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Item 1. Financial Statements

2021-11-15 compared with 2021-08-04 · 802 added, 210 removed, 354 unchanged (74% of the section changed)

3 unchanged sentences

in thousands, except share amounts and par value)

September 30,

Current assets:

Cash and cash equivalents

$ 55,337  

$ 52,864  

Marketable securities

50,872  

49,154  

Restricted cash

2 unchanged sentences

Total current assets

125,140  

115,619  

Non-current assets:

4 unchanged sentences

Other non-current assets

$ 134,603  

$ 122,005  

Liabilities and Shareholders' Equity

1 unchanged sentence

Accounts payable and accrued expense

$ 11,062  

$ 10,023  

Employee related accrued expense

1 unchanged sentence

Total current liabilities:

19,806  

21,436  

Non-current liabilities:

Prepaid forward obligation

79,927  

Long-term lease liability

1 unchanged sentence

Total Liabilities

103,066  

25,650  

Commitments and contingencies (Note 14)

1 unchanged sentence

Ordinary shares, NIS 0.01 par value;

100,000,000 shares

authorized at June 30, 2021 and December 31, 2020;

and 22,167,791 shares issued and outstanding as

of June 30, 2021 and December 31, 2020, respectively

100,000,000 shares authorized at September 30, 2021 and December 31, 2020;

22,404,845 and 22,167,791 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

470,341  

452,525  

Accumulated deficit

( 438,869 )  

Accumulated other comprehensive income

Total Shareholders' Equity

31,537  

96,355  

Total Liabilities and Shareholders' Equity

$ 134,603  

$ 122,005  

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

in thousands, except share and per share amounts)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

$ 11,351  

$ 3,461  

$ 31,868  

$ 3,833  

Cost of revenue

10,107  

28,300  

Operating expense:

Research and development expense

11,923  

10,211  

34,560  

34,905  

Selling, general and administrative expense

21,624  

22,065  

66,117  

68,056  

Operating loss

( 23,440 )  

( 29,124 )  

( 72,377 )  

Financing on prepaid forward obligation

( 6,828 )  

( 9,948 )  

Interest and other income, net

Loss before income taxes

( 30,211 )  

( 28,816 )  

( 82,056 )  

Income tax expense

$ ( 30,211 )  

$ ( 28,816 )  

$ ( 82,368 )  

Statements of Comprehensive Loss

$ ( 30,211 )  

$ ( 28,816 )  

$ ( 82,368 )  

Other comprehensive income

Unrealized (loss) gain on marketable securities

( 41 )  

( 268 )  

( 267 )  

Comprehensive Loss

$ ( 30,252 )  

$ ( 29,084 )  

$ ( 82,635 )  

Net loss per ordinary share basic and diluted

Weighted average number of shares

outstanding used in computation

of basic and diluted loss per

ordinary share

$ ( 1.35 )  

$ ( 1.31 )  

$ ( 3.69 )  

Weighted average number of shares outstanding used in computation of basic and diluted loss per ordinary share

22,380,598  

22,058,343  

22,318,589  

21,657,712  

The accompanying notes are an integral part of these condensed consolidated financial statements.

UroGen Pharma Ltd.

Condensed Consolidated Statements of Shareholders’ Equity

Condensed Consolidated Statements of Shareholders ’

in thousands, except share amounts)

Ordinary Shares

comprehensive

Additional paid-in

Other comprehensive

income (loss)

Balance as of April 1, 2021

Changes During the Three

Months Ended June 30, 2021

Balance as of July, 1 2021

22,354,533  

$ 464,823  

$ ( 408,658 )  

$ 56,271  

Changes During the Three Months Ended September 30, 2021

Exercise of options into ordinary shares

50,312  

Share-based compensation

Other comprehensive loss

Balance as of June 30, 2021

Balance as of April 1, 2020

Changes During the Three

Months Ended June 30, 2020

( 41 )  

( 30,211 )  

Balance as of September 30, 2021

22,404,845  

$ 470,341  

$ ( 438,869 )  

$ 31,537  

Balance as of July, 1 2020

22,001,296  

$ 438,999  

$ ( 297,159 )  

$ 142,660  

Changes During the Three Months Ended September 30, 2020

Exercise of options into ordinary shares

70,136  

Share-based compensation

Issuance of ordinary shares, net

of issuance expense

Other comprehensive loss

Balance as of June 30, 2020

( 268 )  

( 28,816 )  

Balance as of September 30, 2020

22,071,432  

$ 445,950  

$ ( 325,975 )  

$ 120,527  

The accompanying notes are an integral part of these condensed consolidated financial statements.

Ordinary Shares

comprehensive

Additional paid-in

Other comprehensive

income (loss)

Balance as of January 1, 2021

Changes During the Six

Months Ended June 30, 2021

22,167,791  

$ 452,525  

$ ( 356,501 )  

$ 96,355  

Changes During the Nine Months Ended September 30, 2021

Exercise of options into ordinary shares

237,054  

Share-based compensation

Other comprehensive loss

Balance as of June 30, 2021

17,756  

Other comprehensive income

( 267 )  

( 82,368 )  

Balance as of September 30, 2021

22,404,845  

$ 470,341  

$ ( 438,869 )  

$ 31,537  

Balance as of January 1, 2020

Changes During the Six

Months Ended June 30, 2020

21,026,184  

$ 407,986  

$ ( 228,017 )  

$ 180,302  

Changes During the Nine Months Ended September 30, 2020

Exercise of options into ordinary shares

345,248  

Share-based compensation

Issuance of ordinary shares in public

offering, net of issuance expense

21,499  

Issuance of ordinary shares in public offering, net of issuance expense

700,000  

15,775  

15,777  

Other comprehensive income

Balance as of June 30, 2020

( 97,958 )  

Balance as of September 30, 2020

22,071,432  

$ 445,950  

$ ( 325,975 )  

$ 120,527  

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Operating Activities

$ ( 82,368 )  

Adjustment to reconcile net loss to net cash from operating activities:

2 unchanged sentences

Amortization on marketable securities

Stock-based compensation

Share-based compensation

17,756  

21,499  

Amortization of right of use asset

Lease liability

( 914 )  

Changes in operating assets and liabilities:

( 1,844 )  

Accounts receivable

( 737 )  

Prepaid expense and other current assets

( 2,749 )  

Other non-current assets

( 1,573 )  

Accounts payable and accrued expense

Employee related accrued expense

( 3,078 )  

Other current liabilities

( 595 )  

Net cash used in operating activities

( 64,822 )  

Cash Flows From Investing Activities

Purchases of marketable securities

( 51,594 )  

Sales of marketable securities

Maturities of marketable securities

44,625  

74,503  

Purchases of property and equipment

( 550 )  

Net cash (used in) provided by investing activities

( 5,056 )  

43,773  

Cash Flows From Financing Activities

Proceeds from prepaid forward arrangement

72,417  

Proceeds from exercise of options into ordinary shares

Issuances of ordinary shares, net of issuance expense

15,853  

Issuance cost related to at-the-market issuances

( 127 )  

Net cash provided by financing activities

72,351  

16,449  

Increase (Decrease) in Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

54,090  

50,211  

Cash, Cash Equivalents and Restricted Cash at End of Period

$ 56,563  

$ 25,789  

Supplemental Disclosures of Non-Cash Activities

Non-cash purchases of property and equipment

Non-cash new lease liabilities

$ ( 36 )  

Non-cash issuance cost

Exercise of options

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1 – Business and Nature of Operations

Note 1 –

Business and Nature of Operations

Nature of Operations

UroGen Pharma Ltd.

is an Israeli company incorporated in April 20 0 4 (“UPL”).

UroGen Pharma Inc., a wholly owned subsidiary of UPL, was incorporated in Del a ware in October 2015 and began operati n g in February 2016 (“UPI”).

UPL and UPI (together the “Company”) is a bi o pharmaceutical company focused on deve l oping and commercializing novel therapies desi g ned to change the standard of care for urological pathologies.

Since commencing operations, the Company has devoted substantially all of its efforts to securing intellectual property rights, performing research and development activities, including conducting clinical trials and manufacturing activities, hiring personnel, launching the Company’s first commercial product, Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, and its product candidate UGN-102, and raising capital to support and expand these activities.

is an Israeli company incorporated in April 2004 ( “UPL”).

UroGen Pharma Inc., a wholly owned subsidiary of UPL, was incorporated in Delaware in October 2015 and began operating in February 2016 ( “UPI”).

UPL and UPI (together the “Company”) is a biopharmaceutical company focused on building and commercializing novel solutions that treat specialty cancers and urologic diseases.

Since commencing operations, the Company has devoted substantially all of its efforts to securing intellectual property rights, performing research and development activities, including conducting clinical trials and manufacturing activities, hiring personnel, launching the Company’s first commercial product, Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN- 101 and raising capital to support and expand these activities.

On April 15, 2020, the U.S.

Food and Drug Administration (“FDA”) granted expedited approval for Jelmyto , a first-in-class treatment indicated for adults with low-grade upper tract urothelial cancer (“low grade-UTUC”).

Food and Drug Administration (“FDA”) granted expedited approval for Jelmyto , a first -in-class treatment indicated for adults with low-grade upper tract urothelial cancer (“low grade-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.

Note 2 – Basis of Presentation

Note 2 –

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.

generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10 -Q and Article 10 of Regulation S- X.

Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

In the opinion of the Company’s management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for fair statement of its financial position, results of operations and cash flows of the Company at the dates and for the periods indicated.

Interim results are not necessarily indicative of results for the full fiscal year.

The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 18, 2021.

31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 18, 2021.

The consolidated financial statements include the accounts of UPL and its wholly owned subsidiary UPI.

Intercompany balances and transactions have been eliminated during consolidation.

The Company has experienced net losses since its inception and has an accumulated deficit of $ 408.7 million and $ 356.5 million as of June 30, 2021 and December 31, 2020, respectively.

The Company has experienced net losses since its inception and has an accumulated deficit o f $ 438.9  

million and $ 356.5 million as of September 30, 2021 and December 

31, 2020, respectively.

The Company expects to incur losses and have negative net cash flows from operating activities as it executes on its strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials.

The success of the Company depends on the ability to successfully commercialize its technologies to support its operations and strategic plan.

Based on management’s cash flow projections the Company believes that its cash and cash equivalents and marketable securities are sufficient to fund the Company’s planned operations for at least the next 12 months.

The Company anticipates that it may need to raise additional capital in the future.

There can be no assurances that the Company will be able to secure such additional financing if at all, or at terms that are satisfactory to the Company, and that it will be sufficient to meet its needs.

The Company anticipates that it will need to raise additional capital in the future.

There can be no assurances that the Company will be able to secure such additional financing if at all, or on terms that are satisfactory to the Company, and that it will be sufficient to meet its needs.

In the event the Company is not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations.

Note 3 – Significant Accounting Policies

Note 3 –

Significant Accounting Policies

Principles of Consolidation

3 unchanged sentences

The preparation of financial statements in conformity with U.S.

GAAP requires man a gement to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of cont i ngent assets and liabilities at the date of the financ i al statements and the reported amounts of revenue and expense duri n g the reporting period.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

Actual results may differ from those estimates.

As applicable to the unaudited condensed consolidated financi a l statements, the critical accounting estimates relate to the fair value of share-based compensat i on, measurement of revenue, estimate of uncertain tax positions, and measurement of liabilities accounted for under the interest method.

As applicable to the unaudited condensed consolidated financial statements, the critical accounting estimates relate to the fair value of share-based compensation, measurement of revenue, estimate of uncertain tax positions, and measurement of liabilities accounted for under the interest method.

Functional Currency

dollar (“Dollar”) is the currency of the primary economic environment in which the operations of the Com p any are conducted.

Therefore, the functional currency of the Company is the Dol l ar.

Accordingly, transactions in currencies other than the Do l lar are measured and recorded in the functional currency usi n g the exchange rate in effect at the date of the transaction.

At the balance sheet date, monetary assets and liab i lities that are denominated in currencies other than the Dollar are measured using the official exch a nge rate at the balance sheet date.

The effects of foreign currency re-measurements are recorded in the condensed consolidated statements of operations as “Interest and other income, net.”

dollar (“Dollar”) is the currency of the primary economic environment in which the operations of the Company are conducted.

Therefore, the functional currency of the Company is the Dollar.

Accordingly, transactions in currencies other than the Dollar are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction.

At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the Dollar are measured using the official exchange rate at the balance sheet date.

The effects of foreign currency re-measurements are recorded in the condensed consolidated statements of operations as “Interest and other income, net.”

Cash and Cash Equivalents;

2 unchanged sentences

Cash and cash equivalents consist primarily of money market funds and bank money market accounts and are stated at cost, which approximates fair value.

Cash and cash equivalents and marketable securities totaled $ 129.3 million as of June 30, 2021.

The Company classifies its marketable securities as available-for-sale in accordance with the Financial Accounting Standards Board (“ FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments — Debt and Equity Securities”.

Available-for-sale debt securities are carried at fair value with unrealized gains and losses reported in other comprehensive income/loss within shareholders’ equity.

Cash and cash equivalents and marketable securities totaled $ 110.3 million as of September 30, 2021 .

The Company classifies its marketable securities as available-for-sale in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments —

Debt and Equity Securities”.

Available-for-sale debt securities are carried at fair value with unrealized gains and losses reported in other comprehensive income/loss within shareholders’

Realized gains and losses are recorded as a component of interest and other income (expense), net.

2 unchanged sentences

These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures.

The majority of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

For individual debt securities classified as available-for-sale securities where there has been a decline in fair value below amortized cost, the Company determines whether the decline resulted from a credit loss or other factors.

3 unchanged sentences

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and cash equivalents and marketable securities.

The primary objectives for the Company ’ s investment portfolio are the preservation of capital and the maintenance of liquidity.

The primary objectives for the Company’s investment portfolio are the preservation of capital and the maintenance of liquidity.

The Company does not enter into any investment transaction for trading or speculative purposes.

The Company ’ s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S.

The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S.

government and U.S.

2 unchanged sentences

The accounts are monitored by management to mitigate the risk.

The Company’s product sales are recognized through the Company's arrangement with a single customer, a third-party national specialty distributor.

The Company’s product sales are recognized through the Company's arrangement with a single customer, a third -party national specialty distributor.

The Company assesses the need for an allowance for doubtful accounts primarily based on creditworthiness, historical payment experience and general economic conditions.

1 unchanged sentence

The Company provides for income taxes based on pretax income, if any, and applicable tax rates available in the various jurisdictions in which it operates, including Israel and the U.S.

deferred taxes are computed using the asset and liabi l ity method.

Under the asset and liability method, deferred income tax assets and liabilities are determined bas e d on the differences between the financial reporti n g and tax bases of assets and liabilities and are mea s ured using the currently enacted tax rates and laws.

A valuation a llowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foresee a ble future.

The Company follows a two-step approach in recognizing a n d measuring uncertain tax positions.

deferred taxes are computed using the asset and liability method.

Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.

A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future.

The Company follows a two -step approach in recognizing and measuring uncertain tax positions.

After concluding that a particular filing position can be recognized (i.e., has a more-likely-than- not chance of being sustained), ASC 740 - 10 - 30 - 7 requires that the amount of benefit recognized be measured using a methodology based on the concept of cumulative probability.

2 unchanged sentences

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business.

The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs.

For Jelmyto , the Company commenced capitalization of inventory at the receipt of FDA approval.

The Company values its inventory at the lower of cost or net realizable value.

The Company measures inventory approximating actual cost under a first-in, first-out basis.

The Company values its inventory at the lower of cost or net realizable value. The Company measures inventory approximating actual cost under a first -in, first -out basis.

The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories .

5 unchanged sentences

Laboratory equipment

3 - 6.5  

5 - 16.5  

Manufacturing equipment

2 unchanged sentences

Prepaid Forward Obligation

The Company is party to a transaction with RTW Investments (the “RTW Transaction”) in which the Company received funds to support the continued launch of Jelmyto and the development of UGN-102 in return for tiered, future cash payments based on net sales of Jelmyto and UGN-102, if approved by the FDA.

The Company is party to a transaction with RTW Investments (the “RTW Transaction”) in which the Company received funds to support the continued launch of Jelmyto and the development of UGN- 102 in return for tiered, future cash payments based on net sales of Jelmyto and UGN- 102, if approved by the FDA.

The net proceeds received under the RTW Transaction were recognized as a long-term liability.

The subsequent measurement for the liability follows the accounting principles defined in ASC Topic 835-30, “Imputation of Interest”.

The subsequent measurement for the liability follows the accounting  principles defined in ASC Topic 835 - 30, “Imputation of Interest”.

See Note 9 for further discussion related to the prepaid forward obligation.

1 unchanged sentence

The Company currently has no finance leases.

The Company accounts for leases in accordance with ASC Topic 842, “Leases” .

The Company accounts for leases in accordance with ASC Topic 842, “Leases”

The Company determines if an arrangement is a lease at inception.

Right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term as of the commencement date.

Operating lease ROU assets are presented as operating lease right of use assets on the condensed consolidated balance sheets.

1 unchanged sentence

Lease expense is recognized on a straight-line basis for operating leases.

Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs.

Variable lease payments are presented as operating expense on the condensed consolidated statements of operations in the same line item as expense arising from fixed lease payments.

The Company’s lease terms may include options to extend the lease.

The lease extensions are included in the measurement of the right of use asset and lease liability when it is reasonably certain that it will exercise that option.

Because most of the Company’s leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis.

The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

ROU assets for operating leases are periodically reviewed for impairment losses under ASC 360-10, “Property, Plant, and Equipment”, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

ROU assets for operating leases are periodically reviewed for impairment losses under ASC 360 - 10, “Property, Plant, and Equipment”, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

Product sales from Jelmyto are recognized as revenue under ASC 606 at the point in time that control of the product has been transferred to the customer, generally at the point the product has been delivered to the treating physician.

All product sales of Jelmyto are recognized through the Company's arrangement with a single customer, a third -party national specialty distributor.

Net revenue recognized include management’s estimate of returns, consideration paid to the customer, chargebacks relating to differences between the wholesale acquisition cost and the contracted price offered to the end consumer, chargebacks relating to 340b drug pricing programs, Medicaid drug rebate programs, and the Company’s copay assistance program, which are estimated based on industry benchmarking studies as well as the Company’s historical experience.

Research and Development Expense

11 unchanged sentences

The fair value of options is determined using the Black-Scholes option-pricing model.

The fair value of a restricted stock unit (“RSU”) equaled the closing price of the Company’s ordinary shares on the grant date.

The Company accounts for forfeitures as they occur in accordance with ASC Topic 718, “Compensation—Stock Compensation”.

The Company elected to recognize compen s ation costs for awards conditioned only on conti n ued service that have a graded vesting schedule using the straight-line method and to value the awards based on the sin g le-option award approach.

The fair value of a restricted stock unit (“RSU”) equaled the closing price of the Company’s ordinary shares on the grant date.

The Company accounts for forfeitures as they occur in accordance with ASC Topic 718, “Compensation—Stock Compensation”.

The Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule using the straight-line method and to value the awards based on the single-option award approach.

Net Loss per Ordinary Share

4 unchanged sentences

The Company has reviewed the Accounting Standards Updates recently issued by the Financial Accounting Standards Board, and determined that they are not applicable to the Company.

Note 4 – Other Financial Information

Note 4 –

Other Financial Information

Accounts Payable and Accrued Expense

Accounts payable and accrued expense consists of the following as of June 30, 2021 and December 31, 2020 (in thousands):

Accounts payable and accrued expense consists of the following as of September 30, 2021 and December 

31, 2020 (in thousands):

September 30,

Accounts payable

$ 4,060  

$ 3,271  

Accrued sales reserves

4 unchanged sentences

Total accounts payable and accrued expense

$ 11,062  

$ 10,023  

Interest and Other Income (Expense), Net

Interest and other income (expense) consisted of the following as of June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

Interest and other income (expense) consisted of the following as of September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Interest income

Other finance (expense)

Total interest and other income

Note 5 – Inventories

Inventories consist of the following as of June 30, 2021 and December 31, 2020 (in thousands):

December 31, 2020

$ 1,719  

Other finance (expense), net

( 76 )  

Total interest and other income, net

$ 1,527  

Note 5 –

Inventories consist of the following as of 

September 30, 2021 and December 

31, 2020 (in thousands):

September 30,

Raw materials (1)

$ 4,106  

$ 1,051  

Finished goods

Total inventories

$ 1.0 million of raw materials at June 30, 2021 are included within other non-current assets on the condensed consolidated balance sheets .

Note 6 – Fair Value Measurements

$ 5,381  

$ 1,964  

$ 1.6  million of raw materials at September 30, 2021 are included within other non-current assets on the condensed consolidated balance sheets.

Note 6 –

Fair Value Measurements

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

5 unchanged sentences

These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Unobservable inputs that reflect the reporting entity ’ s own assumptions.

The carrying amounts of the Company ’ s other current assets, accounts payable and accrued liabilities are generally considered to be representative of their fair value because of the short-term nature of these instruments.

Unobservable inputs that reflect the reporting entity’s own assumptions.

The carrying amounts of the Company’s other current assets, accounts payable and accrued liabilities are generally considered to be representative of their fair value because of the short-term nature of these instruments.

No transfers between levels have occurred during the periods presented.

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of June 30, 2021 are as follows (in thousands):

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of September 30, 2021 are as follows (in thousands):

Fair Value Measurements Using

1 unchanged sentence

Balance as of

September 30,

Identical Assets

1 unchanged sentence

US government

$ 19,401  

Corporate bonds

12,349  

Commercial paper

15,989  

Money market funds (1)

35,924  

Certificates of deposit

Total marketable securities

$ 90,867  

$ 55,325  

$ 35,542  

Included within cash and cash equivalents on the condensed consolidated balance sheets.

$ 3.0 million included within cash and cash equivalents on the condensed consolidated balance sheets.

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2020 are as follows (in thousands):

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 

31, 2020 are as follows (in thousands):

Fair Value Measurements Using

4 unchanged sentences

US government

$ 29,186  

Corporate bonds

21,861  

Money market funds (1)

39,744  

Total marketable securities

$ 90,791  

$ 68,930  

$ 21,861  

Included within cash and cash equivalents on the condensed consolidated balance sheets.

The Company ’ s in money market funds are valued based on publicly available quoted market prices for identical securities as of June 30, 2021 and December 31, 2020.

Note 7 – Marketable Securities

The following table summarizes the Company’s marketable securities as of June 30, 2021 (in thousands):

The Company’s in money market funds are valued based on publicly available quoted market prices for identical securities as of September 30, 2021 and December 

Note 7 –

Marketable Securities

The following table summarizes the Company’s marketable securities as of September 30, 2021 (in thousands):

Marketable securities:

US government

$ 19,399  

$ 19,401  

Corporate bonds

12,348  

12,349  

Commercial paper

15,988  

15,989  

Money market funds (1)

35,924  

Certificates of deposit

Total marketable securities

$ 90,863  

$ 90,867  

Included within cash and cash equivalents on the condensed consolidated balance sheets

$ 3.0 million included within cash and cash equivalents on the condensed consolidated balance sheets.

The Company classifies its marketable securities as available-for-sale and they consist of all debt securities.

The amortized cost basis as of June 30, 2021 includes $ 0.2 million of accrued interest receivable .

As of June 30, 2021 marketable securities were no t in a net unrealized gain or loss position.

Un realized gains and losses on available-for-sale debt securities are included as a component of comprehensive loss.

As of June 30, 2021, the aggregate fair value of marketable securities held by the Company in an unrealized loss position was $ 40.2 million which consisted of 24 securities.

The unrealized loss was driven by investments in commercial paper and certificates of deposit which are measured at fair value based on bid price and purchased at ask price (bid-ask spread).

The amortized cost basis as of September 30, 2021 includes $ 0.1  million of accrued interest receivable.

As of September 30, 2021 marketable securities were in a net unrealized gain position. Unrealized gains and losses on available-for-sale debt securities are included as a component of comprehensive loss. 

September 30, 2021 , the aggregate fair value of marketable securities held by the Company in an unrealized loss position was $ 11.9  million which consisted of 

13 securities. The unrealized loss was primarily driven by minor fluctuations in the fair value of corporate bonds.

The Company does not expect to settle the debentures at a price less than the amortized cost basis of the investment;

the Company expects to recover the entire amortized cost basis of the security.

In accordance with the Company’s general investment strategy, the Company does not intend to sell the investments before maturity.

As of June 30, 2021, the Company believes the cost basis for its marketable securities were recoverable in all material aspects and no credit impairments were recognized in the period.

The Company’s marketable securities as of June 30, 2021 mature at various dates through February 2022.

In accordance with the Company’s general investment strategy, the Company does not intend to sell the investments before maturity.

September 30, 2021 , the Company believes the cost basis for its marketable securities were recoverable in all material aspects and no credit impairments were recognized in the period.

The Company’s marketable securities as of September 30, 2021 mature at various dates through February 2022.

The fair values of marketable securities by contractual maturity consist of the following (in thousands):

September 30,

Maturities within one year

$ 86,797  

$ 88,898  

Maturities after one year through three years

Total marketable securities

Note 8 – Property and Equipment

Property and equipment, consists of the following as of June 30, 2021 and December 31, 2020 (in thousands):

$ 90,867  

$ 90,791  

Note 8 –

Property and Equipment

Property and equipment, consists of the following as of September 30, 2021 and December 

31, 2020 (in thousands):

September 30,

Laboratory equipment

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accumulated depreciation and amortization

( 2,013 )  

Property and equipment, net

Depreciation and amortization expense was $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021 and $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2020.

Note 9 – Prepaid Forward Obligation

In March 2021, the Company entered into a prepaid forward agreement with RTW Investments (“RTW”).

Under the terms of the RTW Transaction, the Company received $ 75 .0 million ($ 72.5 million net of transactions costs) to support the continued launch of Jelmyto and the development of UGN-102.

$ 1,978  

$ 2,046  

Depreciation and amortization expense was $ 0.2 million and 

$ 0.6  million for the 

three and nine months ended September 30, 2021 and $ 0.1 million and $ 0.3  million for the three and nine months ended September 30, 2020 .

Note 9 –

Prepaid Forward Obligation

In March 2021, the Company entered into a prepaid forward agreement with RTW Investments (“RTW”).

Under the terms of the RTW Transaction, the Company received $ 75.0 million ( $ 72.4  million net of transaction costs) to support the continued launch of Jelmyto and the development of UGN- 102.

In return for the transferred funds, RTW is entitled to receive tiered, future cash payments based on aggregate worldwide annual net product sales of Jelmyto in an amount equal to:

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As security for the payment and fulfilment of these amounts throughout the arrangement, the Company has granted RTW a first priority security interest in Jelmyto and UGN- 102, including the regulatory approvals, intellectual property, material agreements, proceeds and accounts receivable related to these products.

In May 2021, following the receipt of necessary regulatory approvals, the Company received the $ 75.0 million prepaid forward payment ($ 72.5 million net of transaction costs) from RTW and recognized an associated prepaid forward obligation liability.

The subsequent measurement for the liability follows the accounting principles as defined in ASC 835-30, “Imputation of Interest”;

In May 2021, following the receipt of necessary regulatory approvals, the Company received the $ 75.0 million prepaid forward payment ($ 72.4  million net of transaction costs) from RTW and recognized an associated prepaid forward obligation liability.

The subsequent measurement for the liability follows the accounting principles as defined in ASC 835 - 30, “Imputation of Interest”;

each period the Company makes a payment to RTW, and recognizes expense related to financing on the prepaid forward obligation based on an imputed rate derived from the expected future payments.

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Changes in future payments from previous estimates are included in the future financing expense on a prospective basis.

The Company does no t expect to make any principal payments in the next 12 months.

The Company does not expect to make any principal payments in the next 12 months.

The following table shows the activity with respect to the carrying value of the prepaid forward liability, in thousands:

Prepaid forward obligation at closing of RTW Transaction

$ 75,000  

Capitalized closing costs

Financing on prepaid forward obligation

Expected payments

Carrying value of prepaid forward obligation as of June 30, 2021

Note 10 – Leases

Amounts paid and payable

Carrying value of prepaid forward obligation as of September 30, 2021

$ 79,927  

Note 10 –

Operating Leases

The Company has the following office and laboratory facility leases:

In April 2016, UPL signed an addendum to its November 2014 lease agreement for the Company’s executive offices located in Israel, in order to increase the office space rented and to extend the rent period until 2019.

In April 2016, UPL signed an addendum to its November 2014 lease agreement for the Company’s offices located in Israel, in order to increase the office space rented and to extend the rent period until 2019.

In March 2019, UPL utilized the agreement extension option and extended the rent period for additional three years until August 2022.

In September 2017, UPI entered into a new lease agreement for its office space in New York, which the Company previously used as its headquarters.

The lease agreement commenced in October 2017 and terminated in February 2021 .

The lease agreement commenced in October 2017 and terminated in February 2021.  

In April 2018, UPI entered into a new lease agreement for an office in Los Angeles, California.

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The landlord provided a tenant allowance for leasehold improvements of $ 0.2 million that was accounted for as a lease incentive.

The Company’s remaining contractual obligation under this lease is approximately $ 0.8 million as of June 30, 2021.

In November 2019, UPI entered into a sublease for this office space, with a lease commencement date of January 1, 2020 and continuing until the end of the lease term in March 2024 .

The subtenants exercised their early access clause and moved into the premises at the end of November 2019.

The remaining rental payments to be received over the lease term is approximately $ 0.7 million as of June 30, 2021 .

The Company’s remaining contractual obligation under this lease is approximately $ 0.7  million as of September 30, 2021 .

In November 2019, UPI entered into a sublease for this office space, with a lease commencement date of 

January 1, 2020 and continuing until the end of the lease term in March 2024.

The subtenants exercised their early access clause and moved into the premises at the end of November 2019. 

The remaining rental payments to be received over the lease term is approximately $ 0.5  million as of September 30, 2021 .

The Company accounts for the sublease as on operating lease in accordance with ASC 842 - 10 - 25 - 2 and ASC 842 - 10 - 25 - 3.

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The lease commencement date was November 29, 2019 and the lease term is 38 months.

The Company’s remaining contractual obligation under this lease is approximately $ 0.9 million as of June 30, 2021.

The Company’s remaining contractual obligation under this lease is approximately $ 0.7  million as of September 30, 2021 .

In addition, the Company has other operating office equipment and vehicle leases.

The Company’s operating leases may require minimum rent payments, contingent rent payments adjusted periodically for inflation, or rent payments equal to the greater of a minimum rent or contingent rent.

The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The Company’s leases expire at various dates from 2021 through 2023 , with varying renewal and termination options.

The components of lease cost for the three and six months ended June 30, 2021 were as follows (in thousands) :

The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The Company’s leases expire at various dates from 2021 through 2023, with varying renewal and termination options.

The components of lease cost for the three and nine months ended September 30, 2021 were as follows (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost

$ 1,282  

Sublease income

( 56 )  

( 168 )  

Variable lease cost

The amounts recognized as of June 30, 2021 and December 31, 2020 were as follows (in thousands):

$ 1,228  

The amounts recognized as of September 30, 2021 and December 31, 2020 were as follows (in thousands):

September 30,

Right of use asset

$ 1,418  

$ 2,158  

Long-term lease liabilities

Other current liabilities

As of June 30, 2021, no impairment losses have been recognized to date.

Supplemental information related to leases for the periods reported is as follows (in thousands):

Six Months Ended June 30, 2021

As of September 30, 2021 , no impairment losses have been recognized to date.

Supplemental information related to leases for the nine months ended September 30, 2021 is as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:

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Right-of-use assets obtained in exchange for new operating lease liabilities

Weighted-average remaining lease term of operating leases

Weighted-average remaining lease term of operating leases (in years)

Weighted-average discount rate of operating leases

As of June 30, 2021, undiscounted cash flows to be received under the Company’s operating sublease on an annual basis were as follows (in thousands):

As of September 30, 2021 , undiscounted cash flows to be received under the Company’s operating sublease on an annual basis were as follows (in thousands):

Operating Leases

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Sublease income is recognized net within operating expense.

Sublease income for the three and six months ended June 30, 2021 was as follows (in thousands):

Ended June 30,

Sublease income for the three and nine months ended September 30, 2021 was as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Sublease income from fixed lease payments

Note 11 – Revenue From Product Sales

Net product sales consist of the following for the three and six months ended June 30, 2021 (in thousands):

Ended June 30,

Note 12 – License and Collaboration Agreements

Note 11 –

Revenue From Product Sales

Net product sales consist of the following for the three and nine months ended September 30, 2021 (in thousands):

Three Months Ended

Nine Months Ended

September 30,

$ 11,351  

$ 3,461  

$ 31,868  

$ 3,833  

Note 12 –

License and Collaboration Agreements

Allergan/AbbVie Agreement

In October 2016, the Company entered into the Allergan/AbbVie Agreement and granted Allergan (now part of AbbVie) 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.

Under the Allergan/AbbVie Agreement , Allergan is solely responsible , at its expense, for developing, obtaining regulatory approvals for and commercializing the Licensed Products on a worldwide basis .

Allergan is obligated to pay the Company 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 the Company’s patent coverage of Licensed Products.

The Company is responsible for payments to any third party for certain RTGel -related third-party intellectual properties.

In August 2017, the Company announced that Allergan had submitted an IND to the FDA in order to be able to commence clinical trials in the United States using an RTGel formulation in combination with BOTOX.

In October 2016, the Company entered into a license agreement with Allergan (the "Allergan/AbbVie Agreement") and granted Allergan (now part of AbbVie) 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.

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.

In August 2020, the Company announced that the Phase 2 APOLLO trial did not meet the primary endpoint, it is believed to be the result of BOTOX not effectively permeating the urothelium.

In August 2020, the Company announced that the Phase 2 APOLLO trial did not meet the primary endpoint. The data suggested that this result may have been due to BOTOX not effectively permeating the urothelium.

Over the past year, the Company has been in discussions with AbbVie to determine whether other products in their portfolio would be complementary with RTGel. Based on this review, the Company determined that there was limited interest to pursue combinatorial products, and therefore, have terminated the relationship in order to allow for maximum flexibility for the RTGel intellectual property.

Agenus Agreement

In November 2019, the Company entered into a license agreement with Agenus Inc., pursuant to which Agenus granted to the Company an exclusive, worldwide (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 in solid tumors.

In November 2019, the Company entered into a license agreement with Agenus Inc., pursuant to which Agenus granted to the Company an exclusive, worldwide ( 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 in solid tumors.

Initially, the Company plans to develop AGEN1884 in combination with UGN- 201 for the treatment of high-grade NMIBC.

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Unless earlier terminated in accordance with the terms of the license agreement, the license agreement will expire on a product-by-product and country-by-country basis at the later of (a) the expiration of the last to expire valid claim of a licensed patent right that covers the licensed product in such country or (b) 15 years after the first commercial sale of the licensed product in such country.

The Company may terminate the license agreement for convenience upon 180 days’ written notice to Agenus.

Either party may terminate the license agreement upon 60 days’ notice to the other party if, prior to the first commercial sale of a licensed product, the Company substantially ceases to conduct development activities of the licensed products for nine consecutive months (and during such period, Agenus has complied with its obligations under the license agreement) other than in response to a requirement of an applicable regulatory authority or an event outside of the Company’s control.

The Company may terminate the license agreement for convenience upon 180 days’

written notice to Agenus.

Either party may terminate the license agreement upon 60 days’

notice to the other party if, prior to the first commercial sale of a licensed product, the Company substantially ceases to conduct development activities of the licensed products for nine consecutive months (and during such period, Agenus has complied with its obligations under the license agreement) other than in response to a requirement of an applicable regulatory authority or an event outside of the Company’s control.

In addition, either party may terminate the license agreement in the event of an uncured material breach of the other party.

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The Company will provide funding, developmental candidates, and other support.

Pursuant to the agreement, the Company makes bi-annual payments to MD Anderson fund the collaboration.

As of June 30, 2021, the Company has made payments to MD Anderson of $ 500,000 recognized evenly over the associated six-month period through research and development expense .

Note 13 – Shareholders’ Equity

The Company had 100.0 million ordinary shares authorized for issuance as of June 30, 2021 and December 31, 2020.

The Company had 22.4 million and 22.2 million ordinary shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

Pursuant to the agreement, the Company makes bi-annual payments to MD Anderson to fund the collaboration.

As of September 30, 2021 , the Company has made payments to MD Anderson of $ 500,000 recognized evenly over the associated period through research and development expense.

Note 13 –

Shareholders ’

The Company had 100.0 million ordinary shares authorized for issuance as of September 30, 2021 and December 

The Company had 22.4 million and 22.2 million ordinary shares issued and outstanding as of September 30, 2021 and December 

31, 2020, respectively.

Each ordinary share is entitled to one vote.

The hol d ers of ordinary shares are also entitled to receive dividends w henever funds are legally available, when and if declared by the Board of Directors (the “Board”) .

The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available, when and if declared by the Board of Directors (the “Board”).

Since its inception, the Board has not declared any dividends.

Note 14 – Share-Based Compensation

In October 2010, the Board approved a share option plan (the “Pl a n”) for grants to Company employees, consultants, directors, and other service providers.

The grant of options to Israeli employees under the Plan is su b ject to the terms stipulated by Section 102 of the Israeli Income Tax Ordinance (“Section 102”).

The option grants are subject to the track chosen by the Company, either the “regular income” track or the “capital gains” track, as set out in Section 102.

The Company registered the Plan un d er the capital gains track, which offers more favorable tax rates to the employees.

As a result, and pursuant to the terms of Section 102, the Company is not allowed to claim as an ex p ense for tax purposes the amounts credited to the employees in respect of options granted to them under the P l an, including amounts recorded as salary be n efits in the Company’s accounts, with the exception of the work-income b e nefit component, if any, determined on grant date.

Note 14 –

Share-Based Compensation

In October 2010, the Board approved a share option plan (the “Plan”) for grants to Company employees, consultants, directors, and other service providers.

The grant of options to Israeli employees under the Plan is subject to the terms stipulated by Section 102 of the Israeli Income Tax Ordinance (“Section 102”

The option grants are subject to the track chosen by the Company, either the “regular income”

track or the “capital gains”

track, as set out in Section 102.

The Company registered the Plan under the capital gains track, which offers more favorable tax rates to the employees.

As a result, and pursuant to the terms of Section 102, the Company is not allowed to claim as an expense for tax purposes the amounts credited to the employees in respect of options granted to them under the Plan, including amounts recorded as salary benefits in the Company’s accounts, with the exception of the work-income benefit component, if any, determined on grant date.

For non-employees and for non-Israeli employees, the Plan is subject to Section 3 (i) of the Israeli Income Tax Ordinance.

Employees are typically granted stock options and/or restricted stock units, or RSUs, upon commencement of employment.

Employees are typically granted stock options and/or restricted stock units ("RSUs"), upon commencement of employment.

Also, eligible employees may receive an annual grant of options or RSUs.

Non-employee members of the Board typically receive a grant of RSUs and/or stock options annually.

Non-employee members of the Board typically receive a grant of stock options and/or RSUs annually.

The term of any option granted under the Plan cannot exceed 10 years.

Options shall not have an exercise price less than 100 % of the fair market value of the Company’s ordinary shares on the grant date, and generally vest over a period of three years .

If the individual possesses more than 10 % of the combined voting power of all classes of equity of the Company, the exercise price shall not be less than 110 % of the fair market value of an ordinary share of stock on the date of grant.

The Company’s RSU and option grants provide for accelerated or continued vesting in certain circumstances as defined in the plans and related grant agreements, including a termination in connection with a change in control.

Options shall not have an exercise price less than 100 % of the fair market value of the Company’s ordinary shares on the grant date, and generally vest over a period of three years.

RSUs generally vest in a 33 % increment upon the first anniversary of grant, and in either equal quarterly or annual amounts for the two years following the one -year anniversary of the grant date.

Options generally vest in a 33 % increment upon the first anniversary of the grant date, and in either equal quarterly or annual amounts for the two years following the one -year anniversary of the grant date.

The expected volatility is based on a mix of the Company’s historical volatility, and the histori c al volatility of comparable companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage.

The expected volatility is based on a mix of the Company’s historical volatility, and the historical volatility of comparable companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage.

The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted.

The expected term is the length of time until the expected dates of exercising the options and is estimated for employees using the simplified method due to insufficient specific historical information of employ e es’ exercise behavior, and for non-employees, and directors using the contractual term.

exercise behavior, and for non-employees, and directors using the contractual term.

In March 2017, the Board adopted the 2017 Equity Incentive Plan (the "2017 Plan"), which was approved by the shareholders in April 2017.

The 2017 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, RSU awards, performance share awards, performance cash awards, and other forms of share awards to the Company's employees, directors and consultants.

The maximum number of ordinary shares that was initially authorized for issuance under the 2017 Plan is 1,400,000 .

On January 1, 2018, the share reserve increased by 250,167 to 1,650,167 .

On October 12, 2018, the Company increased the amount of registered ordinary shares of the Company’s 2017 Plan by 1,900,000 to 3,550,167 .

On June 8, 2020 the Company’s shareholders approved an increase to the amount of registered ordinary shares of the Company’s 2017 Plan by 400,000 to 3,950,167 .

On June 7, 2021, the Company’s shareholders approved an increase of the amount of registered ordinary shares of the Company’s 2017 Plan by 400,000 to 4,350,167 .

As of June 30, 2021, 3,197,979 ordinary shares are subject to outstanding awards under the 2017 Plan and 752,188 ordinary shares remain available for future awards.

The maximum number of ordinary shares that was initially authorized for issuance under the 2017 Plan is 1,400,000 . On January 1, 2018, the share reserve increased by 250,167 to 1,650,167 .

On October 12, 2018, the Company increased the amount of registered ordinary shares of the Company’s 2017 Plan by 1,900,000 to 3,550,167 .

On June 8, 2020 the Company’s shareholders approved an increase to the amount of registered ordinary shares of the Company’s 2017 Plan by 400,000 to 3,950,167 .

On June 7, 2021, the Company’s shareholders approved an increase of the amount of registered ordinary shares of the Company’s 2017 Plan by 400,000 to 4,350,167 .

In May 2019, the Company adopted the UroGen Pharma Ltd.

2019 Inducement Plan (the “Inducement Plan”).

Under the Inducement Plan, the Company is authorized to issue up to 900,000 ordinary shares pursuant to awards issued under the Inducement Plan.

The only persons eligible to receive grants of Awards (as defined below) under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) or 5635(c)(3) and the related guidance under Nasdaq IM 5635-1, including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company.

Under the Inducement Plan, an “Award” is a nonstatutory stock option, restricted stock unit or other right to receive ordinary shares pursuant to the Inducement Plan.

The following table illustrates the effect of share-based com p ensation on the condensed consolidated statements of operations (in thousands):

For the Three Months Ended June 30,

Six Months Ended June 30,

5635 - 1,  including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company. Under the Inducement Plan, an “Award”

is a nonstatutory stock option, RSU or other right to receive ordinary shares pursuant to the Inducement Plan.

As of September 30, 2021 , 3,587,774 ordinary shares are subject to outstanding awards under the Company's share-based compensation plans and 1,362,156 ordinary shares remain available for future awards.

The following table illustrates the effect of share-based compensation on the condensed consolidated statements of operations (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Research and development expense

$ 1,519  

$ 3,119  

$ 5,032  

Selling, general and administrative expense

The total unrecognized compensation cost of options and RSUs at June 30, 2021 is $ 27.7 million with a weighted average recognition period of 1.78 years.

Note 15 – Income Taxes

14,637  

16,467  

$ 5,515  

$ 6,763  

$ 17,756  

$ 21,499  

The total unrecognized compensation cost of options and RSUs at September 30, 2021 is $ 22.9  million with a weighted average recognition period of 1.76  years.

Note 15 –

UroGen Pharma Ltd.

is taxed under Israeli tax laws.

As of June 30, 2021, the Company continues to maintain a full valuation allowance against deferred tax assets for all jurisdictions.

As of September 30, 2021 , the Company continues to maintain a full valuation allowance against deferred tax assets for all jurisdictions.

In evaluating the need for a valuation allowance, the Company considers all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, forecasts of future taxable income, and tax planning strategies.

The Company has cumulative global pretax losses for the years ended 2020, 2019 and 2018, and for the six months ended June 30, 2021.

The Company has cumulative global pretax losses for the years ended 2020, 2019 and 2018, and for the nine months ended September 30, 2021 .

The Company will continue to assess the extent to which its deferred tax assets may be realized in the future and will adjust the valuation allowance as needed.

The Company has a liability for uncertain tax positions of $ 2.7 million as of June 30, 2021, for tax positions relating to transfer pricing between affiliated entities.

The Company has a liability for uncertain tax positions of $ 2.7 million as of September 30, 2021 , for tax positions relating to transfer pricing between affiliated entities.

The Company recognizes interest accrued and penalties related to uncertain tax positions as a component of income tax expense.

As of June 30, 2021, the Company’s liability for uncertain tax positions includes $ 0.7 million of interest and penalties accrued during 2020.

As of September 30, 2021 , the Company’s liability for uncertain tax positions includes $ 0.7 million of interest and penalties accrued during 2020.

The Company operates on a global basis and is subject to tax laws and regulations in the U.S.

The estimate of the Company’s tax liabilities relating to uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex tax laws and regulations, expectations regarding the outcome of tax authority examinations, as well as the ultimate measurement of potential liabilities.

The uncertain tax positions are reviewed quarterly and adjusted as events occur that could affect potential liabilities for additional taxes, including lapsing of applicable statutes of limitations, correspondence with tax authorities, proposed assessments by tax authorities, identification of new issues, and issuance of new legislation or regulations.

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Based upon the information currently available, the Company does not reasonably expect changes in its existing uncertain tax positions in the next 12 months and has recorded the gross uncertain tax positions as a long-term liability.

Note 16 – Related Parties

There were no related party transactions for the six months ended June 30, 2021 or 2020.

Note 17 – Commitments and Contingencies

Note 16 –

Related Parties

There were no related party transactions for the 

nine months ended September 30, 2021 or 2020.

Note 17 –

Commitments and Contingencies

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers.

Further, the Company indemnifies its directors and officers who are, or were, serving at the Company ’ s request in such capacities.

The Company ’ s maximum exposure under these arrangements is unknown as of June 30, 2021 and December 31, 2020.

Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities.

The Company’s maximum exposure under these arrangements is unknown as of September 30, 2021 and December 

The Company does not anticipate recognizing any significant losses relating to these arrangements.

Grants from the Israeli Innovation Authority in Israel (“IIA”)

Grants from the Israeli Innovation Authority in Israel ( “

The Company has received grants from the IIA for research and development funding.

Up until 2007, the IIA participation in the funding of the Company’s operations was by grants provided to Granot Ventures, a government supported technology incubator, as

part of the Israeli Ministry of Industry and Commerce Director General Directive 8.2.

Since 2008, the funding was provided directly to Company.

Up until 2007, the IIA participation in the funding of the Company’s operations was by grants provided to Granot Ventures, a government supported technology incubator, as part of the Israeli Ministry of Industry and Commerce Director General Directive 8.2.

Since 2008, the funding was provided directly to the Company.

On January 12, 2020, the IIA 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.

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See Note 10 for further discussion regarding lease commitments.

Note 18 – Subsequent Events

The Company has evaluated and determined there were no subsequent events through August 4, 2021.

Note 18 –

Subsequent Events

See Note 12 for discussion related to the Allergan/AbbVie Agreement.

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, 2020 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, 2020 ( “

Annual Report ”

), which was filed with the SEC 

on March 18, 2021.

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 effective treatment option.

Our 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 (“low-grade UTUC”) and low-grade intermediate risk non-muscle invasive bladder cancer (“low-grade intermediate risk NMIBC”), respectively.

We estimate that the annual treatable patient population of low-grade UTUC in the United States is approximately 6,000 to 7,000;

the estimated annual treatable population of low-grade intermediate risk NMIBC is approximately 80,000.

RTGel is a novel proprietary polymeric biocompatible, reverse thermal gelation hydrogel, which, unlike the general characteristics of most forms of matter, is liquid at lower temperatures and converts into gel form when warmed to body temperature.

We believe that these characteristics promote ease of delivery into and retention of drugs in body cavities, including the bladder and the upper urinary tract, forming a transient reservoir of drug that disintegrates over time while preventing rapid excretion, providing for increased dwell time.

RTGel leverages the physiologic flow of urine to provide a natural exit from the body.

We believe that RTGel , when formulated with an active drug, may allow for the improved efficacy of treatment of various types of specialty cancers and urologic diseases without compromising the safety of the patient or interfering with the natural flow of fluids in the urinary tract.

RTGel achieves this by:

increasing the exposure of active drugs in the bladder and upper urinary tract by significantly extending the dwell time of the active drug while conforming to the anatomy of the bladder and the upper urinary tract, which allows for enhanced drug tissue coverage.

For example, the average dwell time of the standard mitomycin water formulation, currently used as adjuvant treatment, in the upper urinary tract is approximately five minutes, compared to approximately six hours when mitomycin is formulated with RTGel ;

administering higher doses of an active drug than would otherwise be possible using standard water-based formulations.

For instance, it is only possible to dissolve 0.5 mg of mitomycin in 1 mL of water while it is possible to formulate up to 8 mg of mitomycin with 1 mL of RTGel ;

maintaining the active drug’s molecular structure and mode of action.

These characteristics of RTGel enable sustained release of mitomycin in the urinary tract for both Jelmyto and UGN-102.

Further, RTGel may be particularly effective in the bladder and upper urinary tract where tumor visibility and access are challenging, and where there exists a significant amount of urine flow and voiding.

We believe that these characteristics of RTGel may prove useful for the local delivery of active drugs to other bodily cavities in addition to the bladder and upper urinary tract.

On April 15, 2020, the FDA approved our new drug application (“NDA”) for Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, for the treatment of adult patients with low-grade UTUC.

Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology.

It has been designed to prolong exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means.

New product exclusivity for Jelmyto exists through April 15, 2023, Orphan Drug exclusivity through April 15, 2027, as well as a composition of matter patent through 2031.

Low-grade 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 low-grade UTUC patients annually.

It is a challenging condition to treat due to the complex anatomy of the urinary tract system.

Prior to Jelmyto , the current standard of care included endoscopic resection(s) and radical nephroureterectomy, which involves the removal of the renal pelvis, kidney, ureter and bladder cuff.

Treatment is further complicated by the fact that low-grade 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 a major surgery.

We are focused on changing the way urothelial cancers are treated, an area in which there has been no significant advancements in recent years. 

Jelmyto 

is the first drug therapy of its kind, providing an alternative to endoscopic resection(s) and/or radical nephroureterectomy.

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

Findings from the final study results include:

Complete response (“CR”) (primary endpoint) of 58% (41/71) 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, 23 patients remained in CR of a total of 41 patients, eight had experienced recurrence of disease and ten patients were unable to be evaluated.

Durability of response was estimated to be 81.8% at 12 months by Kaplan-Meier analysis.

The median duration of response was not reached.

The most commonly reported adverse events (≥ 20%) were ureteric obstruction, flank pain, urinary tract infection, hematuria, abdominal pain, fatigue, renal dysfunction, nausea, dysuria and vomiting.

Most adverse events were mild to moderate and manageable using well established treatments.

No treatment-related deaths occurred.

In June 2020, we initiated our commercial launch of Jelmyto in the United States.

Currently, we have a commercial team comprising a field force of approximately 46 territory business managers with deep experience in both urology and oncology.

The territory business managers are led by seven regional business managers.

Each region is supported by a Clinical Nurse Educator to provide education around instillation, as well as a Field Reimbursement Manager to help ensure access and reimbursement for appropriate patients.

In addition, our organization includes seven medical science liaisons who appropriately engage, both in person and virtually, with physicians interested in learning more about UroGen, Jelmyto and our technology.

We are committed to helping patients access Jelmyto .

Our market access teams have laid the foundation for coverage and reimbursement, meeting multiple times with payors.

The majority of large commercial plans have policies in place, covering over 150 million lives.

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, prepares and dispenses the Jelmyto admixture on our behalf.

In October 2020, a Medicare C-Code was issued for Jelmyto .

Centers for Medicare & Medicaid Services established a permanent and product-specific J-code for Jelmyto that took effect on January 1, 2021, and replaced the C-Code.

We are evaluating the safety and efficacy of UGN-102, our novel sustained-release intravesical formulation of mitomycin, for the treatment of low-grade intermediate risk NMIBC.

We have shared final topline data from the Phase 2b OPTIMA II trial for our lead product candidate, UGN-102, in patients with low-grade 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 trial completed enrollment of 63 patients at clinical sites across the United States and Israel in September 2019.

Patients were treated with six weekly instillations of UGN-102 and underwent assessment of CR (the primary endpoint) four to six weeks following the last instillation.

The interim data were also published as a supplement to the April 2020 issue of The Journal of Urology.

The final topline data were published online in The Journal of Urology in October 2021 and will also be included in the January 2022 print edition.

In October 2021, we reported final topline data consistent with our previous reports showing that 65%, or 41 out of 63 patients, treated with UGN-102 achieved a complete response three months after the start of therapy.

In this subset of patients, 39 (95%), 30 (73%), and 25 (61%) remained disease-free at 6, 9, and 12 months after treatment initiation, respectively.

The probability of durable response nine months after CR (12 months after treatment initiation) was estimated to be 72.5% by Kaplan-Meier analysis. T hirteen patients had documented recurrences.

57 of 63 (90%) patients completed all six instillations of UGN-102 according to study protocol.

Median duration of response was not reached.

The most common adverse events, greater than 10%, were most often reported as mild to moderate in severity and include dysuria, hematuria, urinary frequency, fatigue, urgency and urinary tract infection.

Urothelial cancer, which is comprised of bladder cancer and UTUC, affects a large, and what we believe to be, an underserved patient population.

Annual expenditures for Medicare alone in the United States for the treatment of urothelial cancer were estimated 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 ("TURBT").

The prevalence of bladder cancer in the United States based on most recently published data was approximately 724,000 and estimated 2021 annual incidence of bladder cancer was approximately 85,000.

We estimate based upon a review of peer-reviewed literature and publicly available data that there are approximately 80,000 low-grade intermediate risk NMIBC patients in the U.S.

We believe that UGN-102 has the potential to be a new therapeutic option for the treatment of low-grade intermediate risk NMIBC patients.

UGN-102 is administered locally using the standard practice of intravesical instillation directly into the bladder via a catheter.

The instillation into the bladder is expected to take place in a physician’s office as a non-operative same-day treatment, in comparison with TURBT or similar surgical procedures, which are operations conducted under general anesthesia and may require an overnight stay.

Surgical tumor removal often has limited success due to the inability to properly identify, reach and resect all tumors.

We believe that an effective chemoablation agent can potentially provide better eradication of tumors irrespective of the detectability and location of the tumors.

In addition, by removing the need for surgery, patients may avoid potential complications associated with surgery.

We initiated the Phase 3 ATLAS trial in December 2020 and unil recently had been enrolling patients in this trial assessing UGN-102 with or without TURBT compared to standard of care.

In parallel, we have continued to engage in discussions with the FDA and, based on this dialogue, have designed an alternative trial in order to demonstrate the efficacy and safety of UGN-102.

This new streamlined Phase 3 trial will be a single-arm, multinational, multicenter study evaluating the efficacy and safety of UGN-102 as primary chemoablative therapy in patients with low-grade intermediate risk NMIBC.

The design for this new trial will be similar to our Phase 2 OPTIMA II trial in that the patient population will have the same clinical characteristics, receive the same treatment regimen and undergo the same efficacy and safety assessments and qualitative follow-up. This study will also require fewer patients than the ATLAS study.

As a result of this new study, we have stopped enrollment in the Phase 3 ATLAS study, however, we have allowed all consented patients to complete screening and, if eligible, to be randomized, and will continue to follow all randomized patients for the duration of the trial in order to gather data and insights in our evaluation of UGN-102 as a primary therapy in the treatment of low-grade intermediate risk NMIBC.

We anticipate enrollment for the new Phase 3 trial to begin the first quarter of 2022.

Our immuno-uro-oncology pipeline includes UGN-301 (zalifrelimab), an anti-CTLA-4 antibody, which we intend to study as a combination therapy with multiple potential agents.

UGN-301, an immune checkpoint inhibitor, is delivered using our proprietary RTGel platform to increase dwell time, which has been shown to significantly improve the effectiveness of intravesical therapy.

Our initial non-clinical studies involve the sequential use of UGN-201 (imiquimod), a toll-like receptor-7 ("TL R 7") ag onist, and UGN-301, as an investigational treatment for high-grade non-muscle invasive bladder cancer (high-grade NMIBC).

UGN-201 is a proprietary novel, liquid formulation of imiquimod, a generic TLR 7 agonist, which has been evaluated for the treatment of high-grade NMIBC, which may include carcinoma in situ ("CIS").

Toll-like receptor agonists play a key role in initiating the innate immune response system.

We believe that the combination of UGN-201 with UGN-301 could represent a valid alternative to the current standard of care for the post-TURBT adjuvant treatment of high-grade NMIBC.

In November 2019, we entered into a worldwide license agreement with Agenus Inc.

to develop and commercialize zalifrelimab, an anti-CTLA-4 antibody, via intravesical delivery in combination with UGN-201 for the treatment of urinary tract cancers, initially in high-grade NMIBC.

We believe that the combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and potential side effects.

Our Research and Development and License Agreements

Allergan/AbbVie Agreement

In October 2016, we entered into the Allergan/AbbVie Agreement and granted Allergan an exclusive worldwide license to research, develop, manufacture and commercialize pharmaceutical products that contain RTGel and clostridial toxins including BOTOX.

The license grants the exclusivity for the 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 ("OAB") who cannot use or do not adequately respond to anticholinergics.

In August 2020, we announced that the Phase 2 APOLLO trial did not meet the primary endpoint. The data suggested that this result may have been due to BOTOX not effectively permeating the urothelium. Over the past year, we have been in discussions with AbbVie to determine whether other products in their portfolio would be complementary with RTGel. Based on this review, we determined that there was limited interest to pursue combinatorial products, and therefore, have terminated the relationship in order to allow for maximum flexibility for the RTGel intellectual property.

Agenus Agreement

In November 2019, we entered into a license agreement with 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-301 is a formulation of RTGel and zalifrelimab that is in early-stage development for high-grade NMIBC.

MD Anderson Agreement

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 high-grade NMIBC.

In January 2021, we announced that we entered into a three-year strategic research collaboration agreement with MD Anderson focusing on UGN-302 as an investigational treatment for high-grade NMIBC.

Under the agreement, MD Anderson and UroGen will collaborate on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee.

UroGen will provide funding, developmental candidates, and other support.

For additional information regarding our research and development and license agreements, see Note 12 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 and future clinical trials, our ongoing commercial launch and future commercialization activities for Jelmyto , and our ability to access capital markets.

During the first quarter 2021, the staged vaccination rollout in the U.S.

prioritized health-care workers, certain other essential workers and high-risk populations, which generally included individuals in their 60s and 70s, and individuals with certain underlying medical conditions.

According to the Centers for Disease Control and Prevention, as of the end of October 2021, approximately 85% of people over age 65 in the U.S.

have been fully vaccinated to protect against COVID-19.

However, as circu mstances evolve, in particular related to the emergence of variants, it will be important to understand potential impacts to patients and the hospital system, and the ability for patients to access Jelmyto.

 Through the third quarter of 2021, we have experienced reduced or limited access to surgery centers and clinics, particularly in regions of the U.S.

that have continued to be heavily impacted by COVID-19. While it is difficult to predict the impact of the ongoing COVID-19 pandemic, including associated variants, on our business and the healthcare industry, we continue to monitor the evolving COVID-19 situation, and the potential further impacts that the pandemic and related government response may have on our business throughout the remainder of 2021 and beyond.

Components of Operating Results

During the three and nine months ended September 30, 2021 we recognized $11.4 million and $31.9 million of revenue, respectively from sales of our product, Jelmyto .

Cost of Revenue

Cost of revenue consists primarily of inventory and related costs associated with the manufacturing, distribution, warehousing and preparation of Jelmyto .

In periods prior to receiving FDA approval for Jelmyto , we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expense.

Research and Development Expense

Research and development expense, net consists primarily of:

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

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

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

expense incurred to purchase active pharmaceutical ingredient (“API”) in support of R&D activities and other related manufacturing costs;

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

We expense all research and development costs as incurred.

We estimate nonclinical study and clinical trial expense 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 expense 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”), an independent and impartial public entity, for some of our development programs.

Through September 30, 2021, we had received grants in the aggregate amount of $2.1 million.

On January 12, 2020, the IIA 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 17 to the condensed consolidated financial statements included in this Quarterly Report for additional information.

We are currently focused on advancing our product candidates, and our future research and development expense will depend on their clinical success.

Research and development expense 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 expense 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 expense 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 expense 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;

delays or operational challenges resulting from the ongoing COVID-19 pandemic;

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;

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.

Selling and Marketing Expense

To date, selling and marketing expense consists primarily of commercial personnel costs (including share-based compensation) along with pre-commercialization and initial commercialization activities related to Jelmyto , formerly known as UGN-101.

We anticipate that our selling and marketing expense

remain relatively consistent for the remainder of 2021, and increase going forward as we increase headcount in relation to the 

continued commercialization of Jelmyto .

General and Administrative Expense

General and administrative expense consists 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 services, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees.

We anticipate that our general and administrative expense will increase  for the remainder of 2021 as a result of compensation related costs, and may also increase in the future to support the potential approval and commercialization of our product candidates and our continued research and development programs. 

Financing on prepaid forward obligation

Financing on prepaid forward obligation is comprised of financing expense related to the RTW Transaction (as defined in Note 3 to our condensed consolidated financial statements included in this Quarterly Report).

Interest and Other Income, Net

Interest and other income, net, consisted primarily of interest income.

We have yet to generate taxable income in Israel.

We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $ 250.2 million as of December 31, 2020.

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 allowance with respect to the deferred tax assets related to these carry forward losses.

Income tax expense also consists of our estimate of uncertain tax positions, and related interest and penalties.

See Note 15 to the Consolidated Financial Statements for further information.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the revenue and expense incurred during the reported periods.

In accordance with GAAP, we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances at the time such estimates are made.

Actual results may differ from these estimates under different assumptions or conditions.

We discussed the critical accounting policies used in the preparation of our financial statements in Management ’

s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report as well as in the Note 3 to the condensed consolidated financial statements included in this Quarterly Report.

Results of Operations

Comparison of the three months ended September 30, 2021 and 2020

The following table sets forth our results of operations for the three months ended September 30, 2021 and 2020.

Three Months Ended September 30,

(in thousands)

Cost of revenue

Operating expense:

Research and development

Selling and marketing

General and administrative

Total operating expense

Operating loss

Financing on prepaid forward obligation

Interest and other income, net

Loss before income taxes

Income tax expense

Revenue was $11.4 

million and $3.5 

million for the three months ended September 30, 2021 and 2020, respectively.

The increase in revenue of $7.9 million reflects the increased volume of sales of our product Jelmyto following its approval by the FDA in April 2020.

Cost of Revenue

Cost of revenue was $1.2 million and $ 0.3  million for the three months ended September 30, 2021 and 2020, respectively.

In periods prior to receiving FDA approval for Jelmyto , we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expense.

We expect this to continue to impact cost of revenue through the second quarter of 2023 as we produce Jelmyto at costs reflecting the full cost of manufacturing and as we deplete inventories that we had expensed prior to receiving FDA approval.

Gross margin would have been approximately 88.3% versus 89.0 % for the three months ended September 30, 2021, if we had not sold Jelmyto units that were expensed prior to regulatory approval.

Research and Development Expense

Research and development (R&D) expense was $11.9 million and $10.2 million for the three months ended September 30, 2021 and 2020, respectively.

The overall increase of $1.7 million is primarily attributable to the launch of our Phase 3 ATLAS study for UGN-102 at the end of 2020, and development cost of UGN-301 partially offset by a decrease in R&D expense related to Jelmyto .  

Selling and Marketing Expense

Selling and marketing expense was $12.5 milli on and $11.0 million for the three months ended September 30, 2021 and 2020 , respectively.

The increase in selling and marketing expense of $1.5 million is primarily attributable to higher brand marketing expense related to 

Jelmyto in 2021, including costs relating to advertising, development of marketing materials and promotional speaking programs and conferences.

General and Administrative Expense

General and administrative expense was $9.2 million and $11.1 million for the three months ended September 30, 2021 and 2020 , respectively.

The decrease in general and administrative expense of $1.9 million resulted primarily from a decrease in compensation expenses in 2021.

Financing on Prepaid Forward Obligation

Financing on prepaid forward obligation was $6.8 million and $0 for the three months ended September 30, 2021 and 2020, respectively.

The cost in 2021 relates to the financing cost of the RTW Transaction which closed in May 2021.

Interest and Other Income, Net

Interest and other income, net was $0.1 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively.

The decrease in interest and other income, net of $0.2 million was primarily due to lower interest earned on cash and marketable securities.

Comparison of the nine months ended September 30, 2021 and 2020

The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020.

Nine Months Ended September 30,

(in thousands)

Cost of revenue

Operating expense:

Research and development

Selling and marketing

General and administrative

Total operating expense

Operating loss

Financing on prepaid forward obligation

Interest and other income, net

Loss before income taxes

Income tax expense

Revenue was $31.9 million and $3.8 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase in revenue of $28.1 million reflects the increased volume of sales of our product Jelmyto following its approval by the FDA in April 2020.

Cost of Revenue

Cost of revenue was $3.6 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

In periods prior to receiving FDA approval for Jelmyto , we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expense.

We expect this to continue to impact cost of revenue through the second quarter of 2023 as we produce Jelmyto at costs reflecting the full cost of manufacturing and as we deplete inventories that we had expensed prior to receiving FDA approval.

Gross margin would have been approximately 87.4% versus 88.8 % for the nine months ended September 30, 2021 if we had not sold Jelmyto units that were expensed prior to regulatory approval.

Research and Development Expense

R&D expense was $34.6 million and $34.9 million for the nine months ended September 30, 2021 and 2020, respectively.

The decrease of $0.3 million is primarily attributable to the one-time payment in the prior year of $6.6 million to unwind our obligation to the IIA and a decrease in compensation attributa ble to R&D employees, partially offset by higher R&D expense in 2021 related to the Phase 3 ATLAS study for UGN-102 which was initiated at the end of 2020 .

Selling and Marketing Expense

Selling and marketing expense was $35.4 million and $34.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase in selling and marketing expense of $1.0 million is primarily attributable to higher field sales force expenses related to Jelmyto .

General and Administrative Expense

General and administrative expense was $30.7 million and $33.7 million for the nine months ended September 30, 2021 and 2020, respectively.

The decrease in general and administrative expense of $3.0 million resulted primarily from 

a decrease in compensation expenses in 2021 .

Financing on Prepaid Forward Obligation

Financing on prepaid forward obligation was $9.9 million and $0 for the nine months ended September 30, 2021 and 2020, respectively.

The cost in 2021 relates to the financing cost of the RTW Transaction which closed in May 2021.

Interest and Other Income,   

Interest and other income, net was an $0.3 million and $1.5 million for the nine months ended September 30, 2021 and 2020, respectively.

The decrease in interest and other income, net of $ 1.2  million was primarily due to lower interest earned on cash and marketable securities.

Liquidity and Capital Resources

As of September 30, 2021, we had $110.3 million in cash and cash equivalents and marketable securities.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation, and is held primarily in U.S.

Based on our cash flow projections, we believe that our current cash and cash equivalents and marketable securities are sufficient to fund our planned operations for at least the next 12 months.

Through September 30, 2021, we funded our operations primarily through public equity offerings, private placements of equity securities and our funding arrangement with RTW Investments (“RTW”).

In December 2019, we entered into a sales agreement (the “ATM Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which we may from time to time offer and sell our ordinary shares having an aggregate offering price of up to $100.0 million.

The shares are offered and will be sold pursuant to a shelf registration statement on Form S-3 which was declared effective by the SEC on January 2, 2020.

During the second quarter of 2020, we sold 700,000 ordinary shares under the ATM Sales Agreement, for gross proceeds of approximately $16.6 million.

The net proceeds to us after deducting sales commissions to Cowen and other issuance expenses were approximately $15.8 million.

The remaining capacity under the ATM Sales Agreement is approximately $83.4 million.

In March 2021, we entered into a prepaid forward agreement with RTW, pursuant to which RTW agreed to provide us with an upfront cash payment of $75.0 million to support the launch of Jelmyto and the development of UGN-102, and we agreed to provide RTW with tiered future payments based on global annual net product sales of Jelmyto and UGN-102, if approved.

In May 2021, following the receipt of necessary regulatory approvals, we received the $75.0 million prepaid forward payment ($ 72.4  million net of transaction costs) from RTW.

We have incurred losses since our inception and negative cash flows from our operations, and as of September 30, 2021 we had an accumulated deficit of $438.9 million.

We anticipate that we will continue to incur losses for the reasonably foreseeable future.

Our primary uses of capital are, and we expect will continue to be, commercialization activities, research and development expense, including third-party clinical research and development services, laboratory and related supplies, clinical costs, including manufacturing costs, legal and other regulatory expense and general and administrative costs, partially offset by proceeds from sales of Jelmyto .

We cannot estimate the actual amounts necessary to successfully commercialize any approved products, including Jelmyto , 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.

In the event the Company is not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations.

The following table sets forth the significant sources and uses of cash for the periods set forth below: 

Nine Months Ended September 30,

(in thousands)

Net cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Net change in cash and cash equivalents

Operating Activities

Net cash used in operating activities was $64.8 million during the nine months ended September 30, 2021, compared to $84.6 million during the nine months ended September 30, 2020.

The $19.8 million decrease was attributable primarily to the decrease of $15.6 million in the net loss driven by revenue from sales of our product Jelmyto during the nine months ended September 30, 2021, as well as lower personnel related costs and the payment to the IIA during the nine months ended September 30, 2020.

Investing Activities

Net cash used in investing activities was $5.1 million during the nine months ended September 30, 2021, compared to $43.8 million provided by investing activities during the nine months ended September 30, 2020.

The net decrease of $48.9 million is primarily related to a decrease in maturities of marketable securities, in addition to an increase in purchases of marketable securities as compared to the prior year.

Financing Activities

Net cash provided by financing activities was $72.4 million during the nine months ended September 30, 2021, compared to $16.4 million during the nine months ended September 30, 2020.

The increase of $55.9 million is related to the receipt of $72.4 mil lion of net proceeds from the RTW Transaction in the current year, as compared to net proceeds received from sales under the ATM Sales Agreement in 2020.

Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off‑balance sheet arrangements as defined under SEC rules.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements