid tumors. UGN-201 is a TLR-7/8 agonist that is in early stage development for high grade non-muscle invasive bladder cancer ("HG NMIBC").

Based on nonclinical studies conducted by us, UGN-201 in combination with anti-CTLA-4 antagonists have shown encouraging results for the potential treatment of HG NMIBC. We intend to continue research and development work in HG NMIBC in 2020.

Under the terms of the agreement, we paid Agenus an upfront fee of $10.0 million and have agreed to pay Agenus up to $115.0 million upon achieving certain clinical development and regulatory milestones, up to $85.0 million upon achieving certain commercial milestones, and royalties on net sales of licensed products in the 14%-20% range. We are solely responsible for costs and development, obtaining all regulatory approvals, and commercialization of the licensed products after receiving the regulatory approval to do so.

In April 2019, the Company entered into an agreement with Janssen to conduct an early-stage feasibility evaluation in a therapeutic area of mutual interest. The Company and Janssen will each conduct certain activities under the terms of the agreement, and the Company will incur the costs of its own efforts related to the feasibility evaluation. Under the agreement the parties agreed to conduct a limited scope of laboratory and animal testing work. On March 24, 2020 and based on results of the animal studies conducted under the MTA Janssen and UroGen mutually agreed to terminate the MTA and therefore recognize that no further work will be conducted by either party.

For additional information regarding our research and development license and collaboration agreements, see Note 9 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

Impact of COVID-19 Pandemic

In the event of a prolonged disruption related to COVID-19, there could be detrimental impact to our ongoing clinical trials, our commercial launch or commercialization activities for Jelmyto, and our ability to access capital markets. See Item 1A. Risk Factors below for further discussion.

Components of Operating Results


To date, we have not generated any revenues from product sales. For each of the three months ended March 31, 2020 and 2019, we did not recognize any revenues from RTGel sales under the Allergan Agreement. In the future, we may generate revenue from a combination of product sales, if approved, reimbursements, up-front payments, milestone payments and royalties in connection with the Allergan Agreement and future collaborations. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to achieve clinical success and/or to obtain regulatory approval of any of our product candidates in a timely manner, our ability to generate future revenue will be impaired.

Research and Development Expenses

Research and development expenses, net consist primarily of:

salaries and related costs, including share-based compensation expense, for our personnel in research and development functions;

expenses incurred under agreements with third parties, including clinical research organizations ("CROs"), subcontractors, suppliers and consultants, nonclinical studies and clinical trials;

expenses incurred to acquire, develop and manufacture nonclinical study and clinical trial materials;

expenses incurred to purchase active pharmaceutical ingredient ("API") and other related manufacturing costs; and

facility and equipment costs, including depreciation expense, maintenance and allocated direct and indirect overhead costs.

We expense all research and development costs as incurred. Since our employees and internal resources may be engaged in projects for multiple programs at any time, our focus is on total research and development expenditures, and we do not allocate our internal research and development expenses by project.

We estimate nonclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations that conduct and manage nonclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them.

We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. Where at risk contingent milestone payments are due to third parties under research and development and collaboration agreements, the milestone payment obligations are expensed when the milestone results are achieved.

We have received grants under the Israeli Law for the Encouragement of Industrial Research, Development and Technological Innovation, 5754-1984 (the "R&D Law"), from the Israel Innovation Authority in Israel (the "IIA"), formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry, an independent and impartial public entity, for some of our development programs. As of March 31, 2020, we had received grants in the aggregate amount of $2.1 million.

On January 12, 2020, the IIA Office of Chief Scientist approved the Company's request to unwind its obligation to the IIA regarding grants that were loaned to the Company between January 2004 and September 2016. The total payment under the IIA approval, net of the royalties already paid, amounts to $6.6 million, which was fully paid during the first quarter of 2020. See Note 14 to the Consolidated Financial Statements included in this report for additional information.

We are currently focused on advancing our product candidates, and our future research and development expenses will depend on their clinical success. Research and development expenses will continue to be significant and will increase over at least the next several years as we continue to develop our product candidates and conduct nonclinical studies and clinical trials of our product candidates.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of our product candidates. Due to the inherently unpredictable nature of nonclinical and clinical development, we are unable to estimate with certainty the costs we will incur and the timelines that will be required in the continued development and approval of our product candidates. Clinical and nonclinical development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, if and when such arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expenses to increase over the next several years as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates. We also expect to incur increased research and development expenses as we selectively identify and develop additional product candidates.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

per patient trial costs;

the number of patients that participate in the trials;

the number of sites included in the trials;

the countries in which the trials are conducted;

the length of time required to enroll eligible patients;

the number of doses that patients receive;

the drop-out or discontinuation rates of patients;

potential additional safety monitoring or other studies requested by regulatory agencies;

the duration of patient follow-up; and

the efficacy and safety profile of the product candidates.

In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate's commercial potential.

Other than Jelmyto which was approved by the FDA in April 2020, we have not received approval of any of our product candidates. UGN-102 is still in clinical development and our other product candidates are in nonclinical development, and the outcome of these efforts is uncertain. As such, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

License fees and development milestone payments related to in-licensed products and technology are expensed as incurred if it is determined at that point that they have no established alternative future use. We recorded $10.0 million in research and development expenses for the year ended December 31, 2019, comprised of a milestone related to our license agreement with Agenus Inc.

The license agreement provides us with an exclusive world-wide, royalty bearing, and sub-licensable license under Agenus's intellectual property rights to exploit licensed products incorporating AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery. It also provides us with preclinical and clinical supply of AGEN1884. No inventory was purchased on the effective date of the License Agreement and subsequent purchases of preclinical and clinical supplies are at arm's length and are priced at cost plus 30% mark-up. Our acquired right to Agenus's intellectual property represents a single identifiable asset sourced from the agreement. Therefore, all the fair value associated with the agreement is concentrated in one identifiable asset and is not considered a business in accordance with ASC 805-10-55-5A. Therefore, we have accounted for the right to Agenus's intellectual property acquired under the license agreement as an asset acquisition of in-process research and development. See Note 9 to the Consolidated Financial Statements for further information.

Selling and Marketing Expenses

To date, selling and marketing expenses consist primarily of commercial personnel costs (including share-based compensation) along with pre-commercialization activities relative to Jelmyto, formerly known as UGN-101. We anticipate that our selling and marketing expenses will increase during the remainder of 2020 as a result of the FDA's approval of Jelmyto in April 2020 and our planned commercial launch of Jelmyto in mid-2020.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors, executives, finance, medical affairs, business development, investor relations, and human resource functions). Other significant costs include medical affairs, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees.

We anticipate that our general and administrative expenses will increase in the future as we increase our administrative headcount and infrastructure to support the potential approval and commercialization of our product candidates and our continued research and development programs. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses.

Interest and Other (Income) Expenses, Net

Interest and other (income) expenses, net, consisted primarily of interest income.

Income Taxes

We have yet to generate taxable income in Israel. We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $151.9 million as of December 31, 2019. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. We have provided a full valuation . . .

May 07, 2020

Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com . You can also contact MarketWatch Customer Service via our Customer Center .

(c) 1995-2020 Cybernet Data Systems, Inc. All Rights Reserved

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.