UroGen Pharma Ltd. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report and the audited financial statements and notes thereto as of and for the year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (“Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 18, 2021 . The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (“Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. Overview We are a biopharmaceutical company dedicated to building and commercializing novel solutions that treat specialty cancers and urologic diseases. We have developed RTGel ™ reverse-thermal hydrogel, a proprietary sustained release, hydrogel-based technology that has the potential to improve therapeutic profiles of existing drugs. Our technology is designed to enable longer exposure of the urinary tract tissue to medications, making local therapy a potentially effective treatment option. Our approved product Jelmyto (mitomycin) for pyelocalyceal solution, and our investigational candidate UGN-102 (mitomycin) for intravesical solution, are designed to ablate tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade upper tract urothelial cancer (“low-grade UTUC”) and low-grade intermediate risk non-muscle invasive bladder cancer (“low-grade intermediate risk NMIBC”), respectively. We estimate that the annual treatable patient population of low-grade UTUC in the United States is approximately 6,000 to 7,000; the estimated annual treatable population of low-grade intermediate risk NMIBC is approximately 80,000. RTGel is a novel proprietary polymeric biocompatible, reverse thermal gelation hydrogel, which, unlike the general characteristics of most forms of matter, is liquid at lower temperatures and converts into gel form when warmed to body temperature. We believe that these characteristics promote ease of delivery into and retention of drugs in body cavities, including the bladder and the upper urinary tract, forming a transient reservoir of drug that disintegrates over time while preventing rapid excretion, providing for increased dwell time. RTGel leverages the physiologic flow of urine to provide a natural exit from the body. We believe that RTGel , when formulated with an active drug, may allow for the improved efficacy of treatment of various types of specialty cancers and urologic diseases without compromising the safety of the patient or interfering with the natural flow of fluids in the urinary tract. RTGel achieves this by: • increasing the exposure of active drugs in the bladder and upper urinary tract by significantly extending the dwell time of the active drug while conforming to the anatomy of the bladder and the upper urinary tract, which allows for enhanced drug tissue coverage. For example, the average dwell time of the standard mitomycin water formulation, currently used as adjuvant treatment, in the upper urinary tract is approximately five minutes, compared to approximately six hours when mitomycin is formulated with RTGel ; • administering higher doses of an active drug than would otherwise be possible using standard water-based formulations. For instance, it is only possible to dissolve 0.5 mg of mitomycin in 1 mL of water while it is possible to formulate up to 8 mg of mitomycin with 1 mL of RTGel ; and • maintaining the active drug’s molecular structure and mode of action. 20 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 On April 15, 2020, the FDA approved our new drug application (“NDA”) for Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, for the treatment of adult patients with low-grade UTUC. Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology. It has been designed to prolong exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means. New product exclusivity for Jelmyto exists through April 15, 2023, Orphan Drug exclusivity through April 15, 2027 as well as a composition of matter patent through 2031. Low-grade UTUC is a rare cancer that develops in the lining of the upper urinary tract, ureters and kidneys. In the United States, there are approximately 6,000 - 7,000 new or recurrent low-grade UTUC patients annually. It is a challenging condition to treat due to the complex anatomy of the urinary tract system. 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, 23 patients remained in CR of a total of 41 patients, eight had experienced recurrence of disease and ten patients were unable to be evaluated. • Durability of response was estimated to be 81.8% at 12 months by Kaplan-Meier analysis. The median duration of response was not reached. • The most commonly reported adverse events (≥ 20%) were ureteric obstruction, flank pain, urinary tract infection, hematuria, abdominal pain, fatigue, renal dysfunction, nausea, dysuria and vomiting. Most adverse events were mild to moderate and manageable using well established treatments. No treatment-related deaths occurred. In June 2020, we initiated our commercial launch of Jelmyto in the United States. 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 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, 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. UGN-102 21 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 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 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. annually. 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. UGN-302 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. 22 Our Research and Development and License Agreements Allergan/AbbVie Agreement In October 2016, we entered into the Allergan/AbbVie Agreement and granted Allergan an exclusive worldwide license to research, develop, manufacture and commercialize pharmaceutical products that contain RTGel and clostridial toxins including BOTOX. The license grants the exclusivity for the RTGel and clostridial toxins including BOTOX alone or in combination with certain other active ingredients, referred to as the Licensed Products, which are approved for the treatment of adults with overactive bladder who cannot use or do not adequately respond to anticholinergics. 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. Allergan is obligated to pay us a tiered royalty in the low single digits based on worldwide annual net sales of Licensed Products, subject to certain reductions for the market entry of competing products and/or loss of our patent coverage of Licensed Products. We are responsible for payments to any third party for certain RTGel -related third-party intellectual properties. In August 2017, we announced that Allergan had submitted an IND to the FDA in order to be able to commence clinical trials in the United States using an RTGel formulation in combination with BOTOX. In October 2017, Allergan commenced a Phase 2 clinical trial of BOTOX/ RTGel for the treatment of OAB, with the potential to evolve from multiple injections of BOTOX into the bladder to a single instillation of the novel formulation. 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. (“Agenus”). Pursuant to the agreement, Agenus granted us an exclusive, worldwide license (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus’s intellectual property rights to develop, make, use, sell, import and otherwise commercialize products incorporating a proprietary antibody of Agenus known as AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery. AGEN1884 is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients and in combination with Agenus’ anti-PD-1 antibody (AGEN2034) in solid tumors. UGN-301 is a formulation of RTGel and zalifrelimab that is in early-stage development for high-grade NMIBC. MD Anderson Agreement Based on nonclinical studies conducted by us, UGN-201 in combination with anti-CTLA-4 antagonists have shown encouraging results for the potential treatment of high-grade NMIBC. In January 2021, we announced that we entered into a three-year strategic research collaboration agreement with MD Anderson focusing on UGN-302 as an investigational treatment for high-grade NMIBC. Under the agreement, MD Anderson and UroGen will collaborate on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee. UroGen will provide funding, developmental candidates, and other support . For additional information regarding our research and development and license agreements, see Note 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. 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. 23 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 Revenues During the three months ended March 31, 2021 we recognized $7.5 million, of revenues from sales of our product, Jelmyto . Cost of Revenues Cost of revenues consist primarily of inventory and related costs associated with the manufacturing, distribution, warehousing and preparation of Jelmyto . In periods prior to receiving FDA approval for Jelmyto , we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expenses. Research and Development Expenses Research and development expenses, net consist primarily of: • salaries and related costs, including share-based compensation expense, for our personnel in research and development functions; • expenses incurred under agreements with third parties, including clinical research organizations (“CROs”), subcontractors, suppliers and consultants, nonclinical studies and clinical trials; • expenses incurred to acquire, develop and manufacture nonclinical study and clinical trial materials; • expenses incurred to purchase active pharmaceutical ingredient (“API”) and other related manufacturing costs; and • facility and equipment costs, including depreciation expense, maintenance and allocated direct and indirect overhead costs. We expense all research and development costs as incurred. We estimate nonclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations that conduct and manage nonclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. Where at risk contingent milestone payments are due to third parties under research and development and collaboration agreements, the milestone payment obligations are expensed when the milestone results are achieved. We have received grants under the Israeli Law for the Encouragement of Industrial Research, Development and Technological Innovation, 5754-1984 (the “R&D Law”), from the Israel Innovation Authority in Israel (the “IIA”), formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry, an independent and impartial public entity, for some of our development programs. 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. The total payment under the IIA approval, net of the royalties already paid, amounts to $6.6 million, which was fully paid during the first quarter of 2020. See Note 16 to the Consolidated Financial Statements included in this report for additional information. 24 We are currently focused on advancing our product candidates, and our future research and development expenses will depend on their clinical success. Research and development expenses will continue to be significant and will increase over at least the next several years as we continue to develop our product candidates and conduct nonclinical studies and clinical trials of our product candidates. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of our product candidates. Due to the inherently unpredictable nature of nonclinical and clinical development, we are unable to estimate with certainty the costs we will incur and the timelines that will be required in the continued development and approval of our product candidates. Clinical and nonclinical development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, if and when such arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expenses to increase over the next several years as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates. We also expect to incur increased research and development expenses as we selectively identify and develop additional product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following: • per patient trial costs; • the number of patients that participate in the trials; • the number of sites included in the trials; • the countries in which the trials are conducted; • the length of time required to enroll eligible patients; • delays or operational challenges resulting from the ongoing COVID-19 pandemic; • the number of doses that patients receive; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring or other studies requested by regulatory agencies; • the duration of patient follow-up; and • the efficacy and safety profile of the product candidates. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate ’ s commercial potential. Other than Jelmyto , which was approved by the FDA in April 2020, we have not received approval of any of our product candidates. UGN-102 is still in clinical development and our other product candidates are in nonclinical development, and the outcome of these efforts is uncertain. As such, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. License fees and development milestone payments related to in-licensed products and technology are expensed as incurred if it is determined at that point that they have no established alternative future use. 25 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 in 2021 as we continue the commercialization of Jelmyto . General and Administrative Expenses General and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors, executives, finance, medical affairs, business development, investor relations, and human resource functions). Other significant costs include medical affairs services, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees. We anticipate that our general and administrative expenses will increase in the future as we increase our administrative headcount and infrastructure to support the potential approval and commercialization of our product candidates and our continued research and development programs. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Interest and Other Income (Expenses), Net Interest and other income (expenses), net, consisted primarily of interest income. Income Taxes We have yet to generate taxable income in Israel. We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $250.2 million as of December 31, 2020. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. We have provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses. Income tax expense also consists of our estimate of uncertain tax positions, and related interest and penalties. See Note 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, 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 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 . 26 Results of Operations 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, 2021 2020 Change (in thousands) Revenues $ 7,485 $ — $ 7,485 Cost of revenues 897 — 897 Gross profit 6,588 — 6,588 Operating expenses: Research and development 10,513 16,588 (6,075 ) Selling and marketing 11,435 10,651 784 General and administrative 10,754 11,322 (568 ) Total operating expenses 32,702 38,561 (5,859 ) Operating loss (26,114 ) (38,561 ) 12,447 Interest and other income, net 179 768 (589 ) Net loss $ (25,935 ) $ (37,793 ) $ 11,858 Revenues 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 $0.9 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. 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 (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 $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 $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. 27 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 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. dollars. 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 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. The shares are offered and will be sold pursuant to a shelf registration statement on Form S-3 which was declared effective by the SEC on January 2, 2020. During the second quarter of 2020, we sold 700,000 ordinary shares under the ATM Sales Agreement, for gross proceeds of approximately $16.6 million. The net proceeds to us after deducting sales commissions to Cowen and other issuance expenses were approximately $15.8 million. The remaining capacity under the ATM Sales Agreement is approximately $83.4 million. In March 2021, 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. 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, partially offset by proceeds from sales of Jelmyto. We cannot estimate the actual amounts necessary to successfully commercialize any approved products, including Jelmyto, or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. Cash Flows The following table sets forth the significant sources and uses of cash for the periods set forth below: Three Months Ended March 31, 2021 2020 (in thousands) Net cash (used in) provided by: Operating activities $ (27,401 ) $ (35,635 ) Investing activities 15,024 13,025 Financing activities 4 90 Net change in cash and cash equivalents $ (12,373 ) $ (22,520 ) 28 Operating Activities 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 $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 $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 During the periods presented, we did not have, nor do we currently have, any off‑balance sheet arrangements as defined under SEC rules.