UroGen Pharma Ltd.
ANNUAL REPORT
2019
May 4, 2020
Dear Shareholders,
The recent U.S. Food and Drug Administration (FDA) approval of Jelmyto™ (mitomycin) for pyelocalyceal solution for
patients with low-grade upper tract urothelial cancer (LG-UTUC), was a historic moment for our company and for the urologic
community. Jelmyto, formerly known as UGN-101, is the first and only FDA-approved non-surgical, chemoablative treatment
for patients with LG-UTUC. Our team is excited and well-prepared to bring this breakthrough therapy to patients who have
been in critical need of an effective, kidney-sparing alternative to the contemporary standard of care. This is the culmination
of many years of work and dedication by our outstanding team at UroGen.
2019 was a pivotal year for UroGen, and our team delivered on the commitments and goals we set out to achieve.
Our accomplishments in 2019 led to this landmark approval and positioned us for what we believe will be the most
transformative year in our history.
In preparation for the launch of Jelmyto, our team worked diligently throughout 2019 to ensure readiness for our first
commercial launch. As part of those planning efforts, we hired a commercial and field team with proven expertise in
both urology and oncology. This team includes a sales force comprised of seasoned veterans with existing relationships in
the uro-oncology community. Novel strategies were developed for patient identification and reimbursement, as well as
physician adoption of Jelmyto. We knew the months preceding our approval and launch would include both exhilarating
and challenging moments. The current environment with the ongoing COVID-19 pandemic has required our team to think
creatively to bring this transformational therapy to patients who deserve better options. We believe the innovative solutions
we have developed, including a virtual platform, will provide for effective engagement with our health care professionals
and key stakeholders as well as support our ability to deliver products to patients and physicians. This is a demonstration
of our mission and the bold, inventive, and connected culture of UroGen.
As we look forward to the remainder of 2020, we will build upon our progress from 2019 and deliver our key milestones. Our
primary focus will be execution of our Jelmyto launch and the advancement of our portfolio. The most significant near-term
candidate, UGN-102 (mitomycin) for intravesical solution, designed for patients with low-grade intermediate-risk non-muscle
invasive bladder cancer (NMIBC), is expected to enter into a pivotal Phase 3 study later this year. There are currently no drugs
approved by the FDA for first-line treatment of LG-NMIBC, and the annual treatable population of patients with low-grade
intermediate-risk NMIBC is approximately 80,000 in the United States alone. Updated complete response and durability data
from the Phase 2b OPTIMA II trial was recently included as part of a late-breaking abstract published in the April supplement
to The Journal of Urology. This study demonstrated a complete response rate at three months following onset of treatment of
65%. Of those who achieved a complete response, 97% and 85% of patients remained free of disease at six- and nine-months
follow-up, respectively. The most commonly reported adverse events were dysuria, hematuria, urinary frequency, fatigue,
urgency and urinary tract infection and the majority were reported as mild to moderate in severity. These data, combined
with the results from our OLYMPUS trial in patients with LG-UTUC, further support our confidence in the potential of UGN-102.
Beyond low-grade disease, we continue to advance UGN-302, a combination of UGN-201, a TLR7/8 agonist with zalifrelimab,
an anti-CTLA-4 antibody we licensed from Agenus Inc. for high-grade NMIBC. The initial indication is supported by the
encouraging nonclinical work we previously shared. We continue to evaluate other areas for both local delivery and novel
medicines in adjacent spaces.
While we are living in a time of uncertainty with the global COVID-19 pandemic, no one can fully predict the potential impact
on business and timelines across industries. However, UroGen will continue to advance our programs and find creative
solutions in our pursuit to pioneer new treatments to improve patient care in specialty cancers and urologic diseases. We are
well-capitalized and equipped with a proven leadership team to navigate these unprecedented times and build UroGen into
a long-term growth company with the mission to have a profound impact for patients. I am inspired by and grateful for our
amazing colleagues and look forward to the exciting path we have ahead.
On behalf of the entire UroGen Team, thank you for your continued support and your commitment to our mission moving
forward. We look forward to updating you on our progress throughout the year.
Warm Regards,
Liz Barrett
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
(cid:4) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to ________________
Commission file number: 001-38079
UROGEN PHARMA LTD.
(Exact name of registrant as specified in its charter)
Israel
(State or other jurisdiction of
incorporation or organization)
400 Alexander Park, Princeton, NJ
(Address of principal executive offices)
98-1460746
(I.R.S. Employer
Identification Number)
08540
(Zip Code)
Registrant’s telephone number, including area code:
(646) 768-9780
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Ordinary Shares, par value NIS 0.01 per share
Trading Symbol
URGN
Name of exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:3) No (cid:4)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:3)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes (cid:3) No (cid:4)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes (cid:3) No (cid:4)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Non-accelerated filer
(cid:3)
(cid:4)
Accelerated filer
Smaller reporting company
Emerging growth company
(cid:4)
(cid:4)
(cid:4)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:3)
The aggregate market value of the ordinary shares held by non-affiliates of the registrant as of June 28, 2019 totaled approximately $695.3 million based on the closing
price for the registrant’s ordinary shares on that day as reported by the Nasdaq Stock Market LLC. Such value excludes ordinary shares held by executive officers,
directors and certain entities affiliated with directors as of June 28, 2019.
As of February 19, 2020, there were 21,154,965 of the registrant’s ordinary shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Description
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the registrant’s fiscal
year ended December 31, 2019 are incorporated by reference into Part III of this report.
10-K Part
III
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Item 16.
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PART I
INTRODUCTION
Unless otherwise indicated, “UroGen Pharma,” “the Company,” “our Company,” “we,” “us” and “our” refer to UroGen Pharma Ltd.
and its subsidiary, UroGen Pharma, Inc.
UroGen RTGel and Jelmyto are trademarks of ours that we use in this Annual Report. This Annual Report also includes trademarks,
tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames
referred to in this Annual Report appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that
we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to our trademark and
tradenames. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or
endorsement or sponsorship of us by, any other companies.
We maintain our books and records in U.S. dollars, and prepare our financial statements in accordance with accounting principles
generally accepted in the United States, or U.S. GAAP, as issued by the Financial Accounting Standards Board, or FASB.
The terms “shekel,” “Israeli shekel” and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms
“dollar,” “U.S. dollar” or “$” refer to United States dollars, the lawful currency of the United States. All references to “shares” in this
Annual Report refer to ordinary shares of UroGen Pharma Ltd., par value NIS 0.01 per share.
We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, numerical figures shown as
totals in some tables may not be an arithmetic aggregation of the figures that preceded them.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, or this Annual Report, contains “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act,
which are subject to the “safe harbor” created by those sections. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth below under Part I, Item 1A, “Risk Factors” in this
Annual Report.
We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future
events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of historical
facts may be deemed to be forward-looking statements and are based upon our current expectations, beliefs, estimates and projections,
and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Forward-looking statements
in this Annual Report include, but are not limited to, statements about:
• the timing and conduct of our clinical trials of UGN-101, UGN-102 and our other product candidates, including statements
regarding the timing, progress and results of current and future nonclinical studies and clinical trials, and our research and
development programs;
• the clinical utility, potential advantages and timing or likelihood of regulatory filings and approvals of UGN-101, UGN-102 and
our other product candidates;
• our expectations regarding the current new drug application, or NDA, review process for UGN-101 or our plans regarding
utilization of regulatory pathways that would allow for accelerated marketing approval in the United States;
• our expectations regarding timing for application for and receipt of regulatory approval for any of our product candidates;
• our ongoing and planned discovery and development of product candidates;
• our expectations regarding future growth, including our ability to develop, and obtain regulatory approval for, new product
candidates;
• our ability to obtain and maintain adequate intellectual property rights and adequately protect and enforce such rights;
• our ability to maintain our collaboration with Allergan Pharmaceuticals International Limited, or Allergan, a wholly owned
subsidiary of Allergan plc, enter into and successfully complete other collaborations, licensing arrangements or in-license or
acquire rights to other products, product candidates or technologies;
• our plans to develop and commercialize our product candidates;
1
• our estimates regarding the commercial potential and market opportunity for our product candidates;
• our estimates regarding expenses, future revenues, capital requirements and the need for additional financing; our planned level
of capital expenditures and our belief that our existing cash, cash equivalents and short-term investments will be sufficient to
fund our operating expenses and capital expenditure requirements for at least the next 12 months;
• the impact of our research and development expenses as we continue developing product candidates;
• the future nonclinical, clinical development of newly licensed products, including UGN-301, and their commercial opportunity;
and
• the impact of government laws and regulations.
We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other
factors that are important to you. In addition, we cannot guarantee future results, level of activity, performance or achievements. You
should refer to the section of this Annual Report under Part I, Item 1A, “Risk Factors” for a discussion of important factors that may
cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these
factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. In addition, statements
that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such
statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an
exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and
investors are cautioned not to unduly rely upon these statements.
If our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these
forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will
achieve our objectives and plans in any specified time frame or at all. Any forward-looking statement made by us in this Annual Report
speaks only as of the date of this Annual Report or as of the date on which it is made. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read this Annual Report and the documents that we reference in this Annual Report and have filed as exhibits to this Annual
Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify
all of our forward-looking statements by these cautionary statements.
This Annual Report may contain market data and industry forecasts that were obtained from industry publications. These data involve a
number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently
verified any third-party information. While we believe the market position, market opportunity and market size information included in
this Annual Report is generally reliable, such information is inherently imprecise.
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Item 1. Business
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 platform 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 more effective treatment option. Our lead investigational candidates, UGN-101
and UGN-102, 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 carcinoma, or LG UTUC, and low-grade non-muscle invasive bladder cancer, or LG NMIBC,
respectively.
We estimate that the annual treatable population of LG UTUC in the United States is approximately 6,000 to 7,000, and that the annual
treatable population of LG Intermediate Risk NMIBC in the United States 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
maximize 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 limited the efficacy of medicines applied locally to the urinary tract.
In December 2019, the FDA accepted for filing and granted priority review for our New Drug Application, or NDA, for UGN-101
(mitomycin gel) for instillation as a potential treatment for patients with LG UTUC. If approved, UGN-101 would be the first non-
surgical treatment option for LG UTUC. We are on track for the potential FDA approval and launch of UGN-101 by mid-year 2020. The
FDA previously granted Orphan Drug, Fast Track, and Breakthrough Therapy Designations to UGN-101 for the treatment of LG UTUC.
The NDA is supported by the positive results from the pivotal Phase 3 OLYMPUS clinical trial. Results from a final analysis of the
primary endpoint showed that UGN-101 demonstrated a complete response rate of 59% in patients with LG UTUC. In addition, the
durability of response was estimated to be 89% at six months and 84% at 12 months by Kaplan Meier analysis. Median time to
recurrence was estimated to be 13 months. The most commonly reported treatment emergent adverse events were ureteric stenosis
(43.7%), urinary tract infection (32.4%), haematuria (31.0%), flank pain (29.6%) nausea (23.9%), dysuria (21.1%), renal impairment
(19.7%) and vomiting (19.7%). The majority of these adverse events were mild to moderate with 8.5% of patients having events of
ureteric stenosis reported as severe.
In addition, we are evaluating the safety and efficacy of UGN-102 (mitomycin gel) for intravesical instillation, our novel sustained-
release high dose formulation of mitomycin, for the treatment of LG Intermediate Risk NMIBC. In September 2019, we reported the
interim data of our Phase 2b OPTIMA II trial of investigational UGN-102 (mitomycin gel) for intravesical instillation for patients with
LG 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 recently 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. In an interim cohort of 32 patients, 63% (20/32) achieved a CR. We also intend
to pursue a 505(b)(2) regulatory pathway for UGN-102. We believe that UGN-102 has the potential to be a new therapeutic option for
the treatment of LG Intermediate Risk NMIBC patients.
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 majority of the expenditures are spent on tumor resection
surgeries such as transurethral resection of bladder tumor, or TURBT. In 2015, the estimated prevalence of urothelial cancer in the
United States was 700,000 with an annual incidence of approximately 80,000. The prevalence of LG NMIBC in the United States was
approximately 350,000.
Our clinical stage pipeline also includes UGN-201, our proprietary immunotherapy product candidate, a 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. UGN-201
is a novel, liquid formulation of imiquimod, a generic TLR7/8, agonist. 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 November 2019, we entered into a worldwide license agreement with Agenus Inc. to develop and commercialize
zalifrelimab (UGN-301, 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 non-muscle invasive bladder cancer, or HG NMIBC. We believe that
the combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and
potential side effects.
3
In October 2016, we granted an exclusive worldwide license to Allergan Pharmaceuticals International Limited, or Allergan, a wholly
owned subsidiary of Allergan plc, to research, develop, manufacture, and commercialize pharmaceutical products formulated with our
RTGel technology platform and clostridial toxins, including BOTOX®, a branded drug, that we believe can potentially serve as an
effective treatment option for patients suffering from overactive bladder, or OAB. In August 2017, we announced that Allergan had
submitted an Investigational New Drug application, or IND, to the FDA in order to be able to commence clinical trials in the U.S. using
RTGel 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.
Our Product Candidate Pipeline
The following chart summarizes the current status of our product candidate pipeline:
Uro-Oncological Indications Targeted by Our Product Candidates
Our product candidates are administered locally using the standard practice of intravesical instillation directly into the bladder or upper
urinary tract 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.
Upper Tract Urothelial Carcinoma (UTUC)
UTUC refers to malignant changes of the urothelium (the epithelial lining) of the upper urinary tract of the calyces, renal pelvis and
ureter. LG UTUC managed with endoscopic resection typically exhibits a high rate of local recurrence. HG UTUC is associated with
renal parenchymal invasion and the development of metastases. UTUC accounts for approximately 5% to 10% of all new cases of
urothelial cancer, which corresponds to an estimated annual incidence in the United States of up to 8,000 cases. UTUC is nearly three
times more common in men than women and is typically diagnosed in patients in the 6th and 7th decades of life. Tumor grade is the key
prognostic factor at the time of diagnosis of UTUC and is assigned based upon microscopic examination of tumor tissue. Approximately
40% of the patients diagnosed annually with UTUC in the United States have LG UTUC.
There are currently no drugs approved by the FDA for the treatment of LG UTUC. Due to the anatomic complexity of the upper urinary
tract, complete endoscopic resection of UTUC is technically very challenging. Endoscopic surgical resection of LG UTUC is associated
with high rates of local recurrence (50-90%). Consequently, most LG UTUC patients ultimately undergo kidney and ureter removal to
control disease (nephroureterectomy).
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Endoscopic tumor resection, which aims to be a kidney sparing surgical procedure, is conducted only in patients with low-grade disease
and with limited tumor burden (unifocal tumor, low grade histology, less than 2 cm in greatest dimension).
Bladder Cancer
The bladder is a hollow organ in the pelvis with flexible muscular walls. Its main function is to store urine before it leaves the body.
Urine is produced by the kidneys and is then carried to the bladder through the upper urinary tract tubes, called ureters. The bladder wall
has four main layers. The innermost lining is comprised of cells called urothelial or transitional cells, and this inner layer is called the
urothelium or transitional epithelium. Beneath the urothelium, there is a layer called the lamina propria. Next is a thick layer of muscle
called the muscularis propria followed by a layer of perivesical fat.
Bladder cancer (annual US incidence 80,000, prevalence 700,000) accounts for approximately 90% to 95% of all new cases of urothelial
cancer in the United States. Bladder cancer is nearly three to four times more common in men than women, and, is most commonly
diagnosed in the elderly. Bladder cancers are described as non-muscle invasive or muscle-invasive based on how far into the wall of the
bladder they have invaded. The physical extent and anatomic location of a tumor is described by clinical staging. The American Joint
Committee on Cancer has established an accepted staging system called the tumor, nodes, metastasis, or TNM System. NMIBC includes
the clinical stages Ta (papillary urothelial cancer confined to the urothelium), T1 (papillary urothelial cancer invading the lamina
propria) and CIS (carcinoma in situ, a form of high-grade NMIBC). NMIBC is associated with high rates of relapse following
endoscopic surgery and treatment with aqueous adjuvant topical chemo and immunotherapy. Progression rates to muscle invasion
approach 30-50% in patients with high-grade T1 disease associated with CIS. Patients with low-grade NMIBC are treated by chronic
endoscopic resection of visible lesions, typically over a period of many years. Patients with LG Intermediate Risk NMIBC have frequent
recurrences of disease that can be difficult to control using contemporary standards of care. MIBC which is described as >T2 in the TNM
system, is treated with systemic chemo- and/or immunotherapy followed by consolidative radiation therapy or bladder removal surgery
(radical cystectomy) in patients with clinically organ-confined disease. Patients presenting with advanced/metastatic bladder cancer
have a limited life expectancy.
Non-Muscle Invasive Bladder Cancer
NMIBC can be characterized as low, intermediate, or high risk and can also be characterized as low- or high-grade. Low-grade,
intermediate risk tumors are defined as having one of more of following characteristics: tumor larger than 3 cm, multiple tumors in the
bladder and a recurrence in less than one year from the prior tumor. We estimate based upon a review of peer-reviewed and publicly
available data that approximately 20% of the prevalent NMIBC population (80,000) may be described as intermediate risk in any given
year.
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The chart below indicates the target patient population for LG NMIBC at intermediate risk of recurrence:
The standard of care for treating LG Intermediate Risk NMIBC patients is TURBT. TURBT is a surgical procedure for tumor removal
conducted under general anesthesia in a hospital setting and may require an overnight stay. Moreover, TURBT’s success is tied to the
physician’s ability to overcome challenges in properly identifying, reaching and resecting all tumors. No drugs have been approved by
the FDA as a treatment for LG NMIBC and only three drugs have been approved by the FDA for NMIBC, all used as adjuvant treatment,
following TURBT. Efficacy of drug treatments has historically been limited due to challenges presented by bladder physiology,
specifically the fact that urine is produced and voided frequently, thus diluting the concentration of the drug almost immediately and
causing the excretion of the drug from the bladder at first urine voiding. A subset of LG NMIBC patients is at risk for frequent local
recurrences. Due to lack of treatment options to reduce recurrences in these patients, they are managed with repeat TURBT for each
subsequent recurrence.
Recent Developments
In December 2019, we entered into a sales agreement with Cowen and Company, LLC, or Cowen, pursuant to which we may from time
to time offer and sell ordinary shares having an aggregate offering price of up to $100.0 million to or through Cowen, acting as sales
agent or principal.
On January 12th, 2020, the Israeli Innovation Authority, or IIA, approved our request to unwind our obligation to the IIA regarding
grants that were loaned to us between January 2004 and September 2016. We have previously reported that the repayment of these grants
could be up to three-times of the original grants and other amounts. Under the approval from the IIA, we will be required to:
1. Make a one-time payment in 2020, for up to three-times the grants provided (linked to Plan No. 33889) plus annual interest, net of a
deduction for the royalties already paid in accordance with Appendix B of the Section 18(F) to Instructions for Benefit Track No. 1 -
R&D Fund, or Benefit Track.
2. Make a commitment to continue employment of at least 75% of its base research and development jobs in Israel (at the time of
settlement) for a period of at least 3 years, in accordance with Appendix B of the Benefit Track.
The total payment under the IIA approval, net of the royalties already paid, amounts to $6.6 million plus any additional accrued interest
since January 2020. We intend to make this payment in the first quarter of 2020.
Subject to payment to the IIA to unwind our obligation, we 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 employment as
discussed above, all other obligations with the IIA will also cease to exist as per the current agreement.
Our Competitive Strengths
We believe our lead product candidates for uro-oncology, which are being developed by leveraging our expertise in drug development
and our proprietary formulation technology, have the ability to replace the repetitive, costly, sub-optimal and burdensome tumor
resection procedures that represent the current standard of care. Furthermore, we believe our proprietary formulation technology has
broad applications and may allow us to develop additional product candidates for indications within and beyond the urinary tract.
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Potential ability to develop minimally invasive, drug therapies for uro-oncology. Leveraging our innovative formulation technology,
we are developing two lead product candidates, UGN-101 and UGN-102, as potential replacements to treatment for LG UTUC and
NMIBC, respectively. Both UGN-101 and UGN-102 are chemoablation agents designed to overcome the challenges posed by the
anatomy of the urinary tract by increasing the dwell time and enhancing the tissue coverage of mitomycin. Clinical data generated to date
supports our belief that our lead product candidates may provide new therapeutic options to the current tumor surgical procedures,
providing a chemoablation treatment that has the potential to better eradicate tumors irrespective of their detectability and location
within the urinary tract.
Expertise in developing proprietary formulations of drugs for clinical benefit. We focus on developing proprietary RTGel
formulations of previously approved drugs and novel therapeutics which we are investigating, whose efficacy for a particular indication
is limited by current formulations or routes of administration. While we have not yet brought a drug to market, our expertise has enabled
us to develop proprietary RTGel-based formulations for previously approved drugs, including clinical stage proprietary formulations of
mitomycin and botulinum toxin. Our formulations are designed to significantly increase the dwell time and exposure of the drugs to the
target sites and limit the need for urine retention, potentially providing enhanced clinical activity, reduced patient burden and increased
patient compliance over existing formulations and modes of administration. We have a strong research and development team to
advance our product candidates.
Streamlined development risks and efficiencies for our pipeline product candidates. We expect the approval process for each of our
current uro-oncology product candidates to comply with the FDA’s 505(b)(2) regulatory pathway, and provide a streamlined, capital
efficient pathway when compared to traditional drug development. Furthermore, two of our product candidates, UGN-101 and UGN-
201, have received Orphan Drug Designation from the FDA for the treatment of LG UTUC and CIS, respectively, which we expect will
provide seven years of regulatory exclusivity following FDA approval, if received. UGN-101 was also granted Fast Track, Breakthrough
Therapy and Priority Review Designations by the FDA.
Leverageable proprietary formulation technology. We believe that RTGel has multiple potential applications beyond urology. Our
formulation know-how may enable us to develop different drug formulations to facilitate the delivery, retention and sustained release of
active drugs to a variety of targeted body cavities. We believe that our proprietary formulation technology can improve the efficacy of
locally administered drugs in body cavities that present anatomical and physiological challenges related to frequent wash out, rapid
excretion and bodily secretions. In October 2016, we announced that we licensed worldwide rights to a proprietary RTGel formulation
with BOTOX® to Allergan for the treatment of overactive bladder and related indications pursuant to the Allergan Agreement.
Strong intellectual property position. We have a robust intellectual property portfolio that includes 35 issued patents worldwide and
more than 75 pending patent applications filed worldwide. In the United States, we have 16 granted patents. Most of these patents are
directed to protect our lead product candidates UGN-101, UGN-102 and UGN-201 as well as our RTGel technology and our other
potential product candidates that are under nonclinical review. These patents claim methods, systems, and novel compositions and
combinations for treating cancer in internal cavities, in particular treating a urinary tract cancer. These issued patents are expected to
expire between 2024 and 2032. Our pending patent application in the United States is set to expire in 2035, if issued. Additionally, the
FDA has granted Orphan Drug Designation to UGN-101 for the treatment of LG UTUC which potentially entitles us to regulatory
exclusivity for UGN-101 for seven years following FDA approval.
Experienced and accomplished leadership team with proven track record. We have an experienced management team, with each
member possessing deep experience in the biopharmaceutical and related industries. Our Chief Executive Officer, Liz Barrett was CEO
of Novartis Oncology and a member of the Executive Committee of Novartis. She previously served as Global President of Oncology at
Pfizer Inc. At Pfizer, she held numerous leadership positions, including President of Global Innovative Pharma for Europe, President of
the Specialty Care Business Unit for North America, and President of United States Oncology. Prior to Pfizer, she was Vice President
and General Manager of the Oncology Business Unit at Cephalon Inc. Ms. Barrett also worked at Johnson & Johnson. In addition, our
Chairman, Arie Belldegrun, M.D., is a seasoned biotech executive and was the founder, Chairman, Chief Executive Officer and
President of Kite Pharma, Inc., which was sold to Gilead Sciences, Inc. Dr. Belldegrun is also a urologist by training. We believe that our
leadership team is well-positioned to lead us through clinical development, regulatory approval and commercialization for our product
candidates.
Our Growth Strategy
We are a biopharmaceutical company dedicated to building and commercializing novel solutions that treat specialty cancers and urologic
diseases. Some key growth drivers are as follows:
7
Establish each of our lead product candidates, UGN-101 and UGN-102, as the treatment in its target indication.
We initiated a rolling submission of the UGN-101 NDA using the 505(b)(2) pathway through submission of nonclinical sections of the
NDA to the FDA in December 2018. In December 2019, the FDA accepted our NDA submission and granted Priority Review
Designation.
We submitted an IND for UGN-102 in June 2018. We recently completed enrollment in an open-label, single-arm Phase 2b clinical trial
to evaluate the efficacy and safety of UGN-102 for the treatment of patients with LG Intermediate Risk NMIBC. We believe that these
local drug treatments have the potential to offer an alternative to costly, sub-optimal and burdensome tumor resection and kidney
removal surgeries to become the standard of care.
Expand our uro-oncology product pipeline.
We believe that combining UGN-201 with immune checkpoint inhibitors or chemotherapy has the potential to serve as a treatment
option for high-grade urothelial tumors. 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 November 2019, we entered into a worldwide license agreement with Agenus Inc. to develop and
commercialize zalifrelimab (UGN-301, anti-CTLA-4 antibody) 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). We
believe that the combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic
exposure and potential side effects.
Utilize our proprietary technology to expand our pipeline to other body cavities and indications.
We believe that RTGel may be suitable for multiple additional applications. Our know-how may enable us to develop different drug
formulations to facilitate the delivery, retention, increased dwell time and sustained release of active drugs to a variety of targeted body
cavities. In the future, we may also choose to develop our RTGel technology in combination with other drugs to treat cancer and other
indications endemic to such body cavities.
Evaluate and selectively pursue potential collaborations to develop improved formulations and product life-cycle management
strategies.
We entered into the Allergan Agreement as part of our strategy to research, develop, manufacture and commercialize pharmaceutical
products that contain RTGel alone or in combination with certain other active ingredients. This collaboration provides us with funding
for our research and development efforts and may accelerate the development and commercialization of our approved products, if any.
In addition, we may in-license or acquire additional product candidates for urological indications. Such collaborations would allow us to
obtain financial support and to capitalize on the expertise and resources of our potential partners, which could allow for new and
improved versions of approved or clinical stage drugs and could accelerate the development and commercialization of additional
product candidates.
RTGel: Our Reverse Thermal Hydrogel Platform Technology
We have developed RTGel, 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 heated. 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, by
conforming to the anatomy of the target organ while preventing rapid excretion of the drug. The following images show the progression
of five stages of RTGel at different temperatures.
RTGel’s components are polymer-based and are inactive ingredients that have been approved by the FDA for use in other products such
as Oraqix, a periodontal gel, Namenda, an oral solution for Alzheimer’s disease, and Xeloda, an oral chemotherapy. We formulate
RTGel with an active drug: mitomycin in the case of UGN-101 and UGN-102, and botulinum toxin in the case of BOTOX. The resulting
formulations are instilled intravesically in liquid form directly into the bladder or upper urinary tract using standard instillation
methodologies via catheters and thereafter convert into gel form at body temperature. Subsequently, upon contact with urine, RTGel
gradually dissolves and releases the active drug over a period of several hours and is less affected by urine creation and voiding cycles as
compared to water formulations.
8
We believe that RTGel, when formulated with an active drug, may allow for the improved efficacy of treatment of various types of
urothelial cancer without compromising the safety of the patient or interfering with the natural flow of fluids from the urinary tract to the
bladder. 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.
These characteristics of RTGel enable sustained release of mitomycin in the urinary tract for both UGN-101 and UGN-102, and of
botulinum toxin in the case of BOTOX. 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.
Mitomycin—Our Target Active Drug for the Treatment of UTUC and NMIBC
Mitomycin is a generic drug currently utilized as an adjuvant chemotherapy for the treatment of LG NMIBC after TURBT. Mitomycin,
a chemotherapy agent, is administered using a water-based solution, which has a relatively short dwell time in the bladder limited to first
voiding. Mitomycin often causes temporary irritation of the urinary tract, including the need to urinate frequently and urgently. In the
upper urinary tract, the dwell time is limited to approximately five minutes as urine flows continuously and no active retention by the
patient is feasible. Numerous in vitro models, in vivo studies and computer simulations have shown that increased dwell time of
mitomycin in the bladder results in increased time to recurrence of urothelial cancer. In one such study, it was shown that mitomycin
activity increased with exposure time. Specifically, the MIC90, or mean inhibitory concentration that causes 90% inhibition in cell
growth, was 11-fold lower when exposure time was increased from 30 minutes to eight hours.
Mitomycin’s main effect is on the cancer cell’s DNA and has been demonstrated to be most effective when the cancer cell is in its S-
phase, or synthesis phase, during which the DNA is replicated. Each cancer cell goes through various phases during the cell cycle.
However, the cell cycle is not synchronized in all cancer cells, which means that at any given point in time only a portion of the cancer
cells are at their S-phase, or susceptible to the instilled mitomycin in the bladder. Increased dwell time, facilitated by our RTgel
preparations UGN-101 and UGN-102, results in increased cell killing and greater efficacy when compared to aqueous solutions of
mitomycin.
Limitations of Current Therapies for Upper Tract Urothelial Carcinoma
There are currently no drugs approved by the FDA for the treatment of LG UTUC, representing a significant unmet medical need. The
current standard-of-care for the treatment of LG UTUC is radical nephroureterectomy, which is complete kidney and upper urinary tract
removal. Recent advances in resection instrument technology have allowed physicians in some cases to treat patients with LG UTUC
using endoscopic tumor resection, a kidney-sparing treatment, rather than nephroureterectomy followed by adjuvant chemotherapy,
typically mitomycin, treatment. However, the specific anatomy and physiology of the upper urinary tract make the performance of
organ-sparing endoscopic tumor resection and instillation of adjuvant chemotherapy challenging, leading to high recurrence rates.
Patients often undergo multiple endoscopic resection procedures, which increases the probability of potential complications of resection,
including perforation and ureteral stricture, or a narrowing of the ureter.
Our Solution: UGN-101(mitomycin gel) for instillation
UGN-101 is our novel sustained-release RTGel-based formulation of mitomycin that we are developing for the treatment of LG UTUC.
RTGel is liquid at lower temperatures and converts into gel form at body temperature. This temperature-dependent viscosity
characteristic allows for simple and convenient instillation of the cooled UGN-101 in its liquid form to the upper urinary tract via
standard catheters. Once instilled, UGN-101 converts into gel form at body temperature. Subsequently, upon contact with urine, UGN-
101 gradually dissolves and releases the active drug, mitomycin, over a period of several hours versus several minutes for mitomycin in
its water-based formulation. We believe that this substantial increase in dwell time of mitomycin positions UGN-101 as a potential
chemoablation treatment for LG UTUC, potentially sparing patients from repeated tumor resection surgeries and potentially reducing
the need for bladder and upper urinary tract surgeries, including upper urinary tract removal.
9
The Orphan Drug Designation granted to UGN-101 for the treatment of LG UTUC potentially entitles us to regulatory exclusivity for a
minimum of seven years following approval by the FDA, if granted. The FDA has also granted Fast Track, Breakthrough and Priority
Review Designations.
UGN-101
In the first quarter of 2017, we commenced the OLYMPUS trial, a pivotal, open-label, single-arm Phase 3 clinical trial of UGN-101 for
the treatment of LG UTUC. OLYMPUS is a prospective, single-arm study designed to assess the efficacy, safety and tolerability of
treatment with UGN-101 instilled in the upper urinary system of patients with noninvasive, LG UTUC. The primary efficacy endpoint is
the complete response, or CR, rate, defined as the percentage of patients with a CR at the primary disease evaluation, or PDE, visit,
which occurs approximately four to five weeks following the sixth weekly instillation. In addition, patients who achieve a CR at the PDE
visit were followed for up to 12 months for durability of response.
Eligible consenting patients were treated with UGN-101 once weekly for a total of six times in a retrograde fashion. Patients who
demonstrated CR were to be treated with UGN-101 once monthly as a maintenance therapy for a total of 11 instillations or up to the first
recurrence, whichever came first. An independent Data Monitoring Committee, or DMC, was assigned to this study. Safety and efficacy
data are monitored periodically by the DMC as detailed in the DMC charter.
The OLYMPUS trial is being conducted in the United States and Israel. The study completed enrollment in November 2018 with 74
patients enrolled, and 71 patients treated.
Results from a final analysis of the primary endpoint for the OLYMPUS trial were presented at the Company’s Investor Day event on
September 24, 2019 and showed that investigational UGN-101 demonstrated a 59% CR rate in patients with LG UTUC. Findings were
consistent with previously presented results.
The final analysis of the primary endpoint showed that in the OLYMPUS intent-to-treat population, 42 of the 71 patients (59%) achieved
a CR. Forty-one patients entered follow-up, which is still ongoing. Durability of response was estimated by Kaplan-Meier to be 89% at
6 months and 84% at 12 months after PDE. The estimated median time-to-recurrence was 13.0 months. Thirty-four of the 71 patients
treated in the study were initially characterized by the treating physician as having endoscopically unresectable tumor at baseline.
Twenty of 34 patients (59%) achieved a CR at the PDE assessment and 12-month durability was identical for this subgroup.
In OLYMPUS, the most common treatment emergent adverse events were ureteric stenosis (43.7%), urinary tract infection (32.4%),
haematuria (31.0%), flank pain (29.6%), nausea (23.9%), dysuria (21.1%), renal impairment (19.7%) and vomiting (19.7%). The
majority of these adverse events were mild to moderate with 8.5% of patients having events of ureteric stenosis reported as severe.
The most common treatment emergent serious adverse events were ureteric stenosis (7.0%), hydronephrosis (5.6%), flank pain (4.2%),
and urosepsis (4.2%).
The most common treatment emergent serious adverse events are presented in the table below:
Preferred Term
Number of patients reporting at least one
serious adverse event
Ureteric stenosis
Hydronephrosis
Flank pain
Urosepsis
Chronic obstructive pulmonary disease
Dehydration
Dyspnoea
Haematuria
Urinary tract infection
Vomiting
Safety Analysis Set
N=71
Relationship to Study Drug
Not
Related
n (%)
Possibly
Related
n (%)
Probably
Related
n (%)
Definitely
Related
n (%)
Total
n (%)
9(12.7)
2(2.8)
2(2.8)
1(1.4)
0(0.0)
0(0.0)
1(1.4)
0(0.0)
0(0.0)
0(0.0)
1(1.4)
9(12.7)
3(4.2)
1(1.4)
1(1.4)
3(4.2)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
1(1.4)
0(0.0)
1(1.4)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
0(0.0)
26(36.6)
5(7.0)
4(5.6)
3(4.2)
3(4.2)
2(2.8)
2(2.8)
2(2.8)
2(2.8)
2(2.8)
2(2.8)
7(9.9)
0(0.0)
1(1.4)
1(1.4)
0(0.0)
2(2.8)
1(1.4)
2(2.8)
2(2.8)
1(1.4)
1(1.4)
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We have obtained Orphan Drug, Fast Track and Breakthrough Therapy Designations for UGN-101 for the treatment of patients with LG
UTUC. We initiated a rolling submission of the UGN-101 NDA using the 505(b)(2) pathway through submission of nonclinical sections
to the FDA in December 2018. In December 2019, the FDA accepted our NDA submission and granted Priority Review Designation.
The FDA grants priority review to applications for medicines that, if approved, would be significant improvements in the safety or
effectiveness of the treatment, diagnosis, or prevention of serious conditions when compared to standard applications. Priority Review
Designation shortens the review period of a 505(b)(2) NDA from the standard 10 months to six months from the submission of the NDA.
The FDA assigned a Prescription Drug User Fee Act, or PDUFA, action date of April 18, 2020.
We have initiated a retreatment protocol as an extension to OLYMPUS. This trial is designed to evaluate the efficacy and safety of
retreatment with UGN-101 in patients treated in the OLYMPUS trial who were found to be a CR at the PDE 1 Visit and were
subsequently found to have a documented recurrence of LG UTUC during follow-up. To date, no patients have recurred and entered into
the retreatment protocol.
Limitations of Current Therapies for Non-Muscle Invasive Bladder Cancer
Tumor grade and stage are the most important variables for determining the likelihood of progression from NMIBC to MIBC. The three
stages of NMIBC are: Ta (70%), T1 (20%) and CIS or Tis (10%). Tumors are graded as low or high, and approximately 70% of NMIBC
patients have a tumor that is classified as low-grade. Tumors classified as Ta and CIS are limited to the urothelial layer, and T1 tumors
extend to the layer below, which is the lamina propria.
Recurrence, which occurs in approximately 80% of patients, is the primary threat for patients with NMIBC. Multiplicity, or number of
tumors, tumor size and prior recurrence rate are the most important variables in determining the likelihood and potential severity of
recurrence. In patients T1 and CIS NMIBC tumors, progression, which occurs in approximately 45% of patients, is the main threat.
Treatment ranges from TURBT in NMIBC patients with a low risk of recurrence to cystectomy for the treatment of HG NMIBC patients
with a high risk of recurrence.
TURBT is conducted in a hospital setting under general anesthesia and can often have side effects and complications. The most common
complications, risks and limitations of TURBT include:
• bleeding at the time of surgery that requires clot irrigation and mild burning;
• infection of the bladder;
• injury to the urethra and bladder perforation with potential intra-abdominal leakage;
• reimplantation and cell migration;
• repeat TURBT procedures, which are necessary for approximately 10% of patients within three months;
• complete removal of tumor tissue often not being feasible;
• potential recurrence of up to 25% of the tumors at the original treatment site; and
• some tumors not being detectable.
Post-operative adjuvant treatments for NMIBC, which are given to prevent reimplantation of the cancerous cells, consist primarily of
chemotherapy in the case of low-grade tumors and immunotherapy in the case of high-grade tumors, and are administered intravesically
via catheter. Adjuvant intravesical chemotherapy is used primarily in low-grade tumors following TURBT in order to try to delay tumor
recurrence but is not used as a chemoablation agent. The rationale is to expose tumors to high local drug concentrations while
minimizing the systemic exposure, thereby enhancing the treatment effect and reducing the drug toxicity. However, these traditional
adjuvant treatments to treating bladder cancer have been limited because, after instillation, the drug concentration is reduced, and the
drug is washed out due to urine voiding. As a result, the cancerous tissue is not exposed to the chemotherapy drug for the optimal length
of time.
No drugs have been approved by the FDA as treatment for NMIBC and only three drugs have been approved for NMIBC, all used as
adjuvant treatment: Thiotepa, which was approved in 1959, Bacillus of Calmette and Guerin, or BCG, which was approved in 1989; and
Valstar® (valrubicin) which was approved in 1998. Mitomycin is the drug used most often for intravesical chemotherapy. It is used as an
adjuvant treatment in the post-operative setting for low-grade tumors with high risk of recurrence. Other drugs that can be used include
docetaxel and gemcitabine. BCG, an immunotherapy-based drug, is used as an adjuvant treatment for patients with high-grade NMIBC.
Upon recurrence, which occurs in approximately 35% of patients, the patients undergo another round of BCG therapy with a response rate
of 30% to 50%. Radical cystectomy, or surgical removal of the bladder, is also a common treatment option for patients who fail multiple
intravesical BCG therapies. However, treatment with BCG is associated with severe side effects, as evidenced by a boxed warning on the
label, which is a warning placed on a prescription drug’s label by the FDA and is designed to call attention to serious or life-threatening
risks.
11
We are not aware of any drugs currently in development for the treatment of NMIBC that take into consideration bladder physiology,
specifically the fact that urine is produced and voided frequently, thus diluting the concentration of the active drug almost immediately.
Our Solution: UGN-102 (mitomycin gel) for intravesical instillation
UGN-102 is our sustained-release formulation of mitomycin that we are developing for the treatment of LG Intermediate Risk NMIBC as a
non-surgical chemoablation alternative to TURBT. It is administered locally using standard catheters and is designed to conform to the
bladder’s anatomy and persist in the bladder despite urine flow and bladder movement. Once instilled, UGN-102 converts into gel form at
body temperature. Subsequently, upon contact with urine, UGN-102 gradually dissolves and releases the active drug, mitomycin, over a
period of several hours versus the time until first voiding, often less than an hour, for mitomycin in its current water-based formulation,
without compromising the safety of the patient or interfering with the natural flow of urine out of the bladder. We believe that the resulting
significantly increased dwell time of mitomycin in the bladder prolongs exposure of mitomycin to the tumor tissue and therefore has the
potential to chemoablate both visible and unseen tumors.
Clinical Development of UGN-102
We presented interim results from the Phase 2b OPTIMA II trial of investigational UGN-102 (mitomycin gel) for intravesical instillation
for patients with LG 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 were treated with six weekly instillations of UGN-102 and underwent efficacy assessment of CR
(the primary endpoint) four to six weeks following the last instillation. In an interim cohort of 32 patients, 63% (20/32) achieved a CR.
Patients who were a CR continue to be followed for durability of response, with 12-month durability to be reported at a later time.
In the interim data from OPTIMA II, the most common treatment emergent adverse events observed were dysuria, pollakiuria, fatigue,
hematuria and urinary tract infection. The majority of these events were characterized as mild or moderate and transient.
Limitations of Current Therapies for High-Grade NMIBC
High-grade NMIBC is a highly aggressive form of bladder cancer. TURBT is the initial treatment of choice for high-grade NMIBC;
however, the high rates of recurrence and significant risk of progression to muscle-invasive tumors are particularly dangerous. Bladder
removal can be the first treatment of choice for young, otherwise healthy patients with high-grade disease or for patients who cannot
tolerate BCG. BCG, an immunotherapy-based drug, is the current standard of care as an adjuvant therapy post-resection in high-grade
tumors. However, treatment with BCG is associated with severe side effects, as evidenced by a boxed warning on the label.
UGN-201(imiquimod)
We believe that UGN-201 our immune-modulation product candidate, could represent a valid alternative to the current standard of care
for the BCG adjuvant, post-TURBT treatment of high-grade NMIBC. UGN-201’s active ingredient is imiquimod, an imidazoquinoline,
synthetic immune modulator, which specifically targets TLR7/8, which is expressed in bladder cancer cells. Toll-like receptors are
pattern recognition receptors whose importance in stimulating innate and adaptive immunity has been established by recent studies.
Toll-like receptors are able to sense microbial components as well as host-derived endogenous molecules released by injured tissues and
play a critical role in defending against invading pathogens.
Imiquimod, in its topical formulation, is FDA approved for several indications, including superficial basal cell carcinoma. UGN-201 is a
liquid formulation of imiquimod for intravesical administration that has been optimized for delivery in the urinary tract. UGN-201 does
not use our RTGel technology. We believe that UGN-201 may elicit an adaptive immune response in the presence of released bladder
cancer antigens, which may translate into a long lasting acquired immune response. We also believe the combination of UGN-201 with
immune checkpoint inhibitors could further increase the adaptive immune response and potentially represent a viable alternative to BCG
for the adjuvant treatment of high-grade NMIBC or UTUC. We have obtained Orphan Drug Designation for UGN-201 for the treatment
of CIS in the bladder. We have an active IND for UGN-201, which has been effective since 2013.
We acquired UGN-201 from Telormedix SA, a private Swiss-based biotechnology company, in the fourth quarter of 2015. Telormedix
conducted all of the previous studies related to UGN-201, including the Phase 1 and Phase 1b studies. UGN-201 is a novel, liquid
formulation of imiquimod, a generic toll-like receptor 7/8, or TLR7/8, agonist. 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 or sustained release chemotherapy drugs like UGN-102, could represent a valid alternative to the current standard
of care for the post-TURBT adjuvant treatment of high-grade NMIBC. In November of 2019, we entered into a worldwide license
agreement with Agenus Inc. to develop and commercialize zalifrelimab (UGN-301, anti-CTLA-4 antibody) via intravesical delivery in
combination with UGN-201 (together, UGN-302) for the treatment of urinary tract cancers, initially in HG NMIBC. We believe that the
combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and
potential side effect.
12
Other Partnered Programs
We have combined a proprietary novel RTGel formulation with BOTOX®, a branded drug, and we believe that the combination can
potentially serve as an effective treatment option for patients suffering from overactive bladder. In October 2016, we announced the
licensing of the worldwide rights to this RTGel formulation in combination with neurotoxins, including BOTOX, to Allergan
Pharmaceuticals International Limited (“Allergan”), a wholly owned subsidiary of Allergan plc (the “Allergan Agreement”). 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 RTGel in combination with BOTOX. In October 2017, Allergan commenced a Phase 2 clinical trial of our proprietary formulation
of RTGel combined with BOTOX for the treatment of overactive bladder.
Nonclinical Programs
Using our proprietary RTGel formulation technology, we are pursuing additional nonclinical programs to expand and enhance our uro-
oncology product portfolio. In particular, we are pursuing nonclinical programs for high-grade bladder cancer and high-grade UTUC
using checkpoint inhibitors such as an anti PD-L1 or an anti CTLA-4.
License and Collaboration Agreements
Allergan Agreement
In October 2016, we entered into the Allergan Agreement with Allergan and granted Allergan an exclusive worldwide license to
research, develop, manufacture and commercialize pharmaceutical products that contain a proprietary RTGel formulation and clostridial
toxins (including BOTOX®), alone or in combination with certain other active ingredients, to which we refer 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 Agreement, Allergan is solely responsible, at its expense, for developing the Licensed Products and obtaining all
regulatory approvals for Licensed Products worldwide. Allergan is also solely responsible, at its expense, for commercializing the
Licensed Products worldwide after receiving the regulatory approval to do so. Allergan is required to use commercially reasonable
efforts to develop and commercialize the Licensed Products for overactive bladder in certain major market countries.
We will supply Allergan with certain quantities of the RTGel formulation for development of Licensed Products through Allergan’s
Phase 2 APOLLO clinical trial using BOTOX together with RTGel in patients with overactive bladder, at Allergan’s request and
expense. Allergan has the right to reduce the next milestone payment to us if there is a material supply failure from us. Prior to
completion of the first Phase 2 clinical trial, Allergan has the right to request that we transfer to Allergan our manufacturing process for
RTGel and Allergan will assume the responsibility to manufacture RTGel and Licensed Product for its own development and
commercialization activities.
Allergan paid us a nonrefundable upfront license fee of $17.5 million upon signing the agreement, and, in the third quarter of 2017, we
received an additional $7.5 million milestone payment upon the submission by Allergan of an IND to the FDA for a Licensed Product. In
October 2017, we announced that Allergan had begun a Phase 2 study of RTGel in combination with BOTOX for the treatment of
overactive bladder.
Further, we are eligible to receive additional material milestone payments of up to an aggregate of $200.0 million upon the successful
completion of certain development, regulatory and commercial milestones, including $20.0 million upon initiation of a Phase 3 clinical
trial for a Licensed Product for overactive bladder; $15.0 million upon initiation of a Phase 3 clinical trial for a Licensed Product for a
specified second indication; $50.0 million and $25.0 million upon the first commercial sale of a Licensed Product for overactive bladder
in the United States and the European Union, respectively; $25.0 million and $15.0 million upon the first commercial sale of a Licensed
Product for a specified second indication in the United States and the European Union, respectively; and $50.0 million upon net sales of
all Licensed Products of $500.0 million. Allergan will 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.
Under the Allergan Agreement, Allergan granted us a non-exclusive, sublicensable, fully paid-up, perpetual, worldwide license under
any improvements Allergan makes to the composition, formulation, or manufacture of the RTGel formulation for the research,
development, manufacture and commercialization of any product containing RTGel and any active ingredient (other than a clostridial
toxin) for all indications other than indications covered by the agreement and an exclusive, sublicensable, royalty-bearing (in low single
digits), perpetual worldwide license under such improvements for use in the prevention or treatment of oncology indications.
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We plan to continue to research, develop and commercialize other products combining RTGel with other active ingredients, except that
there are certain restrictions with respect to the overactive bladder and neurogenic detrusor overactivity indications. Neurogenic detrusor
overactivity is when a known neurologic abnormality impairs the signaling systems between the bladder and the central nervous system,
and the brain is unable to inhibit the detrusor muscles controlling urination.
Either party may terminate the Allergan Agreement for uncured material breach by the other party and for the insolvency of the other
party. We may terminate the Allergan Agreement if Allergan or its affiliates challenges any of our patents licensed to Allergan and such
patent challenge is not required under a court order or subpoena and is not a defense against a claim, action or proceeding asserted by us,
our affiliates or licensees against Allergan, its affiliates or sublicensees. In addition, Allergan may unilaterally terminate the Allergan
Agreement for any reason upon advance notice. If Allergan has the right to terminate the Allergan Agreement due to our uncured
material breach, Allergan may elect to continue the agreement and reduce all future milestone and royalty payment obligations to us by
a specified percentage. In the event of any termination of the Allergan Agreement, Allergan will assign or grant a right of reference to
any regulatory documentation related to RTGel to us, all rights and licenses to Allergan will terminate, and the license Allergan granted
to us under their improvements to RTGel will continue.
Agenus Agreement
In November 2019, we entered into a license agreement with Agenus Inc. Pursuant to the agreement, Agenus granted us 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, we plan to develop AGEN1884
in combination with UGN-201 for the treatment of high-grade non-muscle invasive bladder cancer. Our company code for the
combination product will be UGN-302.
Pursuant to 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% to 20% range. We 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 us for use in development and commercialization.
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. We 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, we substantially cease 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 our control. In addition, either party may terminate the license agreement in the event of an uncured material breach of the
other party.
Early-Stage Feasibility Evaluation with Janssen Research & Development, LLC
On April 22, 2019, we entered into an agreement with Janssen to conduct an early-stage formulation feasibility evaluation in a
therapeutic area of mutual interest. Both parties will each conduct certain activities under the terms of the agreement, and we will incur
the costs of our own efforts related to the feasibility evaluation.
Intellectual Property
Our patent estate includes patents and applications with claims directed to our UGN-101, UGN-102, RTGel, BOTOX/RTGel reverse
thermal hydrogel, and UGN-201 product candidates, as well as broader claims for potential future product candidates.
On a worldwide basis, our patent estate includes more than 75 patent filings for our product candidates claiming new treatment methods,
manufacturing process, novel intravesical devices and future combination products that are mainly designed to treat internal cavity
cancers.
In the United States, we currently have 16 issued patents and more than 15 pending patent applications filed in the United States that are
directed to methods, systems, compositions and combination products for treating internal cavity cancers, and in particular, urinary tract
cancer and bladder cancer. These U.S. issued patents are expected to remain in effect until between 2024 and 2035. As noted earlier,
companies are required as part of the NDA submission process to list patents with the FDA whose claims cover the applicant’s product.
Accordingly, UroGen has submitted select patents as part of its NDA process.
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Our worldwide intellectual property portfolio includes patents and patent applications filed in many jurisdictions such as the United
States, European Union, Canada, Israel, Australia, China, Japan, Mexico of which are expected to remain in effect until 2035:
• Hydrogel-based pharmaceutical compositions for optimal delivery of various therapeutic agents to internal cavities such as the
bladder and/or urinary tract.
• The method for treating bladder cancer, upper urinary tract cancer and urothelial cancer using hydrogel-based compositions.
• The method for treating overactive bladder and IC topically without a need for injections in the bladder wall.
• Special catheters and in-dwelling ureter-catheter systems for optimal delivery of a drug into the renal cavity.
• Pharmaceutical compositions comprising an imidazoquinolin-amine (specifically imiquimod) and lactic acid for treating bladder
cancer diseases.
• Composition comprising immunomodulators such as aPD1 and/or aCTLA4 for topical/intravesical administration as a
monotherapy or a combo-therapy.
• Novel phospholipid drug analogs (new chemical entities) for treating cancer or infections.
In addition to patents, we have filed applications for trademark registration with the United States Patent and Trademark Office, or the
USPTO, as well as certain other international jurisdictions for "UroGen", “Jelmyto,” “RTGel” and for certain other tradenames and
logos.
Furthermore, we rely upon trade secrets, know-how and continuing technological innovation to develop and maintain our competitive
position. Preparing and filing patent applications is a joint endeavor of our research and development team and our in-house and external
patent attorneys. Our patent attorneys conduct patent prior-art searches and then analyze the data in order to provide our research and
development team with recommendations on a routine basis. This results in:
• protecting our product candidates that are under development;
• encouraging pharmaceutical companies to negotiate development agreements with us; and
• preventing competitors from attempting to design-around our inventions.
Competition
We are developing products for patients with LG UTUC, LG NMIBC and HG NMIBC.
In the UTUC space, there are no approved drugs used to treat the disease. Tumor resection surgeries are conducted in some cases of LG
UTUC; however, complete kidney and upper urinary tract removal is the standard of care for recurring UTUC. We are not aware of
competition in LG UTUC. We do not know whether the competitors in the NMIBC space are already developing, or plan to develop,
UTUC treatments. Competition may increase further as a result of advances in the commercial applicability of technologies and greater
availability of capital for investment in this industry. Our competitors may succeed in developing, acquiring or licensing on an exclusive
basis, products that are more effective, easier to administer or less costly than our product candidates.
The standard of care for treating LG NMIBC is repeated TURBT procedures. While effective, patients with Intermediate Risk NMIBC
experience frequent recurrences and repeated surgical procedures. Mitomycin is sometimes used off-label as adjuvant treatment in the
post-TURBT setting for LG NMIBC patients. Off-label means that while the FDA has not approved mitomycin as adjuvant treatment in
the post-TURBT setting for LG Intermediate Risk NMIBC patients, physicians are permitted to utilize it as standard of care for this
indication as part of medical practice. However, off-label usage as a standard of care does not change the FDA’s approval criteria and
does not suggest that FDA approval is more likely than for other investigational drugs. Companies such as Lipac Oncology and
Spectrum Pharmaceuticals are developing products for LG NMIBC.
The standard of care for treating HG NMIBC patients is the TURBT procedure for papillary tumor resection, followed by post-operative
adjuvant BCG. In the case of HG disease without papillary tumor (CIS), BCG is used alone as primary therapy. BCG was approved by
the FDA in 1989, since its approval, only two other drugs were approved for HG NMIBC: Valstar, approved by the FDA in 1998; and
Keytruda, approved by the FDA in 2020. Valstar is indicated for patients with CIS that do not respond to BCG treatment and is rarely
used. Keytruda was approved for CIS with or without papillary involvement for patients who do not respond to BCG treatment.
Keytruda was approved in this indication only this year, and it remains to be seen whether the broader urology community will adopt a
systemic infused immunotherapy into their clinical management of BCG unresponsive NMIBC. In addition to these approved options,
off-label intravesical chemotherapy can be used (such as gemcitabine and cisplatin). If the disease can no longer be controlled, patients
will typically proceed to cystectomy, or surgical removal of the bladder, to prevent progression to muscle invasive and metastatic
disease. There are several products in the development pipeline, most of which are treatments targeted for high-grade NMIBC patients
who have failed BCG treatment and are facing cystectomy. Companies developing these options include AstraZeneca, Merck, BMS,
Altor BioScience, FerGene, Vyriad and Sesen Bio. In addition, Janssen recently acquired Taris Biomedical, a company that was
developing an extended release chemotherapeutic technology for muscle-invasive bladder cancers closely related to high-grade NMIBC.
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In addition, we face competition from existing standards of treatment, including TURBT, which is surgery for bladder cancer. If we are
not able to demonstrate that our product candidates are at least as safe and effective as such courses of treatment, medical professionals
may not adopt our product candidates to replace the existing standard of care, which is a tumor surgical procedure for both bladder
cancer and UTUC.
The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Our potential
competitors include large and experienced companies that enjoy significant competitive advantages over us, such as greater financial,
research and development, manufacturing, personnel and marketing resources, greater brand recognition, and more experience and
expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities. These companies may develop new drugs
to treat the indications that we target or seek to have existing drugs approved for use for the treatment of the indications that we target.
These potential competitors may therefore introduce competing products without our prior knowledge and without our ability to take
preemptive measures in anticipation of their commercial launch. Competition may increase further as a result of advances in the
commercial applicability of technologies and greater availability of capital for investment in this industry. Our competitors may succeed
in developing, acquiring or exclusively licensing products that are more effective, easier to administer or less costly than our product
candidates.
Government Regulation
The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements
upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local
entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling,
storage, packaging, recordkeeping, tracking, approval, import, export, distribution, advertising and promotion of our products.
The process required by the FDA before product candidates may be marketed in the United States generally involves the following:
• nonclinical laboratory and animal tests that must be conducted in accordance with good laboratory practices, or GLPs;
• submission of an IND, which must become effective before clinical trials may begin;
• approval by an independent institutional review board, or IRB, for each clinical site or centrally before each trial may be
initiated;
• adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its
intended use, performed in accordance with good clinical practices, or GCPs;
• submission to the FDA of an NDA;
• satisfactory completion of an FDA advisory committee review, if applicable;
• pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with current good
manufacturing practices, or cGMP and GCPs; and
• FDA approval of an NDA to permit commercial marketing for particular indications for use.
The testing and approval process require substantial time, effort and financial resources. Nonclinical studies include laboratory
evaluation of drug substance chemistry, pharmacology, toxicity and drug product formulation, as well as animal studies to assess
potential safety and efficacy. Prior to commencing the first clinical trial with a product candidate, we must submit the results of the
nonclinical tests and nonclinical literature, together with manufacturing information, analytical data and any available clinical data or
literature, among other things, to the FDA as part of an IND. Some nonclinical studies may continue even after the IND is submitted. The
IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety
concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA
must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to
commence a clinical trial. A separate submission to the existing IND must be made for each successive clinical trial conducted during
product development, as well as amendments to previously submitted clinical trials. Further, an independent IRB for each study site
proposing to conduct the clinical trial must review and approve the plan for any clinical trial, its informed consent form and other
communications to study subjects before the clinical trial commences at that site. The IRB must continue to oversee the clinical trial
while it is being conducted, including any changes to the study plans. Regulatory authorities, an IRB or the sponsor may suspend or
discontinue a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable
health risk, the clinical trial is not being conducted in accordance with the FDA’s or the IRB’s requirements, if the drug has been
associated with unexpected serious harm to subjects, or based on evolving business objectives or competitive climate. Some studies also
include a data safety monitoring board, which receives special access to unblinded data during the clinical trial and may advise us to halt
the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of
efficacy.
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In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
• Phase 1—Studies are initially conducted to test the product candidate for safety, dosage tolerance, structure-activity
relationships, mechanism of action, absorption, metabolism, distribution and excretion in healthy volunteers or subjects with the
target disease or condition. If possible, Phase 1 trials may also be used to gain an initial indication of product effectiveness.
• Phase 2—Controlled studies are conducted with groups of subjects with a specified disease or condition to provide enough data
to evaluate the preliminary efficacy, optimal dosages and dosing schedule and expanded evidence of safety. Multiple Phase 2
clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
• Phase 3—These clinical trials are undertaken in larger subject populations to provide statistically significant evidence of clinical
efficacy and to further test for safety in an expanded subject population at multiple clinical trial sites. Evidence is considered to
be statistically significant when the probability of the result occurring by random chance, rather than from the efficacy of the
treatment, is sufficiently low. These clinical trials are intended to establish the overall risk/benefit ratio of the product and
provide an adequate basis for product labeling. These trials may be done globally to support global registrations so long as the
global sites are also representative of the U.S. population and the conduct of the study at global sites comports with FDA
regulations and guidance, such as compliance with GCPs.
The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies
may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a product
candidate and can provide important safety information.
Clinical trials must be conducted under the supervision of qualified investigators in accordance with GCP requirements, which includes
the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial, and the
review and approval of the study by an IRB. Investigators must also provide information to the clinical trial sponsors to allow the
sponsors to make specified financial disclosures to the FDA. Clinical trials are conducted under protocols detailing, among other things,
the objectives of the trial, the trial procedures, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated and
a statistical analysis plan. Information about some clinical trials, including a description of the trial and trial results, must be submitted
within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website.
The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs
and active pharmaceutical ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling
and distribution. Further, the export of investigational drug products outside of the United States is subject to regulatory requirements of
the receiving country as well as U.S. export requirements under the Federal Food, Drug and Cosmetic Act, or the FDCA. Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and the IRB and more frequently if
serious adverse events, or SAEs occur.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information
about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and
purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to
demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
505(b)(2) Regulatory Approval Process
Section 505(b)(2) of the FDCA, or 505(b)(2), provides an alternate regulatory pathway to FDA approval for new or improved
formulations or new uses of previously approved drug products. Specifically, 505(b)(2) permits the filing of an NDA where at least some
of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not
obtained a right of reference or use from the person by or for whom the investigations were conducted. The applicant may rely upon the
FDA’s prior findings of safety and efficacy for an approved product that acts as the reference listed drug for purposes of a 505(b)(2)
NDA. The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support any changes from the
reference listed drug. The FDA may then approve the new product candidate for all or some of the labeled indications for which the
referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant.
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Orange Book Listing
Section 505 of the FFDCA describes three types of marketing applications that may be submitted to the FDA to request marketing
authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and
efficacy. A 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy, but where at least some of
the information required for approval comes from investigations that were not conducted by or for the applicant and for which the
applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory
pathway enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy for an existing product, or published
literature, in support of its application. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug
products through the submission of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a generic drug
product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and
intended use, among other things, to a previously approved product. ANDAs are termed “abbreviated” because they are generally not
required to include nonclinical and clinical data to establish safety and efficacy. Instead, generic applicants must scientifically
demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo or other
testing. The generic version must deliver the same amount of active ingredients into a subject’s bloodstream in the same amount of time
as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.
In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list patents with the FDA which
claims cover the applicant’s product. The patents chosen as part of this submission do not reflect the entire patent estate or set of product
protections associated with this product, which may provide various protections beyond the patents submitted in the NDA application.
Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with
Therapeutic Equivalence Evaluations, also known as the Orange Book. These products may be cited by potential competitors in support
of approval of an ANDA or 505(b)(2) NDA.
Any applicant who submits an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a
505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product
that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent
expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the
application is submitted. This last certification is known as a Paragraph IV certification. Generally, the ANDA or 505(b)(2) NDA cannot
be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through
a Paragraph IV certification. If the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a
patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the
referenced product have expired.
If the competitor has provided a Paragraph IV certification to the FDA, the competitor must also send notice of the Paragraph IV
certification to the holder of the NDA for the reference listed drug and the patent owner once the application has been accepted for filing
by the FDA. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph
IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the
FDA from approving the application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the
lawsuit, a decision in the infringement case that is favorable to the applicant or such shorter or longer period as may be ordered by a
court. This prohibition is generally referred to as the 30-month stay. In instances where an ANDA or 505(b)(2) NDA applicant files a
Paragraph IV certification, the NDA holder or patent owner regularly take action to trigger the 30-month stay, recognizing that the
related patent litigation may take many months or years to resolve. Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for
a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate
patent litigation. The applicant may also elect to submit a statement certifying that its proposed label does not contain, or carves out, any
language regarding the patented method-of-use rather than certify to a listed method-of-use patent.
Exclusivity
The FDA provides periods of regulatory exclusivity, which provides the holder of an approved NDA limited protection from new
competition in the marketplace for the innovation represented by its approved drug for a period of three or five years following the
FDA’s approval of the NDA. Five years of exclusivity are available to NCEs. An NCE is a drug that contains no active moiety that has
been approved by the FDA in any other NDA. An active moiety is the molecule or ion, excluding those appended portions of the
molecule that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent, or not
involving the sharing of electron pairs between atoms, derivatives, such as a complex (i.e., formed by the chemical interaction of two
compounds), chelate (i.e., a chemical compound), or clathrate (i.e., a polymer framework that traps molecules), of the molecule,
responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review or
approve an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. An ANDA
or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.
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If a product is not eligible for the NCE exclusivity, it may be eligible for three years of exclusivity. Three-year exclusivity is available to
the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a new
formulation for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials, was
essential to the approval of the application and was conducted or sponsored by the applicant. This three-year exclusivity period protects
against FDA approval of ANDAs and 505(b)(2) NDAs for the condition of the new drug’s approval. As a general matter, three-year
exclusivity does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug
product. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting
a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled
clinical trials necessary to demonstrate safety and efficacy.
The Orphan Drug Act
Under the Orphan Drug Act, the FDA may grant Orphan Drug Designation to drugs intended to treat a rare disease or condition—
generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan Drug Designation must be
requested before submitting an NDA. After the FDA grants Orphan Drug Designation, the generic identity of the drug and its potential
orphan use are disclosed publicly by the FDA. Orphan Drug Designation does not convey any advantage in, or shorten the duration of,
the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a
particular disease with FDA Orphan Drug Designation is entitled to a seven-year exclusive marketing period in the United States for that
product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the
same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan
drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the
same drug for a different disease or condition. Among the other benefits of Orphan Drug Designation are tax credits for certain research
and a waiver of the NDA application user fee.
Fast Track and Breakthrough Therapy Designations
The FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-
threatening condition for which there is no effective treatment, and which demonstrate the potential to address unmet medical needs for
the condition. Under the Fast Track program, the sponsor of a new product candidate may request the FDA to designate the product for
a specific indication as a Fast Track product concurrent with or after the submission of the IND for the product candidate. The FDA must
determine if the product candidate qualifies for Fast Track and Breakthrough Therapy designations within 60 days after receipt of the
sponsor’s request.
For Fast Track and Breakthrough Therapy products, the sponsor may have more frequent interactions with the FDA and the FDA may
initiate review of sections of a Fast Track or Breakthrough Therapy product’s NDA before the application is complete. This rolling
review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the
applicant pays applicable user fees. However, the FDA’s time period goal for reviewing a Fast Track or Breakthrough Therapy
application does not begin until the last section of the NDA is submitted. In addition, the Fast Track and Breakthrough Therapy
designations may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the
clinical trial process. A Fast Track and Breakthrough Therapy designated product candidate would ordinarily meet the FDA’s criteria for
priority review.
NDA Submission and Review by the FDA
Assuming successful completion of the required clinical and nonclinical testing, among other items, the results of product development,
including chemistry, manufacture and controls, nonclinical studies and clinical trials are submitted to the FDA, along with proposed
labeling, as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. These user fees must be
paid at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee waivers or
reductions are available in some circumstances. One basis for a waiver of the application user fee is if the applicant employs fewer than
500 employees, including employees of affiliates, the applicant does not have an approved marketing application for a product that has
been introduced or delivered for introduction into interstate commerce, and the applicant, including its affiliates, is submitting its first
marketing application.
In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active ingredient,
indication, dosage form, dosage regimen or route of administration must contain data that are adequate to assess the safety and efficacy
of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each
pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant,
grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers
from the pediatric data requirements.
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The FDA may refer applications for drugs that contain active ingredients that have not previously been approved by the FDA or drugs
which present difficult questions of safety, purity or potency to an advisory committee. An advisory committee is typically a panel that
includes clinicians and other experts who review, evaluate and make a recommendation as to whether the application should be approved
and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions.
The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the
manufacturing controls are adequate to assure and preserve the product’s identity, strength, quality and purity. Before approving an NDA,
the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it
determines that the manufacturing processes and facilities, including contract manufacturers and subcontracts, are in compliance with
cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before
approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCPs.
Once the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a
substantive review, before it accepts the application for filing. Once the submission is accepted for filing, the FDA begins an in-depth
review of the NDA. The FDA’s NDA review times may differ based on whether the application is a standard review or priority review
application. The FDA may give a priority review designation to drugs that are intended to treat serious conditions and provide significant
improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. Under the goals and policies
agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, the FDA has set the review goal of 10 months from the 60-
day filing date to complete its initial review of a standard NDA for an NME and make a decision on the application. For non-NME
standard applications, the FDA has set the review goal of 10 months from the submission date to complete its initial review and to make
a decision on the application. For priority review applications, the FDA has set the review goal of reviewing NME NDAs within six
months of the 60-day filing date and non-NME applications within six months of the submission date. Such deadlines are referred to as
the PDUFA date. The PDUFA date is only a goal and the FDA does not always meet its PDUFA dates. The review process and the
PDUFA date may also be extended if the FDA requests or the NDA sponsor otherwise provides additional information or clarification
regarding the submission.
Once the FDA’s review of the application is complete, the FDA will issue either a Complete Response Letter, or CRL, or approval letter.
A CRL indicates that the review cycle of the application is complete, and the application is not ready for approval. A CRL generally
contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional
clinical or nonclinical testing, or other information or analyses in order for the FDA to reconsider the application. The FDA has the goal
of reviewing 90% of application resubmissions in either two or six months of the resubmission date, depending on the kind of
resubmission. Even with the submission of additional information, the FDA ultimately may decide that the application does not satisfy
the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may issue an
approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific
indications.
The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or
information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product, or impose other conditions,
including distribution restrictions or other risk management mechanisms. For example, the FDA may require a risk evaluation and
mitigation strategy, or REMS, as a condition of approval or following approval to mitigate any identified or suspected serious risks and
ensure safe use of the drug. The FDA may prevent or limit further marketing of a product, or impose additional post-marketing
requirements, based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the
approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing
requirements, FDA notification and FDA review and approval. Further, should new safety information arise, additional testing, product
labeling or FDA notification may be required.
If regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be
marketed or may include contraindications, warnings or precautions in the product labeling, which has resulted in a boxed warning. The
FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Once approved, the FDA may withdraw
the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the
product reaches the marketplace. In addition, the FDA may require Phase 4 post-marketing studies to monitor the effect of approved
products and may limit further marketing of the product based on the results of these post-marketing studies.
Post-approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including
manufacturing, periodic reporting, product sampling and distribution, advertising, promotion, drug shortage reporting, compliance with
any post-approval requirements imposed as a conditional of approval such as Phase 4 clinical trials, REMS and surveillance,
recordkeeping and reporting requirements, including adverse experiences.
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After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA
review and approval. There also are continuing annual program user fee requirements for any approved products, as well as new
application fees for supplemental applications with clinical data. Drug manufacturers and their subcontractors are required to register
their establishments with the FDA and certain state agencies and to list their drug products and are subject to periodic announced and
unannounced inspections by the FDA and these state agencies for compliance with cGMPs and other requirements, which impose
procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or
future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements.
Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented, or FDA
notification. FDA regulations also require investigation and correction of any deviations from cGMPs and specifications and impose
reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain
cGMP compliance.
Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in withdrawal of marketing approval, mandatory
revisions to the approved labeling to add new safety information or other limitations, imposition of post-market studies or clinical trials
to assess new safety risks or imposition of distribution or other restrictions under a REMS program, among other consequences.
The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy,
purity and potency that are approved by the FDA. Physicians, in their independent professional medical judgement, may prescribe
legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by
the FDA. We, however, are prohibited from marketing or promoting drugs for uses outside of the approved labeling but may share
truthful and not misleading information that is otherwise consistent with the product’s approved labeling.
In addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing
Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the
registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription
pharmaceutical product samples and impose requirements to ensure accountability in distribution. The Drug Supply Chain Security Act
also imposes obligations on manufacturers of pharmaceutical products related to product tracking and tracing.
Failure to comply with any of the FDA’s requirements could result in significant adverse enforcement actions. These include a variety of
administrative or judicial sanctions, such as refusal to approve pending applications, license suspension or revocation, withdrawal of an
approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of
promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial
suspension of production or distribution, debarment, injunctions, fines, consent decrees, corporate integrity agreements, refusals of
government contracts and new orders under existing contracts, exclusion from participation in federal and state healthcare programs,
restitution, disgorgement or civil or criminal penalties, including fines and imprisonment. Any of these sanctions could result in adverse
publicity, among other adverse consequences.
Other Healthcare Regulations
Our business activities, including but not limited to, research, sales, promotion, distribution, medical education and other activities
following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in
addition to the FDA, including potentially the Department of Justice, the Department of Health and Human Services, or HHS, and its
various divisions, including the Centers for Medicare & Medicaid Services, or CMS, and the Health Resources and Services
Administration, the Department of Veterans Affairs, the Department of Defense and state and local governments. Our business activities
must comply with numerous federal, state, and foreign healthcare laws and regulations, including those described below.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying,
soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return
for, the referral of an individual for, or purchasing, leasing, ordering, or arranging for the purchase, lease or order of, any good, facility,
item or service reimbursable, in whole or in part, by Medicare, Medicaid or other federal healthcare programs. The term remuneration
has been interpreted broadly to include anything of value, including unlawful financial inducements paid to prescribers and
beneficiaries, as well as impermissible promotional practices. There are a number of statutory exceptions and regulatory safe harbors
protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly. Failure to meet all of the
requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the
federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative
review of all of its facts and circumstances. Additionally, the Patient Protection and Affordable Care Act of 2010, as amended by the
Health Care and Education Reconciliation Act of 2010, or collectively the ACA, amended the intent requirement of the federal Anti-
Kickback Statute so that a person or entity no longer needs to have actual knowledge of the federal Anti-Kickback Statute, or the specific
intent to violate it, to have violated the statute. The ACA also provided that a violation of the federal Anti-Kickback Statute is grounds
for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a
false or fraudulent claim for purposes of the federal civil False Claims Act.
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The federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit, among other things, any person or
entity from knowingly presenting, or causing to be presented, a false claim for payment to, or for approval by, the federal government,
including the Medicare and Medicaid programs, or knowingly making, using, or causing to be made or used a false record or statement
material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have
presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service
that was not provided as claimed or is false or fraudulent.
As a condition of receiving Medicaid coverage for prescription drugs, the Medicaid Drug Rebate Program requires manufacturers to
calculate and report to CMS their Average Manufacturer Price, or AMP, which is used to determine rebate payments shared between the
states and the federal government and, for some multiple source drugs, Medicaid payment rates for the drug, and for drugs paid under
Medicare Part B, to also calculate and report their average sales price, which is used to determine the Medicare Part B payment rate for
the drug. In January 2016, CMS issued a final rule regarding the Medicaid Drug Rebate Program, effective April 1, 2016, that, among
other things, revises the manner in which the AMP is to be calculated by manufacturers participating in the program and implements
certain amendments to the Medicaid rebate statute created under the ACA. Drugs that are approved under a biologics license application,
or BLA, or an NDA, including a 505(b)(2) NDA, are subject to an additional requirement to calculate and report the manufacturer’s best
price for the drug and inflation penalties which can substantially increase rebate payments. For BLA and NDA drugs, the Veterans
Health Care Act requires manufacturers to calculate and report to the Department of Veterans Affairs a different price called the Non-
Federal AMP, offer the drugs for sale on the Federal Supply Schedule, and charge the government no more than a statutory price referred
to as the Federal Ceiling Price, which includes an inflation penalty. A separate law requires manufacturers to pay rebates on these drugs
when paid by the Department of Defense under its TRICARE Retail Pharmacy Program. Knowingly submitting false pricing
information to the government creates potential federal civil False Claims Act liability.
The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal civil and criminal
statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,
including public and private payors, or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money
or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or
private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation
of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or
making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating
to healthcare matters. The ACA amended the federal health care fraud criminal statute implemented under HIPAA so that a person or
entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have violated the statute.
Additionally, the federal Open Payments program pursuant to the Physician Payments Sunshine Act, created under Section 6002 of the
ACA and its implementing regulations, require some manufacturers of drugs, devices, biologicals and medical supplies for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with specified exceptions) to report
annually information related to specified payments or other transfers of value provided to physicians, as defined by such law, and
teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, physicians and teaching hospitals and to
report annually specified ownership and investment interests held by physicians and their immediate family members.
In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct
our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their
implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health
information on HIPAA covered entities, which include certain healthcare providers, health plans and healthcare clearinghouses, and
their business associates, including mandatory contractual terms and the implementation of certain safeguards of such information.
Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates, independent contractors or
agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a
covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties
directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions
in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In
addition, state laws govern the privacy and security of health information in some circumstances, many of which differ from each other
in significant ways, may not have the same effect and may not be preempted by HIPAA, thus complicating compliance efforts.
In addition, the European Union, or EU, has established its own data security and privacy legal framework, including but not limited to
the European General Data Protection Regulation, or GDPR, which contains provisions specifically directed at the processing of health
information, higher sanctions and extra-territoriality measures intended to bring non-EU companies under the regulation. We anticipate
that over time we may expand our business to include additional operations outside of the United States and Israel. With such expansion,
we would be subject to increased governmental regulation in the EU countries in which we might operate, including the GDPR.
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Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the
California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in
the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. Effective
January 1, 2020, the CCPA requires covered companies to provide new disclosures to California consumers, provides such consumers
new ways to opt-out of certain sales of personal information, and allows for a new cause of action for data breaches. The CCPA will
likely impact (possibly significantly) our business activities and exemplifies the vulnerability of our business to not only cyber threats
but also the evolving regulatory environment related to personal data and protected health information.
Many states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or
services reimbursed by any payor, including commercial insurers. In addition, we may be subject to certain analogous foreign healthcare
laws. We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and/or state laws that
require drug manufacturers to report information related to marketing expenditures or payments and other transfers of value to
physicians and other healthcare providers, and drug pricing. Certain state and local laws also require the registration of pharmaceutical
sales representatives.
Enforcement actions can be brought by federal or state governments or, in some cases, as “qui tam” actions brought by individual
whistleblowers in the name of the government. Depending on the circumstances, failure to comply with these laws can result in
significant penalties, including criminal, civil and administrative penalties, damages, fines, disgorgement, debarment from government
contracts, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or
similar agreement to resolve allegations of non-compliance with these laws, exclusion from government programs, refusal to allow us to
enter into supply contracts, including government contracts, reputational harm, diminished profits and future earnings and the
curtailment or restructuring of our operations, any of which could adversely affect our business.
Coverage and Reimbursement
Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and adequate
reimbursement for our products, once approved, and related treatments will be available from third-party payors, such as government
health administration authorities, private health insurers and managed care organizations. Third-party payors determine which
medications they will cover and separately establish reimbursement levels. Even if we obtain coverage for a given product by a third-
party payor, the third-party payor’s reimbursement rates may not be adequate to make the product affordable to patients or profitable to
us, or the third-party payors may require co-payments that patients find unacceptably high. Patients who are prescribed medications for
the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs
associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is
adequate to cover all or a significant portion of the cost of our products. Therefore, coverage and adequate reimbursement is critical to
new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when
more established or lower cost therapeutic alternatives are already available or subsequently become available.
Government authorities and other third-party payors are developing increasingly sophisticated methods of controlling healthcare costs,
such as by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring
that drug companies provide them with predetermined discounts from list prices as a condition of coverage, are using restrictive
formularies and preferred drug lists to leverage greater discounts in competitive classes and are challenging the prices charged for
medical products. Further, no uniform policy for determining coverage and reimbursement for drug products exists among third-party
payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a
result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and
clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be
applied consistently or obtained in the first instance.
We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is
available, that the level of reimbursement will be adequate. Coverage and reimbursement may impact the demand for, or the price of, any
product candidate for which we obtain marketing approval. If coverage and reimbursement are not available, or if reimbursement is
available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.
Healthcare Reform Measures
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals
designed to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and
payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals
of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a
particular focus of these efforts and has been significantly affected by major legislative initiatives.
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For example, in March 2010, the ACA was passed, which has changed health care financing by both governmental and private insurers
and significantly affected the U.S. pharmaceutical industry. The ACA, among other things, subjected manufacturers to new annual fees
and taxes for specified branded prescription drugs, increased the minimum Medicaid rebates owed by most manufacturers under the
Medicaid Drug Rebate Program, expanded health care fraud and abuse laws, revised the methodology by which rebates owed by
manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated,
imposed an additional rebate similar to an inflation penalty on new formulations of drugs, extended the Medicaid Drug Rebate Program
to Medicaid managed care organizations, expanded the 340B program, which caps the price at which manufacturers can sell covered
outpatient pharmaceuticals to specified hospitals, clinics and community health centers, and provided incentives to programs that
increase the federal government’s comparative effectiveness research.
There remain judicial and Congressional challenges, as well as efforts by the Trump Administration to repeal or replace certain aspects
of the ACA. For example, since January 2017, President Trump has signed two executive orders and other directives designed to delay,
circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal
or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the
implementation of certain taxes under the ACA has been signed into law. Legislation enacted in 2017 informally titled the Tax Cuts and
Jobs Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility
payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is
commonly referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently eliminates, effective
January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and,
effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things,
amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut
hole.” On December 14, 2018, a U.S. District Court judge in the Northern District of Texas, or the Texas District Court Judge, ruled that
the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the
remaining provisions of the ACA are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit
upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to
determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future decisions, subsequent
appeals, and other efforts to repeal and replace the ACA will impact the ACA.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget
Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit
Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to
reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate
reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent
legislative amendments to the statute, including the BBA, will remain in effect through 2029 unless additional U.S. Congressional action
is taken. In addition, in January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other
things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years.
Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing
practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted legislation at the federal
and state levels designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and
manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement
methodologies for drugs. At the federal level, the Trump Administration’s budget proposal for fiscal year 2020 contains further drug
price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to
permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices
under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a
“Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug
manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the
list price of their products, and reduce the out of pocket costs of drug products paid by consumers. HHS has solicited feedback on some
of these measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow
Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s
policy change that was effective January 1, 2019. While some of these and other measures may require additional authorization through
additional legislation to become effective, Congress and the Trump Administration have both stated that it will continue to seek new
legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and
implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. Additional health reform measures may continue
and affect our business in unknown ways.
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The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering or authorizing payment or
offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any
act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also
obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the companies to
maintain books and records that accurately and fairly reflect all transactions of the companies, including international subsidiaries, and
to devise and maintain an adequate system of internal accounting controls for international operations.
Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial
sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The approval process
varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Manufacturing, Supply and Production
We do not own or operate manufacturing facilities for the production of our product candidates, nor do we have plans to develop our own
manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturers for all of our required raw
materials, active ingredients and finished products for our nonclinical research and clinical trials. The company is in the process of
negotiating commercial supply agreements with its primary third-party vendors. We anticipate that these agreements will be executed in
advance of the potential FDA approval of UGN-101. The company also intends to negotiate back-up supply agreements with other third-
party manufacturers for the commercial production of any approved products, including UGN-101 if approved.
Development and commercial quantities of any products that we develop will need to be manufactured in facilities, and by processes, that
comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval. We currently
employ internal resources to manage our manufacturing contractors. The relevant manufacturers of our drug products for our current
nonclinical and clinical trials have advised us that they are compliant with both current good laboratory practice, or cGLP, and cGMP.
Our product candidates, if approved, may not be producible in sufficient commercial quantities, in compliance with regulatory
requirements or at an acceptable cost. We and our contract manufacturers are, and will be, subject to extensive governmental regulation
in connection with the manufacture of any pharmaceutical products or medical devices. We and our contract manufacturers must ensure
that all of the processes, methods and equipment are compliant with cGMP and cGLP for drugs on an ongoing basis, as mandated by the
FDA and foreign regulatory authorities, and conduct extensive audits of vendors, contract laboratories and suppliers.
Marketing, Sales and Distribution
Our U.S. subsidiary, Urogen Pharma, Inc., was formed to support our U.S. development and potential commercialization efforts. We
have established a commercial management team that is preparing our organization for the planned future launch of UGN-101, if
approved. This commercial management team is comprised of experienced professionals in sales, sales operations, market access,
marketing and medical affairs. In addition, we have established a field-based organization comprised of approximately 80 individuals,
including a sales team, reimbursement support team, clinical nurse educators, national account managers and medical liaisons. Pre-
launch marketing efforts have focused on disease-state education and building relationships within key potential customer accounts.
If UGN-101 is approved, our sales force will focus on promoting UGN-101.
In the event that we receive regulatory approvals for our products in markets outside of the United States, we intend, where appropriate,
to pursue commercialization relationships, including strategic alliances and licensing, with pharmaceutical companies and other
strategic partners, which are equipped to market or sell our products through their well-developed sales, marketing and distribution
organizations in such countries.
In addition, we may out-license some or all of our worldwide patent rights to more than one party to achieve the fullest development,
marketing and distribution of any products we develop.
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Employees
As of February 17, 2020, we had 173 employees worldwide, 127 in the United States and 46 in Israel, many of whom hold advanced
degrees. None of our employees are subject to a collective bargaining agreement. We have never experienced any employment-related
work stoppages and consider our relationships with our employees are good.
Israeli labor laws govern the length of the workday and workweek, minimum wages for employees, procedures for hiring and dismissing
employees, determination of severance pay, annual leave, sick days, advance notice of termination, payments to the National Insurance
Institute, and other conditions of employment and include equal opportunity and anti-discrimination laws. While none of our employees
is party to any collective bargaining agreements, certain provisions of the collective bargaining agreements between the Histadrut
(General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists’
Associations) are applicable to our employees in Israel by order of the Israeli Ministry of Economy and Industry. These provisions
primarily concern pension fund benefits for all employees, insurance for work-related accidents, recuperation pay and travel expenses.
We generally provide our employees with benefits and working conditions beyond the required minimums.
Corporate Information
Our legal and commercial name is UroGen Pharma Ltd, with registered offices at 9 Ha'Ta'asiya St., Ra'anana 4365007, Israel. We are a
company organized under the laws of State of Israel. We were formed in 2004 with an indefinite duration. We are registered with the
Israeli Registrar of Companies. Our principal executive offices are located at 400 Alexander Park, Princeton, NJ 08540. Our telephone
number is (646)768-9780. Investors should contact us for any inquiries through the address and telephone number of our principal
executive office. We maintain a web site at http://www.urogen.com. The reference to our website is an inactive textual reference only
and the information contained in, or that can be accessed through, our website is not incorporated into this Annual Report.
We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other information with the
U.S. Securities and Exchange Commission, or SEC. Our filings with the SEC are available free of charge on the SEC’s website at
www.sec.gov and on our website under the “Investors” tab as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the SEC.
Unless the context requires otherwise, references in this Annual Report to “we,” “us”, “our” and “UroGen” refer to UroGen Pharma, Ltd.
and its subsidiaries.
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Item 1A. Risk Factors
An investment in our ordinary shares involves a high degree of risk. You should carefully consider all of the information set forth in this
Annual Report and in our other filings with the SEC, including the following risk factors which we face. Our business, financial
condition or results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking
statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking
statements, as a result of certain factors including the risks described below and elsewhere in this Annual Report. See “Special Note
Regarding Forward-Looking Statements” above.
Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements
We have a limited operating history and have incurred significant losses and negative cash flows since our inception, and we
anticipate that we will continue to incur significant losses and negative cash flows for the foreseeable future, which makes it difficult
to assess our future viability.
We are a clinical stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and
prospects. We are not profitable and have incurred net losses in each period since we commenced operations in 2004, including net
losses of $104.9 million and $75.7 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we
had an accumulated deficit of $228.0 million. We expect to continue to incur significant expenses and increasing operating losses for the
foreseeable future. Our ability to ultimately achieve recurring revenues and profitability is dependent upon our ability to successfully
complete the development of our product candidates and obtain necessary regulatory approvals for and successfully manufacture,
market and commercialize our products.
We believe that we will continue to expend substantial resources in the foreseeable future for the clinical development of our current
product candidates or any additional product candidates and indications that we may choose to pursue in the future. These expenditures
will include costs associated with research and development, conducting nonclinical studies and clinical trials, and payments for third-
party manufacturing and supply, as well as sales and marketing of any of our product candidates that are approved for sale by regulatory
agencies. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to
successfully complete the development and commercialization of our clinical stage and nonclinical drug candidates and any other drug
candidates that we may develop in the future. Other unanticipated costs may also arise.
Our future capital requirements depend on many factors, including:
• the timing of, and the costs involved in, clinical development and obtaining regulatory approvals for our product candidates;
• changes in regulatory requirements during the development phase that can delay or force us to stop our activities related to any of
our product candidates;
• the cost of commercialization activities if our products are approved for sale, including marketing, sales and distribution costs;
• the cost of third-party manufacturing of our products candidates and any approved products;
• the number and characteristics of any other product candidates we develop or acquire;
• our ability to establish and maintain strategic collaborations, licensing or other commercialization arrangements, and the terms
and timing of such arrangements;
• the extent and rate of market acceptance of any approved products;
• the expenses needed to attract and retain skilled personnel;
• the costs associated with being a public company;
• the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent and other intellectual property
claims, including potential litigation costs, and the outcome of such litigation;
• the timing, receipt and amount of sales of, or royalties on, future approved products, if any;
• any product liability or other lawsuits related to our products;
• scientific breakthroughs in the field of urothelial cancer treatment and diagnosis that could significantly diminish the need for our
product candidates or make them obsolete; and
• changes in reimbursement or other regulatory policies that could have a negative impact on our future revenue stream.
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In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and
uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical industry.
Drug development is a highly speculative undertaking and involves a substantial degree of risk. To date, we have not obtained any
regulatory approvals for any of our product candidates, commercialized any of our product candidates or generated any material revenue
from product sales.
We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed and on
acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization efforts or
other operations.
Since our inception, almost all our resources have been dedicated to the nonclinical and clinical development of our lead product
candidates, UGN-101 and UGN-102. As of December 31, 2019, we had cash and cash equivalents and marketable securities of $195.6
million. In January 2019, we completed an underwritten public offering in which we received net proceeds of approximately $161.4
million, after deducting the underwriting discounts and commissions and payment of other offering expenses.
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. We expect that we will require additional capital to complete clinical trials, obtain
regulatory approval for and commercialize our product candidates. However, our operating plan may change as a result of many factors
currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity financings,
convertible debt or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations,
strategic alliances and licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to
pursue nonclinical and clinical activities, and pursue regulatory approval for, and to commercialize, our pipeline product candidates.
Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market
conditions are favorable or if we have specific strategic considerations.
Any additional fundraising efforts may divert the attention of our management from day-to-day activities, which may adversely affect
our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available
in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may negatively impact the holdings or
the rights of our shareholders, and the issuance of additional securities, whether equity or debt, by us or the possibility of such issuance
may cause the market price of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations
and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on
our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to
conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an
earlier stage than would be desirable and we may be required to relinquish rights to some of our technologies, intellectual property or
product candidates or otherwise agree to terms unfavorable to us, any of which may harm our business, financial condition, cash flows,
operating results and prospects.
If adequate funds are not available to us on a timely basis, we may be required or choose to:
• delay, limit, reduce or terminate nonclinical studies, clinical trials or other development activities for our product candidates or
any of our future product candidates;
• delay, limit, reduce or terminate our other research and development activities; or
• delay, limit, reduce or terminate our establishment or expansion of manufacturing, sales and marketing or distribution
capabilities or other activities that may be necessary to commercialize UGN-101, UGN-102 or any of our other product
candidates.
We may also be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could harm our
business, financial condition, cash flows and results of operations.
Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our
technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through equity, convertible
debt or debt financings, as well as selectively continuing to enter into collaborations, strategic alliances and licensing arrangements. We
do not currently have any committed external source of funds other than funding under the existing exclusive license agreement we
entered into with Allergan Pharmaceuticals International Limited, or Allergan, a wholly owned subsidiary of Allergan plc, in October
2016, or the Allergan Agreement. Under the Allergan Agreement, we may receive additional material milestone payments upon the
successful completion of certain development, regulatory and commercial milestones and royalties with respect to future sales of
collaboration products by Allergan. Allergan may unilaterally terminate our existing collaboration for any reason upon advance notice.
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To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be
diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as an ordinary
shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures or declaring and distributing dividends, and may be
secured by all or a portion of our assets.
If we raise funds by selectively continuing to enter into additional collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish additional valuable rights to our technologies, future revenue streams, research programs or product
candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity,
convertible debt or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or
future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and
market ourselves. If we are unable to raise additional funds through other collaborations, strategic alliances or licensing arrangements,
we may be required to terminate product development or future commercialization efforts or to cease operations altogether.
Risks Related to Our Business and Strategy
We are dependent on the success of UGN-101 and our other lead product candidates, including obtaining regulatory approval to
market our product candidates in the United States.
We have invested almost all our efforts and financial resources in the research and development of our lead product candidates, UGN-
101 and UGN-102. Our future success depends on our ability to market and sell these product candidates. However, these product
candidates remain in clinical development and have yet to receive regulatory approval from the U.S. Food and Drug Administration, or
the FDA, or any other regulatory agency. We are focusing a significant portion of our activities and resources on UGN-101, and we
believe our prospects are highly dependent on, and a significant portion of the value of our company relates to, our ability to obtain
regulatory approval for and successfully commercialize UGN-101 in the United States and potentially in additional territories. The
regulatory approval and successful commercialization of UGN-101 is subject to many risks, including the risks discussed in other risk
factors, and UGN-101 may not receive marketing approval from any regulatory agency. The FDA assigned a Prescription Drug User Fee
Act, or PDUFA, action date of April 18, 2020 for UGN-101. However, the PDUFA date is only a goal and the FDA does not always meet
its PDUFA dates.
Our product candidates’ marketability is subject to significant risks associated with successfully completing current and future clinical
trials, including:
• the FDA’s acceptance of our parameters for regulatory approval relating to UGN-101, UGN-102 and our other product
candidates, including our proposed indications, primary and secondary endpoint assessments and measurements, safety
evaluations and regulatory pathways, and proposed labeling and packaging;
• the FDA’s timely review and approval of our New Drug Application, or NDA, for UGN-101;
• the FDA’s acceptance that the single pivotal Phase 3 clinical trial for UGN-101, will be sufficient to support FDA approval;
• our ability to successfully complete the FDA requirements related to chemistry, manufacturing and controls, or CMC, for UGN-
101, UGN-102 and our other product candidates, and if completed, their sufficiency to support an NDA;
• the FDA’s timely acceptance of our Investigational New Drug applications, or INDs, for our product candidates. Without such
IND acceptances, we will be unable to commence clinical trials in the United States;
• the FDA’s acceptance of the number, design, size, conduct and implementation of our clinical trials, our trial protocols and the
interpretation of data from nonclinical studies or clinical trials;
• our ability to successfully complete the clinical trials of our product candidates, including timely patient enrollment and
acceptable safety and efficacy data and our ability to demonstrate the safety and efficacy of the product candidates undergoing
such clinical trials;
• the FDA’s need to schedule an advisory committee meeting, and to conduct such meeting, in a timely manner to evaluate and
decide on the approval of our potential future NDA for UGN-102;
• if applicable, the recommendation of the FDA’s advisory committee to approve our applications to market UGN-102 and our
other product candidates in the United States, without limiting the approved labeling, specifications, distribution or use of the
products, or imposing other restrictions;
• the FDA’s determination of safety and efficacy of our product candidates;
• the prevalence and severity of adverse events associated with our product candidates as there are no drugs and related drug
administration procedures approved for LG UTUC or low-grade non-muscle invasive bladder cancer, that are based on RTGel
technology;
• the timely and satisfactory performance by third-party contractors of their obligations in relation to our clinical trials;
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• our success in educating physicians and patients about the benefits, administration and use of our product candidates, if
approved, particularly in light of the fact that there are currently no drugs approved by the FDA for the treatment of upper tract
urothelial carcinoma, or UTUC, and the FDA has not approved a drug for the treatment of non-muscle invasive bladder cancer,
or NMIBC, in more than 15 years;
• the availability, perceived advantages, relative cost, safety and efficacy of alternative and competing treatments for the
indications addressed by our product candidates;
• the effectiveness of our marketing, sales and distribution strategy, and operations, as well as that of any current and future
licensees;
• our ability to develop, validate and maintain a commercially viable manufacturing process that is compliant with current good
manufacturing practices, or cGMP;
• our ability to secure supply of the raw materials from TAPI (Teva Active Pharmaceutical Ingredients) or other suppliers for our
product candidates to support clinical trials and commercial use;
• our ability to obtain, protect and enforce our intellectual property rights with respect to our product candidates; and
• our ability to properly train physicians or nurses for the skillful preparation and administration of our products, including UGN-
101 and UGN-102, and our ability to develop a broad experiential knowledge base of aggregated clinician feedback from which
we can refine appropriate procedures for product administration, without which there could be a risk of adverse events.
Many of these clinical, regulatory and commercial risks are beyond our control. Accordingly, we cannot assure you that we will be able
to advance any of our product candidates through clinical development, or to obtain regulatory approval of or commercialize any of our
product candidates. If we fail to achieve these objectives or overcome the challenges presented above, we could experience significant
delays or an inability to successfully commercialize our product candidates. Accordingly, we may not be able to generate sufficient
revenues through the sale of our product candidates to enable us to continue our business.
We may be unable to obtain regulatory approval for our product candidates.
The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping,
marketing, distribution, post-approval monitoring and reporting, and export and import of drug products are subject to extensive
regulation by the FDA and by foreign regulatory authorities. These regulations differ from country to country. To gain approval to
market our product candidates, we must provide clinical data that adequately demonstrate the safety and efficacy of the product for the
intended indication. We have not yet obtained regulatory approval to market any of our product candidates in the United States or any
other country. Our business depends upon obtaining these regulatory approvals. There are currently no drugs approved by the FDA for
the treatment of low-grade UTUC and only three drugs have been approved by the FDA for NMIBC, with the last approval having
occurred over 15 years ago. The FDA can delay, limit or deny approval of our product candidates for many reasons, including:
• our inability to satisfactorily demonstrate that the product candidates are safe and effective for the target indication;
• the FDA’s disagreement with our trial protocol, the interpretation of data from nonclinical studies or clinical trials or conduct and
control of clinical trials;
• the patient population studied in the clinical trial may not be sufficiently large, broad or representative to assess efficacy and
safety in the patient population for which we seek approval;
• our inability to demonstrate that clinical or other benefits of our product candidates outweigh any safety or other perceived risks;
• the FDA’s determination that the 505(b)(2) regulatory pathway is not available for our product candidates;
• the FDA’s determination that additional nonclinical studies or clinical trials are required;
• the FDA’s determination that the Orphan Drug Designation, or ODD, for UGN-101, for the treatment of UTUC is not valid;
• the FDA’s determination that the quality of our drug substance or drug product, formulation, labeling, packaging, or the
specifications of our product candidates is insufficient for approval;
• the FDA’s failure to accept the manufacturing processes or facilities of third-party manufacturers with which we contract;
• the potential for approval policies or regulations of the FDA to significantly change in a manner rendering our clinical data
insufficient for approval; or
• resistance to approval from the FDA’s advisory committee for any reason including safety or efficacy concerns.
Our NDA for UGN-101 for LG UTUC may receive a complete response letter at the conclusion of the FDA review period. Even if we
eventually complete clinical testing and receive approval of any regulatory filing for our product candidates, the FDA may grant
approval contingent on the performance of costly and potentially time-consuming additional post-approval clinical trials or subject to
restrictive risk evaluation and mitigation strategies. The FDA may also approve our product candidates for a more limited indication or
a narrower patient population than we originally requested, and the FDA may not approve the labeling that we believe is necessary or
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desirable for the successful commercialization of our product candidates. To the extent we seek regulatory approval in foreign countries,
we may face challenges similar to those described above with regulatory authorities in applicable jurisdictions. Any delay in obtaining,
or inability to obtain, applicable regulatory approval for any of our product candidates would delay or prevent commercialization of our
product candidates and would thus negatively impact our business, results of operations and prospects.
To date we have only generated limited clinical data for our product candidates.
Positive results in nonclinical testing and early clinical trials do not ensure that later clinical trials will be successful. A number of
pharmaceutical companies have suffered significant setbacks in clinical trials, including in Phase 3 clinical trials, after promising results
in nonclinical testing and early clinical trials. These setbacks have included negative safety and efficacy observations in later clinical
trials, including previously unreported adverse effects. To date, our clinical trials and other programs have involved small patient
populations and because of the small sample size, the results of these clinical trials may be subject to substantial variability and may not
be indicative of future results. For instance, only 22 patients were enrolled in the UGN-101 Compassionate Use Program and only 71
patients were treated in our pivotal Phase 3 OLYMPUS (TC-UT-03) clinical trial for UGN-101; to date, no patients have recurred and
entered our Phase 3b extension trial retreatment protocol. In our Phase 3 Clinical Trial TC-UT-03, we observed several adverse events,
such as ureteric stenosis, urinary tract infection, hematuria, flank pain, nausea and dysuria and serious adverse events, including ureteric
stenosis, hydronephrosis, flank pain and urosepsis. In addition, we have observed perturbation of laboratory measures of renal and
hematopoietic function as well as ureteral stricture and stenosis. These adverse events are known mitomycin or procedure-related
adverse events and many are indicated as potential side effects of mitomycin usage on the mitomycin label. However, we cannot assure
you that new adverse events related to UGN-101 and UGN-102 that are not directly attributable to mitomycin specifically will not occur.
Additional safety information for UGN-101 is contained under “Business—Overview— UGN-101(mitomycin gel) for instillation” of
this report, presenting the most common treatment emergent serious adverse events occurring in at least two patients, by relationship to
study medication. In addition, our clinical trials may not be successful. If our clinical trials do not ultimately indicate that our product
candidates are safe and effective for their intended use, the FDA may not approve any NDA that we may submit to market such product
candidates, and our business would not be able to generate revenue from the sale of any such product candidates.
Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more
patient data become available and are subject to audit and verification procedures that could result in material changes in the final
data.
From time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials. These interim updates are based
on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change as patient data
become available and following a more comprehensive review of the data related to the particular study or trial. We also make
assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the
opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the
same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully
evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different
from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are
available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials
that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. In particular, interim data may reflect small sample sizes, be subject to substantial
variability and may not be indicative of either future interim results or final results. Durability is a key secondary endpoint for our
ongoing pivotal Phase 3b open label extension of the OLYMPUS clinical trial. Additional safety information for UGN-101 is contained
under “Business—Overview— UGN-101(mitomycin gel) for instillation” of this report, presenting the most common treatment
emergent serious adverse events occurring in in at least two patients, by relationship to study medication. Adverse changes between
interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim data by us or by
our competitors in the future could result in volatility in the price of our ordinary shares. See the description of risks under the heading
“Risks Related to Ownership of our Ordinary Shares” for additional disclosures related to the risk of volatility in the price of our
ordinary shares.
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Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or
analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the
approvability or commercialization of the particular product candidate or product and our company in general. In addition, the
information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive
amount of available information. Furthermore, we may report interim analyses of only certain endpoints rather than all endpoints. You
or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any
information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views,
activities or otherwise regarding a particular product, product candidate or our business. If the preliminary or topline data that we report
differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to
obtain approval for, and commercialize, UGN-101, UGN-102 or any other product candidate may be harmed, which could harm our
business, financial condition, results of operations and prospects.
We have limited experience in conducting clinical trials and have never obtained approval for any product candidates and may be
unable to do so successfully.
As a company, we have limited experience in conducting clinical trials and have never progressed a product candidate through to
regulatory approval. In part because of this lack of experience, our clinical trials may require more time and incur greater costs than we
anticipate. We cannot be certain that the planned clinical trials will begin or conclude on time, if at all. Large-scale trials will require
significant additional financial and management resources. In addition, due to the significant lack of drug development for non-muscle
invasive urothelial cancers over the past 15 years, neither we nor any third-party clinical investigators, clinical research organizations, or
CROs, and/or consultants are likely to have extensive experience conducting clinical trials for the indications we are targeting. Third-
party clinical investigators do not operate under our control. Any performance failure on the part of such third parties could delay the
clinical development of our product candidates or delay or prevent us from obtaining regulatory approval or commercializing our current
or future product candidates, depriving us of potential product revenue and resulting in additional losses.
We have regulatory applications in process or have not yet applied for regulatory approvals to market some of our product
candidates, and we may be delayed in obtaining or failing to obtain such regulatory approvals and to commercialize our product
candidates.
The process of developing, obtaining regulatory approval for and commercializing our product candidates is long, complex, costly and
uncertain, and delays or failure can occur at any stage. The research, testing, manufacturing, labeling, marketing, sale and distribution of
drugs are subject to extensive and rigorous regulation by the FDA and foreign regulatory agencies, as applicable. These regulations are
agency-specific and differ by jurisdiction. We are not permitted to market any product candidate in the United States until we receive
approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from the respective regulatory
agencies in such countries. To gain approval of an NDA or other equivalent regulatory approval, we must provide the FDA or relevant
foreign regulatory authority with nonclinical and clinical data that demonstrates the safety and efficacy of the product for the intended
indication.
Before we can submit an NDA to the FDA or comparable similar applications to foreign regulatory authorities, we must conduct Phase
3 clinical trials, or a pivotal/registration trial equivalent, for each product candidate. Our pivotal clinical trial for UGN-101 evaluated 71
patients, and we completed a rolling submission to the FDA of an NDA for UGN-101 in October 2019. After submission of an NDA, the
FDA may raise additional questions on any data contained in the application. These questions may come in the form of information
requests or in the NDA 74-day letter as review issues. We must address these questions during the review, but we do not know whether
our responses will be acceptable to the FDA. We cannot assure you that the FDA will not decide to require us to perform additional
clinical trials, including potentially requiring us to perform an additional pivotal study with a control arm, before approving, or as a
condition of approving, our NDA for UGN-101.
Phase 3 clinical trials often produce unsatisfactory results even though prior clinical trials were successful. Moreover, the results of
clinical trials may be unsatisfactory to the FDA or foreign regulatory authorities even if we believe those clinical trials to be successful.
The FDA or applicable foreign regulatory agencies may suspend one or all of our clinical trials or require that we conduct additional
clinical, nonclinical, manufacturing, validation or drug product quality studies and submit that data before considering or reconsidering
any NDA or comparable foreign regulatory application that we may submit. Depending on the extent of these additional studies,
approval of any applications that we submit may be significantly delayed or may cause the termination of such programs or may require
us to expend more resources than we have available.
If any of these outcomes occur, we may not receive regulatory approval for the corresponding product candidates, and our business
would not be able to generate revenue from the sale of any such product candidates.
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Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership
and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise
prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively
impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and
funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes.
Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other
government agencies on which our operations may rely, including those that fund research and development activities is subject to the
political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary
government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut
down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other
government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability
of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to
properly capitalize and continue our operations.
We may not be able to advance our nonclinical product candidates into clinical development and through regulatory approval and
commercialization.
Certain of our product candidates are currently in nonclinical development and are therefore currently subject to the risks associated with
nonclinical development, including the risks associated with:
• generating adequate and sufficient nonclinical safety and efficacy data in a timely fashion to support the initiation of clinical
trials;
• obtaining regulatory approval to commence clinical trials in any jurisdiction, including the submission and acceptance of INDs;
• contracting with the necessary parties to conduct a clinical trial;
• enrolling sufficient numbers of patients in clinical trials in timely fashion, if at all; and
• timely manufacture of sufficient quantities of the product candidate for use in clinical trials.
If we are unsuccessful in advancing our nonclinical product candidates into clinical trials in a timely fashion, our business may be
harmed. Even if we are successful in advancing our nonclinical product candidates into clinical development, their success will be
subject to all of the clinical, regulatory and commercial risks described elsewhere in the Annual Report and our other filings with the
SEC. Accordingly, we cannot assure you that we will be able to develop, obtain regulatory approval for, commercialize or generate
significant revenue from our product candidates.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, results of earlier studies and trials
may not be predictive of future trial results, and our clinical trials may fail to adequately demonstrate the safety and efficacy of our
product candidates.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more of
our clinical trials can occur at any time during the clinical trial process. We do not know whether our ongoing and future clinical trials, if
any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all.
Clinical trials can be delayed, suspended or terminated for a variety of reasons, including failure to:
• generate sufficient nonclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical
trials;
• obtain regulatory approval or feedback on trial design, in order to commence a trial;
• identify, recruit and train suitable clinical investigators;
• reach agreement on acceptable terms with prospective CROs and clinical trial sites, and have such CROs and sites effect the
proper and timely conduct of our clinical trials;
• obtain and maintain institutional review board, or IRB, approval at each clinical trial site;
• identify, recruit and enroll suitable patients to participate in a trial;
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• have a sufficient number of patients enrolled, complete a trial or return for post-treatment follow-up;
• ensure clinical investigators and clinical trial sites observe trial protocol or continue to participate in a trial;
• address any patient safety concerns that arise during the course of a trial;
• address any conflicts with new or existing laws or regulations;
• add a sufficient number of clinical trial sites;
• manufacture sufficient quantities at the required quality of product candidate for use in clinical trials; or
• raise sufficient capital to fund a trial.
Patient enrollment is a significant factor in the timing and success of clinical trials and is affected by many factors, including the size and
nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical
trial, competing clinical trials and clinicians’ and patients’ or caregivers’ perceptions as to the potential advantages of the drug candidate
being studied in relation to other available therapies, including any new drugs or treatments that may be developed or approved for the
indications we are investigating.
We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are
being conducted, by the trial’s data safety monitoring board, by the FDA or by the applicable foreign regulatory authorities. Such
authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the
clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial
site by the FDA or foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side
effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial.
If we experience delays in carrying out or completing any clinical trial of our product candidates, the commercial prospects of our
product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed.
In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and
approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may
significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the
commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
The market opportunities for our product candidates may be limited to those patients who are ineligible for established therapies or
for whom prior therapies have failed and may be small.
Cancer therapies are sometimes characterized as first-line, second-line or third-line. When cancer is detected early enough, first-line
therapy, often chemotherapy, hormone therapy, surgery, radiotherapy or a combination of these, is sometimes adequate to cure the
cancer or prolong life. Second- and third-line therapies are administered to patients when prior therapy is not or is no longer effective.
For urothelial cancers, the current first-line standard of care is surgery designed to remove one or more tumors. Chemotherapy is
currently used in treating urothelial cancer only as an adjuvant, or supplemental therapy, after tumor resection. We are designing our lead
product candidates with the goal of replacing surgery as the standard of care for certain urothelial cancers. However, there is no
guarantee that our product candidates, if approved, would be approved for first-line or even later lines of therapy, and, that prior to any
such approvals, we will not have to conduct additional clinical trials.
Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers
who have previously failed prior treatments, and who have the potential to benefit from treatment with our product candidates, are based
on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of
clinics, patient foundations or third-party market research, and may prove to be incorrect. Further, new studies may change the estimated
incidence or prevalence of these cancers and the number of patients may turn out to be lower than expected. Additionally, the potentially
addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product
candidates. For instance, our pivotal Phase 3 OLYMPUS clinical trial for UGN-101 was designed to evaluate the use of UGN-101 for
the treatment of tumors in the renal pelvis (the funnel-like dilated part of the ureter in the kidney) and was not designed to evaluate the
use of UGN-101 for the treatment of tumors in the ureter (the tube that connects the kidneys to the bladder). Even if UGN-101 is
approved for the treatment of LG UTUC, physicians may choose to only use it to treat tumors in the renal pelvis and not tumors in the
ureter, which would limit the degree of physician adoption and market acceptance of UGN-101. Even if we receive regulatory approval
for our product candidates and obtain significant market share, because the potential target populations are small, we may never achieve
profitability without obtaining regulatory approval for additional indications, including the use of the products as first- or second-line
therapy. For example, LG UTUC is a rare malignant tumor of the cells lining the urinary tract and there is limited scientific literature or
other research on the incidence and prevalence of LG UTUC. If our estimates of the incidence and prevalence of LG UTUC are
incorrect, UGN-101’s commercial viability may prove to be limited, which may negatively affect our financial results.
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UGN-101, UGN-102 or any of our other product candidates may produce undesirable side effects that we may not have detected in
our previous nonclinical studies and clinical trials or that are not expected with mitomycin treatment or inconsistent with catheter
administration procedures. This could prevent us from gaining marketing approval or market acceptance for these product
candidates, or from maintaining such approval and acceptance, and could substantially increase commercialization costs and even
force us to cease operations.
As with most pharmaceutical products, use of UGN-101, UGN-102 or our other product candidates may be associated with side effects
or adverse events that can vary in severity and frequency. Our proprietary reverse thermal gelation hydrogel, or RTGel, which is used in
the formulation of UGN-101 and UGN-102, has not undergone extensive testing in humans. Side effects or adverse events associated
with the use of UGN-101 and UGN-102 may be observed at any time, including in clinical trials or once a product is commercialized,
and any such side effects or adverse events may negatively affect our ability to obtain regulatory approval or market our product
candidates. To date, in our nonclinical testing, completed Compassionate Use Program for UGN-101 and clinical trials, we have
observed several adverse events and serious adverse events, including ureteral stenosis, inhibition of urine flow, rash, flank pain, kidney
swelling, kidney infection, urgency in urination and pain during urination. In addition, we have observed transient perturbation of
laboratory measures of renal and hematopoietic function as well as ureteral stricture and stenosis. These adverse events are known
mitomycin or procedure-related adverse events and many are indicated as potential side effects of mitomycin usage on the mitomycin
label. Additional safety information for UGN-101 is contained under “Business—Overview— UGN-101(mitomycin gel) for
instillation” of this report, presenting the most common treatment emergent serious adverse events occurring in at least two patients, by
relationship to study medication. However, we cannot assure you that we will not observe additional drug or procedure-related serious
adverse events in the future or that the FDA will not determine them as such. Side effects such as toxicity or other safety issues
associated with the use of our product candidates could require us to perform additional studies or halt development or sale of these
product candidates or expose us to product liability lawsuits, which will harm our business.
Furthermore, our single pivotal Phase 3 clinical trial for UGN-101 and our Phase 2b clinical trial for UGN-102 involve larger patient
bases than in our prior studies of these candidates, and the commercial marketing of UGN-101 and UGN-102, if approved, will further
expand the clinical exposure of the drugs to a wider and more diverse group of patients than those participating in the clinical trials,
which may identify undesirable side effects caused by these products that were not previously observed or reported.
The FDA and foreign regulatory agency regulations require that we report certain information about adverse medical events if our
products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date
upon which we become aware of the adverse event as well as the nature and severity of the event. We may fail to report adverse events
of which we become aware within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable
adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time
from the use of our products. If we fail to comply with our reporting obligations, the FDA or a foreign regulatory agency could take
action including enforcing a hold on or cessation of clinical trials, withdrawal of approved drugs from the market, criminal prosecution,
the imposition of civil monetary penalties or seizure of our products.
Additionally, in the event we discover the existence of adverse medical events or side effects caused by one of our product candidates, a
number of other potentially significant negative consequences could result, including:
• our inability to submit an NDA or similar application for our product candidates because of insufficient risk-reward, or the denial
of such application by the FDA or foreign regulatory authorities;
• the FDA or foreign regulatory authorities suspending or terminating our clinical trials or suspending or withdrawing their
approval of the product;
• the FDA or foreign regulatory authorities requiring the addition of labeling statements, such as boxed or other warnings or
contraindications or distribution and use restrictions;
• the FDA or foreign regulatory authorities requiring us to issue specific communications to healthcare professionals, such as
letters alerting them to new safety information about our product, changes in dosage or other important information;
• the FDA or foreign regulatory authorities issuing negative publicity regarding the affected product, including safety
communications;
• our being limited with respect to the safety-related claims that we can make in our marketing or promotional materials;
• our being required to change the way the product is administered, conduct additional nonclinical studies or clinical trials or
restrict or cease the distribution or use of the product; and
• our being sued and held liable for harm caused to patients.
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Any of these events could prevent us from achieving approval or market acceptance of the affected product candidate and could
substantially increase commercialization costs or even force us to cease operations. We cannot assure you that we will resolve any issues
related to any product-related adverse events to the satisfaction of the FDA or any regulatory agency in a timely manner or ever, which
could harm our business, prospects and financial condition.
Even if our product candidates receive marketing approval, we may continue to face future developmental and regulatory
difficulties. In addition, we are subject to government regulations and we may experience delays in obtaining required regulatory
approvals to market our proposed product candidates.
Even if we complete clinical testing and receive approval of any regulatory filing for our product candidates, the FDA or applicable
foreign regulatory agency may grant approval contingent on the performance of additional costly post-approval clinical trials, risk
mitigation requirements and surveillance requirements to monitor the safety or efficacy of the product, which could negatively impact us
by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. Absence of long-
term safety data may further limit the approved uses of our products, if any.
The FDA or applicable foreign regulatory agency also may approve our product candidates for a more limited indication or a narrower
patient population than we originally requested or may not approve the labeling that we believe is necessary or desirable for the
successful commercialization of our product candidates. Furthermore, any such approved product will remain subject to extensive
regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage,
advertising, promotion, distribution and recordkeeping.
If we fail to comply with the regulatory requirements of the FDA or other applicable foreign regulatory authorities, or previously
unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be
subject to administrative or judicially imposed sanctions or other setbacks, including the following:
• suspension or imposition of restrictions on operations, including costly new manufacturing requirements;
• regulatory agency refusal to approve pending applications or supplements to applications;
• suspension of any ongoing clinical trials;
• suspension or withdrawal of marketing approval;
• an injunction or imposition of civil or criminal penalties or monetary fines;
• seizure or detention of products;
• bans or restrictions on imports and exports;
• issuance of warning letters or untitled letters;
• suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or
• refusal of regulatory authorities to approve pending applications or supplements to applications.
In addition, various aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change
from time to time. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert
management resources and attention and, consequently, could adversely affect our business, financial condition, cash flows and results
of operations.
Even if our product candidates receive regulatory approval, they may fail to achieve the broad degree of physician adoption and use
and market acceptance necessary for commercial success.
Even if we obtain FDA or foreign regulatory approvals for our product candidates, the commercial success of such products will depend
significantly on their broad adoption and use by physicians, for approved indications, including, in the case of UGN-101, for the
treatment of LG UTUC, and in the case of UGN-102, for the treatment of LG Intermediate Risk NMIBC, and for other therapeutic
indications that we may seek to pursue with any of our product candidates. Physicians treating LG UTUC and LG Intermediate Risk
NMIBC have never had to consider treatments other than surgery. The degree and rate of physician and patient adoption of our product
candidates, if approved, will depend on a number of factors, including:
• the clinical indications for which the product is approved;
• the approved labeling and packaging for our products, including the degree of product preparation and administration
convenience and ease of use that is afforded to physicians by the approved labeling and product packaging;
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• the prevalence and severity of adverse side effects and the level of risk/reward observed in our clinical trials;
• sufficient patient satisfaction with the results and administration of our product and overall treatment experience, including
relative convenience, ease of use and avoidance of, or reduction in, adverse side effects;
• the extent to which physicians recommend our products to patients;
• physicians’ and patients’ willingness to adopt new therapies in lieu of other products or treatments, including willingness to
adopt our lead product candidates as locally administered drug replacements to current surgical standards of care;
• the cost of treatment, safety and efficacy of our product candidates in relation to alternative treatments, including the recurrence
rate of our treatments;
• the extent to which the costs of our product candidates are covered and reimbursed by third-party payors, including the
availability of a physician reimbursement code for our treatments, and patients’ willingness to pay for our products;
• whether treatment with our product candidates, including the treatment of LG UTUC with UGN-101 and the treatment of LG
Intermediate Risk NMIBC with UGN-102, will be deemed to be an elective procedure by third- party payors; if so, the cost of
treatment would be borne by the patient and would be less likely to be broadly adopted;
• proper training of physicians or nurses for the skillful administration of our products, including UGN-101 and UGN-102, and
development of a broad experiential knowledge base of aggregated clinician feedback from which we can refine appropriate
procedures for product administration, without which there could be a risk of adverse events;
• the revenues and profitability that our products will offer physicians as compared to alternative therapies; and
• the effectiveness of our sales and marketing efforts, especially the success of any targeted marketing efforts directed toward
physicians and clinics and any direct-to-consumer marketing efforts we may initiate.
If UGN-101, UGN-102 or any of our other product candidates is approved for use but fails to achieve the broad degree of physician
adoption and market acceptance necessary for commercial success, our operating results and financial condition would be adversely
affected.
If we are not successful in developing, receiving regulatory approval for and commercializing our nonclinical and clinical product
candidates other than UGN-101 or UGN-102, our ability to expand our business and achieve our strategic objectives could be
impaired.
Although we will devote a substantial portion of our resources to the continued clinical testing and potential approval of UGN-101 for
the treatment of LG UTUC and UGN-102 for the treatment of LG Intermediate Risk NMIBC, another key element of our strategy is to
discover, develop and commercialize a portfolio of products to serve additional therapeutic markets. We are seeking to do so through our
internal research programs, but our resources are limited, and those that we have are geared towards clinical testing and seeking
regulatory approval of UGN-101, UGN-102 and our other existing product candidates. We may also explore strategic collaborations for
the development or acquisition of new products, but we may not be successful in entering into such relationships. Research programs to
identify product candidates require substantial technical, financial and human resources, regardless of whether any product candidates
are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield
product candidates for clinical development for many reasons, including:
• the research methodology used may not be successful in identifying potential product candidates;
• competitors may develop alternatives that render our product candidates obsolete or less attractive;
• a product candidate may in a subsequent trial be shown to have harmful side effects or other characteristics that indicate it is
unlikely to be effective or otherwise does not meet applicable regulatory criteria;
• a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;
• a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors, if
applicable; and
• intellectual property or other proprietary rights of third parties for product candidates we develop may potentially block our entry
into certain markets or make such entry economically impracticable.
If we fail to develop and successfully commercialize other product candidates, our business and future prospects may be harmed, and our
business will be more vulnerable to any problems that we encounter in developing and commercializing our product candidates.
Our product candidates, if approved, will face significant competition with competing technologies and our failure to compete
effectively may prevent us from achieving significant market penetration.
The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Our potential
competitors include large and experienced companies that enjoy significant competitive advantages over us, such as greater financial,
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research and development, manufacturing, personnel and marketing resources, greater brand recognition and more experience and
expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities. These companies may develop new drugs
to treat the indications that we target or seek to have existing drugs approved for use for the treatment of the indications that we target.
The FDA has approved four immunotherapy drugs known as checkpoint inhibitors; Tecentriq (atezolizumab), Bavenico (Avelumab),
Imfinzi (durvalumab) and Keytruda (pembrolizumab) for the treatment of locally advanced or metastatic bladder cancer, a form of
muscle invasive bladder cancer.
We are aware of several pharmaceutical companies that are developing drugs in the fields of urology and uro-oncology, such as Roche,
Vyriad, GSK, Celgene, Lipac Oncology, Samyang biopharma, Merck Sharp & Dohme Corp., Eleven biotherapeutics, Viralytics
Limited, AADi, LLC, Biocancell Ltd., Altor BioScience Corporation, FKD Therapies Oy and Spectrum Pharmaceuticals, Inc. We do
not know whether these potential competitors are already developing, or plan to develop, LG UTUC or high-grade UTUC treatments or
other indications that we are pursuing.
We are also aware that other companies, such as Taris and Lipac are conducting, or have recently conducted clinical trials for product
candidates for the treatment of LG Intermediate Risk NMIBC, including carcinoma in situ, or CIS. Outside of these indications where
we are developing products, we are aware of other companies doing work in both bladder and upper tract cancers, but these are with
agents or on targets in high-grade, metastatic, or muscle invasive cancers. Competition may increase further as a result of advances in the
commercial applicability of technologies and greater availability of capital for investment in this industry. Our competitors may succeed
in developing, acquiring or licensing on an exclusive basis, products that are more effective, easier to administer or less costly than our
product candidates.
In addition, we face competition from existing standards of treatment, including transurethral resection of bladder tumor, or TURBT,
surgery for bladder cancer. If we are not able to demonstrate that our product candidates are at least as safe and effective as such courses
of treatment, medical professionals may not adopt our product candidates in replacement of the existing standard of care, which is first-
line tumor surgical procedures.
We have no experience in marketing or distributing products and are therefore subject to certain risks in relation to the
commercialization of our product candidates once approved.
Our strategy is to build a fully integrated biopharmaceutical company to successfully execute the commercial launch of UGN-101 in the
United States, if approved. We have established a commercial management team that is preparing our organization for the planned future
launch of UGN-101, if approved, and have also established a field-based organization comprised of approximately 80 individuals,
including a sales team, reimbursement support team, clinical nurse educators, national account managers and a medical liaisons.
However, in order to successfully market UGN-101, if approved, we must continue to build our sales, marketing, managerial,
compliance, and related capabilities or make arrangements with third parties to perform these services. This involves many challenges,
such as recruiting and retaining talented personnel, training employees, setting the appropriate system of incentives, managing
additional headcount and integrating new business units into an existing corporate infrastructure. These efforts will continue to be
expensive and time-consuming, and we cannot be certain that we will be able to successfully develop this capability. While we recently
established a field-based sales organization, we will need to conduct further activities to develop our sales force in order to successfully
execute the commercial launch of UGN-101, if approved. Additionally, even after initial development of our sales force and the
commercial launch of UGN-101, we will need to maintain and further develop our sales force, and we will be competing with other
pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. In the event we are unable
to effectively develop and maintain our commercial team, including our sales force, our ability to effectively commercialize UGN-101
would be limited, and we would not be able to generate product revenues successfully. Moreover, as an organization, we have no
experience in marketing or distributing products, and we cannot be certain that we will successfully develop this capability. We will
have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain personnel for medical affairs,
marketing and sales. If we fail to establish and maintain an effective sales and marketing infrastructure, we will be unable to successfully
commercialize our product candidates, which in turn would have an adverse effect on our business, financial condition and results of
operations.
We have entered into a licensing agreement and in the future may enter into collaborations with other third parties for the
development or commercialization of our product candidates. If our collaborations are not successful, we may not be able to
capitalize on the market potential of these product candidates.
In October 2016, we entered into the Allergan Agreement. Under the Allergan Agreement, we granted Allergan an exclusive worldwide
license to research, develop, manufacture and commercialize pharmaceutical products that contain a proprietary RTGel formulation and
clostridial toxins (including BOTOX), alone or in combination with certain other active ingredients, which we refer to collectively as the
Licensed Products. Either party may terminate the Allergan Agreement for uncured material breach by the other party and for the
insolvency of the other party. We may terminate the Allergan Agreement if Allergan or its affiliates challenges any of our patents
licensed to Allergan and such patent challenge is not required under a court order or subpoena and is not a defense against a claim, action
or proceeding asserted by us, our affiliates or licensees against Allergan, its affiliates or sublicensees. In addition, Allergan may
unilaterally terminate the Allergan Agreement for any reason upon advance notice. If Allergan has the right to terminate the Allergan
Agreement due to our uncured material breach, Allergan may elect to continue the agreement and reduce all future milestone and royalty
38
payment obligations to us by a specified percentage. In the event of any termination of the Allergan Agreement, Allergan will assign or
grant a right of reference to any regulatory documentation related to RTGel to us, all rights and licenses to Allergan will terminate, and
the license Allergan granted to us under their improvements to RTGel will continue. If any of these events occurs, we will not be able to
obtain, or may be delayed in obtaining, marketing approvals for the Licensed Products and will not be able to, or may be delayed in our
efforts to, successfully commercialize the Licensed Products, and our business will be harmed.
We may utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to develop our
product candidates and commercialize our approved product candidates, if any. We are not currently party to any such arrangement. Our
ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the
functions assigned to them in these arrangements.
Our existing collaboration with Allergan and any future collaborations that we enter into, may pose a number of risks, including the
following:
• collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to
these collaborations;
• collaborators may not perform their obligations as expected;
• product candidates developed by collaborators may not perform sufficiently in clinical trials to be determined to be safe and
effective, thereby delaying or terminating the drug approval process and reducing or eliminating milestone payments to which
we would otherwise be entitled if the product candidates had successfully met their endpoints and/or received FDA approval;
• clinical trials conducted by collaborators could give rise to new safety concerns;
• clinical trials, such as the ongoing Phase 2 trial being conducted by Allergan for overactive bladder with a proprietary
formulation of RTGel in combination with BOTOX, could fail to meet its efficacy objectives;
• collaborators may not pursue development and commercialization of our product candidates that receive marketing approval or
may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the
collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create
competing priorities;
• collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a
product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
• collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our
products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed
or can be commercialized under terms that are more economically attractive than ours;
• product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own
product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our
product candidates;
• a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval
may not commit sufficient resources to the marketing and distribution of such product or products;
• disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course
of development, might cause delays or termination of the research, development or commercialization of product candidates,
might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any
of which would divert management attention and resources, be time-consuming and expensive;
• collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such
a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to
potential litigation;
• collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential
liability; and
• collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise
additional capital to pursue further development or commercialization of the applicable product candidates.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at
all. If the Allergan Agreement, and any future collaborations that we enter into, do not result in the successful development and
commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research
funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements,
our development of our product candidates could be delayed, and we may need additional resources to develop our product candidates.
All the risks relating to product development, regulatory approval and commercialization described in this report also apply to the
activities of our collaborators.
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Additionally, subject to its contractual obligations to us, if a collaborator of ours were to be involved in a business combination, it might
deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators
terminates its agreement with us, we may find it more difficult to attract new collaborators and perception of us in the business and
financial communities could be harmed.
If in the future we acquire or in-license technologies or product candidates, we may incur various costs, may have integration
difficulties and may experience other risks that could harm our business and results of operations.
In the future, we may acquire or in-license additional product candidates and technologies. Any product candidate or technologies we in-
license or acquire will likely require additional development efforts prior to commercial sale, including extensive nonclinical or clinical
testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone to risks
of failure inherent in pharmaceutical product development, including the possibility that the product candidate, or product developed
based on in-licensed technology, will not be shown to be sufficiently safe and effective for approval by regulatory authorities. If
intellectual property related to product candidates or technologies, we in-license is not adequate, we may not be able to commercialize
the affected products even after expending resources on their development. In addition, we may not be able to economically manufacture
or successfully commercialize any product candidate that we develop based on acquired or in-licensed technology that is granted
regulatory approval, and such products may not gain wide acceptance or be competitive in the marketplace. Moreover, integrating any
newly acquired or in-licensed product candidates could be expensive and time-consuming. If we cannot effectively manage these aspects
of our business strategy, our business may be materially harmed.
We currently contract with third-party subcontractors and single-source suppliers for certain raw materials, compounds and
components necessary to produce UGN-101, UGN-102 and UGN-201 for nonclinical studies and clinical trials, and expect to
continue to do so to support commercial scale production of UGN-101, UGN-102 and UGN-201, if approved. There are significant
risks associated with the manufacture of pharmaceutical products and contracting with contract manufacturers and with single-
source suppliers. Furthermore, our existing third-party subcontractors and single-source suppliers may not be able to meet the
increased need for certain raw materials, compounds and components that may result from our potential commercialization efforts.
This increases the risk that we will not have sufficient quantities of UGN-101, UGN-102 or UGN-201 or be able to obtain such
quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We currently rely on third-party subcontractors and suppliers for certain compounds and components necessary to produce UGN-101,
UGN-102 and UGN-201 for our nonclinical studies, clinical trials and commercial use, should our drug candidates receive regulatory
approval. We currently depend on Teva Pharmaceuticals Industries Ltd., or Teva, as our single-source supplier of mitomycin active
pharmaceutical ingredient, or API, for UGN-101 and UGN-102. We also currently depend on single sources for the gel contained in
UGN-101 and UGN-102, and imiquimod for UGN-201. Because there are a limited number of suppliers for the raw materials that we
use to manufacture our product candidates, we may need to engage alternate suppliers to prevent a possible disruption of the
manufacture of the materials necessary to produce our product candidates for our clinical trials, and if approved, ultimately for
commercial sale. We do not have any control over the availability of raw materials. If we or our manufacturers are unable to purchase
these raw materials on acceptable terms, at sufficient quality levels, or in adequate quantities, if at all, the development and
commercialization of our product candidates or any future product candidates, would be delayed or there would be a shortage in supply,
which would impair our ability to meet our development objectives for our product candidates or generate revenues from the sale of any
approved products.
We expect to continue to rely on these or other subcontractors and suppliers to support our commercial requirements if UGN-101, UGN-
102 or any of our other product candidates is approved for marketing by the FDA or foreign regulatory authorities. We also rely on a
single third-party manufacturer to produce our proprietary drug product, or final mitomycin formulation, necessary for our clinical trial
and commercial requirements. We have yet to complete the mitomycin drug product validation process, and scale-up work at this
manufacturer that would be required for approval and commercial purposes, and there is a risk that we will not be able to do so in a
timely or satisfactory manner. Even if we establish ourselves as an approved commercial supplier of mitomycin through this drug
product manufacturer, we plan to continue to rely on third parties for such production of mitomycin API, as well as for the raw materials,
compounds and components necessary to produce our product candidates and for nonclinical studies and clinical trials. We would expect
that if we become a commercial supplier of mitomycin, through a third-party manufacturer of mitomycin, it would provide us with
enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process
changes, and allow for better long-term margins. However, we have no experience as a company in the commercial supply of drugs and
may never be successful as a commercial supplier of mitomycin.
Even if we are successful in being approved as a commercial supplier of mitomycin, cost-overruns, unexpected delays, equipment
failures, logistics breakdowns, labor shortages, natural disasters, power failures, production failures or product recalls and numerous
other factors could prevent us from realizing the intended benefits of our sales strategy and have a material adverse effect on our
business. Further, establishing ourselves as a commercial supplier of mitomycin, if we choose to pursue this, will require additional
investment, will be time-consuming and may be subject to delays, including because of shortage of labor, compliance with regulatory
requirements or receipt of necessary regulatory approvals. In addition, building out our mitomycin commercial supply capabilities may
cost more than we currently anticipate, and delays or problems may adversely impact our ability to provide supply for the development
and commercialization of our product candidates as well as our financial condition.
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Moreover, before we can begin to commercially manufacture our product candidates, whether in a third-party facility or in our own
facility, once established, we must obtain regulatory approval from the FDA for our manufacturing process and facility in order to sell
such products in the United States. A manufacturing authorization would also have to be obtained from the appropriate European Union
regulatory authorities in order sell such products in the European Union. In order to obtain approval, we will need to ensure that all of the
processes, methods and equipment of such manufacturing facilities are compliant with cGMP, and perform extensive audits of vendors,
contract laboratories and suppliers. If any vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we
may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work
to identify suitable replacement vendors. The cGMP requirements govern quality control of the manufacturing process and
documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production,
record keeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply
with these requirements, we would be subject to possible regulatory action and may not be permitted to sell any product candidate that
we may develop.
Our continuing reliance on third-party subcontractors and suppliers entails a number of risks, including reliance on the third party for
regulatory compliance and quality assurance, the possible breach of the manufacturing or supply agreement by the third party, and the
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. In addition, third
party subcontractors and suppliers may not be able to comply with cGMP or quality system regulation, also called QSR, or similar
regulatory requirements outside the United States. If any of these risks transpire, we may be unable to timely retain alternate
subcontractors or suppliers on acceptable terms and with sufficient quality standards and production capacity, which may disrupt and
delay our clinical trials or the manufacture and commercial sale of our product candidates, if approved.
Our failure or the failure of our third-party subcontractors and suppliers to comply with applicable regulations could result in sanctions
being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect
supplies of UGN-101, UGN-102 or any of our other product candidates that we may develop. Any failure or refusal to supply or any
interruption in supply of the components for UGN-101, UGN-102 or any other product candidates that we may develop could delay,
prevent or impair our clinical development or commercialization efforts.
In addition to mitomycin, we currently use other single-source suppliers relative to production of the RTGel products, the ureteral
catheter and injector which are included within the planned UGN-101 product package. Both the ureteral catheter and injector are used
as part of the delivery of UGN-101. Although we are in the process of negotiating supply agreements with these single-source suppliers
for commercial supply, we do not yet have any supply agreements with these single-source suppliers and may not be able to establish
supply agreements on a timely basis, on favorable terms, or at all.
We are assessing second-source suppliers regarding all key components of UGN-101 and are advancing these conversations as a means
to ensure both a second source and potential future reductions in cost of goods sold. However, there can be no assurance that we will be
able to secure any second-source suppliers for these key components on a timely basis, on favorable terms, or at all.
Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed
abroad.
In order to market and sell our products in the European Union and other jurisdictions, we or our third-party collaborators must obtain
separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among
countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain
FDA approval. Regulatory approval processes outside the United States generally include all of the risks associated with obtaining FDA
approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before
the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States
on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and
approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or
jurisdictions or by the FDA. We may not be able to submit for marketing approvals and may not receive the necessary approvals to
commercialize our product candidates in any particular market.
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We rely on third parties and consultants to assist us in conducting our clinical trials for our product candidates. If these third parties
or consultants do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain
regulatory approval for or commercialize UGN-101, UGN-102 or any of our other product candidates.
We do not have the ability to independently conduct many of our nonclinical studies or our clinical trials. We rely on medical
institutions, clinical investigators, contract laboratories, and other third parties, such as CROs to conduct clinical trials on our product
candidates. Third parties play a significant role in the conduct of our clinical trials and the subsequent collection and analysis of data.
These third parties are not our employees, and except for remedies available to us under our agreements, we have limited ability to
control the amount or timing of resources that any such third party will devote to our clinical trials. Due to the limited drug development
for non-muscle invasive urothelial cancers over the past 15 years, neither we nor any third-party clinical investigators, CROs and/or
consultants are likely to have extensive experience conducting clinical trials for the indications we are targeting. If our CROs or any
other third parties upon which we rely for administration and conduct of our clinical trials do not successfully carry out their contractual
duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain
is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, or if they otherwise
perform in a substandard manner, our clinical trials may be extended, delayed, suspended or terminated, and we may not be able to
complete development of, obtain regulatory approval for or successfully commercialize our product candidates.
We and the third parties upon whom we rely are required to comply with Good Clinical Practice, or GCP, regulations, which are
regulations and guidelines enforced by regulatory authorities around the world for products in clinical development. Regulatory
authorities enforce these GCP regulations through periodic inspections of clinical trial sponsors, principal investigators and clinical trial
sites. If we or our third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be
deemed unreliable and our submission of marketing applications may be delayed, or the regulatory authorities may require us to perform
additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, a regulatory authority
will determine that any of our clinical trials comply or complied with applicable GCP regulations. In addition, our clinical trials must be
conducted with material produced under current cGMP regulations, which are enforced by regulatory authorities. Our failure to comply
with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our
business may be impacted if our CROs, clinical investigators or other third parties violate federal or state fraud and abuse or false claims
laws and regulations or healthcare privacy and security laws.
In order for our clinical trials to be carried out effectively and efficiently, it is imperative that our CROs and other third parties
communicate and coordinate with one another. Moreover, our CROs and other third parties may also have relationships with other
commercial entities, some of which may compete with us. Our CROs and other third parties may terminate their agreements with us
upon as few as 30 days’ notice under certain circumstances. If our CROs or other third parties conducting our clinical trials do not
perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements
with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to
our clinical trial protocols or GCPs, or for any other reason, we may need to conduct additional clinical trials or enter into new
arrangements with alternative CROs, clinical investigators or other third parties. We may be unable to enter into arrangements with
alternative CROs on commercially reasonable terms, or at all. Switching or adding CROs, clinical investigators or other third parties can
involve substantial cost and require extensive management time and focus. In addition, there is a natural transition period when a new
CRO commences work. As a result, delays may occur, which can impact our ability to meet our desired clinical development timelines.
Although we carefully manage our relationship with our CROs, clinical investigators and other third parties, there can be no assurance
that we will not encounter such challenges or delays in the future or that these delays or challenges will not have a negative impact on our
business, prospects, financial condition or results of operations.
Our ability to market our product candidates, if approved, will be limited to certain indications. If we want to expand the indications
for which we may market our products, we will need to obtain additional regulatory approvals, which may not be granted.
We are currently developing UGN-101 for the treatment of LG UTUC, and UGN-102 and UGN-201 for the treatment of various forms
of bladder cancer. The FDA and other applicable regulatory agencies will restrict our ability to market or advertise our products to the
scope of the approved label for the applicable product and for no other indications, which could limit physician and patient adoption. We
may attempt to develop and, if approved, promote and commercialize new treatment indications for our products in the future, but we
cannot predict when or if we will receive the regulatory approvals required to do so. Failure to receive such approvals will prevent us
from promoting or commercializing new treatment indications. In addition, we would be required to conduct additional clinical trials or
studies to support approvals for additional indications, which would be time consuming and expensive, and may produce results that do
not support regulatory approvals. If we do not obtain additional regulatory approvals, our ability to expand our business will be limited.
If our product candidates are approved for marketing, and we are found to have improperly promoted off-label uses, or if physicians
misuse our products, we may become subject to prohibitions on the sale or marketing of our products, significant sanctions, and
product liability claims, and our image and reputation within the industry and marketplace could be harmed.
The FDA and other regulatory agencies strictly regulate the marketing and promotional claims that are made about drug products. In
particular, a product may not be promoted for uses or indications that are not approved by the FDA or such other regulatory agencies as
reflected in the product’s approved labeling. For example, if we receive marketing approval for UGN-101 for the treatment of LG
UTUC, the first indication we are pursuing, we cannot promote the use of our product in a manner that is inconsistent with the approved
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label but we are permitted to share truthful and not misleading information that is otherwise consistent with the product’s FDA approved
labeling. However, physicians are able, in their independent medical judgment, to use UGN-101 on their patients in an off-label manner,
such as for the treatment of other urology indications. If we are found to have promoted such off-label uses, we may receive warning
letters and become subject to significant liability, which would harm our business. The federal government has levied large
administrative, civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from
engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and
promotional practices, we could face similar sanctions, which would harm our business. In addition, management’s attention could be
diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA has
also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is
changed or curtailed. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be
subject to prohibitions on the sale or marketing of our products or significant fines and penalties, and the imposition of these sanctions
could also affect our reputation with physicians, patients and caregivers, and our position within the industry.
Physicians may also misuse our products or use improper techniques, potentially leading to adverse results, side effects or injury, which
may lead to product liability claims. If our products are misused or used with improper technique, we may become subject to costly
litigation. Product liability claims could divert management’s attention from our core business, be expensive to defend, and result in
sizable damage awards against us that may not be covered by insurance. We currently carry product liability insurance covering our
clinical trials with policy limits that we believe are customary for similarly situated companies and adequate to provide us with coverage
for foreseeable risks. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or
settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance
coverage. Furthermore, the use of our products for conditions other than those approved by the FDA may not effectively treat such
conditions, which could harm our reputation in the marketplace among physicians and patients.
We have recently increased the size of our organization and will need to continue to increase the size of our organization. If we fail to
manage our growth effectively, our business could be disrupted.
As of February 17, 2020 we had 173 employees, 46 of whom are based in Israel and 127 are based in the United States. We will need to
continue to expand our development, quality, managerial, operational, finance, marketing sales, and other resources to manage our
operations and clinical trials, continue our development activities and commercialize our product candidates, if approved. Our
management, personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to
effectively execute our expansion strategy requires that we:
• manage our clinical trials effectively;
• identify, recruit, retain, incentivize and integrate additional employees;
• manage our internal development efforts effectively while carrying out our contractual obligations to third parties; and
• continue to improve our operational, financial and management controls, reporting systems and procedures.
As we continue to grow as an organization, including by expanding our development efforts and building out our commercial
capabilities in anticipation of commercial launch of UGN-101, if approved, we will evaluate, and may implement, changes to our
organization that may be appropriate in order to properly manage and direct our growth and transformation into a commercial-stage
company. Due to our limited financial resources and our limited experience in managing a larger company, we may not be able to
effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our
operations may lead to significant costs and may divert our management and business development resources. Any inability to manage
expansion or other significant changes to our organization could delay the execution of our development, commercialization and
strategic objectives or disrupt our operations; and if we are not successful in commercializing our product candidates, either on our own
or through collaborations with one or more third parties, our revenues will suffer and we would incur significant additional losses.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit
commercialization of any of our other products we develop.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk
if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be
otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations
of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a
breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Even a
successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability
claims may result in:
• decreased demand for our product candidates or products we develop;
• injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants or cancellation of clinical trials;
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• costs to defend the related litigation, which may be only partially recoverable even in the event of successful defenses;
• a diversion of management’s time and our resources;
• substantial monetary awards to trial participants or patients;
• regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;
• loss of revenues;
• exhaustion of any available insurance and our capital resources; and
• the inability to commercialize any product we develop.
Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against
potential product liability claims could prevent or inhibit the commercialization of products we may develop. We currently carry general
clinical trial product liability insurance in an amount that we believe is adequate to cover the scope of our ongoing clinical programs.
Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an
amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance
policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage.
We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not
covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Moreover, in the future, we
may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If and when we
obtain approval for marketing UGN-101, UGN-102 or any other product candidate, we intend to expand our insurance coverage to
include the commercialization of UGN-101, UGN-102 or any other approved product that we may have; however, we may be unable to
obtain this liability insurance on commercially reasonable terms.
If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our product
candidates, conduct our clinical trials and commercialize any of the products we develop.
Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific
personnel. We believe that our future success is highly dependent upon the contributions of members of our senior management, as well
as our senior scientists and other members of our management team. The loss of services of any of these individuals could delay or
prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of our
product candidates.
Although we have not historically experienced unique difficulties in attracting and retaining qualified employees, we could experience
such problems in the future. For example, competition for qualified personnel in the pharmaceutical field is intense due to the limited
number of individuals who possess the skills and experience required by our industry. We will need to hire additional personnel as we
expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable
terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been
improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their
research output.
Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which
could result in a disruption of our drug development programs.
Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and
consultants are vulnerable to damage from cyber-security threats, including computer viruses, harmful code and unauthorized access,
natural disasters, fire, terrorism, war and telecommunication and electrical failures. If a disruption event were to occur and cause
interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of
clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or
damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the
further development of our product candidates could be delayed.
Under applicable employment laws, we may not be able to enforce covenants not to compete.
We generally enter into non-competition agreements as part of our employment agreements with our employees. These agreements
generally prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors or clients
for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work, and
it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed
while working for us.
For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings of a former employee to
demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the
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employer which have been recognized by the courts as justification for the enforcement of non-compete undertakings, such as the
protection of a company’s trade secrets or other intellectual property.
Our employees, independent contractors, clinical investigators, CROs, consultants and vendors may engage in misconduct or other
improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk that our employees, independent contractors, clinical investigators, CROs, consultants and vendors may
engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent
conduct, breach of contract or other unauthorized activities that violate: FDA regulations, including those laws requiring the reporting of
true, complete and accurate information to the FDA; manufacturing standards; federal, state and foreign healthcare fraud and abuse laws;
or laws that require the reporting of financial information or data accurately.
Specifically, research, sales, marketing, education and other business arrangements in the healthcare industry are subject to extensive
laws intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws may restrict or prohibit a
wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive and other business arrangements.
Activities subject to these laws also include the improper use of information obtained in the course of clinical trials, which could result in
regulatory sanctions and serious harm to our reputation. We have adopted a Corporate Code of Ethics and Conduct, but it is not always
possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this
activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against us, even
if we are successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business.
Violations of such laws subject us to numerous penalties, including, but not limited to, the imposition of significant civil, criminal and
administrative penalties, damages, monetary fines, disgorgement, imprisonment, additional reporting requirements and oversight if we
become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws,
possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational
harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to
operate our business and our results of operations.
Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with
environmental laws and regulations, which can be expensive and restrict how we do business.
Our research and development activities and our third-party subcontractors’ and suppliers’ activities involve the controlled storage, use,
transportation and disposal of hazardous materials owned by us, including mitomycin, key components of our product candidates, and
other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use,
manufacture, storage, handling and disposal of these hazardous materials. Despite our efforts, we cannot eliminate the risk of
contamination. This could cause an interruption of our commercialization efforts and business operations, environmental damage
resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of
these materials and specified waste products. Although we believe that the safety procedures utilized by us and our subcontractors and
suppliers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we
cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we
may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable
authorities may curtail our use of certain materials and interrupt our business operations.
Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot
predict the impact of such changes and cannot be certain of our future compliance.
Exchange rate fluctuations between the U.S. Dollar and the New Israeli Shekel may negatively affect our earnings.
The U.S. dollar is our functional and reporting currency. However, a significant portion of our operating expenses are incurred in New
Israeli Shekels, or NIS, which is the lawful currency of the State of Israel. As a result, we are exposed to the risks that the NIS may
appreciate relative to the dollar, or, if the NIS instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate
of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of
our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. We cannot predict
any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against the dollar. For example, although
the dollar appreciated against the NIS in 2018 by 8.1%, the dollar depreciated against the NIS in 2019 by 7.8%.. If the dollar cost of our
operations in Israel increase, our dollar-measured results of operations will be adversely affected.
Risks Related to Our Intellectual Property
If our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our product candidates and
technologies are not adequate, we may not be able to compete effectively, and we otherwise may be harmed.
Our commercial success depends in part upon our ability to obtain and maintain patent protection and utilize trade secret protection for
our intellectual property and proprietary technologies, our products and their uses, as well as our ability to operate without infringing
45
upon the proprietary rights of others. We rely upon a combination of patents, trade secret protection and confidentiality agreements,
assignment of invention agreements and other contractual arrangements to protect the intellectual property related to hydrogel-based
pharmaceutical compositions for optimal delivery of a drug in internal cavities such as the bladder, the method for treating urothelial
cancer using hydrogel-based compositions, the method for treating overactive bladder topically without the need for injections, an in-
dwelling ureter catheter system for optimal delivery of a drug into the renal cavity, and pharmaceutical compositions comprising an
imidazoquinolin (amine) and lactic acid for use in a method for the treatment of bladder diseases, as well as other intellectual property
advancements.
We seek patent protection for our product candidates, and we have established several patent families comprised of issued patents and
pending patent applications covering our proprietary RTGel technology, the pharmaceutical compositions, methods of use and
manufacturing aspects of our product candidates. In the United States, we currently have 16 granted patents that are directed to protect
our lead product candidates, UGN-101, UGN-102, a proprietary RTGel technology, various local compositions comprising different
active ingredients, inter alia compositions comprising a Botulinium Toxin, UGN-201 and future product candidates that are under
company research. These patents claim methods, systems, combination products and novel compositions for treating different diseases,
especially cancer in internal cavities, in particular urinary tract cancer. These issued patents are expected to expire between 2024 and
2032. Moreover, our IP portfolio includes more than 45 pending patent applications filed worldwide that are directed to cover various
methods, systems and compositions for treating cancer locally, by intravesical means, utilize various active ingredients and the
combinations thereof. These patent applications, if issued, set to expire between 2031 and 2036.
Limitations on the scope of our intellectual property rights may limit our ability to prevent third parties from designing around such
rights and competing against us. For example, our patents do not claim a new compound. Rather, the active pharmaceutical ingredients
of our products are known compounds and our granted patents and pending patent applications are directed inter alia to novel
formulations of these known compounds with our proprietary RTGel technology. Accordingly, other parties may compete with us, for
example, by independently developing or obtaining competing topical formulations that design around our patent claims, but which may
contain the same active ingredients, or by seeking to invalidate our patents. Any disclosure to or misappropriation by third parties of our
confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, eroding
our competitive position in the market.
We will not necessarily seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to
adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.
One or more of the patent applications that we filed or license may fail to result in granted patents in the United States or foreign
jurisdictions, or if granted may fail to prevent a potential infringer from marketing its product or be deemed invalid and unenforceable by
a court. Competitors in the field of reverse thermal gel therapies have created a substantial amount of scientific publications, patents and
patent applications and other materials relating to their technologies. Our ability to obtain and maintain valid and enforceable patents
depends on various factors, including interpretation of our technology and the prior art and whether the differences between them allow
our technology to be patentable. Patent applications and granted patents are complex, lengthy and highly technical documents that are
often prepared under limited time constraints and may not be free from errors that make their interpretation uncertain. The existence of
errors in a patent may have an adverse effect on the patent, its scope and its enforceability. Our pending patent applications may not
issue, and the scope of the claims of patent applications that do issue may be too narrow to adequately protect our competitive advantage.
Also, our granted patents may be subject to challenges or narrowly construed and may not provide adequate protection.
We may be subject to claims that we infringe, misappropriate or otherwise violate the intellectual property rights of third parties.
Even if our patents do successfully issue, third parties may challenge the validity, enforceability or scope of such granted patents or any
other granted patents we own or license, which may result in such patents being narrowed, invalidated or held unenforceable. For
example, patents granted by the European Patent Office may be opposed by any person within nine months from the publication of their
grant. Also, patents granted by the United States Patent and Trademark Office, or USPTO, may be subject to reexamination and other
challenges.
Pharmaceutical patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us,
could negatively impact our patent position. There is significant litigation activity in the pharmaceutical industry regarding patent and
other intellectual property rights. Such litigation could result in substantial costs and be a distraction to management and other
employees.
The patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve complex legal and factual
questions. The interpretation and breadth of claims allowed in some patents covering pharmaceutical compositions may be uncertain and
difficult to determine and are often affected materially by the facts and circumstances that pertain to the patented compositions and the
related patent claims. Furthermore, even if they are not challenged, our patents and patent applications may not adequately protect our
intellectual property or prevent others from designing around our claims. To meet such challenges, which are part of the risks and
uncertainties of developing and marketing product candidates, we may need to evaluate third party intellectual property rights and, if
appropriate, to seek licenses for such third party intellectual property or to challenge such third party intellectual property, which may be
costly and may or may not be successful, which could also have an adverse effect on the commercial potential for UGN-101, UGN-102
and any of our product candidates.
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We may receive only limited protection, or no protection, from our issued patents and patent applications.
There can be no assurance that the patent applications will be granted. The term of individual patents depends upon the legal term of the
patents in the countries in which they are obtained.
The patent application process, also known as patent prosecution, is expensive and time consuming, and we or any future licensors and
licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. It is also possible that we or any future licensors or licensees will fail to identify patentable aspects of inventions made in the
course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, these and any
of our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is
possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for
example with respect to proper priority claims, inventorship, etc., although we are unaware of any such defects that we believe are of
material import. If we or any future licensors or licensees fail to establish, maintain or protect such patents and other intellectual property
rights, such rights may be reduced or eliminated. If any future licensors or licensees are not fully cooperative or disagree with us as to the
prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in
the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Any of these
outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
The strength of patents in the pharmaceutical field involves complex legal and scientific questions and can be uncertain. This uncertainty
includes changes to the patent laws through either legislative action to change statutory patent law or court action that may reinterpret
existing law in ways affecting the scope or validity of issued patents. The patent applications that we own or in-license may fail to result
in issued patents in the United States or foreign countries with claims that cover our product candidates. Even if patents do successfully
issue from the patent applications that we own or in-license, third parties may challenge the validity, enforceability or scope of such
patents, which may result in such patents being narrowed, invalidated or held unenforceable. For example, patents granted by the
European Patent Office may be challenged, also known as opposed, by any person within nine months from the publication of their
grant. Any successful challenge to our patents could deprive us of exclusive rights necessary for the successful commercialization of our
product candidates. Furthermore, even if they are unchallenged, our patents may not adequately protect our product candidates, provide
exclusivity for our product candidates, or prevent others from designing around our claims. If the breadth or strength of protection
provided by the patents we hold or pursue with respect to our product candidates is challenged, it could dissuade companies from
collaborating with us to develop or threaten our ability to commercialize our product candidates.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various
extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our
product candidates, we may be open to competition from generic versions of our product candidates. Further, if we encounter delays in
our development efforts, including our clinical trials, the period of time during which we could market our product candidates under
patent protection would be reduced.
A considerable number of our patents and patent applications are entitled to effective filing dates prior to March 16, 2013. For U.S.
patent applications in which patent claims are entitled to a priority date before March 16, 2013, an interference proceeding can be
provoked by a third party, for example a competitor, or instituted by the USPTO to determine who was the first to invent any of the
subject matter covered by those patent claims. An unfavorable outcome could require us to cease using the related technology or to
attempt to license rights from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on
commercially reasonable terms. Our participation in an interference proceeding may fail and, even if successful, may result in
substantial costs and distract our management.
Our trade secrets may not have sufficient intellectual property protection.
In addition to the protection afforded by patents, we also rely on trade secret protection to protect proprietary know-how that may not be
patentable or that we elect not to patent, processes for which patents may be difficult to obtain or enforce, and any other elements of our
product candidates, and our product development processes (such as manufacturing and formulation technologies) that involve
proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. If the
steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for
misappropriating any trade secrets. Misappropriation or unauthorized disclosure of our trade secrets could significantly affect our
competitive position and may have an adverse effect on our business. Furthermore, trade secret protection does not prevent competitors
from independently developing substantially equivalent information and techniques and we cannot guarantee that our competitors will
not independently develop substantially equivalent information and techniques. The FDA, as part of its Transparency Initiative, is
currently considering whether to make additional information publicly available on a routine basis, including information that we may
consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may
change in the future, if at all.
In an effort to protect our trade secrets and other confidential information, we require our employees, consultants, advisors, and any
other third parties that have access to our proprietary know-how, information or technology, for example, third parties involved in the
formulation and manufacture of our product candidates, and third parties involved in our clinical trials to execute confidentiality
agreements upon the commencement of their relationships with us. These agreements require that all confidential information developed
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by the individual or made known to the individual by us during the course of the individual’s relationship with us is kept confidential and
not disclosed to third parties. However, we cannot be certain that our trade secrets and other confidential proprietary information will not
be disclosed despite having such confidentiality agreements. Adequate remedies may not exist in the event of unauthorized use or
disclosure of our trade secrets. In addition, in some situations, these confidentiality agreements may conflict with, or be subject to, the
rights of third parties with whom our employees, consultants, or advisors have previous employment or consulting relationships. To the
extent that our employees, consultants or contractors use any intellectual property owned by third parties in their work for us, disputes
may arise as to the rights in any related or resulting know-how and inventions. If we are unable to prevent unauthorized material
disclosure of our trade secrets to third parties, we may not be able to establish or maintain a competitive advantage in our market, which
could harm our business, operating results and financial condition.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly on obtaining
and enforcing patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity,
and therefore, is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently
implementing wide-ranging patent reform legislation. Further, recent U.S. Supreme Court rulings have either narrowed the scope of
patent protection available in certain circumstances or weakened the rights of patent owners in certain situations. In addition to
increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with
respect to the value of patents, once obtained.
For our U.S. patent applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty
in the patent law. In September 2011, the Leahy-Smith America Invents Act, or the America Invents Act, or AIA, was signed into law.
The AIA includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be
prosecuted and may also affect patent litigation. The USPTO is currently developing regulations and procedures to govern
administration of the AIA, and many of the substantive changes to patent law associated with the AIA. It is not clear what other, if any,
impact the AIA will have on the operation of our business. Moreover, the AIA and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could
harm our business and financial condition.
An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first-to-file” system for
deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same
invention. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent
covering an invention of ours even, if we had made the invention before it was made by the third party. This will require us to be
cognizant going forward of the time from invention to filing of a patent application. Furthermore, our ability to obtain and maintain valid
and enforceable patents depends on whether the differences between our technology and the prior art allow our technology to be
patentable over the prior art. Since patent applications in the United States and most other countries are confidential for a period of time
after filing, we cannot be certain that we were the first to either (i) file any patent application related to our product candidates or
(ii) invent any of the inventions claimed in our patents or patent applications.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and
provide opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those
issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in
a United States federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO
proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim
if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent
claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action.
Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could
change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we
might obtain in the future.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and
other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-
compliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent prosecution process.
Periodic maintenance fees and various other governmental fees on any issued patent and/or pending patent applications are due to be
paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent or patent application. We have systems in
place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees. While an
inadvertent lapse may sometimes be cured by payment of a late fee or by other means in accordance with the applicable rules, there are
many situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. If we fail to maintain the patents and patent applications directed to our product
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candidates, our competitors might be able to enter the market earlier than should otherwise have been the case, which could harm our
business.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively
expensive. The requirements for patentability may differ in certain countries, particularly developing countries. For example, unlike
other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of
a claimed drug. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as laws in the
United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the
United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own
products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement on
infringing activities is inadequate. These products may compete with our products, and our patents or other intellectual property rights
may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other
intellectual property protection, particularly those relating to pharmaceuticals, which could make it difficult for us to stop the
infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from
other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk
of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the
damages or other remedies awarded, if any, may not be commercially meaningful. In addition, certain countries in Europe and certain
developing countries, including India and China, have compulsory licensing laws under which a patent owner may be compelled to grant
licenses to third parties. In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a
license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue
opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a
significant commercial advantage from the intellectual property that we own or license. Finally, our ability to protect and enforce our
intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws.
If we are unable to protect our trademarks from infringement, our business prospects may be harmed.
We filed applications for trademarks (Jelmyto ™, RTGel ™) that identify our branding elements, UGN-101 and our unique technology
platform in the United States, Europe and Japan. Although we take steps to monitor the possible infringement or misuse of our
trademarks, it is possible that third parties may infringe, dilute or otherwise violate our trademark rights. Any unauthorized use of our
trademarks could harm our reputation or commercial interests. In addition, our enforcement against third-party infringers or violators
may be unduly expensive and time-consuming, and the outcome may be an inadequate remedy.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors,
which could be expensive and time consuming.
Third parties may infringe or misappropriate our intellectual property, including our existing patents, patents that may issue to us in the
future, or the patents of our licensors to which we have a license. As a result, we may be required to file infringement claims to stop third-
party infringement or unauthorized use. Further, we may not be able to prevent, alone or with our licensors, misappropriation of our
intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. If we file an infringement
action against such a generic drug manufacturer, that company may challenge the scope, validity or enforceability of our or our
licensors’ patents, requiring us and/or our licensors to engage in complex, lengthy and costly litigation or other proceedings.
For example, if we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering our product
candidates, the defendant could counterclaim that the patent covering our product candidates is invalid and/or unenforceable. In patent
litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are
numerous grounds upon which a third party can assert invalidity or unenforceability of a patent.
In addition, within and outside of the United States, there has been a substantial amount of litigation and administrative proceedings,
including interference and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in various
foreign jurisdictions, regarding patent and other intellectual property rights in the pharmaceutical industry. Recently, the AIA introduced
new procedures including inter partes review and post grant review. The implementation of these procedures brings uncertainty to the
possibility of challenges to our patents in the future, including challenges by competitors who perceive our patents as blocking entry into
the market for their products, and the outcome of such challenges.
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Such litigation and administrative proceedings could result in revocation of our patents or amendment of our patents such that they do
not cover our product candidates. They may also put our pending patent applications at risk of not issuing or issuing with limited and
potentially inadequate scope to cover our product candidates. The outcome following legal assertions of invalidity and unenforceability
is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which
we and the patent examiner were unaware during prosecution. Additionally, it is also possible that prior art of which we are aware, but
which we do not believe affects the validity or enforceability of a claim, may, nonetheless, ultimately be found by a court of law or an
administrative panel to affect the validity or enforceability of a claim. If a defendant were to prevail on a legal assertion of invalidity
and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of
patent protection could have a negative impact on our business.
Enforcing our or our licensors’ intellectual property rights through litigation is very expensive, particularly for a company of our size,
and time-consuming. Some of our competitors may be able to sustain the costs of litigation more effectively than we can because of
greater financial resources. Patent litigation and other proceedings may also absorb significant management time.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete
in the marketplace. The occurrence of any of the foregoing could harm our business, financial condition or results of operations.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative
proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, during the course
of litigation or administrative proceedings, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price
for our ordinary shares could be significantly harmed.
We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could
result in litigation and adversely affect our business.
A significant portion of our intellectual property has been developed by our employees during their employment. Under the Israeli
Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee during the scope of his or her employment with a
company are regarded as “service inventions.” The Israeli Compensation and Royalties Committee, or the Committee, a body
constituted under the Patent Law, has previously held, in certain cases, that employees may be entitled to remuneration for service
inventions that they develop during their service for a company despite their explicit waiver of such right. Therefore, although we enter
into agreements with our employees pursuant to which they waive their right to special remuneration for service inventions created in the
scope of their employment or engagement and agree that any such inventions are owned exclusively by us, we may face claims by
employees demanding remuneration beyond their regular salary and benefits.
Third-party claims alleging intellectual property infringement may adversely affect our business.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties, for example,
the intellectual property rights of competitors. Our research, development and commercialization activities may be subject to claims that
we infringe or otherwise violate patents owned or controlled by third parties. Numerous U.S. and foreign issued patents and pending
patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the
biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our activities related to our
product candidates may give rise to claims of infringement of the patent rights of others. We cannot assure you that our product
candidates will not infringe existing or future patents. We may not be aware of patents that have already issued that a third party might
assert are infringed by our product candidates. It is also possible that patents of which we are aware, but which we do not believe are
relevant to our product candidates, could nevertheless be found to be infringed by our product candidates. Nevertheless, we are not
aware of any issued patents that we believe would prevent us from marketing our product candidates, if approved. There may also be
patent applications that have been filed but not published that, when issued as patents, could be asserted against us.
Third parties making claims against us for infringement or misappropriation of their intellectual property rights may seek and obtain
injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product
candidates. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development,
manufacturing or sales of the product or product candidate that is the subject of the suit. Defense of these claims, regardless of their
merit, would cause us to incur substantial expenses, and would be a substantial diversion of management time and employee resources
from our business. In the event of a successful claim of infringement against us by a third party, we may have to (i) pay substantial
damages, including treble damages and attorneys’ fees if we are found to have willfully infringed the third party’s patents; (ii) obtain one
or more licenses from the third party; (iii) pay royalties to the third party; and/or (iv) redesign any infringing products. Redesigning any
infringing products may be impossible or require substantial time and monetary expenditures. Further, we cannot predict whether any
required license would be available at all or whether it would be available on commercially reasonable terms. In the event that we could
not obtain a license, we may be unable to further develop and commercialize our product candidates, which could harm our business
significantly. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the
rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property.
Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as
a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.
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Defending ourselves or our licensors in litigation is very expensive, particularly for a company of our size, and time-consuming. Some of
our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of
greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting
from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The
occurrence of any of the foregoing could harm our business, financial condition or results of operations.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed
confidential information of third parties.
We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to
claims that we or our employees, consultants or independent contractors have inadvertently or otherwise improperly used or disclosed
confidential information of these third parties or our employees’ former employers. Further, we may be subject to ownership disputes in
the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product
candidates. We may also be subject to claims that former employees, consultants, independent contractors, collaborators or other third
parties have an ownership interest in our patents or other intellectual property. Litigation may be necessary to defend against these and
other claims challenging our right to and use of confidential and proprietary information. If we fail in defending any such claims, in
addition to paying monetary damages, we may lose our rights therein. Such an outcome could have a negative impact on our business.
Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our
management and employees.
Risks Related to Government Regulation
If the FDA does not conclude that UGN-101, UGN-102, or our other product candidates satisfy the requirements under
Section 505(b)(2) of the Federal Food Drug and Cosmetic Act, or Section 505(b)(2), or if the requirements for such product
candidates are not as we expect, the approval pathway for these product candidates will likely take significantly longer, cost
significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.
The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2)
to the Federal Food, Drug and Cosmetic Act. Section 505(b)(2) permits the filing of an NDA where at least some of the information
required for approval comes from studies that were not conducted by or for the applicant, and for which the applicant has not received a
right of reference, which could expedite the development program for UGN-101, UGN-102 and our other product candidates by
potentially decreasing the amount of nonclinical and clinical data that we would need to generate in order to obtain FDA approval.
However, while we believe that our product candidates are reformulations of existing drugs and, therefore, will not be treated as new
chemical entities, or NCEs, the submission of an NDA under the Section 505(b)(2) pathway does not preclude the FDA from
determining that the product candidate that is the subject of such submission is an NCE and therefore not eligible for review under such
regulatory pathway.
If the FDA does not allow us to pursue the Section 505(b)(2) pathway as anticipated, we may need to conduct additional nonclinical
experiments and clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this
were to occur, the time and financial resources required to obtain FDA approval for these product candidates, and complications and
risks associated with these product candidates, would likely increase significantly. Moreover, inability to pursue the Section 505(b)(2)
pathway could result in new competitive products reaching the market more quickly than our product candidates, which would likely
harm our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) pathway, our product candidates
may not receive the requisite approvals for commercialization.
In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) certain competitors and others
have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully
challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from
approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and
Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved
drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in
approval of our potential future NDAs for up to 30 months depending on the outcome of any litigation. It is not uncommon for a
manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval
requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the
new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers
and responds to the petition. In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway for our product
candidates, there is no guarantee this would ultimately lead to faster product development or earlier approval.
Moreover, even if these product candidates are approved under the Section 505(b)(2) pathway, as the case may be, the approval may be
subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval or may contain
requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.
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We expect current and future legislation affecting the healthcare industry, including healthcare reform, to impact our business
generally and to increase limitations on reimbursement, rebates and other payments, which could adversely affect third-party
coverage of our products, our operations, and/or how much or under what circumstances healthcare providers will prescribe or
administer our products, if approved.
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to
change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the
United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing
healthcare costs, improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus of
these efforts and has been significantly affected by major legislative initiatives.
For example, in March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act of 2010, or collectively, the ACA, laws intended, among other things, to broaden access to health
insurance, improve quality of care, and reduce or constrain the growth of healthcare spending.
Provisions of the ACA relevant to the pharmaceutical industry included the following:
• an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs, not including
orphan drug sales;
• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and
13% of the average manufacturer price for most branded and generic drugs, respectively;
• a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale
discounts on negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition
for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
• extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations;
• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133%
of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
• expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
• new requirements to report annually certain financial arrangements with physicians and teaching hospitals; as defined in the
ACA and its implementing regulations, including reporting any payment or “transfer of value” provided to physicians and
teaching hospitals and any ownership and investment interests held by physicians and their immediate family members during
the preceding calendar year;
• expansion of healthcare fraud and abuse laws, including the federal civil False Claims Act and the federal Anti-Kickback Statute,
new government investigative powers and enhanced penalties for noncompliance; and
• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical
effectiveness research, along with funding for such research.
There remain judicial and Congressional challenges to certain aspects of the ACA. As a result, there have been delays in the
implementation of, and action taken to repeal or replace, certain aspects of the ACA. For example, since January 2017, President Trump
has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the
ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress
has not passed comprehensive repeal legislation, bills affecting the implementation of certain taxes under the ACA have been signed into
law. For example, the Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision that repealed, effective January 1, 2019, the tax-
based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all
or part of a year that is commonly referred to as the “individual mandate.” For example, the 2020 federal spending package permanently
eliminates, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical
device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among
other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to
as the “donut hole.” In December 2018, the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department
of Health and Human Services, or HHS, published a new final rule permitting further collections and payments to and from certain ACA
qualified health plans and health insurance issuers under the ACA risk adjustment program. On December 14, 2018, a U.S. District
Court judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical and
inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are
invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that
the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining
provisions of the ACA are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal
and replace the ACA will impact the ACA and our business.
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In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August 2011,
President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on
Deficit Reduction, or a Joint Selection Committee, to recommend to Congress proposals in spending reductions. The Joint Select
Committee did not achieve a targeted deficit reduction of an amount greater than $1.2 trillion for the years 2013 through 2021, triggering
the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to
healthcare providers of up to 2.0% per fiscal year, which started in 2013 and, due to subsequent legislative amendments to the statute,
including the BBA, will stay in effect through 2029 unless additional Congressional action is taken. In January 2013, President Obama
signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories
of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years.
Additionally, there have been several recent U.S. Congressional inquiries and proposed and enacted legislation at the federal and state
levels designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and
manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement
methodologies for drugs. At the federal level, the Trump Administration’s budget proposal for fiscal year 2020 contains further drug
price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to
permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices
under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Additionally, the Trump Administration
released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase
manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the
list price of their products and reduce the out of pocket costs of drug products paid by consumers. The HHS has started soliciting
feedback on some of these measures and is concurrently implementing others under its existing authority. For example, in May 2019,
CMS issued a final rule to allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1, 2020.
This final rule codified CMS’s policy change that was effective January 1, 2019. Although a number of these and other measures may
require additional authorization to become effective, Congress and the Trump Administration have both stated that they will continue to
seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed
legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk purchasing. If healthcare policies or reforms
intended to curb healthcare costs are adopted, or if we experience negative publicity with respect to the pricing of our products or the
pricing of pharmaceutical drugs generally, the prices that we charge for any approved products may be limited, our commercial
opportunity may be limited and/or our revenues from sales of our products may be negatively impacted.
If we obtain regulatory approval and commercialization of UGN-101, UGN-102 or any of our other product candidates, these laws may
result in additional reductions in healthcare funding, which could have an adverse effect on our customers and accordingly, our financial
operations. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and
promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether
regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of UGN-101,
UGN-102 or our other product candidates may be.
Although we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional
legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce
reimbursement for, or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare
providers will prescribe or administer our products. This could adversely affect our business by reducing our ability to generate
revenues, raise capital, obtain additional licensees and market our products. In addition, we believe the increasing emphasis on managed
care in the United States has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely
impact product sales.
We may be unable to obtain Orphan Drug Designation or exclusivity for future product candidates we may develop. If our
competitors are able to obtain orphan drug exclusivity for their products that are for the same indication as our product candidates,
we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.
Under the Orphan Drug Act of 1983, or the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat
an orphan disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater
than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from
sales in the United States.
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In the United States, Orphan Drug Designation entitles a party to financial incentives, such as opportunities for grant funding towards
clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for
which it has Orphan Drug Designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any
other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a
showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product
quantity.
Although the FDA has granted Orphan Drug Designation to UGN-101 for the treatment of UTUC and to UGN-201 for treatment of CIS,
we may not receive Orphan Drug Designation for any of our other product candidates. If our competitors are able to obtain orphan drug
exclusivity for their products that are the same or similar to our product candidates before our drug candidates are approved, we may not
be able to have competing product candidates approved by the FDA for a significant period of time. Any delay in our ability to bring our
product candidates to market would negatively impact our business, revenue, cash flows and operations.
Orphan Drug Designation may not ensure that we will enjoy market exclusivity in a particular market, and if we fail to obtain or
maintain orphan drug exclusivity for our product candidates, we may be subject to earlier competition and our potential revenue will
be reduced.
Orphan Drug Designation entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax
advantages, user-fee waivers and market exclusivity for certain periods of time.
UGN-101 and UGN-201 have been granted Orphan Drug Designation for the treatment of UTUC and CIS, respectively, in the United
States. Even if we obtain Orphan Drug Designation for our other product candidates, we may not be the first to obtain regulatory
approval for any particular orphan indication due to the uncertainties associated with developing biopharmaceutical products. Further,
even if we obtain Orphan Drug Designation for a product candidate, that exclusivity may not effectively protect the product from
competition because different drugs with different active moieties can be approved for the same condition. In addition, if a competitor
obtains approval and marketing exclusivity for a drug product with an active moiety that is the same as that in a product candidate we are
pursuing for the same indication, approval of our product candidate would be blocked during the period of marketing exclusivity unless
we could demonstrate that our product candidate is clinically superior to the approved product. Conversely, even if we are granted
orphan exclusivity, a competitor that demonstrates clinical superiority with the same active moiety may obtain approval prior to
expiration of our exclusivity. In addition, if a competitor obtains approval and marketing exclusivity for a drug product with an active
moiety that is the same as that in a product candidate, we are pursuing for a different orphan indication, this may negatively impact the
market opportunity for our product candidate. There have been legal challenges to aspects of the FDA’s regulations and policies
concerning the exclusivity provisions of the Orphan Drug Act, and future challenges could lead to changes that affect the protections
afforded our product candidates in ways that are difficult to predict.
Even if we receive regulatory approval for our product candidates, we will be subject to ongoing regulatory obligations and
continued regulatory review, which may result in significant additional expenses, limit or withdraw regulatory approval and subject
us to penalties if we fail to comply with applicable regulatory requirements.
If and when regulatory approval has been granted, our product candidates or any approved product will be subject to continual regulatory
review by the FDA and/or foreign regulatory authorities. Additionally, any product candidates, if approved, will be subject to extensive
and ongoing regulatory requirements, including labeling and other restrictions and market withdrawal and we may be subject to
penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indications for
which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing
testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product. In addition, if the applicable
regulatory agency approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event
reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory
requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well
as continued compliance with cGMP and GCP for any clinical trials that we conduct post-approval.
Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or
frequency, or problems with our third-party manufacturers’ processes, or failure to comply with regulatory requirements, may result in,
among other things:
• restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory product recalls;
• fines, warning letters or holds on clinical trials;
• refusal by the FDA to approve pending applications or supplements to approved applications submitted by us, or suspension or
revocation of product license approvals; and
• product seizure or detention, or refusal to permit the import or export of products; and injunctions or the imposition of civil or
criminal penalties.
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Our ongoing regulatory requirements may also change from time to time, potentially harming or making costlier our commercialization
efforts. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the United States or other countries. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing
approval that we may have obtained, and we may not achieve or sustain profitability, which would adversely affect our business.
Our relationships with healthcare professionals, independent contractors, clinical investigators, CROs, consultants and vendors in
connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false
claims laws, transparency laws, government price reporting, and health information privacy and security laws. If we are unable to
comply, or have not fully complied, with such laws, we could face penalties.
We may currently be or may become subject to various U.S. federal, state, and foreign health care laws, including those intended to
prevent health care fraud and abuse.
The federal Anti-Kickback Statute prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering,
receiving or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in
kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any
good, facility, item or service, for which payment may be made, in whole or in part, by a federal healthcare program such as Medicare
and Medicaid. Remuneration has been broadly defined to include anything of value, including, but not limited to, cash, improper
discounts, and free or reduced-price items and services.
Federal false claims laws, including the federal civil False Claims Act, or the FCA, and civil monetary penalties law impose penalties
against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government,
claims for payment or approval that are false or fraudulent or making a false record or statement to avoid, decrease or conceal an
obligation to pay money to the federal government. The FCA has been used to, among other things, prosecute persons and entities
submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not
medically necessary. The FCA includes a whistleblower provision that allows individuals to bring actions on behalf of the federal
government and share a portion of the recovery of successful claims.
Many states have similar fraud and abuse statutes and regulations that may be broader in scope and may apply regardless of payor, in
addition to items and services reimbursed under Medicaid and other state programs. State and federal authorities have aggressively
targeted medical technology companies for, among other things, alleged violations of these anti-fraud statutes, based on among other
things, unlawful financial inducements paid to prescribers and beneficiaries, as well as impermissible promotional practices, including
certain marketing arrangements that rely on volume-based pricing and off-label promotion of FDA-approved products.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, among other things, imposes civil and criminal
liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including
public and private payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false
statement in connection with the delivery of or payment for healthcare benefits, items or services.
Additionally, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their
implementing regulations, impose, among other things, specified requirements on covered entities, including certain healthcare
providers, health plans, and healthcare clearinghouses, and their business associates relating to the privacy, security and transmission of
individually identifiable health information, including mandatory contractual terms and required implementation of certain safeguards
of such information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates,
independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a
service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and
criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for
damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil
actions. In addition, state laws govern the privacy and security of health information in some circumstances, many of which differ from
each other in significant ways, may not have the same effect and may not be preempted by HIPAA, thus complicating compliance
efforts.
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Our operations will also be subject to the federal Open Payments program pursuant to the Physician Payments Sunshine Act, created
under Section 6002 of the ACA and its implementing regulations, which requires certain manufacturers of drugs, devices, biologicals
and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with
specific exceptions, to annually report to CMS information related to payments and other transfers of value provided to physicians, as
defined by such law, and teaching hospitals and certain ownership and investment interests held by physicians and their immediate
family members to CMS. We may also be subject to state laws that require drug manufacturers to report information related to payments
and other transfers of value to physicians and other healthcare providers or marketing expenditures, drug pricing, and/or state laws that
require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant
compliance guidelines promulgated by the federal government. Certain state and local laws also require the registration of
pharmaceutical sales representatives.
Many states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or
services reimbursed by any payor, including commercial insurers. In addition, we may be subject to certain foreign healthcare laws that
are analogous to the U.S. healthcare laws described above. If any of our business activities, including but not limited to our relationships
with healthcare providers, are found to violate any of the aforementioned laws, we may be subject to significant administrative, civil and
criminal penalties, damages, monetary fines, disgorgement, imprisonment, possible exclusion from participation in Medicare, Medicaid
and other federal healthcare programs, contractual damages, reputational harm, additional reporting requirements and oversight if we
become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws,
diminished profits and future earnings and curtailment or restructuring of our operations.
Also, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their
intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We cannot
assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees,
future distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines,
penalties or prosecution and have a negative impact on our business, results of operations and reputation.
Legislative or regulatory healthcare reforms in the United States or abroad may make it more difficult and costly for us to obtain
regulatory clearance or approval of our product candidates or any future product candidates and to produce, market, and distribute
our products after clearance or approval is obtained.
From time to time, legislation is drafted and introduced in Congress in the United States or by governments in foreign jurisdictions that
could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture, and marketing of
regulated products or the reimbursement thereof. In addition, FDA or foreign regulatory agency regulations and guidance are often
revised or reinterpreted by the FDA or the applicable foreign regulatory agency in ways that may significantly affect our business and
our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen
review times of our product candidates or any future product candidates. We cannot determine what effect changes in regulations,
statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such
changes could, among other things, require:
• changes to manufacturing methods;
• recall, replacement, or discontinuance of one or more of our products; and
• additional recordkeeping.
Each of these would likely entail substantial time and cost and could harm our business and our financial results. In addition, delays in
receipt of or failure to receive regulatory clearances or approvals for any future products would harm our business, financial condition,
and results of operations.
U.S. state and federal data collection is governed by restrictive regulations governing the use, processing, and cross-border transfer
of personal information.
The European Union, or EU, has established its own data security and privacy legal framework, including but not limited to the
European General Data Protection Regulation, or GDPR, which contains provisions specifically directed at the processing of health
information, higher sanctions and extra-territoriality measures intended to bring non-EU companies under the regulation. We anticipate
that over time we may expand our business to include additional operations outside of the United States and Israel. With such expansion,
we would be subject to increased governmental regulation in the EU countries in which we might operate, including the GDPR.
Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the
California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in
the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. Effective
January 1, 2020, the CCPA requires covered companies to provide new disclosures to California consumers, provides such consumers
new ways to opt-out of certain sales of personal information, and allows for a new cause of action for data breaches. The CCPA will
likely impact (possibly significantly) our business activities and exemplifies the vulnerability of our business to not only cyber threats
but also the evolving regulatory environment related to personal data and protected health information.
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Also, many states have similar healthcare statutes or regulations that apply to items and services reimbursed under Medicaid and other
state programs, or, in several states, that apply regardless of the payer. Additional state laws require pharmaceutical companies to
implement a comprehensive compliance program, comply with industry’s compliance guidelines and relevant compliance guidance
promulgated by the federal government and register pharmaceutical sales representatives and limit expenditure for, or payments to,
individual medical or health professionals. In addition, certain state laws require pharmaceutical companies to report expenses relating
to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual physicians in the states; and
report pricing with respect to certain drug products.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or
incur costs that could negatively impact our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and
the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and
flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We
generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or
injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable
for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or
criminal fines and penalties.
We maintain workers compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting
from the use of hazardous materials or other work-related injuries with policy limits that we believe are customary for similarly situated
companies and adequate to provide us with coverage for foreseeable risks. Although we maintain such insurance, this insurance may not
provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or
future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research,
development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or
other sanctions.
It may be difficult for us to profitably sell our product candidates if coverage and reimbursement for these products is limited by
government authorities and/or third-party payor policies.
In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of UGN-101, UGN-102
and our other product candidates, if approved, will depend on the coverage and reimbursement policies of third-party payors, like
government authorities, private health insurers, and managed care organizations. Third-party payors decide which medications they will
cover and separately establish reimbursement levels.
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government and other third-party payors are
increasingly challenging the prices charged for health care products, examining the cost effectiveness of drugs in addition to their safety
and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement for prescription drugs. We cannot be sure
that coverage will be available for UGN-101, UGN-102 or our other product candidates, if approved, or, if coverage is available, the
level of reimbursement will be adequate to make our products affordable for patients or profitable for us.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States,
decisions about reimbursement for new medicines under Medicare are made by CMS, as the administrator for the Medicare program.
Private third-party payors often use CMS as a model for their coverage and reimbursement decisions, but also have their own methods
and approval process apart from CMS’s determinations. It is difficult to predict what CMS as well as other third-party payors will decide
with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents
for these new products.
Reimbursement may impact the demand for, and/or the price of, any product for which we obtain marketing approval. Assuming we
obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may
require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions,
and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their
prescription drugs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover all or a
significant portion of the cost of our products. Therefore, coverage and adequate reimbursement is critical to new product acceptance.
Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower
cost therapeutic alternatives are already available or subsequently become available. There may be significant delays in obtaining
coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is
approved by the FDA or applicable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply
that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and
distribution.
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Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor’s determination that use of
a product is:
• a covered benefit under its health plan;
• safe, effective and medically necessary;
• appropriate for the specific patient;
• cost-effective; and
• neither experimental nor investigational.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and
costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the
payor. Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the
United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the
coverage determination process may require us to provide scientific and clinical support for the use of our products to each payor
separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. We
may not be able to provide data sufficient to gain acceptance with respect to coverage and/or sufficient reimbursement levels. We cannot
be sure that coverage or adequate reimbursement will be available for UGN-101, UGN-102 or any of our other product candidates, if
approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future products. If
reimbursement is not available, or is available only to limited levels, we may not be able to commercialize UGN-101, UGN-102 or our
other product candidates, or achieve profitably at all, even if approved.
Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory
clearance or approval of UGN-101, UGN-102 or any of our other product candidates and to produce, market, and distribute our
products after clearance or approval is obtained.
From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing
the regulatory clearance or approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA
regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our
products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review
times of UGN-101, UGN-102 or any of our other product candidates. We cannot determine what effect changes in regulations, statutes,
legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could,
among other things, require:
• changes to manufacturing methods;
• change in protocol design;
• additional treatment arm (control);
• recall, replacement, or discontinuance of one or more of our products; and
• additional recordkeeping.
Each of these would likely entail substantial time and cost and could harm our business and our financial results.
Risks Related to Ownership of Our Ordinary Shares
The market price of our ordinary shares has been and may continue to be subject to fluctuation and you could lose all or part of your
investment.
The stock market in general has been, and the market price of our ordinary shares in particular has been and may continue to be, subject
to fluctuation, whether due to, or irrespective of, our operating results and financial condition. The market price of our ordinary shares on
the Nasdaq Global Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not
limited to:
• actual or anticipated variations in our and our competitors’ results of operations and financial condition;
• physician and market acceptance of our products;
• the mix of products that we sell;
• our success or failure to obtain approval for and commercialize our product candidates;
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• changes in the structure of healthcare payment systems;
• changes in earnings estimates or recommendations by securities analysts, if our ordinary shares are covered by analysts;
• development of technological innovations or new competitive products by others;
• announcements of technological innovations or new products by us;
• publication of the results of nonclinical or clinical trials for UGN-101, UGN-102 or our other product candidates;
• failure by us to achieve a publicly announced milestone;
• delays between our expenditures to develop and market new or enhanced product candidates and the generation of sales from
those products;
• developments concerning intellectual property rights, including our involvement in litigation brought by or against us;
• regulatory developments and the decisions of regulatory authorities as to the approval or rejection of new or modified products;
• changes in the amounts that we spend to develop, acquire or license new products, technologies or businesses;
• changes in our expenditures to promote our products;
• our sale or proposed sale, or the sale by our significant shareholders, of our ordinary shares or other securities in the future;
• changes in key personnel;
• success or failure of our research and development projects or those of our competitors;
• the trading volume of our ordinary shares; and
• general economic and market conditions and other factors, including factors unrelated to our operating performance.
These factors and any corresponding price fluctuations may negatively impact the market price of our ordinary shares and result in
substantial losses being incurred by our investors. In the past, following periods of market volatility, public company shareholders have
often instituted securities class action litigation. If we were to become involved in securities litigation, it could impose a substantial cost
upon us and divert the resources and attention of our management from our business.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or
downgrade our ordinary shares, the price of our ordinary shares could decline.
The trading market for our ordinary shares relies in part on the research and reports that equity research analysts publish about us and our
business, if at all. We do not have control over these analysts and we do not have commitments from them to write research reports about
us. The price of our ordinary shares could decline if no research reports are published about us or our business, or if one or more equity
research analysts downgrade our ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports
about us or our business.
Future sales of our ordinary shares could reduce the market price of our ordinary shares.
If our existing shareholders, particularly our directors, their affiliates, or our executive officers, sell a substantial number of our ordinary
shares in the public market, the market price of our ordinary shares could decrease significantly. The perception in the public market that
our shareholders might sell our ordinary shares could also depress the market price of our ordinary shares and could impair our future
ability to obtain capital, especially through an offering of equity securities.
As of December 31, 2019, the holders of up to approximately 3.6 million ordinary shares are entitled to registration rights. In addition,
our sale of additional ordinary shares or similar securities in order to raise capital might have a similar negative impact on the share price
of our ordinary shares. A decline in the price of our ordinary shares might impede our ability to raise capital through the issuance of
additional ordinary shares or other equity securities and may cause you to lose part or all of your investment in our ordinary shares.
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Future equity offerings could result in future dilution and could cause the price of our ordinary shares to decline.
In order to raise additional capital, we may in the future offer additional ordinary shares or other securities convertible into or
exchangeable for our ordinary shares at prices that we determine from time to time, and investors purchasing shares or other securities in
the future could have rights superior to existing shareholders. We may choose to raise additional capital due to market conditions or
strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. On December 20, 2019, we
entered into a sales agreement with Cowen and Company, LLC 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, to or through Cowen, acting as sales agent or principal, in any manner
deemed to be an “at-the market offering”. The shares will be offered and sold pursuant to our shelf registration statement on Form S-3
filed with the SEC on December 20, 2019, which was declared effective on January 2, 2020. Our prior open market sales agreement with
Jefferies LLC, dated October 12, 2018, was terminated on December 20, 2019.
The significant share ownership position of our officers, directors and entities affiliated with certain of our directors may limit your
ability to influence corporate matters.
Our officers, directors and entities affiliated with certain of our directors beneficially own a significant portion of our outstanding
ordinary shares. Accordingly, these persons are able to significantly influence, though not independently determine, the outcome of
matters required to be submitted to our shareholders for approval, including decisions relating to the election of our board of directors,
and the outcome of any proposed merger or consolidation of our company. These interests may not be consistent with those of our other
shareholders. In addition, these persons’ significant interest in us may discourage third parties from seeking to acquire control of us,
which may adversely affect the market price of our ordinary shares.
We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable
future.
We have never declared or paid cash dividends on our share capital, nor do we anticipate paying any cash dividends on our share capital
in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of
our business. As a result, capital appreciation, if any, of our ordinary shares will be investors’ sole source of gain for the foreseeable
future. In addition, Israeli law limits our ability to declare and pay dividends and may subject our dividends to Israeli withholding taxes.
If we are classified as a passive foreign investment company, or PFIC, our U.S. shareholders may suffer adverse tax consequences.
Generally, for any taxable year, if at least 75% of our gross income is passive income, or at least 50% of the value of our assets is
attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be
characterized as a PFIC for U.S. federal income tax purposes. The determination of whether we are a PFIC is a fact-intensive
determination made on an annual basis and the applicable law is subject to varying interpretation. In particular, the characterization of
our assets as active or passive may depend in part on our current and intended future business plans, which are subject to change. In
addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by
reference to the market price of our common shares from time to time, which may fluctuate considerably. Under the income test, our
status as a PFIC depends on the composition of our income which will depend on the transactions we enter into in the future and our
corporate structure. The composition of our income and assets is also affected by how, and how quickly, we spend the cash we raise in
any offering.
We believe that we were classified as a PFIC for the taxable year ended December 31, 2019. We have not yet made a determination as to
our expected PFIC status for the current taxable year. We cannot provide any assurances regarding our PFIC status for the current or
future taxable years, and our U.S. tax counsel has not provided any opinion regarding our PFIC status.
If we are characterized as a PFIC, our U.S. Holders (as defined below) may suffer adverse tax consequences, including having gains
realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable
to dividends received on our ordinary shares by individuals who are U.S. Holders, having interest charges apply to distributions by us
and gains from the sales of our shares, and additional reporting requirements under U.S. federal income tax laws and regulations. A U.S.
Holder that (i) owns our ordinary shares at any point during a year in which we are characterized as a PFIC and (ii) does not timely make
a QEF Election (as described below) will treat such ordinary shares as stock in a PFIC for all subsequent tax years, even if we no longer
qualify as a PFIC under the relevant tests in such subsequent tax years. A U.S. Holder may be able to elect out of such treatment if we are
no longer characterized as a PFIC by making a “purging election.” For purposes of this discussion, a “U.S. Holder” is a beneficial owner
of our ordinary shares that, for U.S. federal income tax purposes, is or is treated as any of the following: (a) an individual who is a citizen
or resident of the United States; (b) a corporation, or entity treated as a corporation for U.S. federal income tax purposes, created or
organized under the laws of the United States, any state thereof, or the District of Columbia; (c) an estate, the income of which is subject
to U.S. federal income tax regardless of its source; or (d) a trust that (1) is subject to the supervision of a U.S. court and the control of one
or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be
treated as a United States person for U.S. federal income tax purposes.
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If we are a PFIC, we plan on providing to investors, by annually posting a “PFIC Annual Information Statement” on our website, the
information required to allow investors to make a qualified electing fund election, or a QEF Election, for United States federal income
tax purposes.
Future changes to tax laws could have a material adverse effect on us and reduce net returns to our shareholders.
Our tax treatment is subject to changes in tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and
reforms under consideration and the practices of tax authorities in jurisdictions in which we operate, as well as tax policy initiatives and
reforms related to the Organisation for Economic Co-Operation and Development’s, or OECD, Base Erosion and Profit Shifting, or
BEPS Project, the European Commission’s state aid investigations and other initiatives.
Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or, in the
specific context of withholding tax dividends paid. We are unable to predict what tax reform may be proposed or enacted in the future or
what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations,
policies or practices, could affect our financial position and overall or effective tax rates in the future in countries where we have
operations, reduce post-tax returns to our shareholders, and increase the complexity, burden and cost of tax compliance.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax
treatment of our domestic and foreign earnings. Any new taxes could adversely affect our domestic and international business operations, and
our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed,
modified or applied adversely to us. For example, the Tax Act made many significant changes to the U.S. Internal Revenue Code of 1986, as
amended, or the Code. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect
us, and certain aspects of the Tax Act could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent
various states will conform to the Tax Act or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of
net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or
future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time
charges, and could increase our future U.S. tax expense.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs,
taxes or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the U.S.
Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid
between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with
respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where
we believe we have not established a taxable nexus, often referred to as a ‘‘permanent establishment’’ under international tax treaties,
and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions. A tax authority may take the
position that material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such
assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the
implications could increase our anticipated effective tax rate, where applicable.
If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal
income tax consequences.
If a U.S. Holder is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ordinary
shares, such U.S. Holder may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our
group (if any). Because our group includes at least one U.S. subsidiary (Urogen Pharma, Inc.), if we were to form or acquire any non-
U.S. subsidiaries in the future, they may be treated as controlled foreign corporations of any U.S. Holder owning (directly, indirectly or
constructively) at least 10% of the value or voting power of our ordinary shares. A United States shareholder of a controlled foreign
corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global
intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any
distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be
allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We
cannot provide any assurances that we will assist investors in determining whether any non-U.S. subsidiaries that we may form or
acquire in the future would be treated as a controlled foreign corporation or whether such investor would be treated as a United States
shareholder with respect to any of such controlled foreign corporations. Further, we cannot provide any assurances that we will furnish
to any U.S. shareholder information that may be necessary to comply with the reporting and tax paying obligations discussed above.
Failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of
limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. U.S. Holders
should consult their tax advisors regarding the potential application of these rules to their investment in our ordinary shares.
61
Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be limited.
Under U.S. federal income tax law, federal net operating losses, or NOLs, incurred in 2018 and in future years may be carried forward
indefinitely, but the deductibility of such federal net operating losses is limited. In addition, under Sections 382 and 383 of the Code,
and corresponding provisions of state law, a corporation that undergoes an “ownership change,” which is generally defined as a greater
than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to utilize its pre-change NOL
carryforwards and other pre-change tax attributes to offset future its post-change income or taxes may be limited. We have not
performed a detailed analysis to determine whether an ownership change under Section 382 of the Code has occurred for Urogen
Pharma, Inc. If we undergo an ownership change, our ability to utilize NOLs and other tax attributes could be limited by Sections 382
and 383 of the Code. Future changes in our share ownership, some of which are outside of our control, could result in an ownership
change under Section 382 of the Code. As a result, even if we attain profitability, we may be unable to use a material portion of our
NOLs and other tax attributes, which could negatively impact our future cash flows. In addition, at the state level, there may be periods
during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently
increase state taxes owed.
Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading
value of our securities.
Shareholders may, from time to time, engage in proxy solicitations or advance stockholder proposals, or otherwise attempt to effect
changes and assert influence on our board of directors and management. Activist campaigns that contest or conflict with our strategic
direction or seek changes in the composition of our board of directors could have an adverse effect on our operating results and financial
condition. A proxy contest would require us to incur significant legal and advisory fees, proxy solicitation expenses and administrative
and associated costs and require significant time and attention by our board of directors and management, diverting their attention from
the pursuit of our business strategy. Any perceived uncertainties as to our future direction and control, our ability to execute on our
strategy, or changes to the composition of our board of directors or senior management team arising from a proxy contest could lead to
the perception of a change in the direction of our business or instability which may result in the loss of potential business opportunities,
make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners,
any of which could adversely affect our business and operating results. If individuals are ultimately elected to our board of directors with
a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our
stockholders. We may choose to initiate, or may become subject to, litigation as a result of the proxy contest or matters arising from the
proxy contest, which would serve as a further distraction to our board of directors and management and would require us to incur
significant additional costs. In addition, actions such as those described above could cause significant fluctuations in our stock price
based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and
prospects of our business.
Risks Related to our Operations in Israel
Our research and development and other significant operations are located in Israel and, therefore, our results may be adversely
affected by political, economic and military instability in Israel.
Our research and development facilities are located in Ra’anana, Israel. If these or any future facilities in Israel were to be damaged,
destroyed or otherwise unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, hurricanes, storms, tornadoes,
other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and
development is disrupted for any other reason, such an event could delay our clinical trials or, if our product candidates are approved and
we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our products as promptly as our
prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives, or if we are
unable to manufacture an approved product within a timeframe that meets our prospective customers’ expectations, our business,
prospects, financial results and reputation could be harmed.
Political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in
1948, a number of armed conflicts have taken place between Israel and its neighboring countries, Hamas (an Islamist militia and political
group that controls the Gaza Strip) and Hezbollah (an Islamist militia and political group based in Lebanon). In addition, several
countries, principally in the Middle East, restrict doing business with Israel, and additional countries may impose restrictions on doing
business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. Any hostilities involving Israel,
terrorist activities, political instability or violence in the region or the interruption or curtailment of trade or transport between Israel and
its trading partners could adversely affect our operations and results of operations and adversely affect the market price of our ordinary
shares.
62
Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle
East. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by
terrorist attacks or acts of war, there can be no assurance that this government coverage will be maintained, or if maintained, will be
sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our
business, financial condition and results of operations.
Further, our operations could be disrupted by the obligations of our employees to perform military service. As of December 31, 2019, we
had 43 employees based in Israel. Of these employees, some may be military reservists, and may be called upon to perform military
reserve duty of up to 36 days per year (and in some cases more) until they reach the age of 40 (and in some cases, up to the age of 45 or
older). Additionally, they may be called to active duty at any time under emergency circumstances. In response to increased tension and
hostilities in the region, there have been, at times, call-ups of military reservists, and it is possible that there will be additional call-ups in
the future. Our operations could be disrupted by the absence of these employees due to military service. Such disruption could harm our
business and operating results.
Provisions of Israeli law and our articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of,
us, even when the terms of such a transaction are favorable to us and our shareholders.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special
approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to
such types of transactions. For example, a tender offer for all of a company’s issued and outstanding shares can only be completed if
shareholders not accepting the tender offer hold less than 5% of the issued share capital. Completion of the tender offer also requires
approval of a majority of the offerees that do not have a personal interest in the tender offer, unless shareholders not accepting the tender
offer hold less than 2% of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their
acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition an Israeli court
to alter the consideration for the acquisition, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may
not seek such appraisal rights.
Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of
residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not
recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in
certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding
period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are
subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when
such time expires, the tax becomes payable even if no disposition of the shares has occurred. These provisions could delay, prevent or
impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to
our shareholders.
It may be difficult to enforce a judgment of a U.S. court against us, our officers and directors or the Israeli experts named in our
reports filed with the SEC in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our
officers and directors and these experts.
We are incorporated in Israel. One of our directors resides outside of the United States, and most of our assets and most of the assets of
this director are located outside of the United States. Therefore, a judgment obtained against us, or this director, including a judgment
based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be
enforced by an Israeli court. It may also be difficult for you to effect service of process on this director in the United States or to assert
U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of
U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli
court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be
applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly
process. Certain matters of procedure will also be governed by Israeli law.
There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing
a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.
63
Your rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the
rights and responsibilities of shareholders of U.S. companies.
The rights and responsibilities of the holders of our ordinary shares are governed by our articles of association and by Israeli law. These
rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. companies. In
particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and
performing its obligations towards the company and other shareholders, and to refrain from abusing its power in the company, including,
among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s articles of association,
increases in a company’s authorized share capital, mergers and acquisitions and related party transactions requiring shareholder
approval, as well as a general duty to refrain from discriminating against other shareholders. In addition, a shareholder who is aware that
it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a
director or executive officer in the company has a duty of fairness toward the company.
There is limited case law available to assist us in understanding the nature of these duties or the implications of these provisions. These
provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically
imposed on shareholders of U.S. companies.
Risks Related to Our Management and Employees
We depend on our executive officers and key clinical, technical and commercial personnel to operate our business effectively, and we
must attract and retain highly skilled employees in order to succeed.
Our success depends upon the continued service and performance of our executive officers who are essential to our growth and
development. The loss of one or more of our executive officers could delay or prevent the continued successful implementation of our
growth strategy, could affect our ability to manage our company effectively and to carry out our business plan, or could otherwise be
detrimental to us. As of February 17, 2020, we had 173 employees. Therefore, knowledge of our product candidates and clinical trials is
concentrated among a small number of individuals. Members of our executive team as well as key clinical, scientific, technical and
commercial personnel may resign at any time and there can be no assurance that we will be able to continue to retain such personnel. If
we cannot recruit suitable replacements in a timely manner, our business will be adversely impacted.
Our growth and continued success will also depend on our ability to attract and retain additional highly qualified and skilled research and
development, operational, managerial and finance personnel. However, we face significant competition for experienced personnel in the
pharmaceutical field. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater
financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse
opportunities and better chances for career advancement. Some of these characteristics may be more appealing to quality candidates than
what we have to offer. If we cannot retain our existing skilled scientific and operational personnel and attract and retain sufficiently
skilled additional scientific and operational personnel, as required, for our research and development and manufacturing operations on
acceptable terms, we may not be able to continue to develop and commercialize our existing product candidates or new products.
Further, any failure to effectively integrate new personnel could prevent us from successfully growing our company.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Effective November 2019, we leased approximately 20,913 square feet of space in Princeton, NJ, which now serves as our principal
executive offices and is used for commercial and marketing as well as general and administrative purposes. We lease an approximately
11,495 square foot facility in Israel, which is used primarily as research and development laboratories as well as for administrative
purposes. We lease approximately 9,336 square feet of space in New York. We believe that our existing facilities are adequate to meet
our current needs, and that suitable additional or alternative spaces will be available in the future on commercially reasonable terms.
Item 3. Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are
not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our
business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of
management resources and other factors.
Item 4. Mine Safety Disclosures
Not applicable.
64
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information
Our ordinary shares have been traded on The Nasdaq Global Market since May 4, 2017 under the symbol URGN. Prior to such time, there
was no public market for our ordinary shares.
Recent Sales of Unregistered Securities
None.
Stock Performance Graph
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into
any of our filings under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The following graph shows the value of an investment of $100 from May 4, 2017 (the date our ordinary shares commenced trading on The
Nasdaq Global Market) through December 31, 2019, in our ordinary shares, the Nasdaq Biotechnology Index, the Standard & Poor’s 500
Index (S&P 500), and Nasdaq Composite Index. The historical share price performance of our common shares shown in the performance
graph is not necessarily indicative of future stock price performance.
Comparison of Cumulative Total Returns from May 4, 2017 to December 31, 2019
Among UroGen Pharma, Ltd. Nasdaq Biotechnology Index, S&P 500 Index, and the Nsadaq
Composite Index
$400.00
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$—
May-04-2017
Q2 2017
Q4 2017
Q2 2018
Q4 2018
Q2 2019
Q4 2019
Urogen Pharma Ltd
Nasdaq Biotechnology Index
S&P 500 Index
Nasdaq Composite Index
5/4/2017
(Inception)
6/30/2017
12/31/2017
6/30/2018
12/31/2018
6/30/2019
Cumulative Total Return date ended
Urogen Pharma
Nasdaq Biotechnology
S&P
Nasdaq Composite
$
100.00 $
100.00
100.00
100.00
129.18 $
103.83
101.42
101.07
266.17 $
107.38
111.89
113.63
355.94 $
110.48
113.76
123.62
308.01 $
97.37
104.91
109.22
257.08 $
110.92
128.55
134.94
12/31/2019
238.70
122.87
142.59
152.03
Holders
As of February 19, 2020, there were approximately 22 registered holders of record of our ordinary shares.
65
Dividend Policy
We have not paid any dividends on our ordinary shares since our inception and do not expect to pay dividends on our ordinary shares in
the foreseeable future. We currently intend to retain all available funds as well as future earnings, if any, to fund the development and
expansion of our operations. Any future determination to pay dividends will be made at the discretion of our board of directors.
Use of Proceeds from Initial Public Offering of Ordinary Shares
In May 2017, we completed our initial public offering, or IPO, and sold 5,144,378 of our ordinary shares at a price of $13.00 per share.
The net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were approximately
$60.8 million. The offering commenced on May 1, 2017 and did not terminate before all of the securities registered in the registration
statement were sold. The effective date of the registration statement, File No. 333-217201, for our ordinary shares was May 3, 2017.
Jefferies LLC and Cowen and Company, LLC acted as joint book-running managers for the IPO, Raymond James & Associates, Inc. and
Oppenheimer & Co. Inc acted as co-managers.
None of the net proceeds of our offering were paid directly or indirectly to any of our directors or executive officers, to their associates,
persons owning ten percent or more of any class of our equity securities, or to any of our affiliates.
As of December 31, 2019, we have used all of the net proceeds from our IPO primarily to fund our UGN-101 and UGN-102 clinical
programs and other programs as well as working capital, including general operating expenses, as further described under the
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
None.
66
Item 6. Selected Financial Data
The following selected financial data has been derived from our audited financial statements, including the consolidated balance sheets
as of December 31, 2019 and 2018 and the related consolidated statements of operations for each of the three years ended December 31,
2019 and related notes appearing elsewhere in this Annual Report. The consolidated statement of operations data for the years ended
December 31, 2016 and 2015 and the consolidated balance sheet data as of December 31, 2017, 2016 and 2015 are derived from our
audited consolidated financial statements that are not included in this Annual Report. Our historical results are not necessarily indicative
of the results that can be expected in the future. The selected historical financial data below should be read in conjunction with the
section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements
and related notes appearing elsewhere in this Annual Report.
Statements of operations data:
Revenues
Cost of revenue
Gross profit (loss)
Research and development expenses, net
General and administrative expenses
Operating (loss) income
Interest and other (income) expenses, net
Loss before income taxes
Income tax expense
Net loss
Loss per ordinary share, basic and diluted
Weighted average number of ordinary
shares outstanding used in computing
loss per share
Balance sheet data:
Cash and cash equivalents and marketable
securities
Working capital
Total assets
Total liabilities
Total shareholders’ equity
2019
18 $
—
18
49,297
60,199
(109,478)
(4,332)
(105,146)
—
(105,146) $
(5.12) $
$
$
$
Years Ended December 31,
2018
2016
2017
(in thousands, except share and per share data)
1,128 $
1,803
(675)
36,934
39,571
(77,180)
(1,648)
(75,532)
125
(75,657) $
(4.80) $
8,158 $
600
7,558
18,697
8,811
(19,950)
31
(19,981)
19
(20,000) $
(2.14) $
17,530 $
28
17,502
10,287
6,417
798
2,739
(1,941)
—
(1,941) $
(1.91) $
2015
—
—
—
10,515
1,895
(12,410)
279
(12,689)
—
(12,689)
(5.88)
20,528,727
15,754,193
9,716,790
2,305,503
2,300,959
2019
2018
As of December 31,
2017
(in thousands)
2016
2015
$
$
195,632 $
129,152
202,388
22,086
180,302 $
101,318
88,778
103,559
13,465
90,094
$
$
73,000
67,437
75,550
7,035
68,515
$
$
21,362
18,904
23,056
6,749
16,307
$
$
17,975
16,894
19,930
3,109
16,281
67
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should
be read together with “Selected Financial Data” and the historical consolidated financial statements and the notes thereto included in
“Financial Statements and Supplementary Data”. This discussion contains forward-looking statements that reflect our plans, estimates
and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of
this Annual Report. Actual results may differ materially from those contained in any forward-looking statements. You should carefully
read “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”
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 platform 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 more effective treatment option. Our lead investigational candidates, UGN-101
(mitomycin gel) for instillation, and UGN-102 (mitomycin gel) for intravesical instillation, 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 carcinoma, or LG
UTUC, and low-grade non-muscle invasive bladder cancer, or 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 Intermediate Risk 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
maximize 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.
In December 2019, the FDA accepted for filing and granted priority review for our New Drug Application, or NDA, for UGN-101
(mitomycin gel) for instillation as a potential treatment for patients with LG UTUC. If approved, UGN-101 would be the first non-
surgical treatment option for LG UTUC. We are on track for the potential launch of UGN-101 by mid-year 2020. The FDA previously
granted Orphan Drug, Fast Track, and Breakthrough Therapy Designations to UGN-101 for the treatment of LG UTUC. The NDA is
supported by the positive results from the pivotal Phase 3 OLYMPUS clinical trial. Results from a final analysis of the primary endpoint
showed that UGN-101 demonstrated a complete response rate of 59% in patients with LG UTUC. In addition, the durability of response
was estimated to be 89% at six months and 84% at 12 months by Kaplan Meier analysis. Median time to recurrence was estimated to be
13 months. The most commonly reported treatment emergent adverse events were ureteric stenosis (43.7%), urinary tract infection
(32.4%), haematuria (31.0%), flank pain (29.6%) nausea (23.9%), dysuria (21.1%), renal impairment (19.7%) and vomiting (19.7%).
The majority of these adverse events were mild to moderate, with 8.5% of patients having events of ureteric stenosis reported as severe.
In addition, we are evaluating the safety and efficacy of UGN-102 (mitomycin gel) for intravesical instillation, our novel sustained-
release high dose formulation of mitomycin, for the treatment of LG NMIBC. In September 2019, we reported the interim data of our
Phase 2b OPTIMA II trial of investigational UGN-102 (mitomycin gel) for intravesical instillation for patients with LG 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 recently completed enrollment of 63 patients at clinical sites across the U.S. 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. In an interim cohort of 32 patients, 63% (20/32) achieved a CR. We also intend to pursue a
505(b)(2) regulatory pathway for UGN-102. We believe that UGN-102 has the potential to be a new therapeutic option for the treatment
of LG Intermediate Risk NMIBC patients.
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 majority of the expenditures are spent on tumor resection
surgeries such as transurethral resection of bladder tumor, or TURBT. In 2015, the estimated prevalence of urothelial cancer in the
United States was 700,000 with an annual incidence of approximately 80,000. The prevalence of each of LG NMIBC and LG UTUC in
the United States was approximately 343,000 and 14,500, respectively.
68
Our clinical stage pipeline also includes UGN-201, our proprietary immunotherapy product candidate, a toll-like receptor 7/8, or TLR
7/8, agonist which have been evaluated for the treatment of high-grade NMIBC, which may include carcinoma in situ, or CIS. UGN-201
is a novel, liquid formulation of imiquimod, a generic TLR7/8, agonist. 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 (UGN-301, anti-CTLA-4 antibody) 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.
In October 2016, we granted an exclusive worldwide license to Allergan Pharmaceuticals International Limited, or Allergan, a wholly
owned subsidiary of Allergan plc, to research, develop, manufacture, and commercialize pharmaceutical products formulated with our
RTGel technology platform and clostridial toxins, including BOTOX®, a branded drug, that we believe can potentially serve as an
effective treatment option for patients suffering from overactive bladder, or OAB. 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 U.S. using RTGel 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.
Our Research and Development and License Agreements
In October 2016, we entered into the Allergan Agreement and granted Allergan an exclusive worldwide license to research, develop,
manufacture and commercialize pharmaceutical products that contain RTGel and clostridial toxins (including BOTOX), alone or in
combination with certain other active ingredients, referred to as the Licensed Products, which are approved for the treatment of adults
with overactive bladder who cannot use or do not adequately respond to anticholinergics. Additionally, 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 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.
Agenus Agreement
On November 8, 2019, we entered into a license agreement with Agenus Inc. Pursuant to the agreement, Agenus granted us 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, we plan to develop AGEN1884
in combination with UGN-201 for the treatment of high-grade non-muscle invasive bladder cancer.
Pursuant to 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 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 us 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. We 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, we substantially cease 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 our control. In addition, either party may terminate the license agreement in the event of an uncured material breach of the
other party.
69
Early-Stage Feasibility Evaluation with Janssen Research & Development, LLC
On April 22, 2019, we entered into an agreement with Janssen to conduct an early-stage feasibility evaluation in a therapeutic area of
mutual interest. Both parties will each conduct certain activities under the terms of the agreement, and we will incur the costs of our own
efforts related to the feasibility evaluation.
For additional information regarding our research and development and license agreements, see Note 8 to our financial statements
appearing elsewhere in this Annual Report.
Follow-on Public Offering
In January 2019, we completed an underwritten public offering of 4,207,317 of our ordinary shares, including 548,780 shares sold
pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $41.00 per share. The net
proceeds to us from the offering were approximately $161.4 million, after deducting the underwriting discounts and commissions and
payment of offering expenses.
Components of Operating Results
Revenues
We do not currently have any products approved for sale and, to date, we have not recognized any revenues from sales of UGN-101,
UGN-102 or UGN-201. For the years ended December 31, 2019 and December 31, 2018, we recognized revenues of $18,000 and $1.1
million from RTGel sales under the Allergan Agreement, respectively. For the year ended December 31, 2017, we recognized revenues
of $7.5 million under the Allergan Agreement upon the achievement of a milestone in August 2017 as well as sales of RTGel to
Allergan, per the Allergan Agreement. 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 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, to the extent any are successfully
commercialized. If we fail to achieve clinical success and/or to obtain regulatory approval of any of our product candidates in a timely
manner, our ability to generate future revenue will be impaired.
Research and Development Expenses
Research and development expenses 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 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, or 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. 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.
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, or the R&D Law, from the Israel Innovation Authority in Israel, or 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 December 31, 2019, we had received grants in the aggregate amount of $2.1 million.
70
A recipient of a grant from the IIA is obligated to pay royalties generally at a rate of 3% to 5% on revenues from sales of products
developed in whole or in part with IIA-funded technology, up to the amount of the grant related to any such products plus accrued
interest. As of December 31, 2018, we had accrued $0.8 million in royalties due to the IIA, which has been recorded in cost of revenues
in our results of operations for the year ended December 31, 2018. In January 2020, the IIA approved our request to unwind our
obligation to the IIA as a transfer of knowledge. See Note 15 to the Consolidated Financial Statements included in this report for
additional information.
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;
• 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.
Because the NDA for UGN-101is pending review by the FDA and UGN-102 is still in clinical development and the outcome of these
efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization
of 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. 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 world-wide, royalty bearing, and sub-licensable license under Agenus’s intellectual
property rights to exploit licensed products incorporating AGEN1884 for the treatment of cancers of the urinary tract via intravesical
delivery. It also provides us with pre-clinical and clinical supply of AGEN1884. No inventory was purchased on the effective date of the
License Agreement and subsequent purchases of pre-clinical 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 8 to the Consolidated Financial Statements
for further information.
71
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors,
executives, finance, commercial, medical affairs, business development, investor relations, and human resource functions). Other
significant costs include commercial, medical affairs, 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 carryforward tax losses
totaling approximately $151.9 million as of December 31, 2019. We anticipate that we will continue to generate tax losses for the
foreseeable future and that we will be able to carryforward 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 carryforward tax losses. We have provided a full
valuation allowance with respect to the deferred tax assets related to these carryforward losses.
Results of Operations
Comparison of the Years Ended December 31, 2019 and 2018
The following table sets forth our results of operations for the years ended December 31, 2019 and 2018.
Revenues
Cost of revenue
Gross profit (loss)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Interest and other income, net
Loss before income taxes
Income tax expense
Net loss
2019
Year Ended December 31,
2018
(in thousands)
Change
$
$
18 $
—
18
1,128 $
1,803
(675)
49,297
60,199
109,496
(109,478)
(4,332)
(105,146)
—
(105,146) $
36,934
39,571
76,505
(77,180)
(1,648)
(75,532)
125
(75,657) $
(1,110)
(1,803)
693
12,363
20,628
32,991
(32,298)
(2,684)
(29,614)
(125)
(29,489)
Revenues
Revenues were $18,000 and $1.1 million for the years ended December 31, 2019 and 2018, respectively. The decrease of $1.1 million
was primarily due to the decreased revenue recognized under the Allergan Agreement.
Research and Development Expenses
Research and development expenses increased by $12.4 million to $49.3 million in the year ended December 31, 2019 from $36.9
million in the year ended December 31, 2018. Excluding the $10 million milestone payment related to our license agreement with
Agenus Inc, research and development expenses increased by $2.4 million. An increase of $2.5 million is mainly comprised of $0.9
million in increased clinical activity of the UGN-102 Phase 2b clinical trial, a $1.1 million increase in headcount and related costs to
support clinical trial activities and a $0.5 million increase in nonclinical activity as we advance our pipeline. An additional increase of
$3.5 million was attributable to the purchase of API and other manufacturing related activities as we prepare for our UGN-101 product
commercial launch, partly offset by a decrease of $3.7 million in share-based compensation. Total non-cash research and development
share-based compensation expense was $8.3 million and $12.0 million for the years ended December 31, 2019 and 2018, respectively.
72
General and Administrative Expenses
General and administrative expenses were $60.2 million and $39.6 million for the years ended December 31, 2019 and 2018,
respectively. The increase in general and administrative expenses of $20.6 million resulted primarily from an $8.1 million increase in
headcount and related costs as part of the buildout of the company in anticipation of commercialization of our first product. The
remaining increase resulted primarily from a $3.1 million increase in share-based compensation expense due to new grants, an $8.5
million increase in commercial services and a $0.6 million increase in consultant and directors’ fees. Total non-cash general and
administrative share-based compensation expense was $21.7 million and $18.6 million for the years ended December 31, 2019 and
2018, respectively.
Interest and Other (Income) Expenses, Net
Interest and other (income) expenses, net was income of $4.3 million and income of $1.6 million for the years ended December 31, 2019
and 2018, respectively. The increase of $2.7 million was primarily due to increased interest earned on our cash balances and investments
in marketable securities.
Comparison of the Years Ended December 31, 2018 and 2017
The following table sets forth our results of operations for the years ended December 31, 2018 and 2017.
Revenues
Cost of revenue
Gross (loss) profit
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Interest and other (income) expenses, net
Loss before income taxes
Income tax expense
Net loss
2018
Year Ended December 31,
2017
(in thousands)
Change
$
1,128 $
1,803
(675)
8,158 $
600
7,558
36,934
39,571
76,505
(77,180)
(1,648)
(75,532)
125
(75,657) $
18,697
8,811
27,508
(19,950)
31
(19,981)
19
(20,000) $
$
(7,030)
1,203
(8,233)
18,237
30,760
48,997
(57,230)
(1,679)
(55,551)
106
(55,657)
Revenues
Our total revenues decreased by $7.0 million to $1.1 million in the year ended December 31, 2018 from $8.2 million in the year ended
December 31, 2017. This decrease is due to the proceeds of $7.5 million received from Allergan upon the achievement of a certain
milestone under the Allergan Agreement in the year ended December 31, 2017.
Research and Development Expenses
Research and development expenses increased by $18.2 million to $36.9 million in the year ended December 31, 2018 from $18.7
million in the year ended December 31, 2017. Approximately $8.1 million of the increase was attributable to share-based compensation,
including $2.4 million in modification costs relating to senior management severance packages and $5.7 million in new grants to
executive management and employees. The remaining increase of $10.1 million is mainly comprised of $4.1 million in increased
headcount and related costs to support increased clinical trial activities, a $2.5 million increase in direct costs associated with the UGN-
101 Phase 3 clinical trial, a $2.7 million increase due to increased clinical activity of the UGN-102 Phase 2b clinical trial and
approximately a $0.6 million increase in allocated overhead costs to support the growth of our U.S. operations. Total non-cash research
and development share-based compensation expense was $12.0 million and $3.9 million for the years ended December 31, 2018 and
2017, respectively.
73
General and Administrative Expenses
General and administrative expenses were $39.6 million and $8.8 million for the years ended December 31, 2018 and 2017, respectively.
The increase in general and administrative expenses of $30.8 million resulted primarily from an increase in share-based compensation
expense of $16.2 million, including $7.5 million in modification costs relating to senior management severance packages and $8.7
million in new grants to executive management and employees. The remaining increase resulted primarily from a $5.3 million increase
in payroll and recruitment costs due to headcount and related costs to support our growing business, an increase of $4.4 million in
commercial services, an increase of $3.2 million in consultant and directors’ fees and an increase of $1.4 million to support the growth of
our U.S. operations. Total non-cash general and administrative share-based compensation expense was $18.6 million and $2.4 million
for the years ended December 31, 2018 and 2017, respectively.
Interest and Other (Income) Expenses, Net
Interest and other (income) expenses, net was ($1.6 million) compared to $31,000 for the years ended December 31, 2018 and 2017,
respectively. The increase was primarily due to increased interest earned on our cash balances.
Liquidity and Capital Resources
As of December 31, 2019, we had $195.6 million in cash, 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. We believe that our existing cash, cash equivalents and short-term investments will enable us to fund our
operating and capital expenditure requirements for at least the next 12 months.
Through December 31, 2019, we funded our operations primarily through public equity offerings, private placements of equity securities
and through the upfront payment received under the Allergan Agreement. In May 2017, we raised $60.8 million, net of issuance costs
and underwriting discounts and commissions, in our IPO on the Nasdaq Global Market. In August 2017, we received $7.5 million from
Allergan upon the achievement of a milestone under the Allergan Agreement.
In January 2018, we completed an underwritten public offering of 1,682,926 of our ordinary shares, including 219,512 shares sold
pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $41.00 per share. The net
proceeds to us from the offering were approximately $64.0 million, after deducting the underwriting discounts and commissions and
payment of other offering expenses.
In January 2019, we completed an underwritten public offering of 4,207,317 of our ordinary shares, including 548,780 shares sold
pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $41.00 per share. The net
proceeds to us from the offering were approximately $161.4 million, after deducting the underwriting discounts and commissions and
payment of other offering expenses.
In December 2019, we entered into a sales agreement 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. No sales have occurred under this agreement as of
the date of this filing.
We have incurred losses since our inception and negative cash flows from our operations, and as of December 31, 2019 we had an
accumulated deficit of $228.0 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.
Because the NDA for UGN-101 is pending review by the FDA and UGN-102 is still in clinical development and the outcome of these
efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization
of 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.
74
Cash Flows
The following table sets forth the significant sources and uses of cash for the periods set forth below:
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Net change in cash and cash equivalents
Operating Activities
2019
Year Ended December 31,
2018
(in thousands)
2017
$
$
(71,017) $
(145,593)
165,250
(51,360) $
(37,334) $
35,287
66,421
64,374 $
(9,568)
(36,277)
61,585
15,740
Net cash used in operating activities was $71.0 million during the year ended December 31, 2019, compared to $37.3 million used in
operating activities during the year ended December 31, 2018. The $33.7 million increase was attributable primarily to the increase of
$29.2 million in the net loss for the year and a net increase in operating assets and liabilities of $4.5 million.
Net cash used in operating activities was $37.3 million during the year ended December 31, 2018, compared to $9.6 million used in
operating activities during the year ended December 31, 2017. The increase in cash used in operating activities was attributable primarily
to the increase of $55.7 million in the net loss for the year partially offset by $24.3 million increase in share-based compensation.
Investing Activities
Net cash used in investing activities was $145.6 million during the year ended December 31, 2019, compared to net cash provided by
investing activities of $35.3 million during the year ended December 31, 2018. The decrease of $180.9 million is primarily related to our
investment in marketable securities.
Net cash provided by investing activities was $35.3 million during the year ended December 31, 2018, compared to net cash used in
investing activities of $36.3 million during the year ended December 31, 2017. The increase of $71.6 million is primarily related to our
investment in 2017 and subsequent sale in 2018 of a short-term investment.
Financing Activities
Net cash provided by financing activities was $165.3 million during the year ended December 31, 2019, compared to net cash provided
by financing activities of $66.4 million during the year ended December 31, 2018. The increase is primarily related to the increased net
proceeds received from our January 2019 financing as compared to our January 2018 financing.
Net cash provided by financing activities was $66.4 million during the year ended December 31, 2018, compared to net cash provided by
financing activities of $61.6 million during the year ended December 31, 2017. The difference is primarily related to the net proceeds
received from our January 2018 financing as compared to our IPO in May 2017.
Funding Requirements
Our present and future funding requirements will depend on many factors, including, among other things:
• the outcome of the FDA’s review of the NDA for UGN-101;
• the progress, timing and completion of clinical trials for UGN-102;
• nonclinical studies and clinical trials for UGN-201 or any of our other product candidates;
• the costs related to obtaining regulatory approval for UGN-101, UGN-102 and UGN-201 and any of our other product
candidates, and any delays we may encounter as a result of regulatory requirements or adverse clinical trial results with respect to
any of these product candidates;
• selling, marketing and patent-related activities undertaken in connection with the commercialization of UGN-101 and UGN-102
and any of our other product candidates, and costs involved in the development of an effective sales and marketing organization;
75
• the costs involved in filing and prosecuting patent applications and obtaining, maintaining and enforcing patents or defending
against claims or infringements raised by third parties, and license royalties or other amounts we may be required to pay to obtain
rights to third party intellectual property rights;
• potential new product candidates we identify and attempt to develop; and
• revenues we may derive either directly or in the form of royalty payments from future sales of UGN-101, UGN-102, UGN-201,
BOTOX/RTGel reverse thermal hydrogel and any other product candidates.
Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise
capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or
future commercialization efforts.
Until such time, if ever, as we can generate substantial product revenue, we may finance our cash needs through a combination of equity
offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of any additional securities
may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve
agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on
terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may
be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop
and market product candidates that we would otherwise prefer to develop and market ourselves.
For more information as to the risks associated with our future funding needs, see “Item 1.A – Risk Factors.” We will require substantial
additional financing to achieve our goals, and a failure to obtain this capital when needed and on acceptable terms, or at all, could force
us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.
Contractual Obligations and Commitments
The obligations detailed below do not include grants received from the IIA pursuant to which we will owe royalties or reimbursement
upon commercialization of our product candidates. As of December 31, 2019, the maximum royalty amount payable by us under these
funding arrangements is $2.1 million, excluding interest. Under the R&D Law, a company that received grants from the IIA may not
transfer IIA-funded technology or manufacture products developed with IIA-funded technology outside of the State of Israel without
first obtaining the approval of the IIA. We may be required to pay increased royalties of up to 300% of the amount of the original grant
and other amounts; if we do not receive such approvals, we may be required to pay significant penalties. In January 2020, the IIA
approved our request to unwind our obligation to the IIA as a transfer of knowledge. See Note 15 to the Consolidated Financial
Statements included in this report for additional information.
The following summarizes our significant contractual obligations as of December 31, 2019:
Less Than
1 Year
1 To 3
Years
Payments Due By Period
3 To 5
Years
(in thousands)
Greater Than
5 Years
Total
Operating lease obligations (1)
$
1,758 $
2,718 $
58 $
— $
4,534
(1) Operating lease obligations consist of payments pursuant to lease agreements for our Israeli offices and laboratory facility and our
New Jersey, New York and Los Angeles offices.
In November 2014, we entered into a lease agreement for our Israeli offices effective from February 1, 2015 for a period of three years,
with an option to extend the lease agreement by an additional three years. In April 2016, we signed an addendum to the November 2014
lease agreement in order to increase the office space rented and extend the rental period. In November 2017, we signed an additional
addendum to the November 2014 lease agreement in order to increase the office space rented. The lease agreement was extended in
September 2019 for three years until September 30, 2022.
76
In September 2017, Urogen Pharma, Inc. entered into a new lease agreement for its current New York office for a period of
approximately 41 months, which period commenced in October 2017. The new lease agreement will terminate on February 1, 2021,
unless earlier terminated in accordance with its terms.
In April 2018, we entered into a new lease agreement for an office in Los Angeles, CA. The lease commencement date was July 10, 2018 and
terminates in March 2024.
In November 2019, we subleased our offices in Los Angeles, CA. The lease commencement date was January 1, 2020 and terminates in
March 2024. The subtenants exercised their early access clause and moved into the premises the end of November 2019.
Also, in November 2019, we entered into a new lease agreement, dated effective October 31, 2019, for an office in Princeton, NJ. The
lease commencement date was November 29, 2019 and the lease term is 38 months.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation
of these 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 as of the dates of the balance sheets and the reported amounts of revenue and
expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ
materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of
changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, are reflected in our financial
statements prospectively from the date of the change in estimate.
We define our critical accounting policies as those accounting principles generally accepted in the United States that require us to make
subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition
and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are
more fully described in Note 3 to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the
following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and
judgments.
Leases
We are a lessee in several noncancelable operating leases, primarily for office space, office equipment and vehicles. We currently have
no finance leases.
We account for leases in accordance with ASC Topic 842, “Leases”. We determine if an arrangement is a lease at inception. Right-of-
use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term as of
the commencement date. Operating lease ROU assets are presented as operating lease right of use assets on the consolidated balance
sheets. The current portion of operating lease liabilities is included in other current liabilities and the long-term portion is presented
separately as operating lease liabilities on the consolidated balance sheets.
Lease expense is recognized on a straight-line basis for operating leases. Variable lease payments associated with our leases are
recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease
payments are presented as operating expense on the consolidated statements of operations in the same line item as expense arising from
fixed lease payments.
Our lease terms may include options to extend the lease. The lease extensions are included in the measurement of the right of use asset
and lease liability when it is reasonably certain that it will exercise that option.
Because most of our leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information
available at the commencement date in determining the present value of lease payments on an individual lease basis. Our 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.
We have lease agreements with lease and non-lease components. We applied the modified retrospective transition method and elected
the transition option to use the effective date of January 1, 2019 as the date of initial application (“Transition Date”). Consequently, the
disclosures required under Topic 842 are not provided for dates and periods before January 1, 2019.
77
Revenues
We derive virtually all our revenues from a license and supply agreement with Allergan. Under the agreement, we grant Allergan an
exclusive license to develop, commercialize, and otherwise exploit products that contain RTGel and agrees to supply Allergan with pre-
clinical and clinical quantities of the RTGel product, also referred to as the RTGel vials. The license agreement contains up-front license
fees, future supply fees, development, regulatory, and sales-based milestone payments, and sales-based royalty payments.
We determined that Allergan is our customer and the license and supply agreements are in scope of accounting standards codification, or
ASC, 606, which we adopted as of January 1, 2018. We adopted ASC 606 under the modified retrospective method, which did not have
a material impact on the Consolidated Statements of Operations. Previously, we analyzed revenues under ASC 605, which states that
revenue is recognized only when all of the following conditions have been met: (i) there is persuasive evidence of an arrangement; (ii)
delivery has occurred: (iii) the fee is fixed or determinable: and (iv) collectability of the fee is reasonably assured. The adoption of
ASC 606 did not have a material impact on the timing and manner of recognized revenues.
Under ASC 606, in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under the agreements
with Allergan, we performed the following steps:
1) Identification of the contract(cid:9)
2) Determination of whether the promised goods or services are performance obligations including whether they are distinct in the
context of the contract(cid:9)
3) Measurement of the transaction price, including the constraint on variable consideration(cid:9)
4) Allocation of the transaction price to the performance obligations(cid:9)
5) Recognition of revenue when or as the Company satisfies each performance obligation.
The license agreement contains two performance obligations: (a) the license component and (b) Allergan’s right to require supply
services of RTGel vials from us. The license component has standalone value (and therefore is accounted for separately from the
supply services) since Allergan can use the license for its intended purposes without the Company’s supply services.
In an arrangement with multiple goods and services, a good or service that is promised to a customer shall be considered a separate
performance obligation if all the following criteria are met:
1) The customer can benefit from the good or service either on its own or together with other resources that are readily available to
the customer (that is, the good or service is capable of being distinct); and
2) The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
(that is, the promise to transfer the good or service is distinct within the context of the contract).
Allocating the Consideration in the Arrangement
Since the license to our intellectual property was determined to be functional and distinct from the other performance obligations
identified in the arrangement, we recognized revenues from non-refundable, up-front fees allocated to the license when the license was
transferred to Allergan and Allergan was able to use and benefit from the license.
Development and Regulatory Milestone Payments
At the inception of an arrangement that includes development milestone payments, we evaluate whether the development milestones are
considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount
method. If it is probable that a significant revenue reversal would not occur, the associated development milestone value is included in
the transaction price. Development milestone payments that are not within our control or the licensee, such as regulatory approvals, are
not considered probable of being achieved until those approvals are received. The milestones are allocated entirely to the license
performance obligation, as (1) the terms of milestone and royalty payments relate specifically to the license and (2) allocating milestones
and royalties to the license performance obligation is consistent with the overall allocation objective, because management’s estimate of
the supply fee approximates the standalone selling price for RTGel vials and management’s estimate of milestones and royalties
approximates the standalone selling price of the license. During the year ended December 31, 2017, we recognized revenue of $7.5
million related to a development milestone payment resulting from Allergan’s submission of an IND application for our RTGel in
combination with Allergan’s BOTOX for the treatment of overactive bladder to the U.S. FDA.
78
Royalties Based on Allergan’s Revenue
We are also entitled to royalties based on Allergan’s revenue from its product, however, these amounts would only be recognized
when the conditions are met.
Supply of RTGel
We recognize revenue related to the supply of RTGel at a point in time, upon delivery to Allergan. During the years ended December 31,
2018 and 2017, we recognized $1.1 million and $0.7 million of revenue related to RTGel vials supplied to Allergan, respectively.
Shipping and handling costs associated with supply of RTGel vials are accounted for as a fulfillment cost and are in included in cost of
revenues.
Research and Development
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, API, other manufacturing costs and professional services. The costs of services performed
by others in connection with the research and development activities of an entity, including research and development conducted by
others on behalf of the entity, shall be included in research and development costs.
The costs of intangibles that are purchased from others for a particular research and development project and that have no alternative
future uses (in other research and development projects or otherwise) and therefore no separate economic values are recognized as
research and development expense at the time the costs are incurred.
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.
Share-Based Compensation
We account for employees’ and directors’ share-based payment awards classified as equity awards using the grant-date fair value
method. The fair value of share-based payment transactions is recognized as an expense over the requisite service period. We account
for forfeitures as they occur according to the FASB’s Accounting Standards Update, or ASU, 2016-09, Improvements to Employee
Share-Based Payment Accounting.
We elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule
using the straight-line method and to value the awards based on the single-option award approach. Performance based awards are
expensed over the requisite service period when the achievement of performance criteria is probable.
As of December 31, 2018, we adopted ASU 2018-07, Compensation-Stock Compensation, which establishes that the measurement of
equity-classified nonemployee awards will be fixed at the grant date. The adoption of ASU 2018-07 did not have an impact on the
consolidated statements of operations.
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.
79
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Fluctuation Risk
Some of the securities in which we invest have market risk in that a change in prevailing interest rates may cause the principal amount of
the marketable securities to fluctuate. Financial instruments that potentially subject us to significant concentrations of credit risk consist
primarily of cash and cash equivalents. As of December 31, 2019, we had $49.7 million in cash and cash equivalents. We invest our cash
primarily in money market accounts, but from time to time may invest in commercial paper and debt instruments of financial
institutions, corporations, U.S. government-sponsored agencies and the U.S. Treasury. The primary objectives of our investment
activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable
securities without significantly increasing risk. We have established guidelines regarding approved investments and maturities of
investments, which are designed to maintain safety and liquidity. If a 10% change in interest rates were to have occurred on December
31, 2019, this change would not have had a material effect on the fair value of our cash and cash equivalents as of that date.
Inflation Risk
Inflation generally may affect us by increasing our cost of labor and clinical trial costs. Inflation has not had a material effect on our
business, financial condition or results of operations during the years ended December 31, 2019, 2018 or 2017.
Foreign Currency Exchange Risk
The U.S. dollar is our functional and reporting currency. However, a significant portion of our operating expenses are incurred in NIS.
As a result, we are exposed to the risk that the NIS may appreciate relative to the dollar, or, if the NIS instead devalues relative to the
dollar, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag
behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results
of operations would be adversely affected. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation,
if any, of the NIS against the dollar. For example, although the dollar appreciated against the NIS in 2018 by 8.1%, the dollar depreciated
against the NIS in 2019 by 7.8%. If the dollar cost of our operations in Israel increases, our dollar-measured results of operations will be
adversely affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in
the future.
We do not currently engage in currency hedging activities in order to reduce this currency exposure, but we may begin to do so in the
future. Instruments that may be used to hedge future risks may include foreign currency forward and swap contracts. These instruments
may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency
fluctuations.
80
Item 8. Financial Statements and Supplementary Data
UroGen Pharma, Ltd.
Index to financial statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Pages
82
84
85
86
87
88
81
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of UroGen Pharma, Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of UroGen Pharma Ltd. and its subsidiary (the “Company”) as of
December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity and
cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's
Annual Report on Internal Control over Financial Reporting under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error
or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
82
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated
or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complex judgments. We determined there are no critical
audit matters.
Tel Aviv, Israel
March 2, 2020
/s/Kesselman & Kesselman
Certified Public Accountants (Isr.)
A member of PricewaterhouseCoopers International Limited
We have served as the Company's auditor since 2010.
83
UROGEN PHARMA, LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Assets
CURRENT ASSETS:
Cash and cash equivalents
Marketable securities
Restricted cash
Prepaid expenses and other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property and equipment, net
Restricted deposit
Right of use asset
Marketable securities
Other non-current assets
TOTAL ASSETS
Liabilities and Shareholders' equity
CURRENT LIABILITIES:
Accounts payable and accrued expenses
Employee related accrued expenses
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITY:
Long-term lease liability
$
$
$
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDERS’ EQUITY:
Ordinary shares, NIS 0.01 par value; 100,000,000 shares authorized at
December 31, 2019 and 2018; 21,026,184 and 16,214,883 shares issued
and outstanding as of December 31, 2019 and 2018, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
December 31,
2019
2018
49,688 $
97,389
523
1,034
148,634
977
223
3,735
48,555
264
202,388 $
11,186 $
6,711
1,585
19,482
2,604
22,086
101,318
—
253
672
102,243
948
51
—
—
317
103,559
8,540
4,925
—
13,465
—
13,465
57
407,986
(228,017)
276
180,302
202,388 $
44
212,921
(122,871)
—
90,094
103,559
The accompanying notes are an integral part of these consolidated financial statements.
84
UROGEN PHARMA, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
REVENUES
COST OF REVENUES
GROSS PROFIT (LOSS)
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT EXPENSES
GENERAL AND ADMINISTRATIVE EXPENSES
OPERATING LOSS
INTEREST AND OTHER (INCOME) EXPENSES, NET
LOSS BEFORE INCOME TAXES
INCOME TAX EXPENSE
NET LOSS
2019
Year Ended December 31,
2018
2017
$
18 $
—
18
49,297
60,199
(109,478)
(4,332)
(105,146)
—
$
(105,146) $
1,128 $
1,803
(675)
36,934
39,571
(77,180)
(1,648)
(75,532)
125
(75,657) $
8,158
600
7,558
18,697
8,811
(19,950)
31
(19,981)
19
(20,000)
STATEMENTS OF COMPREHENSIVE LOSS
NET LOSS
OTHER COMPREHENSIVE INCOME:
UNREALIZED GAIN ON MARKETABLE SECURITIES
COMPREHENSIVE LOSS
LOSS PER ORDINARY SHARE BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
USED IN COMPUTATION OF BASIC AND DILUTED LOSS
PER ORDINARY SHARE
$
(105,146) $
(75,657) $
(20,000)
276
(104,870) $
(5.12) $
$
$
—
(75,657) $
(4.80) $
—
(20,000)
(2.14)
20,528,727
15,754,193
9,716,790
The accompanying notes are an integral part of these consolidated financial statements.
85
UROGEN PHARMA, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share amounts)
Ordinary Shares
Preferred Shares
Additional
paid-in
capital
Accumulated
Deficit
Other
Comprehensive
Income
Total
BALANCE AS OF JANUARY 1, 2017 2,305,743 $
CHANGES DURING 2017
Number of
Shares
Number of
Shares
6 5,193,427 $
Amount
Amount
Amounts
13 $ 43,502 $ (27,214) $
— $ 16,307
Exercise of options into ordinary shares
Share-based compensation
Exercise of warrants into preferred
shares
Exercise of preferred shares into
ordinary shares
IPO, net of issuance expense and
underwriters discounts of $6,105
Net loss
5,557,463
5,144,378
BALANCE AS OF JANUARY 1, 2018 13,751,390 $
CHANGES DURING 2018
743,806
2
402
6,300
364,036
1
4,731
14 (5,557,463)
(14)
15
37
60,757
(20,000)
— $ — $115,692 $ (47,214) $
60,772
(20,000)
— $ 68,515
404
6,300
4,732
—
Exercise of options into ordinary shares
Share-based compensation
Issuance of ordinary shares in public
offering, net of issuance expenses
Net loss
780,567
2
1,682,926
5
44
BALANCE AS OF JANUARY 1, 2019 16,214,883 $
CHANGES DURING 2019
2,399
30,642
64,188
(75,657)
— $ — $212,921 $ (122,871) $
Exercise of options into ordinary shares
Share-based compensation
Issuance of ordinary shares in public
offering, net of issuance expenses
Other comprehensive income
Net loss
603,984
2
3,662
29,967
4,207,317
11
161,436
(105,146)
2,401
30,642
64,193
(75,657)
— $ 90,094
3,664
29,967
276
161,447
276
(105,146)
BALANCE AS OF DECEMBER 31,
2019
21,026,184 $
57
— $ — $407,986 $ (228,017) $
276 $ 180,302
The accompanying notes are an integral part of these consolidated financial statements.
86
UROGEN PHARMA, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustment to reconcile net loss to net cash from operating activities:
Depreciation and amortization
Amortization/Accretion on marketable securities
Stock-based compensation
Fair value adjustment of warrants for preferred shares
Realized loss on sale of short-term investment
Amortization of right of use asset
Change in lease liability
Changes in operating assets and liabilities:
Decrease (increase) in inventory
Decrease in accounts receivable
(Increase) decrease in prepaid expenses and other current assets
Increase in accounts payable and accrued expenses
(Decrease) increase in deferred revenues
Increase in employee related accrued expenses
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short-term investments
Purchase of marketable securities
Maturities of marketable securities
Change in restricted deposit
Purchase of property and equipment
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options into ordinary shares
Proceeds from exercise of warrants for preferred shares
Issuance cost for shelf filing
Issuance of ordinary shares, net of issuance expenses
Issuance cost for secondary offering
Net cash provided by financing activities
INCREASE IN CASH AND CASH EQUIVALENTS
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT
BEGINNING OF THE YEAR
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT
END OF THE YEAR
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
2019
Year Ended December 31,
2018
2017
$
(105,146) $
(75,657) $
(20,000)
296
(572)
29,967
—
—
1,028
(910)
—
—
(394)
2,928
—
1,786
(71,017)
—
(197,686)
52,590
(172)
(325)
(145,593)
3,664
—
(76)
161,662
—
165,250
(51,360)
417
—
30,642
—
100
—
—
316
—
318
4,205
(650)
2,975
(37,334)
35,901
—
—
(54)
(560)
35,287
2,401
—
—
64,235
(215)
66,421
64,374
207
—
6,300
168
—
—
—
(211)
83
(562)
2,534
650
1,263
(9,568)
—
(36,001)
—
(5)
(271)
(36,277)
404
382
—
60,841
(42)
61,585
15,740
101,571
37,197
21,457
$
50,211 $
101,571 $
37,197
Non-cash issuance cost
Non-cash new lease liabilities
Exercise of warrants to preferred shares
$
$
$
188 $
1,741 $
— $
102 $
— $
— $
202
—
4,732
The accompanying notes are an integral part of these consolidated financial statements.
87
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-BUSINESS AND NATURE OF OPERATIONS
Nature of Operations
UroGen Pharma Ltd. is an Israeli company incorporated in April 2004.
UroGen Pharma Inc., a subsidiary of UroGen Pharma Ltd., was incorporated in Delaware in October 2015 and began operating in
February 2016.
UroGen Pharma Ltd. and UroGen Pharma Inc. (together the “Company”) is a biopharmaceutical company dedicated to building and
commercializing novel solutions that treat specialty cancers and urologic diseases.
As of the date of issuance of the consolidated financial statements, the Company has the ability to fund its planned operations for at least
the next 12 months. However, the Company’s product candidates may never achieve commercialization and it will continue to incur
losses for the foreseeable future. Therefore, in order to fund the Company’s research and development expenses, general and
administrative expenses and capital expenditures until such time that the Company can generate substantial revenues, the Company may
need to raise additional funds.
NOTE 2-BASIS OF PRESENTATION AND MANAGEMENT PLANS
The Company has not generated any revenue from the sale of products since its inception. The Company has experienced net losses
since its inception and has an accumulated deficit of $228.0 million and $122.9 million as of December 31, 2019 and 2018, 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 accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United
States.
The success of the Company depends on its ability to develop its technologies to the point of U.S. Food and Drug Administration
(“FDA”) approval and subsequent revenue generation or through the sale, merger, or other transfer of all or substantially all of the
Company’s assets and, accordingly, to raise enough capital to finance these developmental efforts. In the future, management will need
to raise additional capital to finance the continued operating and capital requirements of the Company. Any amounts raised will be used
to further develop the Company’s technologies, acquire additional product licenses and for other working capital purposes. There can be
no assurances that the Company will be able to secure such additional financing, or if available, that it will be sufficient to meet its needs.
If the Company cannot obtain adequate working capital, it will be forced to reevaluate its planned business operations.
NOTE 3-SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company’s consolidated financial statements include the accounts of its subsidiary, UroGen Pharma Inc. Intercompany balances
and transactions have been eliminated during consolidation.
Use of Estimates
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 most significant estimates and assumptions relate to the fair
value of share-based compensation and timing of revenue recognition.
Functional Currency
The U.S. dollar (“Dollar”) is the currency of the primary economic environment in which the operations of the Company and subsidiary
are conducted. Therefore, the functional currency of the Company is the Dollar.
88
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accordingly, transactions in currencies other than the Dollar are measured and recorded in the functional currency using the exchange
rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies
other than the Dollar are measured using the official exchange rate at the balance sheet date. The effects of foreign currency re-
measurements are recorded in the consolidated statements of operations as “Interest and other (income) expenses, net.”
Cash and Cash Equivalents
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.
Marketable Securities
The Company classifies its marketable securities as available-for-sale in accordance with the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments — Debt Securities”. Available-for-sale debt securities
are carried at fair value with unrealized gains and losses reported in other comprehensive income/loss within shareholders’ equity.
Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are
included in interest and other income (expense), net. The cost of securities sold is based on the specific-identification method.
The Company reviews its available-for-sale securities for other-than-temporary declines in fair value below its cost basis each quarter
and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. This evaluation is based
on a number of factors that include the length of time and extent to which fair value has been less than the cost basis and adverse
conditions related specifically to the security, and the intent to sell, or whether the Company will more likely than not be required to sell,
the security before recovery of its amortized cost basis. The Company’s assessment of whether a security is other-than-temporarily
impaired could change in the future due to new developments or changes in assumptions related to any particular security.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and
cash equivalents and marketable securities. The primary objectives for the Company’s investment portfolio are the preservation of
capital and the maintenance of liquidity. The Company does not enter into any investment transaction for trading or speculative
purposes.
The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market
instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities, and places
restrictions on maturities and concentration by type and issuer. The Company maintains cash balances in excess of amounts insured by
the FDIC and concentrated within a limited number of financial institutions. The accounts are monitored by management to mitigate the
risk.
Income Taxes
The Company provides for income taxes based on pretax income, if any, and applicable tax rates available in the various jurisdictions in
which we operate. Deferred taxes are computed using the asset and liability method. Under the asset and liability method, deferred
income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is
more likely than not that the deferred taxes will not be realized in the foreseeable future.
The Company follows a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate the tax
position for recognition by determining if the available evidence indicates that it is more likely than not that the position will be
sustained upon examination by the taxing authorities based on the technical merits of the position. If this threshold is met, the second
step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. As of
December 31, 2019 and 2018, the Company had not accrued a provision for uncertain tax positions. See Note 12 for further discussion
related to income taxes.
89
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Property and Equipment
Property and equipment is recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment
charges. We review our property and equipment assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Annual rates of depreciation are as follows:
Computers and software
Laboratory equipment
Furniture
Manufacturing equipment
%
33
15-30
6-15
50
Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. See Note 6
for further discussion regarding property and equipment.
Leases
The Company is a lessee in several noncancelable operating leases, primarily for office space, office equipment and vehicles. The
Company currently has no finance leases.
Commencing January 1, 2019, the Company accounts for leases in accordance with ASC Topic 842, “Leases”. The Company
determines if an arrangement is a lease at inception. Right-of-use, or ROU, assets and operating lease liabilities are recognized based on
the present value of lease payments over the lease term as of the commencement date. Operating lease ROU assets are presented as
operating lease right of use assets on the consolidated balance sheets. The current portion of operating lease liabilities is included in other
current liabilities and the long-term portion is presented separately as operating lease liabilities on the consolidated balance sheets.
Lease expense is recognized on a straight-line basis for operating leases. Variable lease payments associated with the Company’s leases
are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable
lease payments are presented as operating expense on the consolidated statements of operations in the same line item as expense arising
from fixed lease payments.
The Company’s lease terms may include options of the Company as the lessee to extend the lease. The lease extensions are included in
the measurement of the right of use asset and lease liability if it is reasonably certain that it will exercise that option.
Because the Company’s leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information
available at the commencement date in determining the present value of lease payments on an individual lease basis. The Company’s
incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to
the lease payments under similar terms.
The Company has lease agreements with lease and non-lease components and has elected the practical expedient to combine lease and
non-lease components for all underlying classes of assets.
We applied the modified retrospective transition method and elected the transition option to use the effective date of January 1, 2019 as
the date of initial application (“Transition Date”). Consequently, the disclosures required under Topic 842 are not provided for dates and
periods before January 1, 2019.
Topic 842 provides for a number of optional practical expedients in transition. The Company elected the ‘package of practical
expedients’, which permits not to reassess under Topic 842 its prior conclusions about lease identification, lease classification, and
initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not
being applicable to the Company.
Topic 842 had a material impact on our consolidated balance sheets but did not have an impact on our consolidated statements of
operations. The most significant impact was the recognition of $3.7 million in ROU assets and $4.2 million in lease liabilities.
90
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
Accounts Payable and Accrued Expenses
Accrued expenses and other current liabilities consist of the following as of December 31, 2019 and 2018, respectively (in thousands):
Accounts payable
Accrued clinical expenses
Accrued research and development costs
Accrued general and administrative expenses
Accrued other expense
Total accrued expenses and other current liabilities
December 31,
2019
December 31,
2018
$
$
4,694 $
399
2,644
2,767
682
11,186 $
4,272
673
780
1,029
1,786
8,540
Revenues
The Company derives virtually all of its revenues from its license and supply agreement with Allergan. Under the agreement, the
Company grants Allergan an exclusive license to develop, commercialize, and otherwise exploit products that contain RTGel and agrees
to supply Allergan with pre-clinical and clinical quantities of the RTGel product, also referred to as the RTGel vials. The license
agreement contains up-front license fees, future supply fees, development, regulatory, and sales-based milestone payments, and sales-
based royalty payments.
The Company determined that Allergan is its customer and the license and supply agreements are in scope of ASC 606, which was
adopted as of January 1, 2018. The Company adopted ASC 606 under the modified retrospective method, which did not have a material
impact on the Consolidated Statements of Operations. Previously, the Company analyzed revenues under ASC 605, which states that
revenue is recognized only when all of the following conditions have been met: (i) there is persuasive evidence of an arrangement; (ii)
delivery has occurred: (iii) the fee is fixed or determinable: and (iv) collectability of the fee is reasonably assured. The adoption of
ASC 606 did not have a material impact on the timing and manner of recognized revenues.
Under ASC 606, in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under the agreements
with Allergan, the Company performs the following steps:
1) Identification of the contract(cid:9)
2) Determination of whether the promised goods or services are performance obligations including whether they are distinct in the
context of the contract(cid:9)
3) Measurement of the transaction price, including the constraint on variable consideration(cid:9)
4) Allocation of the transaction price to the performance obligations(cid:9)
5) Recognition of revenue when or as the Company satisfies each performance obligation.
In an arrangement with multiple goods and services, a good or service that is promised to a customer shall be considered a separate
performance obligation if all of the following criteria are met:
1) The customer can benefit from the good or service either on its own or together with other resources that are readily available to
the customer (that is, the good or service is capable of being distinct); and
2) The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
(that is, the promise to transfer the good or service is distinct within the context of the contract).
The license agreement contains two performance obligations: (a) the license component and (b) Allergan’s right to require supply
services of RTGel vials from the Company. The license component has standalone value (and therefore is accounted for separately
from the supply services) since Allergan can use the license for its intended purposes without the Company’s supply services.
91
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Allocating the Consideration in the Arrangement
Since the license to the Company’s intellectual property was determined to be functional and distinct from the other performance
obligations identified in the arrangement, the Company recognized revenues from non-refundable, up-front fees allocated to the license
when the license was transferred to Allergan and Allergan was able to use and benefit from the license. During the year ended December
31, 2016, the Company received consideration in an amount of $17.5 million for both the license of the intellectual property as well as
Allergan’s right to future supply services (which would be provided in consideration for future payments to the Company according to
the pricing stipulated in the supply agreement). The Company determined that the pricing of the supply services represented their
standalone selling price. Accordingly, the Company allocated the entire upfront fee of $17.5 million to the license performance
obligation.
Development and Regulatory Milestone Payments
At the inception of an arrangement that includes development milestone payments, the Company evaluates whether the development
milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most
likely amount method. If it is probable that a significant revenue reversal would not occur, the associated development milestone value is
included in the transaction price. Development milestone payments that are not within the control of the Company or the licensee, such
as regulatory approvals, are not considered probable of being achieved until those approvals are received. The milestones are allocated
entirely to the license performance obligation, as (1) the terms of milestone and royalty payments relate specifically to the license and (2)
allocating milestones and royalties to the license performance obligation is consistent with the overall allocation objective, because
management’s estimate of the supply fee approximates the standalone selling price for RTGel vials and management’s estimate of
milestones and royalties approximates the standalone selling price of the license. During the year ended December 31, 2017, the
Company recognized revenue of $7.5 million related to a development milestone payment resulting from Allergan’s submission of an
IND application for the Company’s RTGel in combination with Allergan’s BOTOX for the treatment of overactive bladder to the U.S.
FDA.
Royalties Based on Allergan’s Revenue
The Company is also entitled to royalties based on Allergan’s revenue from its product and recognize revenue related to the sales-base
royalty when the related sales occur,
Supply of RTGel to Allergan
The Company recognizes revenue related to supply of RTGel at a point in time, upon delivery to Allergan. During the years ended
December 31, 2019, 2018 and 2017, the Company recognized $18,000, $1.1 million and $0.7 million of revenue related to RTGel vials
supplied to Allergan, respectively.
Shipping and handling costs associated with supply of RTGel vials are accounted for as a fulfillment cost and are in included in cost of
revenues.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors,
executives, finance, commercial, medical affairs, business development, investor relations and human resources functions). Other
significant costs include commercial, medical affairs, external professional service costs, facility costs, accounting and audit services,
legal services and other consulting fees. 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.
Research and Development
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, professional services, active pharmaceutical ingredient, or API, and other related
manufacturing costs. The costs of services performed by others in connection with the research and development activities of an entity,
including research and development conducted by others on behalf of the entity, 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.
92
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
License fees and development milestone payments related to in-licensed products and technology are expensed as in-process research
and development if it is determined at that point that they have no established alternative future use.
On November 8, 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 non-muscle invasive bladder
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% to 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.
No inventory was purchased on the effective date and subsequent purchases of pre-clinical and clinical supplies are at arm’s length and
are priced at cost plus mark-up. The Company’s acquired right to Agenus’s intellectual property represents a single identifiable asset
sourced from the license agreement. Therefore, all the fair value associated with the license agreement is concentrated in one identifiable
asset and is not considered a business in accordance with ASC 805-10-55-5A. Therefore, the Company has accounted for the right to
Agenus’s intellectual property acquired under the license agreement as an acquisition of an asset.
Share-Based Compensation
Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the
required service period, which is equal to the vesting period. The fair value of stock options is determined using the Black-Scholes
option-pricing model. The fair value of a restricted stock unit equaled the closing price of our ordinary shares on the grant date.The
Company accounts for forfeitures as they occur according to the FASB’s Accounting Standards Update (ASU) 2016-09, Improvements
to Employee Share-Based Payment Accounting.
The Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting
schedule using the straight-line method and to value the awards based on the single-option award approach.
As of December 31, 2018, the Company adopted ASU 2018-07, Compensation-Stock Compensation, which establishes that the
measurement of equity-classified nonemployee awards will be fixed at the grant date. The adoption of ASU 2018-07 did not have an
impact on the condensed consolidated statements of operations.
Interest and Other (Income) Expense, net
Interest and Other (Income) Expense, net, consisted of the following as of December 31, 2019 and 2018 (in thousands):
Changes in fair value of warrants for preferred
shares
Interest income on cash, cash equivalents and
marketable securities
Realized loss on sale of short-term investment
Other expense (income)
Total interest and other (income) expenses
2019
Year Ended December 31,
2018
2017
$
—
$
—
$
(4,616)
—
284
(4,332)
$
(1,872)
100
124
(1,648)
$
$
93
168
(125)
—
(12)
31
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Net Loss per Common Share
Basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of
common shares outstanding. Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is
increased to include the number of additional common shares that would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. In addition, the net loss attributable to common shareholders is adjusted for
Series A and A-1 Preferred Stock dividends for the periods in which Series A and A-1 Preferred Stock is outstanding.
For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted loss per share as their effect is
anti-dilutive.
The following table summarizes the calculation of basic and diluted loss per common share for the periods presented (in thousands,
except share and per share amounts):
Basic and diluted:
Loss attributable to equity holders of the
Company
Dividend accumulated for preferred shares
during the period
Loss attributable to equity holders of the
Company, after deducting dividend
accumulated for preferred shares
Weighted-average number of ordinary shares
Loss per ordinary share
$
$
$
$
2019
Year Ended December 31,
2018
2017
105,146 $
75,657 $
20,000
— $
— $
825
105,146 $
75,657 $
20,528,727
15,754,193
5.12 $
4.80 $
20,825
9,716,790
2.14
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-13, Financial
Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 requires an entity
to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that
reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities with unrealized losses,
the standard requires allowances to be recorded through net income instead of directly reducing the amortized cost of the investment
under the current other-than-temporary impairment model. The standard is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of this standard to have a
significant impact on our financial statements.
Recently Adopted Accounting Pronouncements
In February 2016, FASB issued ASU No. 2016-02, “Leases”, or Topic 842. Topic 842 supersedes existing guidance in Leases (“Topic 840”).
Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-
10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. Topic 842 requires lessees to recognize
right-of-use, or ROU, assets and lease liabilities on the balance sheet for leases with lease terms greater than twelve months, including those
classified as operating leases. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense
recognition in the income statement. The lease liability is measured at the present value of the unpaid lease payments and the ROU assets are
derived from the calculation of the lease liability. Lease payments will include fixed and in-substance fixed payments, variable payments based
on an index or rate, exercise price of purchase options that are reasonably certain to be exercised, termination penalties, and probable amounts
the lessee will owe under a residual value guarantee. Topic 842 also requires lessees to disclose key information about leasing arrangements.
Lessor accounting will remain largely unchanged.
The Company applied the modified retrospective transition method and elected the transition option to use the effective date of January 1, 2019
as the date of initial application, or Transition Date. Consequently, financial information was not updated, and the disclosures required under the
Topic 842 were not provided for dates and periods before January 1, 2019.
94
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4-FAIR VALUE MEASUREMENTS
The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent
framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a
recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should
be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in
measuring fair value as follows:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include
quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets
that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The carrying amounts of the Company’s other current assets, accounts payable and accrued liabilities are generally considered to be
representative of their fair value because of the short-term nature of these instruments. No transfers between levels have occurred during
the periods presented.
Assets and liabilities measured at fair value on a recurring basis based on Level 1, Level 2, and Level 3 fair value measurement criteria
as of December 31, 2019 are as follows (in thousands):
Quoted Prices
in Active
Fair Value Measurements Using
Significant
Other
Significant
Balance as of Markets for
December 31, Identical Assets
2019
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Marketable securities:
US government
Corporate bonds
Commercial paper
Money market funds(1)
Certification of deposit
$
$
66,094 $
68,084
7,658
16,998
4,108
162,942 $
66,094 $
—
—
16,998
—
83,092 $
— $
68,084
7,658
—
4,108
79,850 $
—
—
—
—
—
—
(1)
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, Level 2, and Level 3 fair value measurement criteria
as of December 31, 2018 are as follows (in thousands):
Quoted Prices
in Active
Fair Value Measurements Using
Significant
Other
Significant
Balance as of Markets for
December 31, Identical Assets
2018
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Assets:
Money market funds(1)
$
89,965 $
89,965 $
— $
—
(1)
Included within cash and cash equivalents on the Company’s consolidated balance sheets.
The Company’s investments in money market funds are valued based on publicly available quoted market prices for identical securities
as of December 31, 2019 and 2018.
95
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5-MARKETABLE SECURITIES
The following table summarizes the Company’s marketable securities as of December 31, 2019 (in thousands):
Marketable securities:
US government
Corporate bonds
Commercial paper
Money market funds(1)
Certificates of deposit
Amortized
Cost Basis
Unrealized
Gains
Unrealized
Losses
Fair Value
$
$
65,947 $
67,957
7,658
16,998
4,106
162,666 $
147 $
131
—
—
2
280 $
— $
(4)
—
—
—
(4) $
66,094
68,084
7,658
16,998
4,108
162,942
(1)
Included within cash and cash equivalents on the Company’s consolidated balance sheets.
The Company classifies its marketable securities as available-for-sale, and they consist of all debt securities. As of December 31, 2019,
they were in a net unrealized gain position of $0.3 million. Unrealized gains and losses on available-for-sale debt securities are included
as a component of comprehensive loss.
As of December 31, 2019, the aggregate fair value of marketable securities held by the Company in an unrealized loss position was $17.9
million, which consisted of 17 securities. No securities have been in an unrealized loss position for more than 12 months.
As of December 31, 2019 and 2018, the Company considered the decreases in market value on its marketable securities to be temporary
in nature and did not consider any of the Company’s investments to be other-than-temporarily impaired.
The Company’s marketable securities as of December 31, 2019 mature at various dates through November 2021. The fair values of
marketable securities by contractual maturity consist of the following (in thousands):
Maturities within one year
Maturities after one year through three years
NOTE 6-PROPERTY AND EQUIPMENT
December 31, 2019
$
114,386 $
48,556
162,942 $
December 31, 2018
89,965
—
89,965
$
Property and equipment, consists of the following as of December 31, 2019 and 2018 (in thousands):
Laboratory equipment
Computer equipment and software
Furniture
Leasehold improvements
Manufacturing equipment
Less: accumulated depreciation and amortization
Property and equipment, net
December 31,
2019
2018
$
$
259 $
416
544
530
226
1,975
(998)
977 $
241
271
395
561
227
1,695
(747)
948
Depreciation and amortization expense was $0.3 million $0.4 million and $0.2 million for the years ended December 31, 2019, 2018 and
2017, respectively.
96
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7-LEASES
In April 2016, UroGen Pharma Ltd. signed an addendum to its November 2014 lease agreement for the Company’s principal executive
offices located in Israel, in order to increase the office space rented and to extend the rent period until September 2019, with an option to
extend the lease for an additional period of three years. In 2019, the option was exercised, and the lease period was extended until
September 2022.
UroGen Pharma Inc. entered into a lease agreement for its office for a period of seven years commencing on May 1, 2016. As part of the
agreement it provided the lessor with a letter of credit which renews on an annual basis. On December 1, 2018 it completed a full
assignment and assumption of the lease to Allogene Therapeutics, Inc. The letter of credit was returned and there is no further liability to
the Company as of December 31, 2018.
In September 2017, UroGen Pharma Inc. entered into a new lease agreement for its New York headquarters. The lease agreement
commenced in October 2017 and shall terminate in February 2021. The remaining contractual obligation is approximately $0.8 million.
In April 2018, UroGen Pharma Inc. entered into a new lease agreement for an office in Los Angeles, CA. The lease commencement date
was July 10, 2018 and terminates in March 2024. The contractual obligation for the remainder of the lease is $1.2 million.
In November 2019, UroGen Pharma Inc. subleased its offices in Los Angeles, CA. The lease commencement date was January 1, 2020
and terminates in March 2024. The subtenants exercised their early access clause and moved into the premises the end of November
2019. The expected rental income over the lease term is approximately $1.2 million. The Company accounts for the sublease as on
operating lease in accordance with ASC 842-10-25-2 and ASC 842-10-25-3. The main lease was considered for impairment and the
amount was determined to be immaterial.
Also, in November 2019, UroGen Pharma Inc. entered into a new lease agreement, dated effective October 31, 2019, for an office in
Princeton, NJ. The lease commencement date was November 29, 2019 and the lease term is 38 months. The minimum lease obligation is
approximately $1.7 million.
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 2024, with varying renewal and termination options.
The components of lease cost for the year ended December 31, 2019 were as follows (in thousands):
Operating lease cost
Sublease income
Variable lease cost
Year Ended
December 31, 2019
$
$
1,243
(19)
105
1,329
The amounts recognized upon adoption and as of December 31, 2019 were as follows (in thousands):
Right of use asset
Long-term lease liability
Other current liabilities
January 1, 2019 December 31, 2019
3,735
$
2,604
1,585
3,022 $
2,429
929
As of December 31, 2019, no impairment losses have been recognized to date.
97
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Supplemental information related to leases for the periods reported is as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted-average remaining lease term of operating leases
Weighted-average discount rate of operating leases
As of December 31, 2019, maturities of lease liabilities were as follows (in thousands):
Years ending December 31,
2020
2021
2022
2023
2024 and thereafter
Total future minimum lease payments
Less: Interest
Present value of lease liabilities
As of December 31, 2018, maturities of lease liabilities were as follows (in thousands):
Years ending December 31,
2019
2020
2021
2022
2023
2024 and thereafter
Total future minimum lease payments
Year Ended
December 31, 2019
1,192
1,741
2.91 years
5.54%
Operating Leases
1,758
1,269
1,101
348
58
4,534
345
4,189
Operating Leases
1,136
1,251
676
567
301
58
3,989
$
$
$
$
$
Rent expense charged to operations was $1.2 million, $1.2 million, and $0.6 million for the years ended December 31, 2019, 2018 and
2017, respectively.
NOTE 8- LICENSE AND COLLABORATION AGREEMENTS
Allergan Agreement
In October 2016, the Company entered into the Allergan Agreement with Allergan and granted Allergan an exclusive worldwide license
to research, develop, manufacture and commercialize pharmaceutical products that contain RTGel and clostridial toxins (including
BOTOX), alone or in combination with certain other active ingredients, referred to as the Licensed Products, which are approved for the
treatment of adults with overactive bladder who cannot use or do not adequately respond to anticholinergics. Additionally, the Company
granted Allergan a non-exclusive, worldwide license to use certain of our trademarks as required for Allergan to practice its exclusive
license with respect to the Licensed Products.
Under the Allergan Agreement, Allergan is solely responsible, at its expense, for developing the Licensed Products and obtaining all
regulatory approvals for Licensed Products worldwide. Allergan is also solely responsible, at its expense, for commercializing the
Licensed Products worldwide after receiving the regulatory approval to do so. Allergan is required to use commercially reasonable
efforts to develop and commercialize the Licensed Products for overactive bladder in certain major market countries.
98
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company will supply Allergan with certain quantities of RTGel for development of Licensed Products through Phase 2 clinical
trials using BOTOX together with RTGel in patients with overactive bladder, at Allergan’s request and expense. Allergan has the right to
reduce the next milestone payment if there is a material supply failure from the Company. Prior to completion of the first Phase 2 clinical
trial, Allergan has the right to request that the Company transfers to Allergan our manufacturing process for RTGel and Allergan will
assume the responsibility to manufacture RTGel and Licensed Product for its own development and commercialization activities.
Allergan paid the Company a nonrefundable upfront license fee of $17.5 million upon signing the agreement, and, in the third quarter of
2017, the Company received an additional $7.5 million milestone payment upon the submission by Allergan of an IND to the FDA for a
Licensed Product. In October 2017, Allergan began a Phase 2 study of RTGel in combination with BOTOX for the treatment of
overactive bladder. Additionally, during the years ended December 31, 2018 and 2017 the Company recognized revenue of $1.1 million
and $0.7 million related to RTGel that was supplied to Allergan, respectively.
Further, the Company is eligible to receive additional material milestone payments of up to an aggregate of $200.0 million upon the
successful completion of certain development, regulatory and commercial milestones, including $20.0 million upon initiation of a Phase
3 clinical trial for a Licensed Product for overactive bladder; $15.0 million upon initiation of a Phase 3 clinical trial for a Licensed
Product for a specified second indication; $50.0 million and $25.0 million upon the first commercial sale of a Licensed Product for
overactive bladder in the United States and the European Union, respectively; $25.0 million and $15.0 million upon the first commercial
sale of a Licensed Product for a specified second indication in the United States and the European Union, respectively; and $50.0 million
upon net sales of all Licensed Products of $500.0 million. Allergan will pay the Company a tiered royalty in the low single digits based
on worldwide annual net sales of Licensed Products, subject to certain reductions for the market entry of competing products and/or loss
of our patent coverage of Licensed Products. The Company is responsible for payments to any third party for certain RTGel-related third
party intellectual properties.
Under the Allergan Agreement, Allergan granted the Company a non-exclusive, sublicensable, fully paid-up, perpetual, worldwide
license under any improvements Allergan makes to the composition, formulation, or manufacture of RTGel for the research,
development, manufacture and commercialization of any product containing RTGel and any active ingredient (other than a clostridial
toxin) for all indications other than indications covered by the agreement and an exclusive, sublicensable, royalty-bearing (in low single
digits), perpetual worldwide license under such improvements for use in the prevention or treatment of oncology indications.
Either party may terminate the Allergan Agreement for uncured material breach by the other party and for the insolvency of the other
party. The Company may terminate the Allergan Agreement if Allergan or its affiliates challenges any of our patents licensed to
Allergan and such patent challenge is not required under a court order or subpoena and is not a defense against a claim, action or
proceeding asserted by the Company, its affiliates or licensees against Allergan, its affiliates or sublicensees. In addition, Allergan may
unilaterally terminate the Allergan Agreement for any reason upon advance notice. If Allergan has the right to terminate the Allergan
Agreement due to an uncured material breach by the Company, Allergan may elect to continue the agreement and reduce all future
milestone and royalty payment obligations to the Company by a specified percentage. In the event of any termination of the Allergan
Agreement, Allergan will assign or grant a right of reference to any regulatory documentation related to RTGel to the Company, all
rights and licenses to Allergan will terminate, and the license Allergan granted to us under their improvements to RTGel will continue.
Agenus Agreement
On November 8, 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 non-muscle invasive bladder
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.
99
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unless earlier terminated in accordance with the terms of the license agreement, the license agreement will expire on a product-by-
product and country-by-country basis at the later of (a) the expiration of the last to expire valid claim of a licensed patent right that covers
the licensed product in such country or (b) 15 years after the first commercial sale of the licensed product in such country. The Company
may terminate the license agreement for convenience upon 180 days’ written notice to Agenus. Either party may terminate the license
agreement upon 60 days’ notice to the other party if, prior to the first commercial sale of a licensed product, the Company substantially
ceases to conduct development activities of the licensed products for nine consecutive months (and during such period, Agenus has
complied with its obligations under the license agreement) other than in response to a requirement of an applicable regulatory authority
or an event outside of the Company’s control. In addition, either party may terminate the license agreement in the event of an uncured
material breach of the other party.
The Company recorded the $10.0 million milestone in acquired in-process research and development expenses for the year ended
December 31, 2019.
Early-Stage Feasibility Evaluation with Janssen Research & Development, LLC
On April 22, 2019, the Company entered into an agreement with Janssen to conduct an early-stage feasibility evaluation in a therapeutic
area of mutual interest. The Company and Janssen will each conduct certain activities under the terms of the agreement, and the
Company will incur the costs of its own efforts related to the feasibility evaluation.
NOTE 9-EMPLOYEE RIGHTS UPON RETIREMENT
In Israel, the Company is required by law to make severance payments upon dismissal of an employee or upon termination of
employment in certain other circumstances.
The Company operates a number of post-employment defined contribution plans. A defined contribution plan is a program that
benefits an employee after termination of employment, under which the Company regularly makes fixed payments to a separate and
independent entity so that the Company has no legal or constructive obligation to pay additional contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The fund assets are not
included in the Company’s financial position.
The Company operates pension and severance compensation plans subject to Section 14 of the Israeli Severance Pay Law, 5723-1963.
The plans are funded through payments to insurance companies or pension funds administered by trustees. In accordance with its
terms, the plans meet the definition of a defined contribution plan, as defined above.
NOTE 10-SHAREHOLDERS’ EQUITY
Ordinary Shares
The Company had 100.0 million ordinary shares authorized for issuance as of December 31, 2019 and 2018, respectively. The Company
had 21.0 million and 16.2 million ordinary shares issued and outstanding as of December 31, 2019 and 2018, respectively. 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.
On April 19, 2017, the Company’s board of directors and shareholders approved an aggregate 3.2 for-1 share split of the Company’s
ordinary, Preferred A and Preferred A-1 shares. The share split was effected on April 19, 2017 by the issuance of 2.2 ordinary shares for
each outstanding ordinary, Preferred A and Preferred A-1 share held immediately prior to the share split.
In May 2017, the Company completed an IPO on the Nasdaq Global Market, in which it issued 5,144,378 ordinary shares, at a public
offering price of $13.00 per share, in consideration for $60.8 million, net of underwriting discounts and commissions and issuance costs,
including exercise of the underwriters’ option to purchase additional 671,005 ordinary shares at the IPO price.
Upon completion of the IPO, the Company converted all outstanding warrants for Preferred A-1 shares into 364,036 Preferred A-1
shares of the Company (see below). Subsequently, the Company converted all outstanding Preferred A and Preferred A-1 shares into
ordinary shares at a ratio of 1:1. As of December 31, 2017, the Company’s share capital was composed entirely of ordinary shares.
100
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In January 2018, the Company completed an underwritten public offering of 1,682,926 of its ordinary shares, including 219,512 shares
sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $41.00 per share.
The net proceeds to the Company from the public offering were approximately $64.2 million, after deducting the underwriting discounts
and commissions and payment of other offering expenses.
In January 2019, the Company completed an underwritten public offering of 4,207,317 of its ordinary shares, including 548,780 shares
sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $41.00 per share.
The net proceeds to the Company from the offering were approximately $161.4 million, after deducting the underwriting discounts and
commissions and payment of other offering expenses.
In December 2019, the Company entered into a sales agreement pursuant to which the Company may from time to time offer and sell the
Company’s ordinary shares having an aggregate offering price of up to $100.0 million. The shares are offered and will be sold pursuant
to the Company’s shelf registration statement on Form S-3 which was declared effective by the SEC on January 2, 2020. No sales have
occurred under this agreement as of the date of this filing.
Warrants for Preferred A-1 Shares
In 2014, as part of a share purchase agreement, the Company issued warrants (the “A-1 warrants”) for preferred shares. The warrants
were exercisable for Series A-1 preferred shares, in consideration for cash representing the exercise price. The A-1 warrants were
measured at fair value in every reporting period, and changes in their fair value were recognized in earnings within finance expenses, net.
In connection with the completion of the IPO, the Company converted all outstanding warrants into 364,036 Preferred A-1 shares of the
Company and subsequently converted all of its preferred shares, including the Preferred A-1 shares, into ordinary shares.
The Company’s warrants outstanding prior to the IPO were exercisable for Series A-1 preferred shares at an exercise price of $7.81 per
share. Prior to the IPO, such warrants were exercisable for 728,312 Preferred A-1 shares.
Series A Preferred Shares
In October 2015 the Company entered into an asset purchase agreement with Telormedix SA (“TMX”) pursuant to which the Company
purchased all of the intellectual property assets of TMX (in process R&D) in consideration for 691,200 Series A preferred shares of the
Company at a price per share of $5.94, which were subsequently converted into ordinary shares on the date of the IPO. The Company
will issue additional shares upon the occurrence of each of three milestones as set in the agreement. The Company has deemed the
probability of achieving these milestones to be remote. The acquired intellectual property costs totaling $4.1 million were expensed as
incurred to research and development costs in accordance with ASC 730, as the intellectual property is purchased from others for a
particular research and development project and has no alternative future uses and therefore no separate economic value.
NOTE 11-SHARE-BASED COMPENSATION
In October 2010, the Company’s board of directors approved a share option plan (the “Plan”) for grants to Company employees,
consultants, directors, and other service providers.
The grant of options to Israeli employees under the Plan is subject to the terms stipulated by Section 102 of the Israeli Income Tax
Ordinance (“Section 102”). The option grants are subject to the track chosen by the Company, either the “regular income” track or the
“capital gains” track, as set out in Section 102. The Company registered the Plan under the capital gains track, which offers more
favorable tax rates to the employees. As a result, and pursuant to the terms of Section 102, the Company is not allowed to claim as an
expense for tax purposes the amounts credited to the employees in respect of options granted to them under the Plan, including
amounts recorded as salary benefits in the Company’s accounts, with the exception of the work-income benefit component, if any,
determined on grant date. For non-employees and for non-Israeli employees, the Plan is subject to Section 3(i) of the Israeli Income
Tax Ordinance.
Certain management and professional level employees typically receive stock options and RSU grants upon commencement of
employment. Eligible employees may also receive a grant of stock options or RSUs annually. Non-employee members of our Board of
Directors and any new, future directors may receive a grant of RSUs and/or stock options annually. The term of any stock option granted
under the Plan cannot exceed 10 years. Options shall not have an exercise price less than 100% of the fair market value of the Company’s
ordinary shares on the grant date, and generally vest over a period of three years. If the individual possesses more than 10% of the
combined voting power of all classes of stock of the Company, the exercise price shall not be less than 110% of the fair market value of
a common share of stock on the date of grant.
101
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s RSU and stock option grants provide for accelerated or continued vesting in certain circumstances as defined in the
plans and related grant agreements, including a termination in connection with a change in control. RSUs generally vest in a 33%
increment upon the first anniversary of grant, and in equal quarterly amounts for the two years following the one-year anniversary of the
grant date. Stock options generally vest in a 33% increment upon the first anniversary of the grant date, and in equal quarterly amounts
for the three years following the one-year anniversary of the grant date.
In March 2017, the Company’s Board of Directors adopted the 2017 Equity Incentive Plan ("2017 Plan"), which was approved by the
shareholders in April 2017. The 2017 Plan provides for the grant of incentive stock options to the Company's employees and for the
grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock
awards, performance cash awards, and other forms of stock awards to the Company's employees, directors and consultants.
The maximum number of ordinary shares that may initially be issued under the 2017 Plan is 1,400,000. In addition, the number of
ordinary shares reserved for issuance under the 2017 Plan will automatically increase on January 1st of each calendar year, from January
1, 2018 through January 1, 2026, so that the number of such shares reserved for issuance will equal 12% of the total number of ordinary
shares outstanding on the last day of the calendar month prior to the date of each automatic increase, or a lesser number of shares
determined by our board of directors. The maximum number of ordinary shares that may be issued upon the exercise of incentive stock
options under the 2017 Plan is 5,600,000. On January 1, 2018, the share reserve increased by 250,167 to 1,650,167. On October 12,
2018, the Company filed a registration statement on Form S-8 increasing the amount of registered ordinary shares of the Company’s
2017 Plan by 1,900,000 to 3,550,167.
In April 2017, the Company’s board of directors approved modifications of performance conditions for 67,200 restricted stock units and
contingent options for executive management. The Company recorded an expense of $0.5 million under general and administrative
expenses with respect to these modifications.
In August 2018, in addition to the modifications, one senior executive was granted 10,466 RSUs in which no compensation expense was
taken because the award vests upon a future performance condition that is not currently probable of occurring.
During the year ended December 31, 2018, the Company recorded $7.2 million in general and administrative and research and
development expenses in the Company’s Statements of Operations for the year ended December 31, 2018 related to the stock option
modifications related to the termination of certain senior executives, based on the executive’s respective allocations.
On January 2, 2019, the Company announced the resignation of its CEO, and the Company's board of directors approved a severance
package, which included a combination of cash and modifications to grants of his related option awards in the amount of $3.4 million.
The cash element followed the termination section in the CEO employment agreement, and the options element included acceleration to
certain grants of his related option awards. The fair value of the modifications to these option awards was estimated at $2.8 million. The
entire severance package was recorded in general and administrative and research and development expenses, based on salary
allocations respectively, in the Company’s Statements of Operations for the year ended December 31, 2018.
On January 3, 2019, the Company appointed Elizabeth Barrett as its President and Chief Executive Officer. In connection with Ms.
Barrett’s employment, she was granted 277,432 options to purchase the Company’s ordinary shares, at an exercise price of $47.57, as
well as 317,065 RSUs, with a combined fair value of $24.1 million.
In May 2019, the Company adopted the UroGen Pharma Ltd. 2019 Inducement Plan (the “Inducement Plan”). Under the Inducement
Plan, the Company is authorized to issue up to 900,000 ordinary shares pursuant to awards issued under the Inducement Plan. The only
persons eligible to receive grants of Awards (as defined below) under the Inducement Plan are individuals who satisfy the standards for
inducement grants under Nasdaq Marketplace Rule 5635(c)(4) or 5635(c)(3) and the related guidance under Nasdaq IM 5635-
1, including individuals who were not previously an employee or director of the Company or are following a bona fide period of non-
employment, in each case as an inducement material to such individual’s agreement to enter into employment with the Company. Under
the Inducement Plan, an “Award” is a nonstatutory stock option, restricted stock unit or other right to receive ordinary shares pursuant to
the Inducement Plan.
In June 2019, as part of the Company’s Annual Meeting of Shareholders, the Company’s Board of Directors approved grants of 70,000
options to its non-employee directors. Each then current non-employee director, including the Chairman of the Board, received a grant
of 10,000 options. Each option is exercisable into one ordinary share of the Company’s stock at an exercise price of $34.83 per share.
The options vest quarterly over one year and expire 10 years from grant date. The grant date fair value of these options was
approximately $1.9 million.
102
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In December 2019, the Company’s board of directors approved a modification of options and RSU's for a consultant. The Company
recorded an expense of $0.9 million under general and administrative expenses with respect to options' modification. No compensation
expense was taken in relation to the RSUs modification because the award vests upon a future performance condition that is not currently
probable of occurring.
Options granted:
Set forth below are grants made by the Company as of December 31, 2019. The majority of options vest over three years and expire on
the tenth anniversary of the date of grant.
a) During 2019, the Company granted 955,732 options with exercise prices ranging from $33.21 to $47.57 per share.
b) During 2018, the Company granted 1,195,000 options with exercise prices ranging from $38.64 to $59.23 per share.
c) During 2017, the Company granted 589,600 options with exercise prices ranging from $1.78 to $39.26 per share.
The fair value of options granted during 2019, 2018 and 2017 was $27.6 million, $40.3 million and $10.9 million, respectively.
The total unrecognized compensation cost of options as of December 31, 2019 is $30.8 million, which is expected to be recognized
over a weighted average period of 1.72 years.
The fair value of options granted was computed using the Black-Scholes model. The underlying data used for computing the fair value
of the options are as follows:
Value of ordinary shares
Dividend yield
Expected volatility
Risk-free interest rate
Expected term
2019
$33.21-47.57
0%
2018
$38.64-59.23
0%
2017
$1.58-39.26
0%
74.09%-80.52%
1.36%-2.62%
5.8-10 years
72.00%-82.04%
1.72%-3.07%
0.2-10 years
68.45%-76.32%
1.38%-2.47%
3.9-10 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. The risk-free
interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted. The expected term
is the length of time until the expected dates of exercising the options and is estimated for employees using the simplified method due
to insufficient specific historical information of employees’ exercise behavior, and for non-employees, and directors using the
contractual term.
The following table summarizes the number of employee and non-employee options outstanding under the Plan for the years ended
December 31, 2019, 2018 and 2017, and related information:
Outstanding as of January 1, 2017
Granted
Canceled/Forfeited
Exercised
Outstanding as of December 31, 2017
Granted
Canceled/Forfeited
Exercised
Outstanding as of December 31, 2018
Granted
Canceled/Forfeited
Exercised
Outstanding as of December 31, 2019
Number of
options
Weighted
Average price
per share
2,389,899 $
589,600 * $
(45,186) $
(690,281) $
2,244,032 $
1,195,000 $
(167,149) $
(748,902) $
2,522,981 $
955,732 $
(183,725) $
(423,653) $
2,871,335 $
4.69
23.95
5.41
4.12
9.91
47.19
35.37
8.99
26.16
41.96
41.85
9.10
32.93
*
Includes 9,600 ordinary shares issuable upon the vesting of options granted in 2016, which were contingent upon the closing of the IPO
103
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The intrinsic value of stock options exercised was $14.2 million, $31.6 million, and $21.4 for the years ended December 31, 2019, 2018,
and 2017, respectively.
The following table summarizes the outstanding and exercisable options as of December 31, 2019:
Exercise
price per
share
$0.00 - 10.00
$10.01 - 20.00
$20.01 - 30.00
$30.01 - 40.00
$40.01 - 50.00
$50.01 - 59.23
Options outstanding
Options exercisable
Number of options
outstanding at end
of year
Weighted average
remaining
contractual life
Number of options
exercisable at end of
year
Weighted average
remaining contractual
life
725,394
75,000
100,000
433,500
1,340,441
197,000
2,871,335
2.80
7.39
7.82
7.78
8.49
7.94
725,394
63,333
66,668
208,331
366,273
145,000
1,574,999
2.80
7.40
7.82
6.33
7.44
7.80
The aggregate intrinsic value of the total vested and exercisable options as of December 31, 2019 is $22.0 million.
The following table summarizes information about RSU activity as of December 31, 2019:
Outstanding as of January 1, 2017
Granted
Vested and released
Forfeited
Outstanding as of December 31, 2017
Granted
Vested and released
Forfeited
Outstanding as of December 31, 2018
Granted
Vested and released
Forfeited
Outstanding as of December 31, 2019
Outstanding
Restricted Stock
Units
275,200
123,300 *
(121,940)
—
276,560
116,493
(118,447)
(10,907)
263,699
455,465
(183,975)
(15,762)
519,427
*
Including 28,800 ordinary shares issuable upon the vesting of options granted in 2016, which were contingent upon the closing of the IPO
The fair value of RSUs granted during 2019, 2018 and 2017 was $19.9 million, $5.7 million, and $3.3, respectively. The total
unrecognized compensation cost of RSUs as of December 31, 2019 is $16.1 million with a weighted average recognition period of 2.04
years.
The following table illustrates the effect of share-based compensation on the statements of operations:
Research and development expenses
General and administrative expenses
Year ended December 31,
2018
2017
2019
$
$
8,291 $
21,676
29,967 $
12,038 $
18,604
30,642 $
3,923
2,377
6,300
104
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12-INCOME TAXES
The Company is taxed under Israeli tax laws:
Corporate tax rate
Presented hereunder are the Israeli tax rates relevant to the Company:
2017 – 24%
2018 and thereafter– 23%
Current taxes for the reported periods are calculated according to the tax rates presented above.
Income Tax Regulations (Rules on Bookkeeping by Foreign Invested Companies and Certain Partnerships and Determination of
their Taxable Income), 1986:
As a "Controller Foreign Cooperation" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the
Company's management has elected to apply Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested
Companies and Certain Partnerships and Determining Their Taxable Income) – 1986, from January 2018. Accordingly, its taxable
income or loss is calculated in US Dollars.
Law for the Encouragement of Industry (Taxation), 1969:
The Company is an “Industrial Company” under the Law for the Encouragement of Industry (Taxation), 1969 and, therefore, is entitled
to certain tax benefits, mainly as follows:
• Amortization in three equal annual portions of issuance expenses when registering shares for trading as from the date the shares
of the company were registered.
• An 8-year period of amortization for acquired patents and know-how used in the process of development performed by the
enterprise.
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company and its subsidiary
deferred tax assets are as follows:
In respect of:
Net operating loss carryforward
Deferred rent
Research and development expenses
Stock-based compensation
Issuance costs
In-process research and development
Right of use asset
Lease Liability
Accrued expenses
Depreciation of fixed assets
Other
Less—valuation allowance
Net deferred tax assets
2019
December 31,
2018
2017
$
$
33,817
—
4,591
6,543
2,063
2,749
(800)
896
762
(90)
62
$
16,943
61
3,891
4,769
1,367
629
—
—
598
(93)
84
(50,593)
— $
(28,249)
— $
$
5,844
46
2,887
897
1,261
761
—
—
5
—
24
(11,725)
—
105
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The change in valuation allowance for the years ended December 31, 2019, 2018 and 2017 were as follows:
Balance at the beginning of the year
Changes during the year
Balance at the end of the year
2018
2019
$ (28,249) $ (11,725) $
(16,524)
2017
(4,158)
(7,567)
$ (50,593) $ (28,249) $ (11,725)
(22,344)
The main reconciling item between the statutory tax rates of the Company and the effective rate is the share-based compensation and
provision for full valuation allowance in respect of tax benefits from carryforward tax losses due to the uncertainty of the realization of
such tax benefits.
Regarding the Company’s U.S. operations, as of December 31, 2019, UroGen Pharma Inc. had federal tax net operating losses of $2.6
million and state tax net operating losses of $0.6 million in several jurisdictions available to carryforward and reduce future income tax
liabilities. The federal and state net operating losses begin to expire after 2036.
The Internal Revenue Code contains provisions that may limit our use of federal net operating loss carryforwards if significant changes
occur in the constructive stock ownership of UroGen Pharma Inc. In the event it has had an “ownership change” within the meaning of
Section 382 of the Code, utilization of its net operating loss carryforwards could be restricted under Section 382 of the Code and similar
state provisions. Such limitations could result in the expiration of the net operating carryforwards incurred before 2018 before their
utilization. In addition, under the Tax Act, federal net operating losses incurred in 2018 and in future years may be carried forward
indefinitely, but the deductibility of such federal net operating losses is limited.
Losses for tax purposes carried forward to future years
As of December 31, 2019, and December 31, 2018, the Company had approximately $151.9 million and $72.1 million of net
carryforward tax losses, respectively, available to reduce future taxable income without limitation of use.
Tax assessments
UroGen Pharma Ltd, has received final tax assessments up to and including its 2013 tax year.
NOTE 13-RELATED PARTIES
UroGen Pharma Inc. entered into a lease agreement, dated as of November 2015 and commencing as of May 2016, for office space in
New York. It shared the office space equitably with Kite Pharma, Inc., a Delaware corporation, which was a cosignatory to such lease
agreement. Arie Belldegrun, M.D., the Company’s chairman, served as the Chairman and Chief Executive Officer of Kite Pharma, Inc.
until his resignation effective as of October 3, 2017, in connection with the acquisition of Kite Pharma, Inc. by Gilead Sciences, Inc.
In April 2018, it terminated its lease for offices at 689 Fifth Avenue in New York, and on December 1, 2018, UroGen Pharma Inc. and
Kite Pharma, Inc., completed a full assignment and assumption of the lease to Allogene Therapeutics, Inc. of which Arie Belldegrun,
M.D., serves as the Chairman of the Board of Directors.
UroGen Pharma Inc. recorded a loss on disposal of fixed assets of $0.2 million for the year ended December 31, 2018, regarding
accelerated depreciation on the leasehold improvements associated with the lease, and there is no further liability as of December 31,
2018.
There were no related party transactions for the year ended December 31, 2019.
NOTE 14-COMMITMENTS AND CONTINGENCIES
Grants from the Israeli Innovation Authority in Israel (“IIA”)
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 as part of the Director General Directive 8.2 of Israel by grants provided to Granot Ventures.
Since 2008, the funding was provided directly to Company.
106
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company is committed to pay royalties to the Government of Israel on proceeds from sales of products in the research and development of
which the IIA participates by way of grants. At the time the grants were received, successful development of the related projects was not
assured. In the case of failure of a project that was partly financed as above, the Company is not obligated to pay any such royalties. Under the
terms of the funding from the IIA, royalties of 3% to 5% are payable on sales of products developed from a project so funded, up to 100% of the
amount of the grant received by the Company (dollar linked); with the addition of annual interest at a rate based on 12-month LIBOR. The
Company is subject to several conditions, including restrictions on its intellectual property.
As of December 31, 2019, the maximum royalty amount payable by the Company under these funding arrangements is $2.1 million
(excluding interest, and inclusive of the $0.8 million in royalties that the Company has accrued as of December 31, 2019). As of
December 31, 2018, the Company has accrued $0.8 million in royalties due to the IIA, which has been recorded in cost of revenues in
our results of operations for the year ended December 31, 2018. In January 2020, the IIA approved the Company’s request to unwind its
obligation to the IIA as a transfer of knowledge (see Note 15).
NOTE 15-SUBSEQUENT EVENTS
On January 2, 2020, the Company’s shelf registration statement on Form S-3 was declared effective by the SEC. As a result, the
Company is permitted pursuant to its December 2019 sales agreement with Cowen and Company, LLC to offer and sell ordinary shares
of stock having an aggregate offering price of up to $100.0 million pursuant to such agreement.
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 Company has previously reported that the
repayment of these grants could be up to three-times of the original grants and other amounts. Under the approval from the IIA, the
Company will be required to:
1. Make a one-time payment in 2020, for up to three-times the grants provided (linked to Plan No. 33889) plus annual interest, net of a
deduction for the royalties already paid in accordance with Appendix B of the Section 18(F) to Instructions for Benefit Track No. 1 -
R&D Fund ("Benefit Track").
2. Make a commitment to continue employment of at least 75% of its base R&D jobs in Israel (at the time of settlement) for a period of
at least 3 years, in accordance with Appendix B of the Benefit Track.
The total payment under the IIA approval, net of the royalties already paid, amounts to $6.6 million plus any additional accrued interest
since January 2020. The Company will pay this amount in the first quarter of 2020.
Subject to payment to the IIA to unwind the Company’s obligation, 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 employment, all other obligations with the IIA will also cease to exist as per the current agreement.
NOTE 16-SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following financial information reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a
fair statement of the results of the interim periods. Summarized quarterly data for 2019 and 2018 are as follows (in thousands, except per
share data):
Total revenues
Total operating expenses
Loss from operations
Net loss attributable to common shareholders
Net loss per share attributable to common
shareholders - basic and diluted
First
Quarter
Second
Quarter
2019
Third
Quarter
Fourth
Quarter
Total
— $
22,433 $
(22,433) $
(21,444) $
18 $
23,771 $
(23,753) $
(22,477) $
— $
23,453 $
(23,453) $
(22,252) $
— $
18
109,496
39,839 $
(39,839) $ (109,478)
(38,973) $ (105,146)
(1.11) $
(1.08) $
(1.06) $
(1.86) $
(5.12)
$
$
$
$
$
107
UROGEN PHARMA, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Total revenues
Total operating expenses
Loss from operations
Net loss attributable to common shareholders
Net loss per share attributable to common
shareholders - basic and diluted
First
Quarter
Second
Quarter
2018
Third
Quarter
Fourth
Quarter
481 $
13,691 $
(13,640) $
(13,382) $
364 $
18,480 $
(18,434) $
(18,026) $
283 $
20,317 $
(21,089) $
(20,533) $
— $
24,017 $
(24,017) $
(23,716) $
Total
1,128
76,505
(77,180)
(75,657)
(0.88) $
(1.14) $
(1.28) $
(1.46) $
(4.80)
$
$
$
$
$
Net loss per share is computed independently for each of the quarters presented in the tables above. Therefore, the sum of the quarterly
per-share calculations will not equal the annual per share calculation.
108
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive and financial officers (our principal executive officer and principal
financial officer, respectively), evaluated the effectiveness of our disclosures controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, as of December 31, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-
15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that
it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal
executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2019, our
principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were
effective at a reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting based on the framework set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013
framework). Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of
December 31, 2019.
The effectiveness of our internal control over financial reporting has been audited by Kesselman & Kesselman (a member firm of
PricewaterhouseCoopers International Limited, or PwC), an independent registered public accounting firm, as stated in their report
herein, which is included under “Item 8—Financial Statements.”
Inherent Limitations of Internal Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve
controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such
activities as implementing new, more efficient systems, consolidating activities, and migrating processes. During the quarter ended
December 31, 2019, there were no changes in our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
109
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item and not set forth below will be set forth in the section headed “—Election of Directors” and
“Information Regarding the Board of Directors and Corporate Governance” in our definitive Proxy Statement for our 2020 Annual
Meeting of Shareholders to be filed with the SEC by April 29, 2020, or Proxy Statement, and is incorporated in this Annual Report by
reference.
We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and
principal accounting officer) and employees, known as the Corporate Code of Ethics and Conduct. The Corporate Code of Ethics and
Conduct is available on our website at http://www.urogen.com under the Corporate Governance section of our Investors page. We will
promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver,
including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person
who is granted the waiver and the date of the waiver. Shareholders may request a free copy of the Corporate Code of Ethics and Conduct
from c/o UroGen Pharma Ltd., 400 Alexander Park Dr., Princeton, NJ 08540.
Item 11. Executive Compensation
The information required by this Item will be set forth in the section headed “Executive Compensation” in our Proxy Statement and is
incorporated in this Annual Report by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be set forth in the section headed “Security Ownership of Certain Beneficial Owners and
Management” in our Proxy Statement and is incorporated in this Annual Report by reference.
Information regarding our equity compensation plans will be set forth in the section headed “Executive Compensation” in our Proxy
Statement and is incorporated in this Annual Report by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be set forth in the section headed “Transactions With Related Persons” in our Proxy Statement
and is incorporated in this Annual Report by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be set forth in the section headed “—Ratification of Selection of Independent Registered
Public Accounting Firm” in our Proxy Statement and is incorporated in this Annual Report by reference.
110
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements.
The response to this portion of Item 15 is set forth under Part II, Item 8 above.
(a)(2) Financial Statement Schedules.
All schedules have been omitted because they are not required or because the required information is given in the Financial Statements
or Notes thereto set forth under Item 8 above.
(a)(3) Exhibits.
Exhibit
Number
2.1
Exhibit Description
Asset Purchase Agreement, dated October 1, 2015, between the Registrant and Telormedix SA (incorporated by
reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form F-1 (File No. 333-217201), filed with the
SEC on April 7, 2017).
3.1
Articles of Association of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Report on Form 6-K
4.1
4.2
4.3
(File No. 001-38079), filed with the SEC on May 18, 2017).
Reference is made to Exhibit 3.1.
Description of the Registrant’s Ordinary Shares.
Investors’ Rights Agreement, dated September 18, 2014, as amended on October 1, 2015 and April 12, 2016, among the
Registrant and the Registrant’s shareholders (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration
Statement on Form F-1 (File No. 333-217201), filed with the SEC on April 7, 2017).
10.1*
Form of Officer Indemnity and Exculpation Agreement (incorporated by reference to Exhibit 99.2 to the Registrant’s
Report Form 6-K (File No. 001-38079), filed with the SEC on July 13, 2018).
10.2*
Amended and Restated 2010 Israeli Share Option Plan (incorporated by reference to Exhibit 4.2 to the Registrant’s
Annual Report on Form 20-F (File No. 001-38079), filed with the SEC on March 15, 2018).
10.3*
2017 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on
Form 10-K (File No. 001-38079), filed with the SEC on February 28, 2019).
10.4*
2017 Israeli Equity Incentive Sub Plan to the 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to the
Registrant’s Registration Statement on Form F-1 (File No. 333-217201), filed with the SEC on April 7, 2017).
10.5
10.6
10.7
10.8*
10.9*
UroGen Pharma Ltd. 2019 Inducement Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K (File No. 001-38079), filed with the SEC on May 28, 2019).
Form of Stock Option Grant Notice and Stock Option Agreement under the UroGen Pharma Ltd. 2019 Inducement Plan
(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38079), filed
with the SEC on May 28, 2019).
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the UroGen Pharma Ltd. 2019
Inducement Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No.
001-38079), filed with the SEC on May 28, 2019).
Employment Agreement by and between the Registrant and Elizabeth Barrett, dated as of January 3, 2019 (incorporated
by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K (File No. 001-38079), filed with the SEC on
February 28, 2019).
Employment Agreement by and between the Registrant and Peter Pfreundschuh, dated as of July 31, 2018 (incorporated
by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K (File No. 001-38079), filed with the SEC
on February 28, 2019).
111
10.10*
10.11*
10.12*
10.13†
Employment Agreement by and between the Registrant and Stephen Mullennix, dated as of January 17, 2018
(incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K (File No. 001-38079), filed
with the SEC on February 28, 2019).
Employment Agreement by and between the Registrant and Mark Schoenberg, dated as of December 5, 2017
(incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K (File No. 001-38079), filed
with the SEC on February 28, 2019).
Separation and Release Agreement between the Registrant and Ron Bentsur, dated as of January 3, 2019 (incorporated by
reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K (File No. 001-38079), filed with the SEC on
February 28, 2019).
License Agreement, dated as of October 7, 2016, by and between the Registrant and Allergan Pharmaceuticals
International Limited (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form F-1
(File No. 333-217201), filed with the SEC on April 7, 2017).
10.14††
License Agreement, dated November 8, 2019, by and between the Registrant and Agenus Inc.
10.15
Lease Agreement, dated November 4, 2019, by and between the Registrant and Witman Properties, L.L.C. and Alexander
Road at Davanne, L.L.C.
21.1
23.1
24.1
31.1
31.2
32.1
101
Subsidiary of the Registrant.
Consent of Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited, an independent
registered public accounting firm.
Power of Attorney (see signature page hereto).
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
The following financial information from the Annual Report on Form 10-K of UroGen Pharma Ltd. for the year ended
December 31, 2019, formatted in Inline XBRL (extensible Business Reporting Language): (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Shareholders Equity, (iv)
Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements.
104
The cover page to this Annual Report on Form 10-K has been formatted in Inline XBRL
* Management contract or compensatory plan.
† Registrant has been granted confidential treatment for certain portions of this exhibit. This exhibit omits the information subject to
this confidentiality treatment. Omitted portions have been filed separately with the SEC.
†† Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Item 16. Form 10-K Summary
None.
112
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
March 2, 2020
UROGEN PHARMA, LTD.
By:
/s/ Elizabeth Barrett
Elizabeth Barrett
Chief Executive Officer
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned directors and officers of UroGen Pharma, Ltd. (the “Company”), hereby severally constitute and appoint Elizabeth
Barrett and Peter Pfreundschuh, and each of them singly, our true and lawful attorneys, with full power to them, and to each of them
singly, to sign for us and in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K,
and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of us might or could do
in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause
to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Date
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
Name
Title
/s/ Elizabeth Barrett
Elizabeth Barrett
Chief Executive Officer, Director
(Principal Executive Officer)
/s/ Peter Pfreundschuh
Peter Pfreundschuh
/s/ Arie Belldegrun
Arie Belldegrun, M.D.
/s/ Cynthia Butitta
Cynthia Butitta
/s/ Fred E. Cohen
Fred E. Cohen
/s/ Kathryn Falberg
Kathryn Falberg
/s/ Stuart Holden
Stuart Holden, M.D.
/s/ Ran Nussbaum
Ran Nussbaum
/s/ Shawn C. Tomasello
Shawn C. Tomasello
Chief Financial Officer
(Principal Financial and Accounting Officer)
Chairman
Director
Director
Director
Director
Director
Director
113
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MANAGEMENT TEAM
Elizabeth Barrett
Chief Executive Officer and Director
Peter P. Pfreundschuh
Chief Financial Officer
Mark P. Schoenberg, MD
Chief Medical Officer
BOARD OF DIRECTORS
Arie Belldegrun, M.D., FACS
Chairman of the Board
Executive Chairman of Allogene Therapeutics, Inc.
Chairman of Two River Group
Chairman of Kronos Bio
Co-Founder and Senior Managing Director of Vida Ventures
Elizabeth Barrett
Chief Executive Officer
Former Chief Executive Officer of Novartis Oncology
Kathryn E. Falberg
Former Executive Vice President and Chief Financial Officer
of Jazz Pharmaceuticals plc
Cynthia M. Butitta
CORPORATE HEADQUARTERS
400 Alexander Park Drive, Princeton, New Jersey 08540
Telephone: +1 (646) 768-9780
www.urogen.com
COMMON STOCK LISTING
Ticker Symbol: URGN, The Nasdaq Global Market
ANNUAL STOCKHOLDERS’ MEETING
The Annual Meeting of Stockholders of UroGen Pharma Ltd
will be held virtually via live audio webcast on Monday, June 8, 2020,
at 9:00 a.m. EDT.
STOCK TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A. 250 Royall Street, Canton,
Massachusetts 02021. Telephone: (781) 575-2000
www.computershare.com/us
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Kesselman & Kesselman, Certified Public Accountants (Israel)
A member firm of PricewaterhouseCoopers International Limited
Former Chief Financial Officer and Chief Operating Officer
of Kite Pharma, Inc.
STOCKHOLDERS’ INQUIRIES
Fred E. Cohen, M.D.
Co-Founder and Managing Partner of Vida Ventures
Stuart Holden, M.D.
Chairman of ProQuest Investments’
Scientific Advisory Board
Ran Nussbaum
Co-Founder and Managing Partner of The Pontifax Group
Shawn C. Tomasello
Former Chief Commercial Officer of Kite Pharma, Inc.
Stockholders may obtain copies of our news releases, Securities
and Exchange Commission filings, including Forms 10-K, 10-Q,
and 8-K, and other company information by accessing our website
at www.urogen.com. Stockholders may also contact Investor
Relations at (646) 768-9780.
FORWARD-LOOKING STATEMENTS
Statements in this annual report and the accompanying letter
from our Chief Executive Officer that are not strictly historical in
nature are forward-looking statements. These statements include
but are not limited to statements related to our planned launch
of Jelymto, the benefits of Jelymto to patients, the clinical utility,
potential advantages and timing or likelihood of regulatory filings
and approvals of UGN-102 and our other product candidates, the
timing and conduct of our clinical trials of UGN-102 and our other
product candidates, including statements regarding the timing,
progress and results of current and future preclinical studies and
clinical trials, and our research and development programs. These
statements are only predictions based on current information and
expectations and involve a number of risks and uncertainties. Actual
events or results may differ materially from those projected in any
of such statements due to various factors, including the risks and
uncertainties inherent in drug discovery, development, approval and
commercialization, risks arising from the global COVID-19 pandemic,
and the fact that past results of clinical trials may not be indicative of
future trial results. For a discussion of these and other factors, please
refer to UroGen’s annual report on Form 10-K for the year ended
December 31, 2019 as well as UroGen’s subsequent filings with the
Securities and Exchange Commission. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date hereof. This caution is made under the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. All forward-looking statements are qualified in their entirety by
this cautionary statement and UroGen undertakes no obligation to
revise or update this report to reflect events or circumstances after the
date hereof, except as required by law.
UROGEN PHARMA LTD.
400 Alexander Park Drive
Princeton, New Jersey 08540
investors@urogen.com