What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-21 compared with 2021-03-18 · 642 added, 363 removed, 409 unchanged (71% of the section changed)

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Index to financial statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm  (PCAOB ID 238 )

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of UroGen Pharma Ltd.

and its subsidiary (the “Company”) as of December 31, 2020, and the related consolidated statements of operations and comprehensive income, of shareholders' equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of UroGen Pharma Ltd.

and its subsidiary (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of shareholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

As described in Note 15 to the consolidated financial statements, the Company has recorded liabilities for uncertain tax positions of $2.7 million as of December 31, 2020.

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

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.

As disclosed by management, the Company has received final tax assessments up to and including its 2014 tax year.

The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are (i) the significant judgment by management when determining uncertain tax positions, including a high degree of estimation uncertainty relative to the interpretation of tax laws;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s timely identification and accurate measurement of uncertain tax positions;

(iii) the evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and resulted in significant auditor judgment as the nature of the evidence is often highly subjective;

and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Prepaid Forward Agreement - Obligation Liability

As described in Notes 3 and 9 to the consolidated financial statements, 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 funds 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 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. 

Each period the Company makes a payment to RTW an expense is recognized related to financing on the prepaid forward obligation based on an imputed rate derived from the expected future payments.

Management reassesses the effective rate each period based on the current carrying value of the obligation and the revised estimated future payments.

Changes in future payments from previous estimates are included in current and future financing expense.

The carrying value of the prepaid forward obligation liability was $85.7 million as of December 31, 2021.

The principal consideration for our determination that performing procedures relating to the prepaid forward agreement obligation liability is a critical audit matter is the significant audit effort in evaluating the accounting for the prepaid forward agreement and determining liability classification.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others (i) testing the information used in the calculation of the liability for uncertain tax positions, including intercompany agreements and the related final tax returns;

(ii) testing the calculation of the liability for uncertain tax positions, including management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained;

and (iii) testing the completeness of management’s assessment of both

the identification of uncertain tax positions and possible outcomes of each uncertain tax position.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s uncertain tax positions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, the application of relevant tax laws, and estimated interest and penalties .

These procedures included, among others, testing management’s process for determining the accounting for the prepaid forward agreement. 

Testing management’s process for determining the accounting for the prepaid forward agreement included (i) reading the prepaid forward agreement;

(ii) assessing the appropriateness of the accounting analysis used by management, (iii) assessing whether the terms of the prepaid forward agreement are accurately reflected within the accounting analysis, and (iv) evaluating the appropriateness of management’s determination of the liability classification of the prepaid forward obligation.

/s/ PricewaterhouseCoopers LLP

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March 21, 2022

We have served as the Company’s auditor since 2020.

To the Board of Directors and Shareholders of UroGen Pharma Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of UroGen Pharma Ltd.

and its subsidiary (the “Company”) as of December 31, 2019, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America .

Basis for Opinion

The consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Tel Aviv, Israel

/s/Kesselman & Kesselman

March 2, 2020

Certified Public Accountants (Isr.)

A member of PricewaterhouseCoopers International Limited

We served as the Company’s auditor from 2010 to 2019.

We have served as the Company’s auditor since 2020.

UROGEN PHARMA, LTD.

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Cash and cash equivalents

$ 44,360  

$ 52,864  

Marketable securities

44,779  

49,154  

Restricted cash

Accounts receivable

Prepaid expenses and other current assets

11,717  

Prepaid expense and other current assets

Total current assets

114,390  

115,619  

Non-current assets:

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Other non-current assets

$ 119,746  

$ 122,005  

Liabilities and Shareholders' Equity

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Accounts payable and accrued expenses

$ 12,102  

$ 10,023  

Employee related accrued expenses

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Total current liabilities:

22,380  

21,436  

Non-current liabilities:

Long-term lease liability

Prepaid forward obligation

85,713  

Long-term lease liabilities

Uncertain tax positions liability

Total Liabilities

111,333  

25,650  

Commitments and contingencies (Note 18)

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Ordinary shares, NIS 0.01 par value;

100,000,000 shares authorized at

December 31, 2020 and 2019;

22,167,791 and 21,026,184 shares issued

and outstanding as of December 31, 2020 and 2019, respectively

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

22,462,995 and 22,167,791 shares issued and outstanding as of December 31, 2021 and 2020, respectively

Additional paid-in capital

475,698  

452,525  

Accumulated deficit

( 467,321 )  

Accumulated other comprehensive income

( 25 )  

Total Shareholders' Equity

96,355  

Total Liabilities and Shareholders' Equity

$ 119,746  

$ 122,005  

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

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Year Ended December 31,

Revenues, net

Cost of revenues

Operating expenses:

Cost of revenue

Operating expense:

Research and development expenses

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Operating loss

Financing on prepaid forward obligation

Interest and other income, net

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Other comprehensive income

Unrealized (loss) gain on marketable securities

Unrealized (loss) on marketable securities, net of tax

Comprehensive Loss

Loss per ordinary share basic and diluted

Weighted average number of shares

outstanding used in computation

of basic and diluted loss per

ordinary share

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

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

UROGEN PHARMA, LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’

(in thousands, except share amounts)

Ordinary Shares

Other Comprehensive Income

Additional Paid-in Capital

Accumulated Deficit

Other Comprehensive Income (Loss)

Number of Shares

Balance as of January 1, 2020

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Share-based compensation

Issuance of ordinary shares in public

offering, net of issuance expenses

Other comprehensive income

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

Other comprehensive loss

Balance as of January 1, 2021

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Share-based compensation

Issuance of ordinary shares in public

offering, net of issuance expenses

Other comprehensive loss

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Depreciation and amortization

Amortization (accretion) on marketable securities

Stock-based compensation

Accrued financing on prepaid forward obligation

Amortization on marketable securities

Share-based compensation

Amortization of right of use asset

Lease liability

Lease liabilities

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Employee related accrued expenses

Current tax payable

Prepaid expense and other current assets

Other non-current assets

Accounts payable and accrued expense

Employee related accrued expense

Other current liabilities

Uncertain tax positions

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Cash Flows From Investing Activities

Change in restricted deposit

Purchase of marketable securities

Sales of marketable securities

Maturities of marketable securities

Purchase of property and equipment

Net cash provided by (used in) investing activities

Purchases of property and equipment

Net cash provided by investing activities

Cash Flows From Financing Activities

Proceeds from prepaid forward arrangement

Proceeds from exercise of options into ordinary shares

Issuance of ordinary shares, net of issuance expenses

Issuances of ordinary shares, net of issuance expenses

Issuance cost related to at-the-market issuances

Net cash provided by financing activities

Decrease in Cash and Cash Equivalents

Increase (Decrease) in Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash at Beginning of Year

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Purchase of property and equipment

Issuance cost

Accrued issuance cost

New lease liabilities

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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, clinical development of 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 biotechnology company dedicated to developing and commercializing innovative solutions that treat urothelial and specialty cancers.

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, clinical development of UGN- 102, 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

– 

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

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All material intercompany balances and transactions have been eliminated during consolidation.

The Company has experienced net losses since its inception and has an accumulated deficit of $ 356.5 million and $ 228.0 million as of December 31, 2020 and 2019, respectively.

The Company expects to incur losses and have negative net cash flows from operating activities as it expands its portfolio and engages in further research and development activities, particularly conducting non-clinical studies and clinical trials.

The Company has experienced net losses since its inception and has an accumulated deficit of $ 467.3  million and $ 356.5 million as of December 31, 2021 and 2020 , respectively.

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 will need to raise additional capital to finance the continued launch of Jelmyto and support its Phase 3 ATLAS trial.

Based on management’s cash flow projections the Company believes that its cash and cash equivalents and marketable securities, in addition to our recently announced debt financing agreement (see Note 19 for additional details) are sufficient to fund the Company’s planned operations for at least the next 12 months. 

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 at 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

3  – 

Significant Accounting Policies

Principles of Consolidation

The Company ’ s consolidated financial statements include the accounts of UPL and its subsidiary, UPI.

The Company’s consolidated financial statements include the accounts of UPL and its subsidiary, UPI.

Intercompany balances and transactions have been eliminated during consolidation.

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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 revenues and expenses 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 revenues and expenses during the reporting period.

Actual results may differ from those estimates.

As applicable to these consolidated financi a l statements, the critical accounting estimates relate to the fair value of share-based compensat i on, measurement of revenue and estimate of uncertain tax positions.

As applicable to these 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.

UROGEN PHARMA, LTD.

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Functional Currency

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.

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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 consolidated statements of operations as “Interest and other income, net”

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

Cash and Cash Equivalents;

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

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.

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.

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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.

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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.

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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.

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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.

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Laboratory equipment

3 - 6.5  

5 - 16.5  

Manufacturing equipment

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms.

See Note 8 for further discussion regarding property and equipment.

See Note 8  for further discussion regarding property and equipment.

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 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”.

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

The Company is a lessee in several noncancelable operating leases, primarily for office space, office equipment and vehicles.

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 consolidated balance sheets.

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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 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.

The Company has lease agreements with lease and non-lease components.

The Company applied the modified retrospective transition method and elected the transition option to use the effective date of January 1, 2019 as the date of initial application (“Transition Date”).

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 a 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 revenues 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 co-pay assistance program, which are estimated based on industry benchmarking studies as well as the Company’s historical experience.

The Company also derived revenues from its license and supply agreement with Allergan Pharmaceuticals International Limited (“Allergan”), a wholly owned subsidiary of Allergan plc which is now a part of AbbVie Inc.

(the “Allergan/AbbVie Agreement”).

Under the Allergan/AbbVie Agreement, the Company granted Allergan an exclusive license to develop, commercialize, and otherwise exploit products that contain reverse thermal hydrogel (“ RTGel ”) and agreed to supply Allergan with pre-clinical and clinical quantities of the RTGel product, also referred to as the RTGel vials.

See Note 11 for additional discussion related to the Company’s license and collaboration agreements.

Research and Development Expenses

Research and development costs are expen s ed as incurred and consist primarily of the cost of salaries, share-based compensat i on expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and d evelopment activities, including nonclinical studies, clinical trials, manufacturing costs and professional services.

The costs of services performed by others in connection with the research a nd development activities of the Company, including research and deve l opment conducted by others on behalf of the Company, are inc l uded in research and development costs and expensed as the contracted work is performed.

Research and development costs are expensed as incurred and consist primarily of the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including nonclinical studies, clinical trials, manufacturing costs and professional services.

The costs of services performed by others in connection with the research and development activities of the Company, including research and development conducted by others on behalf of the Company, are included in research and development costs and expensed as the contracted work is performed.

The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from its external service providers.

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The Company accrues for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from its service providers and adjusting its accruals as actual costs become known.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

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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

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For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted loss per share as their effect is anti-dilutive.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the calculation of basic and diluted loss per common share for the periods presented (in thousands, except share and per share amounts):

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Basic and diluted:

Loss attributable to equity holders of the

Company, after deducting dividend

accumulated for preferred shares

Loss attributable to equity holders of the Company

$ 110,820  

$ 128,484  

Weighted-average number of ordinary shares

22,347,481  

21,780,826  

Loss per ordinary share

$ 4.96  

$ 5.90  

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No.

2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments, or ASU 2016-13.

ASU 2016-13 requires the Company to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the Company’s current estimate of credit losses expected to be incurred.

For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded through net income instead of directly reducing the amortized cost of the investment under the prior other-than-temporary impairment model.

The Company applied the modified retrospective transition method as of the date of initial application, January 1, 2020 .

As of December 31, 2020, 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.

Similarly, the Company estimates minimal current expected credit losses on trade receivables and has not recognized any allowance for doubtful accounts in the period.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4-OTHER FINANCIAL INFORMATION

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.

N OTE 4 - o THER f INANCIAL I NFORMATION

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2021 and 2020 (in thousands):

December 31, 2021

December 31, 2020

Accounts payable

$ 5,786  

$ 3,271  

Accrued sales reserves

3 unchanged sentences

Accrued other expense

Total accrued expenses and other current liabilities

Interest and Other Income (Expenses), Net

Interest and other income (expenses) consisted of the following as of December 31, 2020 and 2019 (in thousands):

Accounts payable and accrued expenses

$ 12,102  

$ 10,023  

Interest and Other Income, Net

Interest and other income consisted of the following as of December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

Interest income

Other finance expenses

Total interest and other income

NOTE 5-INVENTORIES

Other finance expense

( 153 )  

Total interest and other income, net

$ 1,629  

N OTE 5 - I NVENTORIES

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

December 31, 2021

December 31, 2020

Raw materials (1)

$ 3,894  

Finished goods

Total inventories

NOTE 6-FAIR VALUE MEASUREMENTS

$ 5,852  

$ 1,964  

( 1 ) $ 1.0 million of raw materials at December 31, 2021 are included within other non-current assets on the condensed consolidated balance sheets.

N OTE 6 - F AIR V ALUE M EASUREMENTS

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.

1 unchanged sentence

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As a basis for considering such assumptions, a three -tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

2 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.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

6 unchanged sentences

US government

$ 19,307  

Corporate bonds

Commercial paper

14,492  

Money market funds (1)

21,402  

Certificates of deposit

Total marketable securities

Included within cash and cash equivalents on the Company ’ s consolidated balance sheets.

$ 66,856  

$ 40,709  

$ 26,147  

Included within cash and cash equivalents on the Company’s 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):

5 unchanged sentences

US government

$ 29,186  

Corporate bonds

Commercial paper

21,861  

Money market funds (1)

Certificates of deposit

39,744  

Total marketable securities

Included within cash and cash equivalents on the Company ’ s consolidated balance sheets.

The Company ’ s investments in money market funds are valued based on publicly available quoted market prices for identical securities as of December 31, 2020 and 2019.

NOTE 7-MARKETABLE SECURITIES

The following table summarizes the Company’s marketable securities as of December 31, 2020 (in thousands):

$ 90,791  

$ 68,930  

$ 21,861  

Included within cash and cash equivalents on the Company’s consolidated balance sheets.

The Company’s investments in US government bonds and money market funds are measured based on publicly available quoted market prices for identical securities as of December 31, 2021 and 2020 .

The Company's investments in corporate bonds, commercial paper and certificates of deposits are measured based on quotes from market makers for similar items in active markets.

N OTE 7 - M ARKETABLE S ECURITIES

The following table summarizes the Company’s marketable securities as of December 31, 2021 (in thousands):

Amortized Cost Basis

Unrealized Gains

Unrealized Losses

Marketable securities:

US government

$ 19,325  

$ ( 18 )  

$ 19,307  

Corporate bonds

Commercial paper

14,494  

14,492  

Money market funds (1)

21,402  

Certificates of deposit

Total marketable securities

$ 66,882  

$ ( 26 )  

$ 66,856  

Included within cash and cash equivalents on the Company’s consolidated balance sheets.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Included within cash and cash equivalents on the Company ’ s consolidated balance sheets.

The following table summarizes the Company’s marketable securities as of December 31, 2020 ( in thousands):

Marketable securities:

US government

Corporate bonds

Money market funds(1)

Total marketable securities

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

As of December 31, 2020, they were in a net unrealized gain position of $ 0.3 million.

As of December 31, 2021 , they were in a net unrealized loss position of approximately $ 26,000 .

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

As of December 31, 2020, the Company did no t hold any marketable securities in an unrealized loss position.

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

As of December 31, 2020, 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 December 31, 2020 mature at various dates through February 2022.

As of December 31, 2021 , the aggregate fair value of marketable securities held by the Company in an unrealized loss position was $ 37.0 million which consisted of 

23 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.

December 31, 2021, the Company believes the cost basis for its marketable securities were recoverable in all material aspects and 

no  allowance for credit loss has been recognized in the period.

The Company’s marketable securities as of December 31, 2021 mature at various dates through July 2023.

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

2 unchanged sentences

Maturities within one year

$ 66,181  

$ 88,898  

Maturities after one year through three years

Total marketable securities

NOTE 8-PROPERTY AND EQUIPMENT

$ 66,856  

$ 90,791  

N OTE 8 - P ROPERTY AND E QUIPMENT

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

4 unchanged sentences

accumulated depreciation and amortization

( 2,226 )  

Property and equipment, net

Depreciation and amortization expense was $ 0.4 million and $ 0.3 million for the years ended December 31, 2020 and 2019, respectively.

NOTE 9-LEASES

$ 1,967  

$ 2,046  

Depreciation and amortization expense was $ 0.8  million and $ 0.4  million for the years ended December 31, 2021 and 2020 , respectively.

9  – 

Prepaid Forward Obligation

March 2021 ,  the Company entered into a prepaid forward agreement with RTW Investments (“RTW”). Under the terms of the RTW Transaction, the Company received funds 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:

9.5 % of annual net sales up to $200  million, (ii) 

3.0 % of annual net sales for annual net sales between 

$200  million and 

$300  million, and (iii) 

1.0 % of annual net sales for annual net sales above 

$300  million.

If certain revenue thresholds for 

Jelmyto  aggregate worldwide annual net sales are 

not  met, the future cash payments to RTW with respect to 

Jelmyto  annual net sales up to 

$200  million will increase by 

3.5 %, and 

decrease back to 

9.5 %  dependent on the Company meeting certain subsequent 

Jelmyto  aggregate worldwide annual net sales thresholds.

Based on this provision, RTW will receive 13.0 % of annual net sales up to $ 200 million in 2022.

In addition, subject to FDA approval of UGN- 102 ,  RTW is entitled to receive tiered, future cash payments based on aggregate worldwide annual net product sales of UGN- 102  in an amount equal to:

2.5 % of annual net sales up to 

$200  million, (ii) 

1.0 % of annual net sales for annual net sales between 

$200  million and 

$300  million, and (iii) 

0.5 % of annual net sales for annual net sales above 

$300  million.

If the Company does 

not  receive FDA approval for UGN- 102  by a specified date, the future cash payments to RTW with respect to aggregate worldwide annual net sales of 

Jelmyto  across all 

Jelmyto  annual net sales tiers will increase by 

In accordance with the prepaid forward agreement, the Company will be required to make payments of amounts owed to RTW each calendar quarter, through and until the quarter in which the aggregate cash payments received by RTW are equal to or greater than $300  million.

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.

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.

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

Management reassesses the effective rate each period based on the current carrying value of the obligation and the revised estimated future payments.

Changes in future payments from previous estimates are included in current and future financing expense.

The carrying value of the prepaid forward obligation liability was $ 85.7 million as of December 31, 2021. 

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

17,291  

Amounts paid and payable (1)

Carrying value of prepaid forward obligation as of December 31, 2021

$ 85,713  

( 1 ) $1.5M of the Amounts paid and payable are included as current portion of the prepaid forward obligation within other current liabilities on the balance sheet

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N OTE 10 - L EASES

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 March 2019, UPL exercised the agreement extension option and extended the rental period for an 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 terminates in February 2021 .

In October 2020, the Company committed to and announced a plan to close the New York office and fully impaired the associated right of use asset.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

In October 2020, the Company committed to and announced a plan to close the New York office and recognized impairment losses of approximately $ 0.2 million in relation to the associated right of use asset.

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

1 unchanged sentence

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 $ 0.9 million as of December 31, 2020.

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 the end of November 2019.

The remaining rental payments to be received over the lease term is approximately $ 0.7 million as of December 31, 2020 .

The Company’s remaining contractual obligation under this lease is approximately $ 0.6 million as of December 31, 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 December 31, 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.

The main lease was considered for impairment and the amount was determined to be immaterial.

The ROU asset associated with the head lease was assessed for impairment; the Company concluded that there was no material impairment.

In November 2019, UPI entered into a new lease agreement for an office in Princeton, New Jersey, which the Company now uses as its headquarters.

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 $ 1.2 million as of December 31, 2020.

The Company’s remaining contractual obligation under this lease is approximately $ 0.6  million as of December 31, 2021 .

In addition, the Company leases operating office equipment and vehicles.

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 year ended December 31, 2020 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 year ended December 31, 2021  and 2020 were as follows (in thousands):

December 31, 2021

December 31, 2020

Operating lease cost

$ 1,045  

$ 1,812  

Sublease income

( 224 )  

Variable lease cost

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

December 31, 2020

$ 1,717  

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

Year Ended December 31, 2021

Year Ended December 31, 2020

Right of use asset

Long-term lease liability

$ 1,180  

$ 2,158  

Long-term lease liabilities

Other current liabilities

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

Supplemental information related to leases for the periods reported is as follows (in thousands, except for lease term and discount rate amounts):

December 31, 2021

December 31, 2020

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

1 unchanged sentence

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)

1.46 years  

Weighted-average discount rate of operating leases

5.62 %  

UROGEN PHARMA, LTD.

5 unchanged sentences

Total future minimum lease payments

$ 1,556  

Present value of lease liabilities

$ 1,487  

As of December 31, 2020 , maturities of lease liabilities were as follows (in thousands):

1 unchanged sentence

Years ending December 31,

$ 1,307  

2025 and thereafter

Total future minimum lease payments

As of December 31, 2020, undiscounted cash flows to be received under the Company’s operating sublease on an annual basis was as follows (in thousands):

$ 2,872  

As of December 31, 2021 , undiscounted cash flows to be received under the Company’s operating sublease on an annual basis was as follows (in thousands):

Operating Leases

2 unchanged sentences

Total future minimum sublease payments

As of December 31, 2020 undiscounted cash flows to be received under the Company’s operating sublease on an annual basis was as follows (in thousands):

Operating Leases

Years ending December 31,

2025 and thereafter

 — 

Total future minimum sublease payments

Sublease income is recognized net within operating expenses.

Sublease income for the year ended December 31, 2020 was as follows (in thousands):

Sublease income for the year ended December 31, 2021  and 2020 was as follows (in thousands):

December 31, 2021

December 31, 2020

Sublease income from fixed lease payments

NOTE 10-REVENUE FROM PRODUCT SALES

N OTE 11 - R EVENUE F ROM P RODUCT S ALES

Net product sales consist of the following for the year ended December 31, 2021 and 2020 (in thousands):

1 unchanged sentence

December 31, 2020

$ 48,042  

$ 11,799  

Net revenue recognized includes 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.

Reserves related to items that are contractually able to be net settled are recognized as contra accounts receivables. The Company had sales reserves within accounts receivable of $ 1.2  million and $ 0.5 million as of 

December 31, 2021 and 2020, respectively.

The remaining reserves are recognized as accrued expenses.

The Company had sales reserves within accrued expenses of $ 0.5 million and $ 0.4 million as of December 31, 2021 and 2020, respectively.

The following table shows the activity with respect to sales reserves for the year ended December 31, 2021 and 2020,  in thousands:

Reserves related to government sponsored programs

Other reserves

Total accrued sales reserves

Balance as of January 1, 2020

Changes during 2020

( 1,121 )  

( 731 )  

Balance as of December 31, 2020

Changes during 2021

( 3,774 )  

( 3,599 )  

Balance as of December 31, 2021

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11- LICENSE AND COLLABORATION AGREEMENTS

N OTE 12 - L ICENSE AND C OLLABORATION A GREEMENTS

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.

Additionally, the Company granted Allergan a non-exclusive, worldwide license to use certain of the Company’s trademarks as required for Allergan to practice its exclusive license with respect to the Licensed Products.

Under the Allergan/AbbVie Agreement, Allergan is solely responsible for costs and development of the Licensed Products and obtaining all regulatory approvals for Licensed Products worldwide, as well as worldwide commercialization of the Licensed Products after receiving the regulatory approval to do so.

Allergan is required to use commercially reasonable efforts to develop and commercialize the Licensed Products for overactive bladder in certain major market countries.

Further, the Company is eligible to receive additional material milestone payments of up to an aggregate of $ 200.0 million upon the successful completion of certain development, regulatory and commercial milestones.

As of December 31, 2020, since inception of the Allergan/AbbVie Agreement the Company has received a total of $ 25.0 million in milestone payments from Allergan.

Allergan will 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.

Under the Allergan/AbbVie Agreement, Allergan granted the Company a non-exclusive, sublicensable, fully paid-up, perpetual, worldwide license under any improvements Allergan makes to the composition, formulation, or manufacture of RTGel for the research, development, manufacture and commercialization of any product containing RTGel and any active ingredient (other than a clostridial toxin) for all indications other than indications covered by the agreement and an exclusive, sublicensable, royalty-bearing (in low single digits), perpetual worldwide license under such improvements for use in the prevention or treatment of oncology indications.

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.

The Company and AbbVie are continuing to explore the potential use of RTGel in combination with other products in AbbVie’s portfolio.

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.

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.

August 2020, 

the Company announced that the Phase 

2  APOLLO trial did 

not  meet the primary endpoint. The data suggested that this result 

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, in November 2021 the Allergan/AbbVie Agreement was terminated.

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 cancer.

Pursuant to the license Agreement, the Company paid Agenus an upfront fee of $ 10.0 million and has agreed to pay Agenus up to $ 115.0 million upon achieving certain clinical development and regulatory milestones, up to $ 85.0 million upon achieving certain commercial milestones, and royalties on net sales of licensed products in the 14 %- 20 % range.

Pursuant to the license Agreement, the Company paid Agenus an upfront fee of $ 10.0 million and has agreed to pay Agenus up to $ 115.0 million upon achieving certain clinical development and regulatory milestones, up to $ 85.0 million upon achieving certain commercial milestones, and royalties on net sales of licensed products in the 14 %- 20 % range.

The Company will be responsible for all development and commercialization activities.

Under the terms of the license agreement, Agenus has agreed to use commercially reasonable efforts to supply AGEN1884 to the Company for use in preclinical studies or clinical trials.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company recorded the $ 10.0 million milestone in acquired in-process research and development expenses for the year ended December 31, 2019.

NOTE 12-EMPLOYEE RIGHTS UPON RETIREMENT

In Israel, the Company is required by law to make severance payments upon dismissal of an employ e e or upon termination of employment in certain other circumstances.

The Company operates a number of post-employment defined contribution pl a ns.

A defined contribution plan is a program that benefits an employee after termination of employment, under which the Company re g ularly makes fixed payments to a separate and indepe n dent entity so that the Company has no legal or constructive obl i gation to pay additional contributi o ns if the fund does not hold sufficient assets to pay all employees the benefits relating to employee servi c e in the current and prior periods.

The fund assets are not included in the Company’s financial position.

The Company operates pension a n d severance compensation plans sub j ect to Section 14 of the Israeli Severance Pay Law, 5723-1963.

The plans are funded through payments to insurance compan i es or pension funds administered by trustees.

In accordance with its terms, the plans meet the definition of a defined contribution p lan, as defined above.

NOTE 13-SHAREHOLDERS’ EQUITY

MD Anderson Agreement

January 2021, 

the Company announced that it entered into a 

three -year strategic research collaboration agreement with MD Anderson focusing on the sequential use of UGN- 201 and UGN- 301 as an investigational treatment for high-grade NMIBC.

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

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

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

December 31, 2021, the Company has made payments to MD Anderson of $ 1,000,000 recognized evenly over the associated period through research and development expense.

N OTE 13 - E MPLOYEE R IGHTS U PON R ETIREMENT

In Israel, the Company is required by law to make severance payments upon dismissal of an employee or upon termination of employment in certain other circumstances.

The Company operates a number of post-employment defined contribution plans.

A defined contribution plan is a program that benefits an employee after termination of employment, under which the Company regularly makes fixed payments to a separate and independent entity so that the Company has no legal or constructive obligation to pay additional contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The fund assets are not included in the Company’s financial position.

The Company operates pension and severance compensation plans subject to Section 14 of the Israeli Severance Pay Law, 5723 - 1963.

The plans are funded through payments to insurance companies or pension funds administered by trustees.

In accordance with its terms, the plans meet the definition of a defined contribution plan, as defined above.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N OTE 14 - S HAREHOLDERS ’

Ordinary Shares

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

The Company had 22.2 million and 21.0 million ordinary shares issued and outstanding as of December 31, 2020 and 2019, respectively.

The Company had 22.5  million and 22.2  million ordinary shares issued and outstanding as of December 31, 2021 and 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.

Since its inception, the Comp a ny has not declared any dividends.

In January 2019, the Company completed an underwritten public offering of 4,207,317 of its ordinary shares, including 548,780 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 41.00 per share.

The net proceeds to the Company from the offering were approximately $ 161.4 million, after deducting the underwriting discounts and commissions and payment of other offering expenses.

In December 2019, the Company entered into a sales agreement (the “ATM Sales Agreement”) w ith Cowen and Company, LLC (“Cowen”), pursuant to which the Company may from time to time offer and sell the Company’s ordinary shares having an aggregate offering price of up to $ 100.0 million to or through Cowen, acting as sales agent or principal .

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

The net proceeds to the Company 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.

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

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Also, eligible employees may receive an annual grant of options or RSU’s.

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

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.

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 incentive stock options to the Company's employees and for the grant of nonstatutory 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 may initially be issued under the 2017 Plan is 1,400,000 .

In addition, the number of ordinary shares reserved for issuance under the 2017 Plan will automatically increase on January 1st of each calendar year, from January 1, 2018 through January 1, 2026, so that the number of such shares reserved for issuance will equal 12 % of the total number of ordinary shares outstanding on the last day of the calendar month prior to the date of each automatic increase, or a lesser number of shares determined by the Board.

The maximum number of ordinary shares that may be issued upon the exercise of stock options under the 2017 Plan is 5,600,000 .

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 increased the amount of registered ordinary of the Company’s 2017 plan by 400,000 to 3,950,167 .

On January 3, 2019, the Company appointed Elizabeth Barrett as its President and Chief Executive Officer.

In connection with Ms.

Barrett’s employment, she was granted 277,432 options to purchase the Company’s ordinary shares, at an exercise price of $ 47.57 , as well as 317,065 RSUs, with a combined grant-date fair value of $ 24.1 million.

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.

In June 2019, the Board approved grants of 70,000 options to its non-employee directors.

Each then current non-employee director, including the Chairman of the Board, received a grant of 10,000 options.

Each option is exercisable into one ordinary share of the Company’s stock at an exercise price of $ 34.83 per share.

The options vest quarterly over one year and expire 10 years from grant date.

The grant date fair value of these options was approximately $ 1.9 million.

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.

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

N OTE 15 - S HARE- B ASED C OMPENSATION

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 

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 

 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 ("RSUs"), upon commencement of employment.

Also, eligible employees 

receive an annual grant of options or RSUs.

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 on the date of grant.

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 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 employees’

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

March 2017, 

the Board adopted the 

2017  Equity Incentive Plan (the 

"2017  Plan"), which was approved by the shareholders in 

April 2017. 

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 was 1,400,000 . On 

January 1, 2018, 

the share reserve increased by 

250,167  to 

October 12, 2018, 

the Company increased the amount of registered ordinary shares of the Company’s 

2017  Plan by 

1,900,000  to 

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 

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 

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, RSU or other right to receive ordinary shares pursuant to the Inducement Plan.

In December 2021, the Board approved a 300,000  increase in the share reserve of the Inducement plan.

As of December 31, 2021, 3,722,831 ordinary shares are subject to outstanding awards under the Company's share-based compensation plans, and 1,168,949 ordinary shares remain available for future awards.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In December 2019, the Board approved a modification of options and RSU's for a consultant.

The Company recorded an expense of $ 0.9 million under general and administrative expenses with respect to options' modification.

No compensation expense was taken in relation to the RSUs modification because the award vests upon a future performance condition that is not currently probable of occurring.

In June 2020, the Board approved grants of an aggregate of 70,000 options to its non-employee directors.

Each non-employee director, including the Chairman of the Board, received a grant of 10,000 options.

Each option is exercisable into one ordinary share of the Company’s stock at an exercise price of $ 28.24 per share.

The options vest quarterly over one year and expire 10 years from the grant date.

The grant date fair value of these options was approximately $ 1.5 million.

Options granted:

1 unchanged sentence

The majority of options vest over three years and expire on the tenth anniversary of the date of grant.

During 2021 , the Company granted 593,000 options with exercise prices ranging from $ 11.92 to $ 22.07  per share.

During 2020 , the Company granted 400,600 options with exercise prices ranging from $ 16.50 to $ 29.41 per share.

b) During 2019, the Company granted 955,732 options with exercise prices ra n ging from $ 33.21 to $ 47.57 per share.

The fair value of options granted during 2020 and 2019 was $ 6.7 and $ 27.6 million, respectively.

The total unrecognized compensati o n cost of options as of December 31, 2020 was $ 13.5 million, whi c h is expected to be recognized over a weighted average period of 1.37 years.

The fair value of options granted was computed using the Black-Scholes mod e l.

The fair value of options granted during 

2021 and 2020 was $ 7.0 and $ 6.7 million, respectively.

The total unrecognized compensation cost of options as of December 31, 2021 was $ 7.3 million, which is expected to be recognized over a weighted average period of 1.92 years.

The fair value of options granted was computed using the Black-Scholes model.

The underlying data used for computing the fair value of the options are as follows:

Value of ordinary shares

Dividend yield

Expected volatility

11.92 2 22.07 7

16.50 0 29.41 1

Dividend yield

Expected volatility

73.76 %- 79.16 %  

71.43 %- 79.80 %  

Risk-free interest rate

Expected term

5.9- 10 years

5.8- 10 years

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.

0.60 %- 1.62 %  

0.37 %- 1.35 %  

Expected term (in years)

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 following table summarizes the number of employee and non-employee options o utstanding under the Plan for the years ended Decem b er 31, 2020 and 2019, and related inform a tion:

Average price

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

The following table summarizes the number of employee and non-employee options outstanding under the Plan for the years ended December 31, 2021 and 2020 , and related information:

Number of options

Weighted Average price per share

Outstanding as of January 1, 2020

2,871,335  

$ 32.93  

400,600  

Canceled/Forfeited

( 408,534 )  

( 137,070 )  

Outstanding as of December 31, 2020

2,726,331  

$ 31.29  

593,000  

Canceled/Forfeited

( 337,717 )  

( 12,057 )  

Outstanding as of December 31, 2021

2,969,557  

Vested and expected to vest, December 31, 2021

2,969,557  

Exercisable, December 31, 2021

2,149,699  

$ 29.69  

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The intrinsic value of stock options exercised was $ 2.3 million and $ 14.2 million for the years ended December 31, 2020 and 2019, respectively.

The following table summarizes the outstand i ng and exercisable options as of December 31, 2020:

The intrinsic value of stock options exercised was $ 0.2  million and $ 2.3 million for the years ended December 31, 2021 and 2020 , respectively. 

The following table summarizes the outstanding and exercisable options as of December 31, 2021 :

Options outstanding

Options exercisable

Number of options

outstanding at end

Weighted average

contractual life

Number of options

exercisable at end of

Weighted average

remaining contractual

$0.00 - 10.00

$10.01 - 20.00

$20.01 - 30.00

$30.01 - 40.00

$40.01 - 50.00

$50.01 - 59.23

The aggregate intrinsic value of the total vested and e x ercisable options as of December 31, 2020 is $ 7.7 million.

Exercise price per share

Number of options outstanding at end of year

Weighted average remaining contractual life

Number of options exercisable at end of year

Weighted average remaining contractual life

$ 0.00 - 10.00  

576,267  

$ 10.01 - 20.00  

590,500  

178,165  

$ 20.01 - 30.00  

503,300  

215,798  

$ 30.01 - 40.00  

351,000  

338,667  

$ 40.01 - 50.00  

852,490  

744,802  

$ 50.01 - 59.23  

96,000  

2,969,557  

2,149,699  

The aggregate intrinsic value of the total vested and exercisable options as of December 31, 2021 is $ 2.4 million.

The following table summarizes information about RSU activity as of December 31, 2021 :

Restricted Stock

Outstanding Restricted Stock Units

Outstanding as of January 1, 2020

519,427  

591,480  

Vested and released

Outstanding as of December 31, 2020

720,416  

501,125  

Vested and released

Outstanding as of December 31, 2021

The fair value of RSUs granted during 2020 and 2019 was $ 15.6 and $ 19.9 million, respectively.

753,274  

The fair value of RSUs granted during 

2021 and 2020 was $ 9.9  million and $ 15.6 million, respectively.

The total unrecognized compensation cost of RSUs as of December 31, 2021 is $ 11.1 million with a weighted average recognition period of 1.84 years.

The following table illustrates the effect of share-based com p ensation on the Statements of Operations:

The following table illustrates the effect of share-based compensation on the Statements of Operations:

Year ended December 31,

Research and development expenses

$ 4,009  

$ 6,432  

Selling, general and administrative expenses

19,104  

21,593  

Total share-based compensation expense

$ 23,113  

$ 28,025  

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15-INCOME TAXES

N OTE 16 - I NCOME T AXES

The Company is taxed under Israeli tax laws:

1 unchanged sentence

The applicable Israeli tax rate relevant to the Company for 2020 and thereafter is 23 %.

For financial reporting purposes, the expense for current income taxes consists of the following:

For financial reporting purposes, the expense for current income taxes consists of the following (in thousands):

Current taxes:

$ 1,454  

$ 3,218  

Total current taxes

$ 1,449  

$ 3,374  

Deferred income taxes:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company and its subsidiary deferred tax assets are as follows:

Significant components of the Company and its subsidiary deferred tax assets are as follows (in thousands):

In respect of:

Net operating loss carryforward

$ 77,277  

$ 57,607  

Research and development expenses

Stock-based compensation

10,958  

Issuance costs

1 unchanged sentence

Right of use asset

Lease Liability

( 228 )  

Lease Liabilities

Accrued expenses

Depreciation of fixed assets

Less—valuation allowance

( 158 )  

Less—valuation allowance

( 100,619 )  

Net deferred tax assets

The change in valuation allowance for the years ended December 31, 2020 and 2019 were as follows:

The change in valuation allowance for the years ended December 31, 2021 and 2020 were as follows (in thousands):

Balance at the beginning of the year

$ ( 76,963 )  

Changes during the year

( 23,656 )  

Balance at the end of the year

The main reconciling item between the statutory tax rates of the Company and the effective rate is the share-based compensation

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

, the provision for a full valuation allowance in respect of tax benefits from carryforward tax losses due to the uncertainty of the realization of such tax benefits , and expense related to uncertain tax positions .

A reconciliation of the Company’s statutory tax rate to effective tax is as follows:

Pretax income

$ ( 100,619 )  

The main reconciling item between the statutory tax rates of the Company and the effective rate is the share-based compensation, the provision for a full valuation allowance in respect of tax benefits from carryforward tax losses due to the uncertainty of the realization of such tax benefits, and expense related to uncertain tax positions.

A reconciliation of the Company’s statutory tax rate to effective tax is as follows (in thousands, except statutory rate):

$ ( 109,371 )  

$ ( 125,110 )

Statutory rate

Income tax expense/(benefit) at statutory rate

( 25,155 )  

Additional tax (tax saving) in respect of:

Non-deductible expenses

Non-deductible compensation expense (1)

Different tax rate of foreign subsidiaries

( 58 )  

Uncertain tax positions

Change in valuation allowance

23,656  

26,370  

Income tax expense

$ 1,449  

$ 3,374  

(1) Certain prior period amounts have been reclassified to conform with the current period presentation

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Pretax loss for December 31, 2021 and 2020 includes pretax loss from foreign (U.S.) jurisdictions of $ 10.1 million and $ 17.0 million, respectively

The Internal Revenue Code contains provisions that may limit our use of federal net operating loss carryforwards if significant changes occur in the constructive stock ownership of UroGen Pharma Inc.

In the event it has had an “ownership change” within the meaning of Section 382 of the Code, utilization of its net operating loss carryforwards could be restricted under Section 382 of the Code and similar state provisions.

Such limitations could result in the expiration of the net operating carryforwards incurred before 2018 before their utilization.

Losses for tax purposes carried forward to future years

As of December 31, 2020, and December 31, 2019, the Company had approximately $ 250.2 and $ 151.9 million of net carryforward tax losses, respectively, available to reduce future taxable income without limitation of use.

In the event it has had an “ownership change”

within the meaning of Section 382 of the Code, utilization of its net operating loss carryforwards could be restricted under Section 

382 of the Code and similar state provisions.

Such limitations could result in the expiration of the net operating carryforwards incurred before 2018 before their utilization. 

Losses  

purposes  

carried  

forward  

future  

As of December 31, 2021 , and December 31, 2020 , the Company had approximately $ 335.8 million and $ 250.2 million of carryforward tax losses, prior to tax effecting, respectively, available to reduce future taxable income without limitation of use.

Uncertain tax positions

A reconciliation of the beginning and ending amount of uncertain tax positions is as follows:

A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):

Uncertain tax positions at the beginning of the year

Gross increases — tax positions in current period

Gross increases — tax positions in prior period

$ 2,717  

Gross increases —

tax positions in current period

Gross increases —

tax positions in prior period

Uncertain tax positions at the end of the year

The balances of uncertain tax positions as of December 31, 2020 would affect the Company’s effective tax rate if recognized.

The Company has recorded liabilities for uncertain tax positions of $ 2.7 million as of December 31, 2020 for tax positions relating to transfer pricing between affiliated entities.

$ 2,842  

$ 2,717  

The balances of uncertain tax positions as of December 31, 2021 would affect the Company’s effective tax rate if recognized.

The Company has recorded liabilities for uncertain tax positions of $ 2.8  million as of December 31, 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 December 31, 2020, the Company has accrued $ 0.7 million of interest and penalties related to uncertain tax positions.

As of December 31, 2021 , the Company has accrued $ 0.9  million of interest and penalties related to uncertain tax positions.

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

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.

1 unchanged sentence

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 have recorded the gross uncertain tax positions as a long-term liability.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company has received final tax assessments up to and including its 2014 tax year.

NOTE 16-RELATED PARTIES

There were no related party transactions for the year ended December 31, 2020 or 2019.

NOTE 17-COMMITMENTS AND CONTINGENCIES

N OTE 17 - R ELATED P ARTIES

There were no related party transactions for the year ended 

December 31, 2021 or 2020 .

N OTE 18 - C OMMITMENTS AND C ONTINGENCIES

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 December 31, 2020 and 2019.

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 December 31, 2021 and 2020 .

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

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

The Company has received grants from the IIA for research and development fundi n g.

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

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.

3 unchanged sentences

Other than the commitment to continue at least 75 % of its based R&D jobs in Israel (at the time of settlement) for a period of at least three years, all other obligations with the IIA ceased to exist as per the agreement.

Separation Agreement

On September 7, 2020, the Company entered into a Separation Agreement with Peter Pfreundschuh, the Company’s Chief Financial Officer, which sets forth the terms of Mr.

Pfreundschuh’s termination of employment with the Company, effective as of October 15, 2020.

The arrangement includes cash severance, a pro rata portion of the target annual bonus for calendar year 2020 contingent on certain performance conditions, and partial acceleration of share-based compensation.

The Company recognized $ 0.7 million during the year ended December 31, 2020 in relation to this arrangement.

NOTE 18-SUBSEQUENT EVENTS

In January 2021, the Company announced that it 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 the Company will collaborate on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee.

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

Pursuant to the agreement, the Company made an upfront payment to MD Anderson of $ 500,000 .

In March 2021, the Company announced a transaction with RTW Investments (“RTW”) totaling $75.0 million in funding for the Company to support the launch of Jelmyto and the development of UGN-102.

RTW will provide the Company with an upfront cash payment of $ 75.0 million and will receive tiered future payments based on global annual net product sales of Jelmyto and UGN-102, if approved.

N OTE 19 - S UBSEQUENT E VENTS

On March 2, 2022, the Company signed an amendment to its supply agreement with Cenexi-Laboratoires Thissen S.A.

Under the amendment, Cenexi will reserve sufficient capacity in order to fulfill certain minimum annual order quantities based on forecasts provided by the Company.

To the extent the Company does not order the minimum annual quantity for any given year, the Company will make shortfall payments for any manufacturing capacity that Cenexi is not able to refill with replacement manufacturing services to other customers.

On March 7, 

2022, the Company entered into a loan agreement with funds managed by Pharmakon Advisors, L.P.

(“Pharmakon”) for a senior secured term loan of up to $ 100 million in two tranches.

The first tranche of $ 75 million ($ 72.6 million net of transaction costs) was funded in March 2022.

At its option, the Company 

may draw up to an additional $ 25 million before December 31, 2022, subject to customary bring down conditions and deliverables.

The facility will mature five years from initial funding and can be prepaid in whole at UroGen’s discretion, at any time, subject to prepayment premiums and makewhole amounts. The loan will require interest-only payments for the first 48 months followed by principal and interest payments with interest accruing using 3 -month London Inter-Bank Offered Rate (“LIBOR”) (with a 1.25 % floor) plus 8.25 %. In the event of the cessation of LIBOR, the benchmark governing the interest rate will be replaced with a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data