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Item 2. Management’s Discussion and Analysis

2021-05-13 compared with 2020-11-09 · 132 added, 137 removed, 140 unchanged (66% of the section changed)

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Our technology is designed to enable longer exposure of the urinary tract tissue to medications, making local therapy a potentially effective treatment option.

Our approved product Jelmyto (mitomycin) for pyelocalyceal solution, and our investigational candidate, UGN-102 (mitomycin) for intravesical solution are designed to ablate tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade upper tract urothelial cancer (“LG-UTUC”) and low-grade non-muscle invasive bladder cancer (“LG-NMIBC”), respectively.

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

the annual treatable population of LG-NMIBC is approximately 80,000.

We believe that RTGel-based drug formulations, which provide for the sustained release of an active drug, may improve the efficacy of treatment of various types of urothelial cancer with an acceptable safety profile that permits the natural flow of fluids from the kidney via the urinary tract to the bladder.

Our formulations are designed to achieve this by increasing the dwell time in the kidney and bladder to prolong tissue exposure of the active drug.

Consequently, we believe that RTGel-based drug formulations may enable us to overcome the anatomical and physiological challenges that have historically contributed to the lack of drug development for the treatment of urothelial cancer and other urological pathologies.

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

Our approved product Jelmyto (mitomycin) for pyelocalyceal solution, and our investigational candidate UGN-102 (mitomycin) for intravesical solution, are designed to ablate tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade upper tract urothelial cancer (“low-grade UTUC”) and low-grade intermediate risk non-muscle invasive bladder cancer (“low-grade intermediate risk NMIBC”), respectively.

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

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

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

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

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

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

RTGel achieves this by:

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

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

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

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

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

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

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

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

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

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

We have also obtained new product exclusivity through April 15, 2023 and Orphan Drug exclusivity through April 15, 2027 for Jelmyto.

LG-UTUC is a rare cancer that develops in the lining of the upper urinary tract, ureters and kidneys.

In the United States, there are approximately 6,000 - 7,000 new or recurrent LG-UTUC patients annually.

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

Low-grade UTUC is a rare cancer that develops in the lining of the upper urinary tract, ureters and kidneys.

In the United States, there are approximately 6,000 - 7,000 new or recurrent low-grade UTUC patients annually.

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

The current standard of care includes multiple surgeries, and most require a radical nephroureterectomy, which includes the removal of the renal pelvis, kidney, ureter and bladder cuff.

Treatment is further complicated by the fact that LG-UTUC is most commonly diagnosed in patients over 70 years of age, who may already have compromised kidney function and may suffer further complications as a result of major surgery.

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

Findings include :

The current standard of care includes multiple surgeries, and most patients require a radical nephroureterectomy, which includes the removal of the renal pelvis, kidney, ureter and bladder cuff.

Treatment is further complicated by the fact that low-grade UTUC is most commonly diagnosed in patients over 70 years of age, who may already have compromised kidney function and may suffer further complications as a result of a major surgery.

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

Findings from the final study results include:

Complete response (“CR”) (primary endpoint) of 58% (41/71) in the intent-to-treat population and in the sub-population of patients who were deemed not capable of surgical removal at diagnosis.

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

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

At the 12-month time point for assessment of durability, 23 patients remained in CR of a total of 41 patients, eight had experienced recurrence of disease and ten patients were unable to be evaluated.

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

The median duration of response was not reached.

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

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

No treatment-related deaths occurred.

The FDA evaluated Jelmyto under Priority Review, which is reserved for medicines that may represent significant improvements in safety or efficacy in treating serious conditions.

Jelmyto was also granted Breakthrough Therapy designation by the FDA, which was created to expedite the development and review of drugs developed for serious or life-threatening conditions with high unmet need.

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

We have staffed, trained and prepared a commercial team comprising a field force of 48 representatives with deep experience in both urology and oncology.

We have staffed, trained and prepared a commercial team comprising a field force of approximately 48 representatives with deep experience in both urology and oncology.

The sales representatives are led by seven regional business managers.

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

In addition, we have a team of seven medical science liaisons who have appropriately engaged with physicians interested in learning more about UroGen and our technology, including through virtual meetings.

In addition, we have a team of seven medical science liaisons who appropriately engage with physicians interested in learning more about UroGen, Jelmyto and our technology, including through virtual meetings.

We are committed to helping patients access Jelmyto .

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

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

In addition to reimbursement and access, we have also been focused on ensuring seamless integration into physician practices.

We have implemented processes to help make Jelmyto preparation and administration safe and seamless for practitioners and patients, including entering into an agreement with a major national pharmacy under which the pharmacy, following receipt of a patient prescription, will prepare and dispense the Jelmyto admixture on our behalf.

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

We have shared interim data from the Phase 2b OPTIMA II trial for UGN-102 in patients with low-grade, intermediate risk non-muscle invasive bladder cancer, defined as those with one or two of the following criteria:

We have implemented processes to help make Jelmyto preparation and administration safe and seamless for practitioners and patients, including entering into an agreement with a major national pharmacy under which the pharmacy, following receipt of a patient prescription, prepares and dispenses the Jelmyto admixture on our behalf.

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

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

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

We have shared final topline data from the Phase 2b OPTIMA II trial for our lead product candidate, UGN-102, in patients with low-grade intermediate risk NMIBC, defined as those with one or two of the following criteria:

multifocal disease, large tumors and rapid rates of recurrence.

The single-arm, open label study trial completed enrollment of 63 patients at clinical sites across the United States and Israel.

Patients are treated with six weekly instillations of UGN-102 and undergo assessment of complete response, or CR (the primary endpoint) four to six weeks following the last instillation.

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

In August 2020, we reported additional interim data consistent with our previous reports showing that 65%, or 41 out of 63 patients, treated with UGN-102 achieved a complete response three months after the start of therapy.

In this subset of patients, the interim Kaplan-Meier (“KM”) analysis shows a 72.4% estimated duration of response at 12 months after initiation of therapy.

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

We believe that UGN-102 has the potential to be a new therapeutic option for the treatment of LG Intermediate Risk NMIBC patients.

We have finalized the protocol for the Phase 3 pivotal study and expect to begin the study by the end of 2020.

We believe that urothelial cancer, which is comprised of bladder cancer and UTUC, affects a large and underserved patient population.

Annual expenditures for Medicare alone in the United States for the treatment of urothelial cancer were estimated to have been at least $4.0 billion in 2010 and are projected to be at least $5.0 billion in 2020.

The single-arm, open label trial completed enrollment of 63 patients at clinical sites across the United States and Israel in September 2019.

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

The interim data were also published as a supplement to the April 2020 issue of The Journal of Urology, and we anticipate publishing the final data in a peer-reviewed journal in 2021.

In November 2020, we reported final topline data consistent with our previous reports showing that 65%, or 41 out of 63 patients, treated with UGN-102 achieved a complete response three months after the start of therapy.

In this subset of patients, duration of response at nine months (12-months from initiation of therapy) was estimated by Kaplan-Meier (KM) analysis to be 72.5%.

Median duration of response was not reached.

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

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

We initiated the Phase 3 ATLAS trial in December 2020 and are currently enrolling patients in this trial assessing UGN-102 with or without trans-urethral resection of bladder tumor (TURBT) compared to standard of care, TURBT.

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

Annual expenditures for Medicare alone in the United States for the treatment of urothelial cancer were estimated to be at least $5.0 billion in 2020.

The majority of the expenditures are spent on tumor resection surgeries such as transurethral resection of bladder tumor, or TURBT.

In 2017, the estimated prevalence of urothelial cancer in the United States was 748,000 and in 2020 the annual incidence of urothelial cancer was approximately 85,000.

The prevalence in 2017 of each of LG-NMIBC and LG-UTUC in the United States was approximately 340,000 and 14,000, respectively.

Our clinical stage pipeline also includes UGN-201 (imiquimod), our proprietary formulation of an immunotherapy product candidate.

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

Toll-like receptor agonists play a key role in

initiating the innate immune response system.

We believe that the combination of UGN-201 with additional immunotherapy drugs, such as immune checkpoint inhibitors could represent a valid alternative to the current standard of care for the post-TURBT adjuvant treatment of high-grade NMIBC.

In the fourth quarter of 2019, we entered into a worldwide license agreement with Agenus Inc.

to develop and commercialize zalifrelimab ( AGEN1884 ) via intravesical delivery in combination with UGN-201 (together UGN-302) for the treatment of urinary tract cancers, initially in high-grade non-muscle invasive bladder cancer (HG NMIBC).

The combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and potential side effects .

The prevalence in 2017 of low-grade intermediate risk NMIBC was approximately 340,000.

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

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

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

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

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

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

Our immuno-uro-oncology pipeline includes UGN-302, the sequential use of UGN-201, a TLR 7/8 agonist and UGN-301, an anti-CTLA-4 antibody, being studied as an investigational treatment for high-grade non-muscle invasive bladder cancer (high-grade NMIBC).

UroGen’s approach involves the local delivery of these potent immunomodulators.

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

UGN-201 is a proprietary novel, liquid formulation of imiquimod, a generic toll-like receptor 7/8, or TLR 7/8 agonist, which has been evaluated for the treatment of high-grade NMIBC, which may include carcinoma in situ, or CIS.

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

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

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

to develop and commercialize zalifrelimab, an anti-CTLA-4 antibody, via intravesical delivery in combination with UGN-201 (together referred to as UGN-302) for the treatment of urinary tract cancers, initially in high-grade NMIBC.

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

Our Research and Development and License Agreements

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

Allergan/AbbVie Agreement

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

The license grants the exclusivity for the RTGel and clostridial toxins including BOTOX alone or in combination with certain other active ingredients, referred to as the Licensed Products, which are approved for the treatment of adults with overactive bladder 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.

Additionally, we granted Allergan a non-exclusive, worldwide license to use certain of our 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, at its expense, for developing, obtaining regulatory approvals for and commercializing, on a worldwide basis, pharmaceutical products that contain RTGel and clostridial toxins (including BOTOX), alone or in combination with certain other active ingredients, collectively, the Licensed Products.

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In October 2017, Allergan commenced a Phase 2 clinical trial of BOTOX/ RTGel for the treatment of OAB, with the potential to evolve from multiple injections of BOTOX into the bladder to a single instillation of the novel formulation.

In August 2020, the Company announced that the Phase 2 APOLLO clinical trial of a RTGel hydrogel formulation in combination with BOTOX intravesical instillation did not meet the primary endpoint, believed to be the result of BOTOX not effectively permeating the urothelium.

UroGen and AbbVie will continue to explore the use of RTGel with AbbVie’s portfolio of toxin proteins.

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

Pursuant to the agreement, Agenus granted us an exclusive, worldwide license (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus’s intellectual property rights to develop, make, use, sell, import, and otherwise commercialize products incorporating a proprietary antibody of Agenus known as zalifrelimab for the treatment of cancers of the urinary tract via intravesical delivery.

Zalifrelimab is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients, and in combination with Agenus’ anti-PD-1 antibody (AGEN2034) in solid tumors.

UGN-301 is a formulation of RTGel and zalifrelimab that is in early stage development for high grade non-muscle invasive bladder cancer (“HG NMIBC”).

Based on nonclinical studies conducted by us, UGN-201 in combination with anti-CTLA-4 antagonists have shown encouraging results for the potential treatment of HG NMIBC.

We intend to continue research and development work in HG NMIBC.

Under the terms of the agreement, we paid Agenus an upfront fee of $10.0 million and have agreed to pay Agenus up to $115.0 million upon achieving certain clinical development and regulatory milestones, up to $85.0 million upon achieving certain commercial milestones, and royalties on net sales of licensed products in the 14%-20% range.

We are solely responsible for costs and development, obtaining all regulatory approvals, and commercialization of the licensed products after receiving the regulatory approval to do so.

For additional information regarding our research and development license and collaboration agreements, see Note 11 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

In August 2020, we 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.

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

Agenus Agreement

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

Pursuant to the agreement, Agenus granted us an exclusive, worldwide license (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus’s intellectual property rights to develop, make, use, sell, import and otherwise commercialize products incorporating a proprietary antibody of Agenus known as AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery.

AGEN1884 is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients and in combination with Agenus’ anti-PD-1 antibody (AGEN2034) in solid tumors.

UGN-301 is a formulation of RTGel and zalifrelimab that is in early-stage development for high-grade NMIBC.

MD Anderson Agreement

Based on nonclinical studies conducted by us, UGN-201 in combination with anti-CTLA-4 antagonists have shown encouraging results for the potential treatment of high-grade NMIBC.

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

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

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

For additional information regarding our research and development and license agreements, see Note 11 to our financial statements appearing elsewhere in this Quarterly Report.

Impact of COVID-19 Pandemic

In the event of a prolonged disruption related to COVID-19, there could be detrimental impact to our ongoing and future clinical trials, our ongoing commercial launch and future commercialization activities for Jelmyto, and our ability to access capital markets.

Risk Factors below for further discussion.

Specifically, we have experienced a delay in site initiation activities in certain countries outside the U.S.

within our UGN-102 clinical trial as well as a softening of our first quarter 2021 Jelmyto revenues.

Recently, the U.S.

has mounted a comprehensive COVID-19 vaccination campaign.

During the first quarter 2021, t he staged vaccination rollout prioritize d health-care workers, certain other essential workers and high-risk populations, which generally include d individuals in their 60s and 70s, and individuals with certain underlying medical conditions.

We believe t he vaccination effort in the U.S.

impacted our ongoing commercialization of Jelmyto in three main aspects.

First, current or potentially eligible patients chose to delay their procedures until after they have been vaccinated for COVID-19.

Second, the p rioritization of hospital and clinic resources towards the vaccination effort may have hinder ed the ability of patients who are currently using Jelmyto or who are eligible to use Jelmyto to schedule Jelmyto instillation procedures.

Lastly, our commercial team was limited in their ability to visit hospitals and clinics due to many facilities restricting access.

As of the end of April 2021, the majority of people over age 65 in the U.S.

have received vaccinations to protect against COVID-19, we believe this is correlated with the increasing amount of new patient starts we observed in both March and April.

It is difficult to predict how COVID-19, and any associated variants, will impact the healthcare industry for the remainder of 2021, as such we continue to monitor the evolving COVID-19 situation, and the potential further impacts that the pandemic and related government response may have on our business throughout 2021.

Components of Operating Results

During the three and nine months ended September 30, 2020 we recognized $3.5 million and $3.8 million, respectively, of revenues from sales of our product, Jelmyto.

We did not recognize any revenues from RTGel sales under the Allergan/AbbVie Agreement during the three and nine months ended September 30, 2020.

During the three and nine months ended September 30, 2019, the Company recognized $18,000 of revenue related to RTGel supplied to Allergan.

In the future, we may generate revenue from a combination of product sales, reimbursements, up-front payments, milestone payments and royalties in connection with the Allergan/AbbVie Agreement and future collaborations.

We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products.

If we fail to achieve clinical success and/or to obtain regulatory approval of future product candidates in a timely manner, our ability to generate future revenue will be limited.

During the three months ended March 31, 2021 we recognized $7.5 million, of revenues from sales of our product, Jelmyto .

Cost of Revenues

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We expense all research and development costs as incurred.

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

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

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We have received grants under the Israeli Law for the Encouragement of Industrial Research, Development and Technological Innovation, 5754-1984 (the “R&D Law”), from the Israel Innovation Authority in Israel (the “IIA”), formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry, an independent and impartial public entity, for some of our development programs.

As of September 30, 2020, we had received grants in the aggregate amount of $2.1 million.

Through March 31, 2021, we had received grants in the aggregate amount of $2.1 million.

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

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License fees and development milestone payments related to in-licensed products and technology are expensed as incurred if it is determined at that point that they have no established alternative future use.

We recorded $10.0 million in research and development expenses for the year ended December 31, 2019, comprised of a milestone related to our license agreement with Agenus Inc.

The license agreement provides us with an exclusive worldwide, royalty bearing, and sub-licensable license under Agenus’s intellectual property rights to exploit licensed products incorporating zalifrelimab for the treatment of cancers of the urinary tract via intravesical delivery.

It also provides us with preclinical and clinical supply of zalifrelimab.

No inventory was purchased on the effective date of the License Agreement and subsequent purchases of preclinical and clinical supplies are at arm’s length and are priced at cost plus 30% mark-up.

Our acquired right to Agenus’s intellectual property represents a single identifiable asset sourced from the agreement.

Therefore, all the fair value associated with the agreement is concentrated in one identifiable asset and is not considered a business in accordance with ASC 805-10-55-5A.

Therefore, we have accounted for the right to Agenus’s intellectual

property acquired under the license agreement as an asset acquisition of in-process research and development.

See Note 11 to the Consolidated Financial Statements for further information.

Selling and Marketing Expenses

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

We anticipate that our selling and marketing expenses will increase during the remainder of 2020 as a result of the FDA’s approval of Jelmyto in April 2020 and our commercial launch of Jelmyto in June 2020.

We anticipate that our selling and marketing expenses will increase in 2021 as we continue the commercialization of Jelmyto .

General and Administrative Expenses

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We have provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses.

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

See Note 14 to the Consolidated Financial Statements for further information.

Critical Accounting Policies and Significant Judgments and Estimates

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

We base our estimates on historical experience and on various other factors that we believe are relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources.

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

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

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

We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 2, 2020 (“Annual Report”) as well as in the Note 3 to the Consolidated Financial Statements included in this report .

We discussed the critical accounting policies used in the preparation of our financial statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 18, 2021 (“Annual Report”) as well as in the Note 3 to the Consolidated Financial Statements included in this report .

Results of Operations

Comparison of the three months ended September 30, 2020 and 2019

The following table sets forth our results of operations for the three months ended September 30, 2020 and 2019.

Three Months Ended September 30,

Comparison of the three months ended March 31, 2021 and 2020

The following table sets forth our results of operations for the three months ended March 31, 2021 and 2020.

Three Months Ended March 31,

(in thousands)

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Interest and other income, net

Revenues were $3.5 million and $0 for the three months ended September 30, 2020 and 2019, respectively.

Revenues were $7.5 million and $0 for the three months ended March 31, 2021 and 2020, respectively.

The increase in revenues of $7.5 million reflects sales of our product Jelmyto following its approval by the FDA in April 2020.

Cost of Revenues

Cost of revenues were $0.3 million and $0 for the three months ended September 30, 2020 and 2019, respectively.

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

We expect this to continue to impact cost of revenues through the first quarter of 2022 as we produce Jelmyto at costs reflecting the full costs of manufacturing and as we deplete inventories that we had expensed prior to receiving FDA approval.

Gross margin would have been approximately 86.7% versus 91.1% for the three months ended September 30, 2020 if we had not sold Jelmyto units that were expensed prior to regulatory approval.

Research and Development Expenses

Research and development (R&D) expenses were $10.2 million and $9.5 million for the three months ended September 30, 2020 and 2019, respectively.

The increase of $0.7 million is primarily attributable to increased expenses related to the UGN-102 clinical trial and UGN-201 studies, partially offset by the completion of the Phase 3 clinical trial and regulatory activity for UGN-101 (now marketed as Jelmyto).

Selling and Marketing Expenses

Selling and marketing expenses were $11.0 million and $3.9 million for the three months ended September 30, 2020 and 2019, respectively.

The increase in selling and marketing expenses of $7.1 million resulted from increased costs and activities related to the commercial launch of Jelmyto in June 2020 including headcount and related costs associated with our sales force.

General and Administrative Expenses

General and administrative expenses were $11.1 million and $10.0 million for the three months ended September 30, 2020 and 2019, respectively.

The increase in general and administrative expenses of $1.1 million resulted primarily from an increase in costs as part of the buildout of the Company for the commercialization of our first product, in addition to consulting and other service provider fees.

Interest and Other Income (Expenses), Net

Interest and other income (expenses), net, was $0.3 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively.

The decrease of $0.9 million in interest and other income was primarily due to a decrease in our cash and cash equivalents and marketable securities.

Comparison of the nine months ended September 30, 2020 and 2019

The following table sets forth our results of operations for the nine months ended September 30, 2020 and 2019.

Nine Months Ended September 30,

(in thousands)

Cost of revenues

Operating expenses:

Research and development

Selling and marketing

General and administrative

Total operating expenses

Operating loss

Interest and other income, net

Revenues were $3.8 million and $18,000 for the nine months ended September 30, 2020 and 2019, respectively.

The increase in revenues of $3.8 million reflects sales of Jelmyto following its approval by the FDA in April 2020.

Cost of Revenues

Cost of revenues were $0.4 million and $0 for the nine months ended September 30, 2020 and 2019, respectively, including certain one-time start-up costs.

Cost of revenues were $0.9 million and $0 for the three months ended March 31, 2021 and 2020, respectively.

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

Gross margin would have been approximately 86.3% versus 90.7% for the nine months ended September 30, 2020 if we had not sold Jelmyto units that were expensed prior to regulatory approval.

We expect this to continue to impact cost of revenues through the second quarter of 2022 as we produce Jelmyto at costs reflecting the full costs of manufacturing and as we deplete inventories that we had expensed prior to receiving FDA approval.

Gross margin would have been approximately 85.6% versus 88.0% for the three months ended March 31, 2021 if we had not sold Jelmyto units that were expensed prior to regulatory approval.

Research and Development Expenses

Research and development expenses were $34.9 million and $29.2 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase of $5.7 million resulted primarily from a one-time payment of $6.6 million to unwind the Company’s obligation to the Israeli Innovation Authority during the first quarter of 2020 and increased expenses related to the UGN-102 clinical trial and UGN-201 studies, partially offset by the completion of the Phase 3 clinical trial and regulatory activity for UGN-101.

Research and development (R&D) expenses were $10.5 million and $16.6 million for the three months ended March 31, 2021 and 2020, respectively.

The overall decrease of $6.1 million is primarily attributable to the one-time payment in the prior year of $6.6 million to unwind our obligation to the IIA.

Excluding the impact of the payment to the IIA, R&D expenses remained largely consistent, however, for the three months ended March 31, 2021 primarily related to the development of UGN-102, as compared to the March 31, 2020 where R&D expenses primarily related to Jelmyto.

Selling and Marketing Expenses

Selling and marketing expenses were $34.4 million and $9.7 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase of $24.7 million resulted primarily from increased costs and activities related to the commercial launch of Jelmyto in June 2020, including headcount and related costs associated with our sales force.

Selling and marketing expenses were $11.4 million and $10.7 million for the three months ended March 31, 2021 and 2020, respectively.

The increase in selling and marketing expenses of $0.7 million is primarily attributable to salaries and benefits of the commercial and marketing team members who joined subsequent to March 31, 2020, partially offset by higher brand marketing expenses in the first quarter of 2020 in preparation for the commercialization of Jelmyto .

General and Administrative Expenses

General and administrative expenses were $33.7 million and $30.8 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase of $2.9 million resulted primarily from an increase in costs as part of the buildout of the Company for the commercialization of our first product and consulting and other service provider fees.

Interest and Other Income (Expenses), Net

Interest and other income (expenses), net, were $1.5 million and $3.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The decrease of $2.0 million in interest and other income was primarily due to a decrease in our cash and cash equivalents and marketable securities.

General and administrative expenses were $10.8 million and $11.3 million for the three months ended March 31, 2021 and 2020, respectively.

The decrease in general and administrative expenses of $0.5 million resulted primarily from a decrease in share-based compensation.

Interest and Other Income ( Expense s ) , Net

Interest and other income (expenses), net, was $0.2 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.

The decrease in interest and other income (expenses), net of $0.6 million was primarily due to a decrease in our cash and cash equivalents and marketable securities.

Liquidity and Capital Resources

As of September 30, 2020, we had $125.5 million in cash and cash equivalents and marketable securities.

As of March 31, 2021, we had $75.9 million in cash and cash equivalents and marketable securities.

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

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

Through September 30, 2020, we funded our operations primarily through public equity offerings, private placements of equity securities and through the upfront payment received under the Allergan/AbbVie Agreement.

Through March 31, 2021, we funded our operations primarily through public equity offerings and private placements of equity securities.

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

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

We have incurred losses since our inception and negative cash flows from our operations, and as of September 30, 2020 we had an accumulated deficit of $326.0 million.

We anticipate that we will continue to incur losses for at least the next several years.

Our primary uses of capital are, and we expect will continue to be, commercialization activities, research and development expenses, including third-party clinical research and development services, laboratory and related supplies, clinical costs, including manufacturing costs, legal and other regulatory expenses and general and administrative costs.

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

RTW will provide us 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.

We received the $75.0 million of cash in May 2021 following the receipt of necessary regulatory approvals.

We have incurred losses since our inception and negative cash flows from our operations, and as of March 31, 2021 we had an accumulated deficit of $382.4 million.

We anticipate that we will continue to incur losses for at least the next two years.

We cannot estimate the actual amounts necessary to successfully commercialize any approved products, including Jelmyto, or whether, or when, we may achieve profitability.

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Operating Activities

Net cash used in operating activities was $84.6 million during the nine months ended September 30, 2020, compared to $45.0 million during the nine months ended September 30, 2019.

The $39.6 million increase was attributable primarily to the increase of $31.8 million in the net loss, which is inclusive of the $6.6 million payment to the IIA.

See Note 16 to the Condensed Consolidated Financial Statements included in this report for additional information.

Net cash used in operating activities was $27.4 million during the three months ended March 31, 2021, compared to $35.6 million during the three months ended March 31, 2020.

The $8.2 million decrease was attributable primarily to the decrease of $11.9 million in the net loss driven by revenue from sales of our product Jelmyto during the three months ended March 31, 2021, as well as the payment to the IIA during the three months ended March 31, 2020, partially offset by inventory build and sales commission payments during the three months ended March 31, 2021.

Investing Activities

Net cash provided by investing activities was $43.8 million during the nine months ended September 30, 2020, compared to $154.9 million used in investing activities during the nine months ended September 30, 2019.

The increase of $198.7 million is primarily related to maturities of our marketable securities, as well as a significant reduction in purchases of marketable securities.

Net cash provided by investing activities was $15.0 million during the three months ended March 31, 2021, compared to $13.0 million provided by investing activities during the three months ended March 31, 2020.

The increase of $2.0 million is primarily related to a decrease in purchases of marketable securities as compared to the prior year.

Financing Activities

Net cash provided by financing activities was $16.4 million during the nine months ended September 30, 2020, compared to $165.0 million during the nine months ended September 30, 2019.

The decrease of $148.6 million is primarily related to the net proceeds received from our January 2019 underwritten public offering of our ordinary shares as compared to proceeds from the issuance under the ATM Sales Agreement during the nine months ended September 30, 2020.

Net cash provided by financing activities was $4,000 during the three months ended March 31, 2021, compared to $0.1 million during the three months ended March 31, 2020.

The decrease of $0.1 million is primarily related a decrease in proceeds from exercise of options, partially offset by reduction in issuance costs.

Off‑Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis