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2021-05-13

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021 

OR

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

98-1460746

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

400 Alexander Park Drive, Princeton, New Jersey

08540

(Address of principal executive offices)

(Zip Code)

 

(646) 768-9780

Registrant’s telephone number, including area code

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of exchange on which registered

Ordinary Shares, par value NIS 0.01 per share

URGN

The Nasdaq Stock Market LLC

 

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      No  

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      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of March 31, 2021, the registrant had 22,280,394 ordinary shares, par value NIS 0.01 per share, outstanding.

 

 

 

 


UroGen Pharma Ltd.

Index

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Shareholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

31

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

81

Item 3.

Defaults Upon Senior Securities

81

Item 4.

Mine Safety Disclosures

82

Item 5.

Other Information

82

Item 6.

Exhibits

83

 

Signatures

84

 

Trademarks and Trade Names

Unless the context requires otherwise, references in this Quarterly Report to the “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 Quarterly Report. This Quarterly 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 Quarterly 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.

 

i


Part I—Financial Information

Item 1. Financial Statements.

UroGen Pharma Ltd.

Condensed Consolidated Balance Sheets

(unaudited; in thousands, except share amounts and par value)

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,492

 

 

$

52,864

 

Marketable securities

 

 

35,417

 

 

 

49,154

 

Restricted cash

 

 

1,225

 

 

 

1,226

 

Accounts receivable

 

 

6,301

 

 

 

7,047

 

Inventory

 

 

3,331

 

 

 

1,964

 

Prepaid expenses and other current assets

 

 

6,316

 

 

 

3,364

 

Total current assets

 

 

93,082

 

 

 

115,619

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

2,142

 

 

 

2,046

 

Restricted deposit

 

 

223

 

 

 

223

 

Right of use asset

 

 

1,901

 

 

 

2,158

 

Marketable securities

 

 

 

 

 

1,893

 

Other non-current assets

 

 

66

 

 

 

66

 

Total Assets

 

$

97,414

 

 

$

122,005

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

10,558

 

 

$

10,023

 

Employee related accrued expenses

 

 

4,712

 

 

 

9,554

 

Other current liabilities

 

 

1,735

 

 

 

1,859

 

Total current liabilities:

 

 

17,005

 

 

 

21,436

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Long-term lease liability

 

 

1,201

 

 

 

1,497

 

Uncertain tax positions liability

 

 

2,717

 

 

 

2,717

 

Total Liabilities

 

 

20,923

 

 

 

25,650

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Ordinary shares, NIS 0.01 par value; 100,000,000 shares

   authorized at March 31, 2021 and December 31, 2020; 22,280,394

   and 22,167,791 shares issued and outstanding as

   of March 31, 2021 and December 31, 2020, respectively

 

 

61

 

 

 

60

 

Additional paid-in capital

 

 

458,723

 

 

 

452,525

 

Accumulated deficit

 

 

(382,436

)

 

 

(356,501

)

Accumulated other comprehensive income

 

 

143

 

 

 

271

 

Total Shareholders' Equity

 

 

76,491

 

 

 

96,355

 

Total Liabilities and Shareholders' Equity

 

$

97,414

 

 

$

122,005

 

 

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

1


UroGen Pharma Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited; in thousands, except share and per share amounts)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Revenues

 

$

7,485

 

 

$

 

Cost of revenues

 

 

897

 

 

 

 

Gross profit

 

 

6,588

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development expenses

 

 

10,513

 

 

 

16,588

 

Selling, general and administrative expenses

 

 

22,189

 

 

 

21,973

 

Operating loss

 

 

(26,114

)

 

 

(38,561

)

Interest and other income, net

 

 

179

 

 

 

768

 

Net Loss

 

$

(25,935

)

 

$

(37,793

)

Statements of Comprehensive Loss

 

 

 

 

 

 

 

 

Net loss

 

$

(25,935

)

 

$

(37,793

)

Other comprehensive income

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

 

(128

)

 

 

35

 

Comprehensive Loss

 

$

(26,063

)

 

$

(37,758

)

Net loss per ordinary share basic and diluted

 

$

(1.17

)

 

$

(1.79

)

Weighted average number of shares

   outstanding used in computation

   of basic and diluted loss per

   ordinary share

 

 

22,242,375

 

 

 

21,158,161

 

 

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

 


2


UroGen Pharma Ltd.

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited; in thousands, except share amounts)

 

 

 

Ordinary Shares

 

 

Additional

paid-in

 

 

Accumulated

 

 

Other

comprehensive

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

capital

 

 

Deficit

 

 

income

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Amounts

 

Balance as of January 1, 2020

 

 

21,026,184

 

 

$

57

 

 

$

407,986

 

 

$

(228,017

)

 

$

276

 

 

$

180,302

 

Changes During the Three

   Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options into ordinary shares

 

 

186,756

 

 

 

1

 

 

 

292

 

 

 

 

 

 

 

 

 

 

 

293

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

7,617

 

 

 

 

 

 

 

 

 

 

 

7,617

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

35

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,793

)

 

 

 

 

 

 

(37,793

)

Balance as of March 31, 2020

 

 

21,212,940

 

 

$

58

 

 

$

415,895

 

 

$

(265,810

)

 

$

311

 

 

$

150,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2021

 

 

22,167,791

 

 

$

60

 

 

$

452,525

 

 

$

(356,501

)

 

$

271

 

 

$

96,355

 

Changes During the Three

   Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options into ordinary shares

 

 

112,603

 

 

 

1

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

4

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

6,195

 

 

 

 

 

 

 

 

 

 

 

6,195

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(128

)

 

 

(128

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,935

)

 

 

 

 

 

 

(25,935

)

Balance as of March 31, 2021

 

 

22,280,394

 

 

$

61

 

 

$

458,723

 

 

$

(382,436

)

 

$

143

 

 

$

76,491

 

 

 

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

 

3


UroGen Pharma Ltd.

Condensed Consolidated Statements of Cash Flow

(unaudited; in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(25,935

)

 

$

(37,793

)

Adjustment to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

191

 

 

 

82

 

Amortization on marketable securities

 

 

191

 

 

 

98

 

Stock-based compensation

 

 

6,195

 

 

 

7,617

 

Amortization of right of use asset

 

 

237

 

 

 

374

 

Lease liability

 

 

(400

)

 

 

(361

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

(1,367

)

 

 

 

Accounts receivable

 

 

746

 

 

 

 

Prepaid expenses and other current assets

 

 

(2,952

)

 

 

(518

)

Accounts payable and accrued expenses

 

 

535

 

 

 

(2,498

)

Employee related accrued expenses

 

 

(4,842

)

 

 

(2,636

)

Net cash used in operating activities

 

 

(27,401

)

 

 

(35,635

)

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

 

 

 

(9,378

)

Maturities of marketable securities

 

 

15,311

 

 

 

22,499

 

Purchases of property and equipment

 

 

(287

)

 

 

(96

)

Net cash provided by investing activities

 

 

15,024

 

 

 

13,025

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Proceeds from exercise of options into ordinary shares

 

 

4

 

 

 

293

 

Issuance cost related to at-the-market issuances

 

 

 

 

 

(203

)

Net cash provided by financing activities

 

 

4

 

 

 

90

 

Decrease in Cash and Cash Equivalents

 

 

(12,373

)

 

 

(22,520

)

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

 

 

54,090

 

 

 

50,211

 

Cash, Cash Equivalents and Restricted Cash at End of Period

 

$

41,717

 

 

$

27,691

 

Supplemental Disclosures of Non-Cash Activities

 

 

 

 

 

 

 

 

Non-cash new lease liabilities

 

$

(20

)

 

$

72

 

 

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

 

 

4


 

UroGen Pharma Ltd.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

Note 1 – Business and Nature of Operations

Nature of Operations

UroGen Pharma Ltd. is an Israeli company incorporated in April 2004 (“UPL”).

UroGen Pharma Inc., a wholly owned subsidiary of UPL, was incorporated in Delaware in October 2015 and began operating in February 2016 (“UPI”).

UPL and UPI (together the “Company”) is a biopharmaceutical company focused on developing and commercializing novel therapies designed to change the standard of care for urological pathologies. Since commencing operations, the Company has devoted substantially all of its efforts to securing intellectual property rights, performing research and development activities, including conducting clinical trials and manufacturing activities, hiring personnel, launching the Company’s first commercial product, Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, and its product candidate UGN-102, and raising capital to support and expand these activities.

On April 15, 2020, the U.S. Food and Drug Administration (“FDA”) granted expedited approval for Jelmyto, a first-in-class treatment indicated for adults with low-grade upper tract urothelial cancer (“low grade-UTUC”). Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology. It has been designed to enable longer exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means.

 

 

Note 2 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for fair statement of its financial position, results of operations and cash flows of the Company at the dates and for the periods indicated. Interim results are not necessarily indicative of results for the full fiscal year. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 18, 2021.

The consolidated financial statements include the accounts of UPL and its wholly owned subsidiary UPI. All material intercompany balances and transactions have been eliminated during consolidation.

The Company has experienced net losses since its inception and has an accumulated deficit of $382.4 million and $356.5 million as of March 31, 2021 and December 31, 2020, respectively. The Company expects to incur losses and have negative net cash flows from operating activities as it executes on its strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials.

The success of the Company depends on the ability to successfully commercialize its technologies to support its operations and strategic plan. Based on management’s cash flow projections the Company believes that its cash and cash equivalents and marketable securities after the closing of the transaction with RTW Investments (See Note 17 for further discussion) are sufficient to fund the Company’s planned operations for at least the next 12 months. The Company anticipates that it may need to raise additional capital in the future. There can be no assurances that the Company will be able to secure such additional financing if at all, or at terms that are satisfactory to the Company, and that it will be sufficient to meet its needs. In the event the Company is not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations.

 

5


 

Note 3 – Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of UPL and its subsidiary, UPI. 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 the unaudited condensed consolidated financial statements, the critical accounting estimates relate to the fair value of share-based compensation, measurement of revenue and estimate of uncertain tax positions.

Functional Currency

The U.S. dollar (“Dollar”) is the currency of the primary economic environment in which the operations of the Company are conducted. Therefore, the functional currency of the Company is the Dollar.

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

Cash and Cash Equivalents; Marketable Securities

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist primarily of money market funds and bank money market accounts and are stated at cost, which approximates fair value.

Cash and cash equivalents and marketable securities totaled $75.9 million as of March 31, 2021. The Company classifies its marketable securities as available-for-sale in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, “Investments — Debt and Equity Securities”. Available-for-sale debt securities are carried at fair value with unrealized gains and losses reported in other comprehensive income/loss within shareholders’ equity. Realized gains and losses are recorded as a component of interest and other income (expense), net. The cost of securities sold is based on the specific-identification method.

Short-term investments are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. The majority of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. 

For individual debt securities classified as available-for-sale securities where there has been a decline in fair value below amortized cost, the Company determines whether the decline resulted from a credit loss or other factors. The Company records impairment relating to credit losses through an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.

 

6


 

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 Companys 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 Companys 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 Federal Deposit Insurance Corporation and concentrated within a limited number of financial institutions. The accounts are monitored by management to mitigate the risk.

The Company’s product sales are recognized through the Company's arrangement with a single customer, a third-party national specialty distributor. The Company assesses the need for an allowance for doubtful accounts primarily based on creditworthiness, historical payment experience and general economic conditions. The Company has not experienced any credit losses related to this customer and has not currently recognized any allowance for doubtful accounts.

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 it operates, including Israel and the U.S. Deferred taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future.

The Company follows a two-step approach in recognizing and measuring uncertain tax positions. After concluding that a particular filing position can be recognized (i.e., has a more-likely-than-not chance of being sustained), ASC 740-10-30-7 requires that the amount of benefit recognized be measured using a methodology based on the concept of cumulative probability. Under this methodology, the amount of benefit recorded represents the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority that has full knowledge of all relevant information.  See Note 14 for further discussion related to income taxes.

Inventory

 

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. For Jelmyto, the Company commenced capitalization of inventory at the receipt of FDA approval.

 

The Company values its inventory at the lower of cost or net realizable value. The Company measures inventory approximating actual cost under a first-in, first-out basis. The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories.

Property and Equipment

Property and equipment are recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment charges. The Company reviews its property and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

7


 

Property and equipment are depreciated over the following useful lives (in years):

 

 

 

Useful Lives

 

Computers and software

 

 

3

 

Laboratory equipment

 

3-6.5

 

Furniture

 

5-16.5

 

Manufacturing equipment

 

 

2

 

 

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. See Note 8 for further discussion regarding property and equipment.

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.

The Company accounts for leases in accordance with ASC Topic 842, “Leases”. The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term as of the commencement date. Operating lease ROU assets are presented as operating lease right of use assets on the condensed 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 condensed 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 condensed consolidated statements of operations in the same line item as expense arising from fixed lease payments.

 

The Company’s lease terms may include options to extend the lease. The lease extensions are included in the measurement of the right of use asset and lease liability when it is reasonably certain that it will exercise that option.

Because most of the Company’s leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

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

Revenues

 

Product sales from Jelmyto are recognized as revenue under ASC 606 at the point in time that control of the product has been transferred to the customer, generally at the point the product has been delivered to the treating physician. All product sales of Jelmyto are recognized through the Company's arrangement with a single customer, a third-party national specialty distributor. Net revenues recognized include management’s estimate of returns, consideration paid to the customer, chargebacks relating to differences between the wholesale acquisition cost and the contracted price offered to the end consumer, chargebacks relating to 340b drug pricing programs, Medicaid drug rebate programs, and the Company’s copay assistance program, which are estimated based on industry benchmarking studies as well as the Company’s historical experience.

 

 

8


 

Research and Development Expenses

Research and development costs are expensed as incurred and consist primarily of the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including nonclinical studies, clinical trials, manufacturing costs and professional services. The costs of services performed by others in connection with the research and development activities of the Company, including research and development conducted by others on behalf of the Company, shall be included in research and development costs and expensed as the contracted work is performed. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from its external service providers. The Company adjusts its accrual as actual costs become known. Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are achieved.

Selling General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors, employees and consultants). Other significant costs include commercial, medical affairs, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees. Selling, general and administrative costs are expensed as incurred, and the Company accrues for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from its service providers and adjusting its accruals as actual costs become known.

 

Share-Based Compensation

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 options is determined using the Black-Scholes option-pricing model. The fair value of a restricted stock unit (“RSU”) equaled the closing price of the Company’s ordinary shares on the grant date. The Company accounts for forfeitures as they occur in accordance with ASC Topic 718, “Compensation—Stock Compensation”.

The Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule using the straight-line method and to value the awards based on the single-option award approach.

 

Net Loss per Ordinary Share

Basic net loss per share is computed by dividing the net loss attributable to ordinary shareholders by the weighted-average number of ordinary 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 ordinary shares that would have been outstanding if the potential ordinary shares had been issued and if the additional ordinary shares were dilutive.

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

 

 

9


 

Note 4 – Other Financial Information

Accounts Payable and Accrued Expenses

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

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Accounts payable

 

$

6,096

 

 

$

3,271

 

Accrued sales reserves

 

 

449

 

 

 

382

 

Accrued clinical expenses

 

 

554

 

 

 

1,359

 

Accrued research and development costs

 

 

862

 

 

 

1,356

 

Accrued selling, general and administrative expenses

 

 

1,309

 

 

 

2,440

 

Accrued other expense

 

 

1,288

 

 

 

1,215

 

Total accounts payable and accrued expenses

 

$

10,558

 

 

$

10,023

 

 

Interest and Other Income (Expenses), Net

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

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Interest income

 

$

167

 

 

$

811

 

Other finance income(expenses)

 

 

12

 

 

 

(43

)

Total interest and other income

 

$

179

 

 

$

768

 

 

 

 

Note 5 – Inventories

 

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

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Raw materials

 

$

2,443

 

 

$

1,051

 

Finished goods

 

 

888

 

 

 

913

 

Total inventories

 

$

3,331

 

 

$

1,964

 

 

Note 6 – 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 entitys own assumptions.

10


 

The carrying amounts of the Companys 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 and Level 2 fair value measurement criteria as of March 31, 2021 are as follows (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Quoted Prices

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Other

 

 

 

Balance as of

 

 

Markets for

 

 

Observable

 

 

 

March 31,

 

 

Identical Assets

 

 

Inputs

 

 

 

2021

 

 

(Level 1)

 

 

(Level 2)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

US government

 

$

20,572

 

 

$

20,572

 

 

$

 

Corporate bonds

 

 

14,845

 

 

 

 

 

 

14,845

 

Money market funds(1)

 

 

30,413

 

 

 

30,413

 

 

 

 

Total marketable securities

 

$

65,830

 

 

$

50,985

 

 

$

14,845

 

 

(1)

Included within cash and cash equivalents on the condensed consolidated balance sheets.

 

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of December 31, 2020 are as follows (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Quoted Prices

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Other

 

 

 

Balance as of

 

 

Markets for

 

 

Observable

 

 

 

December 31,

 

 

Identical Assets

 

 

Inputs

 

 

 

2020

 

 

(Level 1)

 

 

(Level 2)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

US government

 

$

29,186

 

 

$

29,186

 

 

$

 

Corporate bonds

 

 

21,861

 

 

 

 

 

 

21,861

 

Money market funds(1)

 

 

39,744

 

 

 

39,744

 

 

 

 

Total marketable securities

 

$

90,791

 

 

$

68,930

 

 

$

21,861

 

 

(1)

Included within cash and cash equivalents on the condensed consolidated balance sheets.

The Companys in money market funds are valued based on publicly available quoted market prices for identical securities as of March 31, 2021 and December 31, 2020.

 

 

Note 7 – Marketable Securities

 

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

 

 

 

Amortized

Cost Basis

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US government

 

$

20,448

 

 

$

124

 

 

$

 

 

$

20,572

 

Corporate bonds

 

 

14,826

 

 

 

19

 

 

 

 

 

 

14,845

 

Money market funds(1)

 

 

30,413

 

 

 

 

 

 

 

 

 

30,413

 

Total marketable securities

 

$

65,687

 

 

$

143

 

 

$

 

 

$

65,830

 

11


 

 

(1)

Included within cash and cash equivalents on the condensed consolidated balance sheets.

 

The Company classifies its marketable securities as available-for-sale and they consist of all debt securities. The amortized cost basis as of March 31, 2021 includes $0.1 million of accrued interest receivable. As of March 31, 2021, marketable securities were in a net unrealized gain position of $0.1 million. Unrealized gains and losses on available-for-sale debt securities are included as a component of comprehensive loss.  

As of March 31, 2021, the Company did not hold any marketable securities in an unrealized loss position. Per the Company’s general investment strategy, the Company does not intend to sell the investments before maturity. As of March 31, 2021, the Company believes the cost basis for its marketable securities were recoverable in all material aspects and no credit impairments were recognized in the period.

 

The Company’s marketable securities as of March 31, 2021 mature at various dates through February 2022. The fair values of marketable securities by contractual maturity consist of the following (in thousands):

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Maturities within one year

 

$

65,830

 

 

$

88,898

 

Maturities after one year through three years

 

 

 

 

 

1,893

 

Total marketable securities

 

$

65,830

 

 

$

90,791

 

 

Note 8 – Property and Equipment

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

 

 

March 31, 2021

 

 

December 31, 2020

 

Laboratory equipment

 

$

337

 

 

$

333

 

Computer equipment and software

 

 

1,970

 

 

 

1,676

 

Furniture

 

 

586

 

 

 

597

 

Leasehold improvements

 

 

609

 

 

 

609

 

Manufacturing equipment

 

 

226

 

 

 

226

 

 

 

 

3,728

 

 

 

3,441

 

Less: accumulated depreciation and amortization

 

 

(1,586

)

 

 

(1,395

)

Property and equipment, net

 

$

2,142

 

 

$

2,046

 

 

 

Depreciation and amortization expenses were $0.2 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively.

Note 9 - Leases

 

Operating Leases

The Company has the following office and laboratory facility leases:

 

 

In April 2016, UPL signed an addendum to its November 2014 lease agreement for the Company’s executive offices located in Israel, in order to increase the office space rented and to extend the rent period until 2019. In March 2019, UPL utilized the agreement extension option and extended the rent period for additional three years until August 2022.

 

In September 2017, UPI entered into a new lease agreement for its office space in New York, which the Company previously used as its headquarters. The lease agreement commenced in October 2017 and terminated in February 2021.  

12


 

 

In April 2018, UPI entered into a new lease agreement for an office in Los Angeles, California. The lease commencement date was July 10, 2018 and terminates in March 2024. The landlord provided a tenant allowance for leasehold improvements of $0.2 million that was accounted for as a lease incentive. The Company’s remaining contractual obligation under this lease is approximately $0.8 million as of March 31, 2021. In November 2019, UPI entered into a sublease for this office space, with a lease commencement date of January 1, 2020 and continuing until the end of the lease term in March 2024. The subtenants exercised their early access clause and moved into the premises the end of November 2019. The remaining rental payments to be received over the lease term is approximately $0.7 million as of March 31, 2021. The Company accounts for the sublease as on operating lease in accordance with ASC 842-10-25-2 and ASC 842-10-25-3. The main lease was considered for impairment and the amount was determined to be immaterial.

 

In November 2019, UPI entered into a new lease agreement for an office in Princeton, New Jersey, which the Company now uses as its headquarters. The lease commencement date was November 29, 2019 and the lease term is 38 months. The Company’s remaining contractual obligation under this lease is approximately $1.0 million as of March 31, 2021.

 

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 three months ended March 31, 2021 were as follows (in thousands):

 

 

 

Three Months Ended March 31, 2021

 

Operating lease cost

 

$

267

 

Sublease income

 

 

(56

)

Variable lease cost

 

 

22

 

 

 

$

233

 

 

The amounts recognized as of March 31, 2021 were as follows (in thousands):

 

 

 

March 31, 2021

 

Right of use asset

 

$

1,901

 

Long-term lease liability

 

 

1,201

 

Other current liabilities

 

 

1,077

 

 

As of March 31, 2021, no impairment losses have been recognized to date.

 

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

 

 

 

Three Months Ended March 31, 2021

 

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

 

 

 

 

Operating cash flows from operating leases

 

 

2,157

 

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

 

 

135

 

Weighted-average remaining lease term of operating leases

 

2.13 years