What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-24 compared with 2022-03-21 · 280 added, 265 removed, 786 unchanged (41% of the section changed)

Financial Statements and Supplementary Data

UroGen Pharma, Ltd.

UroGen Pharma Ltd.

Index to financial statements

2 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Shareholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

4 unchanged sentences

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”).

and its subsidiary (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of shareholders' equity (deficit) 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, 2022 and 2021, 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.

Substantial Doubt About the Company ’

s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has incurred losses and experienced negative operating cash flows since its inception that raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

15 unchanged sentences

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.

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.

Revenue Recognition - Gross Revenue from Product Sales

As described in Notes 1, 3 and 12 to the consolidated financial statements, product sales from the Company’s commercial product, Jelmyto, are recognized as revenue at the point in time that control of the product has been transferred to the customer, generally at the point the product has been delivered to the treating physician.

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

Net revenue recognized includes gross revenue and 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.

The Company’s consolidated net revenue was $64.4 million for the year ended December 31, 2022, of which gross revenue from product sales represented a majority.

The principal consideration for our determination that performing procedures relating to revenue recognition for gross revenue from product sales is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.

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, 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.

These procedures included, among others (i) testing the Company’s reconciliation of gross revenue recognized from product sales to third-party information, (ii) evaluating reconciling items, as applicable, (iii) confirming sales terms with the Company’s single customer, (iv) confirming accounts receivable from product sales of Jelmyto with the Company’s single customer, and (v) evaluating a sample of gross revenue transactions by obtaining and inspecting source documents, including the customer contract, purchase orders, invoices, proof of delivery, cash remittances, and bank statements, as applicable.

/s/ PricewaterhouseCoopers LLP

2 unchanged sentences

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

UROGEN PHARMA, LTD.

UROGEN PHARMA LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(in thousands, except share amounts and par value)

Current assets:

8 unchanged sentences

12,704  

Prepaid expense and other current assets

11,717  

Prepaid expenses and other current assets

11,101  

Total current assets

4 unchanged sentences

Restricted deposit

Right of use asset

Right of use assets

Marketable securities

2 unchanged sentences

$ 119,746  

Liabilities and Shareholders' Equity

Liabilities and Shareholders' Equity (Deficit)

Current liabilities:

10 unchanged sentences

98,923  

85,713  

Long-term debt

97,537  

Long-term lease liabilities

4 unchanged sentences

Commitments and Contingencies (Note 19)

Shareholders' equity:

Shareholders' Equity (Deficit):

Ordinary shares, NIS 0.01 par value;

6 unchanged sentences

( 577,104 )  

Accumulated other comprehensive income

Accumulated other comprehensive loss

( 107 )  

Total Shareholders' Equity

Total Shareholders' (Deficit) Equity

( 89,361 )  

Total Liabilities and Shareholders' Equity

Total Liabilities and Shareholders' (Deficit) Equity

$ 135,619  

1 unchanged sentence

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

UROGEN PHARMA, LTD.

UROGEN PHARMA LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

2 unchanged sentences

Cost of revenue

Operating expense:

Operating expenses:

Research and development expenses

2 unchanged sentences

Financing on prepaid forward obligation

Interest expense on long-term debt

Interest and other income, net

2 unchanged sentences

Statements of Comprehensive Loss

Other comprehensive income

Unrealized (loss) on marketable securities, net of tax

Other comprehensive (loss)

Unrealized (loss) on investments

Comprehensive Loss

Loss per ordinary share basic and diluted

Net loss per ordinary share - basic and diluted

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

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

UROGEN PHARMA, LTD.

UROGEN PHARMA LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’

EQUITY (DEFICIT)

(in thousands, except share amounts)

2 unchanged sentences

Accumulated Deficit

Other Comprehensive Income (Loss)

Other Comprehensive Loss

Number of Shares

3 unchanged sentences

Share-based compensation

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

Other comprehensive loss

6 unchanged sentences

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

UROGEN PHARMA, LTD.

UROGEN PHARMA LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

4 unchanged sentences

Depreciation and amortization

Inventory Obsolescence

Accrued financing on prepaid forward obligation

Amortization on marketable securities

Amortization (accretion) on marketable securities

Share-based compensation

Amortization of right of use asset

Lease liabilities

Amortization of discount on long-term debt

Amortization of right of use assets

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expense and other current assets

Prepaid expenses and other current assets

Other non-current assets

Accounts payable and accrued expense

Employee related accrued expense

Accounts payable and accrued expenses

Employee related accrued expenses

Other current liabilities

Lease liabilities

Uncertain tax positions

1 unchanged sentence

Cash Flows From Investing Activities

Purchase of marketable securities

Purchases of marketable securities

Sales of marketable securities

5 unchanged sentences

Proceeds from exercise of options into ordinary shares

Issuances of ordinary shares, net of issuance expenses

Proceeds from issuance of long-term debt

Issuance cost related to at-the-market issuances

4 unchanged sentences

Supplemental Disclosures of Non-Cash Activities

Purchase of property and equipment

Accrued issuance cost

New lease liabilities

Non-cash issuance cost

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

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

12 unchanged sentences

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

– 

Basis of Presentation

– Basis of Presentation

The Company has experienced net losses since its inception and has an accumulated deficit of $ 577.1  million and $ 467.3  million as of December 31, 2022 and 2021 , respectively. The Company expects to incur losses and have negative net cash flows from operating activities as it executes on its strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials.

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

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

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

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 $ 467.3  million and $ 356.5 million as of December 31, 2021 and 2020 , 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 nonclinical studies and clinical trials.

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

Based on management’s cash flow projections the Company believes that its cash and cash equivalents and marketable securities, 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.

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

In accordance with the accounting guidance related to the presentation of financial statements, management evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the date the financial statements are issued.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, and do not include any adjustments relating to the carrying amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company’s ability to continue as a going concern is expected to be impacted by its ability to raise additional capital to fund its operations, produce cash inflows from Jelmyto product sales and develop UGN- 102.

The Company believes that absent sufficient proceeds received from equity, financing, or business development transactions, the Company will not have sufficient cash and cash equivalents to fund its operations beyond one year from the issuance of these financial statements.

Accordingly, the Company will, over the next twelve months, require significant additional financing to continue its operations.

In addition, there can be no assurances that the Company will be able to secure such additional financing if at all, on terms that are satisfactory to the Company, and in amounts sufficient to meet its needs.

These factors raise substantial doubt about the ability of the Company to continue as a going concern. 

Failure to successfully receive additional financing will require the Company to delay, limit or reduce product development and commercialization efforts.

3  – 

5 unchanged sentences

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

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 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.

As applicable to the 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.

5 unchanged sentences

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 in “Interest and other income, net”.

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

Cash and Cash Equivalents;

Marketable Securities

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

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 —

The Company presents all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents.

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

The Company accounts for its investments, which include cash equivalents and marketable securities, as available-for-sale in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments —

Debt and Equity Securities”.

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

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

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

The cost of securities sold is based on the specific-identification method.

Short-term investments are valued using models or other valuation methodologies that use Level 2 inputs.

Certain short-term investments are valued using models or other valuation methodologies that use Level 2 inputs.

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.

3 unchanged sentences

Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.

Restricted cash is related primarily to cash held to secure corporate credit cards;

restricted deposits are related to cash held to secure leases.

Concentration of Credit Risk

12 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 liability method.

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 United States. 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.

19 unchanged sentences

Manufacturing equipment

2 - 10  

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

8 unchanged sentences

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

Long-Term Debt

The Company is party to a loan agreement with funds managed by Pharmakon Advisors, L.P.

(“Pharmakon”).

The Company recognizes interest expense in current earnings, and accrued interest within other current liabilities on the consolidated balance sheets.

The Company recognizes capitalized financing expenses as a direct offset to the long-term debt on the Company's consolidated balance sheets and amortizes them over the term of the debt using the effective interest method.

See Note 10 for further discussion related to long-term debt.

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

14 unchanged sentences

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.

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

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

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

Net 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.

Net revenue recognized includes gross revenue and 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 the Company’s historical experience.

Research and Development Expenses

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 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, shall be 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.

The Company adjusts its accrual as actual costs become known.

Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are achieved.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors, employees and consultants).

Selling, general and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors, employees and consultants).

Other significant costs include commercial, medical affairs, external professional service costs, facility costs, accounting and audit services, legal services and other consulting fees.

Selling, general and administrative costs are expensed as incurred.

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.

Selling, general and administrative costs are expensed as incurred, and 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.

Share-Based Compensation

22 unchanged sentences

$ 4.96  

Recently Adopted Accounting Pronouncements

Recently Adopted Issued Pronouncements

The Company has reviewed the Accounting Standards Updates recently issued by the Financial Accounting Standards Board, and determined that they are 

2 unchanged sentences

Accounts Payable and Accrued Expenses

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

Accounts payable and accrued expenses consisted of the following as of December 31, 2022 and 2021 (in thousands):

December 31, 2022

5 unchanged sentences

Accrued clinical expenses

Accrued research and development costs

Accrued general and administrative expenses

Accrued other expense

Accounts payable and accrued expenses

Accrued research and development expenses

Accrued selling, general and administrative expenses

Accrued other expenses

Total accounts payable and accrued expenses

$ 12,383  

1 unchanged sentence

Interest and Other Income, Net

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

Interest and other income, net consisted of the following as of December 31, 2022 and 2021 (in thousands):

Year Ended December 31,

Interest income

Other finance expense

( 153 )  

Other income (expense), net

Total interest and other income, net

6 unchanged sentences

$ 4,676  

$ 3,894  

Finished goods

2 unchanged sentences

$ 5,852  

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

( 1 )  $ 2.4  million and $ 1.0 million of raw materials are included within other non-current assets on the consolidated balance sheets at December 31, 2022 and December 31, 2021, respectively.

Changes in non-current assets are reflected on the consolidated statements of cash flows within the caption of other non-current assets.

N OTE 6 - F AIR V ALUE M EASUREMENTS

9 unchanged sentences

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.

The carrying amounts of the Company’s cash, restricted cash, 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 assets and liabilities. 

The carrying value of the prepaid forward obligation (See Note 9 - Prepaid Forward Obligation) approximates its fair value. 

The Company estimated the fair value of the prepaid forward obligation using Level 3 inputs, including internally developed financial forecasts and management's estimate of probability of success related to product candidates, and determined that the effective interest rate in the obligation approximates market rates for loans with similar terms and risk characteristics.

The Company estimated the fair value of long-term debt (see Note 10 - Long-Term Debt) using the income approach with Level 3 inputs.

The Company estimated future floating rate interest payments using a forward curve of a three -month benchmark rate, and estimated fair value based on publicly available data reported in the financial statements of publicly traded venture lending companies.

Based on a reasonable range of yields for debt instruments of similar tenor in a similar industry, the Company determined that the carrying value of the long-term debt on the Company's balance sheet approximates its fair value.

No transfers between levels have occurred during the periods presented.

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2021 are as follows (in thousands):

Assets measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2022 are as follows (in thousands):

Fair Value Measurements Using

8 unchanged sentences

Commercial paper

14,492  

Money market funds (1)

21,402  

Certificates of deposit

3 unchanged sentences

$ 15,863  

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):

Assets measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2021 are as follows (in thousands):

Fair Value Measurements Using

2 unchanged sentences

Identical Assets

Cash equivalents

Money market funds

$ 21,402  

Marketable securities

3 unchanged sentences

Corporate bonds

Commercial paper

14,492  

Money market funds (1)

Certificates of deposit

Total marketable securities

$ 45,454  

$ 19,307  

Total marketable securities

$ 26,147  

Total assets at fair value

$ 66,856  

$ 40,709  

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

$ 26,147  

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, 2022 and 2021 .

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):

7 - I nvestments

The following table summarizes the Company’s investments as of December 31, 2022 (in thousands):

Amortized Cost Basis

9 unchanged sentences

( 25 )  

14,492  

Money market funds (1)

21,402  

Certificates of deposit

( 28 )  

Total marketable securities

2 unchanged sentences

$ 44,556  

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

UROGEN PHARMA LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

Amortized Cost Basis

Unrealized Gains

Unrealized Losses

Cash equivalents

Money market funds

$ 21,402  

Marketable securities

US government

$ 19,325  

$ ( 18 )  

$ 19,307  

Corporate bonds

Money market funds(1)

Commercial paper

14,494  

14,492  

Certificates of deposit

Total marketable securities

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

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

$ 45,480  

$ ( 26 )  

$ 45,454  

Total assets at fair value

$ 66,882  

$ ( 26 )  

$ 66,856  

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

As of December 31, 2022 , the amortized cost of investments included an immaterial amount of accrued interest.

As of December 31, 2022 , marketable securities were in a net unrealized loss position.

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

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.

As of December 31, 2022 , the aggregate fair value of investments held by the Company in an unrealized loss position was $ 42.2  million which consisted of 20  securities. The unrealized loss was primarily driven by rising interest rates.

The Company does 

4 unchanged sentences

December 31, 2022 , 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):

no  allowance for credit losses were recognized in the period.

The Company’s investments as of December 31, 2022 mature at various dates through August 2023.

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

December 31, 2022

4 unchanged sentences

Maturities after one year through three years

Total marketable securities

Total investments

$ 44,556  

11 unchanged sentences

$ 1,967  

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

Depreciation and amortization expense was $ 0.9 million and $ 0.8 million for the years ended December 31, 2022 and 2021 , 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.

March 2021 ,  the Company entered into a prepaid forward agreement with RTW Investments (“RTW”). Under the terms of the RTW Transaction, the Company received $ 75.0 million ($ 72.4  million net of transaction costs) to support the continued launch of Jelmyto and the development of UGN- 102.

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

15 unchanged sentences

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.

The rate in effect for the year ended December 31, 2022 for annual net sales up to $ 200 million was 13.0 %.

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:

18 unchanged sentences

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 

Changes in future payments from previous estimates are included in future financing expense. The Company does 

not  expect to make any principal payments in the next 

9 unchanged sentences

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

Financing on prepaid forward obligation

21,559  

Amounts paid and payable (1)

Carrying value of prepaid forward obligation as of December 31, 2022

$ 98,923  

( 1 ) $ 2.3 million and $ 1.5 million of the Amounts paid and payable are included as current portion of the prepaid forward obligation within other current liabilities on the consolidated balance sheets as of December 31, 2022 and December 31, 2021, respectively.

UROGEN PHARMA LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N OTE 10 - L EASES

NOTE 10 - Long-Term Debt

March 7, 

2022,  the Company entered into a loan agreement with Pharmakon for a senior secured term loan of up to $ 100  million in 

two  tranches.

first  tranche of $ 75  million was funded in 

The second tranche of $ 25 million was funded in December 2022.

The facility will mature 

five  years from initial funding and can be prepaid in whole at the Company's discretion, at any time, subject to prepayment premiums and make-whole amounts. The loan will require interest-only payments for the 

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.

The Company is not required to maintain any financial covenants.

The Company incurred financing expenses of $ 4.2 million which are recognized as a direct offset to the long-term debt on the Company's consolidated balance sheets.

These debt issuance costs are amortized over the term of the debt using the effective interest method, and are recorded in the consolidated statements of operations as “Interest expense".

The following table shows the activity with respect to the carrying value of the long-term debt, in thousands:

Long-term debt at closing of Pharmakon loan

$ 100,000  

Capitalized costs and discounts

Interest expense

Carrying value of Pharmakon loan as of December 31, 2022

$ 97,537  

N OTE 11  - 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.

The Company had the following office and laboratory facility leases as of December 31, 2022 :

In April 2016, UPL signed an addendum to its November 2014 lease agreement for the Company’s offices located in Israel, in order to increase the office space rented and to extend the rent period for an additional three years until August 2022. 

July 2022, 

the Company signed a lease extension agreement for the Company’s offices located in Israel, extending the term of the lease through 

September 2025.  

The Company's remaining contractual obligation under this lease is approximately $ 0.7  million as of December 31, 2022.

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

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

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 $ 0.6 million as of December 31, 2021 .

The Company’s remaining contractual obligation under this lease is approximately $ 0.4  million as of December 31, 2022 .

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

2 unchanged sentences

The remaining rental payments to be received over the lease term is approximately $ 0.3  million as of December 31, 2022 .

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

The Company accounts for the sublease as on operating lease in accordance with ASC 842.

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 lease commencement date was November 29, 2019 with an original lease term of 38 months, expiring January 31, 2023.

In June 2022, the Company signed a lease extension for the Princeton office, extending the term of the lease through January 31, 2026.

The Company’s remaining contractual obligation under this lease is approximately $ 1.8  million as of December 31, 2022 .

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

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

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

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

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

The components of lease cost for the year ended December 31, 2021  and 2020 were as follows (in thousands):

December 31, 2021

December 31, 2020

The Company’s leases expire at various dates from 2022  through 2026, with varying renewal and termination options.

The components of lease cost for the year ended December 31, 2022  and 2021  were as follows (in thousands):

Year Ended December 31, 2022

Year Ended December 31, 2021

Operating lease cost

$ 1,045  

$ 1,812  

Sublease income

1 unchanged sentence

Variable lease cost

$ 1,717  

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

The amounts recognized as of December 31, 2022  and 2021  were as follows (in thousands):

Year Ended December 31, 2022

Year Ended December 31, 2021

Right of use asset

Right-of-use assets

$ 2,452  

2 unchanged sentences

Other current liabilities

As of December 31, 2022, no impairment losses have been recognized.

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

Year Ended December 31, 2022

Year Ended December 31, 2021

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

2 unchanged sentences

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

1.46 years  

Weighted-average discount rate of operating leases

5 unchanged sentences

Years ending December 31,

2025 and thereafter

$ 1,146  

Total future minimum lease payments

6 unchanged sentences

$ 1,141  

2025 and thereafter

Total future minimum lease payments

$ 1,556  

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):

As of December 31, 2022 , undiscounted cash flows to be received under the Company’s operating sublease on an annual basis were as follows (in thousands):

Operating Leases

Years ending December 31,

2025 and thereafter

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):

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

Years ending December 31,

2025 and thereafter

 — 

Total future minimum sublease payments

1 unchanged sentence

Sublease income for the year ended December 31, 2022  and 2021 was as follows (in thousands):

December 31, 2021

December 31, 2020

Year Ended December 31, 2022

Year Ended December 31, 2021

Sublease income from fixed lease payments

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

N OTE 12  - R EVENUE F ROM P RODUCT S ALES

Net product sales consist of the following for the year ended December 31, 2022 and 2021 (in thousands):

December 31, 2021

December 31, 2020

Year Ended December 31, 2022

Year Ended December 31, 2021

$ 64,357  

$ 48,042  

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:

340b  drug pricing programs, Medicaid drug rebate programs, and the Company’s copay assistance program, which are estimated based on the Company’s historical experience.

Reserves related to items that are contractually able to be net settled are recognized as contra accounts receivable while other remaining reserves are recognized within other current liabilities on the consolidated balance sheets. The following table shows the activity with respect to sales reserves for the year ended December 31, 2022 and 2021 , in thousands:

Reserves related to government sponsored programs

6 unchanged sentences

Balance as of December 31, 2021

$ 1,314  

Changes during 2022

1 unchanged sentence

( 6,750 )  

( 6,557 )  

Balance as of December 31, 2022

$ 1,437  

UROGEN PHARMA LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N OTE 12 - L ICENSE AND C OLLABORATION A GREEMENTS

Allergan/AbbVie Agreement

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.

N OTE 13  - L ICENSE AND C OLLABORATION A GREEMENTS

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.

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.

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.

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.

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

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 monoclonal antibody of Agenus known as AGEN1884 (zalifrelimab), an anti-CTLA- 4 antagonist, for the treatment of cancers of the urinary tract via intravesical delivery. UGN- 301 is a formulation of zalifrelimab administered using RTGel 

technology that is in Phase 1 clinical development for high-grade NMIBC.

MD Anderson Agreement

1 unchanged sentence

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

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. Pursuant to the agreement, as of December 31, 2022 the Company has made bi-annual payments totaling $ 2.0 million to MD Anderson to fund the collaboration, recognized evenly over the associated period through research and development expenses. In July 2022, the Company determined that it had achieved the objectives that it established when the agreement was initiated, and notified MD Anderson that it was exercising its right to conclude the collaboration in 2022 as the Company did not foresee initiating further development activities as part of the collaboration, although the Company will continue to collaborate on existing joint projects.

As a result of this notification, the Company is not responsible for any further fixed bi-annual funding payments, although the Company will be responsible for costs related to existing joint projects that exceed the payments already made to MD Anderson.

N OTE 14  - 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.

7 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N OTE 14 - S HAREHOLDERS ’

N OTE 15  - S HAREHOLDERS ’

Ordinary Shares

2 unchanged sentences

Each ordinary share is entitled to one vote.

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

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

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

N OTE 16  - 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 

the Board approved a share option plan (the “2010 Plan”) for grants to Company employees, consultants, directors, and other service providers. Subsequently, in March 2017, the Board adopted the 2017 Equity Incentive Plan (the "2017 Plan" and, together with the 2010 Plan, the "Plans"), which was approved by the shareholders in April 2017.

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

The grant of options to Israeli employees under the Plans is subject to the terms stipulated by Section 

102  of the Israeli Income Tax Ordinance (“Section 

2 unchanged sentences

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.

 The Company registered the Plans 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 

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 Plans, 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 Plans is subject to Section 

3 (i) of the Israeli Income Tax Ordinance.

2 unchanged sentences

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 

Non-employee members of the Board typically receive a grant of stock options upon initial appointment to the Board, and/or stock options annually.

The term of any option granted under the Plans cannot exceed 

10  years.

22 unchanged sentences

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 

3 unchanged sentences

250,167  to 

1,650,167 shares.

October 12, 2018, 

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

2017  Plan by 

the Company increased the amount of ordinary shares authorized for issuance under the 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 

3,550,167 shares.

June 8, 2020, the Company’s shareholders approved an increase to the amount of ordinary shares authorized for issuance under the 2017  Plan by 

400,000  to 

3,950,167 shares.

June 7, 2021, 

the Company’s shareholders approved an increase of the amount of registered ordinary shares of the Company’s 

2017  Plan by 

the Company’s shareholders approved an increase to the amount of ordinary shares authorized for issuance under the 2017  Plan by 

400,000  to 

4,350,167 shares.

On June 8, 2022, the Company's shareholders approved an increase to the amount of ordinary shares authorized for issuance under the 2017  Plan by 400,000 to 4,750,167 shares.

May 2019, 

2 unchanged sentences

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 

900,000  ordinary shares pursuant to inducement awards.

The only persons eligible to receive grants under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 

5635 (c)( 4 ) 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.

As of December 31, 2022, 3,281,494  ordinary shares are subject to outstanding awards under the Company's share-based compensation plans, and 1,595,328  ordinary shares remain available for future awards.

UROGEN PHARMA LTD.

3 unchanged sentences

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.

During 2022 , the Company granted 410,064  options with exercise prices ranging from $ 5.19  to $ 11.88  per share.

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

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.

2022 and 2021 was $ 2.2  million and $ 7.0  million, respectively.

The total unrecognized compensation cost of options as of December 31, 2022 was $ 4.0  million, which is expected to be recognized over a weighted average period of 1.6  years.

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

11 unchanged sentences

Expected term (in years)

6.0-10 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.

9 unchanged sentences

593,000  

Canceled/Forfeited

( 337,717 )  

4 unchanged sentences

410,064  

Canceled/Forfeited

( 496,417 )  

2 unchanged sentences

2,590,539  

$ 27.05  

Vested and expected to vest, December 31, 2022

2,590,539  

$ 27.05  

Exercisable, December 31, 2022

32 unchanged sentences

1,910,065  

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

The aggregate intrinsic value of the total vested and exercisable options as of December 31, 2022 is $ 0.9  million.

The following table summarizes information about RSU activity as of December 31, 2022 :

12 unchanged sentences

2022 and 2021 was $ 3.2  million and $ 9.9 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 total unrecognized compensation cost of RSUs as of December 31, 2022 is $ 5.8  million with a weighted average recognition period of 1.59  years.

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

5 unchanged sentences

19,104  

21,593  

Total share-based compensation expense

3 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N OTE 16 - I NCOME T AXES

N OTE 17  - I NCOME T AXES

The Company is taxed under Israeli tax laws:

Corporate tax rate

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

The applicable Israeli tax rate relevant to the Company for 2021  and thereafter is 23 %.

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

1 unchanged sentence

$ 1,454  

$ 3,218  

Total current taxes

9 unchanged sentences

Research and development expenses

17,949  

Stock-based compensation

11,485  

10,958  

Issuance costs

16 unchanged sentences

$ ( 129,601 )  

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.

$ ( 100,619 )

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

6 unchanged sentences

Non-deductible compensation expense

R&D and orphan drug credits

( 3,586 )  

Different tax rate of foreign subsidiaries

7 unchanged sentences

$ 1,449  

(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

Pretax loss for December 31, 2022 

and 2021  includes pretax loss from foreign (United States) jurisdictions of $ 13.3  million and $ 10.1  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.

8 unchanged sentences

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.

As of December 31, 2022  and 

2021 , the Company had approximately $ 419.1  million and $ 335.8 million of carryforward tax losses, prior to tax effecting, respectively, available to reduce future taxable income without limitation of use.

Uncertain tax positions

2 unchanged sentences

$ 2,842  

$ 2,717  

Gross increases —

6 unchanged sentences

The balances of uncertain tax positions as of December 31, 2022 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 has recorded a liability for uncertain tax positions of $ 3.0  million as of December 31, 2022 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, 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.

As of December 31, 2022 , the Company's liability for uncertain tax positions includes $ 1.1  million of accrued interest and penalties.

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

1 unchanged sentence

The Company believes that adequate amounts of tax have been provided in income tax expense for any adjustments that may result from its uncertain tax positions.

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.

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

N OTE 17 - R ELATED P ARTIES

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

The Company has received final tax assessments up to and including its 2015  tax year.

N OTE 18  - R ELATED P ARTIES

There were no related party transactions for the year ended 

December 31, 2022 or 2021 .

N OTE 18 - C OMMITMENTS AND C ONTINGENCIES

N OTE 19  - 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.

2 unchanged sentences

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

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.

On January 12, 2020, the IIA Office of Chief Scientist approved the Company's request to unwind its obligation to the IIA regarding grants that were loaned to the Company between January 2004 and September 2016.

The total payment under the IIA approval, net of the royalties already paid, $ 6.6 million, was fully paid during the first quarter of 2020 and recognized as research and development expense.

Based on this payment, the Company will have full freedom to transfer IIA-funded technology or manufacture products developed with IIA-funded technology outside of the State of Israel.

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.

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.

See Note 11  for further discussion regarding lease commitments.

N OTE 20  - S UBSEQUENT E VENTS

The Company has evaluated and determined there were no subsequent events.

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